Last year, we launched the first public directory of investment vehicles devoted to financing Alternative Ownership Enterprises (AOEs), firms that significantly shift economic value and decision-making power toward workers, producers, consumers, community members, or non-financial purposes.
Since then, the database has become a critical resource for our partners supporting AOEs: investors seeking a starting point to find funds, business leaders looking for potential sources of capital, and other field building organizations tracking gaps and opportunities.
Since the AOE landscape has grown and evolved considerably in the past year, we’ve updated the database to capture new funds and trends. Below, we summarize the changes to the database and in the field, and provide some guidance on how to make the most of this tool.
What’s new?
We saw seven new financing entities launch publicly in the past year, which are now included in the database. These new vehicles capture the exciting range of impact strategies, types of capital, target AUM, fund structure, and phases of maturity.
Financing Entities Launched in Past 12 Months
We’ve added 26 entries for ESOP lenders and independent sponsors, bringing the total known number of AOE financing vehicles to 86. This total number also reflects four vehicles that were removed from the database, because they are no longer investing in AOEs or have been shut down. These new entries expand the usefulness of the database, in particular for technical assistance providers and others seeking capital for transactions.
The total assets that funds have raised or are planning to raise increased from $3.8 billion to $4.9 billion (excluding bank assets). This $1.1 billion dollar increase demonstrates the considerable growth of the industry, though it is still far short of the one trillion dollars that could be productively invested in Employee Ownership (EO).
The bulk of the AOE financing activity continues to be focused on Employee Ownership, with some funds that finance worker cooperatives also investing in other types of cooperatives (e.g. food, consumer coops).
How to use the database
The database is hosted on Airtable which includes sorting, filtering and grouping functions as well as the possibility to download the information as a .csv file. Here are some useful tips for getting the most out of the resource.
1. Filter by “Structure”
The Structure column refers to vehicle structure. Most investors will want to focus on entities tagged as “Fund” and “Fund of funds,” which include closed-end and evergreen structures. Additional types of structures include:
- “Bank” or ”Credit union:" typical providers of senior debt for EO transactions
- ”Conglomerate:" EO company that grows through acquisition, some of which raise outside capital to fuel their growth in addition to their own cash reserves.
- ”Independent sponsor:" raise capital on a deal-by-deal basis
2. Filter by “Investment approach"
This column captures the type(s) of AOE models a fund invests in, as well as its degree of explicit impact focus. These categories are important, as the investment approaches vary widely, even within EO. We have categorized existing funds into eight different types of investment approaches, which can help identify which type of fund might best align with an investor’s financial and impact priorities.
EO exclusive: invest only in Employee Ownership. They mainly fund conversion deals, but can provide other forms of financing (for startups or for ongoing needs) as well.
- “EO: ESOP conversion:" focus exclusively on ESOPs.
- “EO: Worker Cooperatives:" focus exclusively on Worker Cooperatives (start-ups, conversions, or other capital needs).
- “EO: EOT conversion:" focus exclusively on EOTs
- “EO: Multiple models:" invest across EO models, which increases complexity for the fund but also allows them to use the model most aligned with the needs of the business.
- “EO: Partial broad-based employee equity:" approximate partial Employee Ownership by sharing a portion of the business’ financial success to a broad base of employees through mechanisms such as profit sharing, broad based equity grants, or phantom stock grants, at no upfront cost for employees.
Non-EO exclusive: Many funds are not designed to invest solely in Employee Ownership, but see EO as an important dimension of their strategy.
- “All cooperatives, incl. Worker coops:" finance many types of cooperatives, in addition to Worker Cooperatives, such as Producer,Consumer and Multi-stakeholder Cooperatives.
- “Other impact strategy, incl. EO:" have a variety of impact strategies, ranging from financing underrepresented business owners to supporting economic development, building climate resilience in a particular region, and advancing shared ownership beyond just enterprises (e.g. real estate and other asset classes).
“Non-impact strategy, with some EO financing:" focused on providing market-rate returns to investors, which occasionally includes EO transactions as part of this strategy due to their beneficial taxation.
As an alternative to using the “Investment approach” as a filter, database users can select the types of entities they are interested in financing in the “Recipient of investment” column to access funds that are most relevant for them e.g. Worker cooperatives, EOTs, AOE funds, etc.
3. Additional Filters
The database can be further refined using other fields. Useful fields for investors include:
- Fundraising status (actively raising, actively raising as an evergreen fund, fully raised or fully deployed)
- Geographic focus (nation-wide, regional, single-city)
- Target return for investors (often provided as a target range)
A note of thanks – and a few caveats
We hope this database serves as a useful tool for those exploring capital that supports Alternative Ownership Enterprises and, ultimately, a more inclusive economy. For users, we’d love to hear feedback from you on how you’re using the database, and how it could grow in the future!
First and foremost, thank you to all of the fund managers and investment leaders who are experimenting with these fund models that distribute wealth and power in transformative ways. These leaders, managers, and investment teams make the database possible via their publicly available information and through Transform Finance surveys. Where possible, we made efforts to validate data with investment teams. Some data is not available or shared publicly (marked with “--” or blank in the database).
We’re also grateful to the National Center for Employee Ownership (NCEO) for sharing information from their Employee Ownership Lender Directory for incorporation into the database. NCEO members can find more information on these lenders here.
Finally, deep thanks to Transform Finance’s donors who make this database, our AOE learning hub, and much more, possible.
The database and this post is for information only and is not investment advice. Spot an error in the database? Email info@transformfinance.org so we can keep improving the resource.
