Ask HN: Has anyone tried alternative company models (like a co-op) for SaaS?

167 points · snide · 2 days ago

Long story short, I'm building a new product and will likely launch it as a yearly SaaS with a permissive license. I'm later in my career and am mostly building it for fun, but I think it has potential to be a good, small business that I'd have fun fiddling with for a long time.

I went through and set up the usual LLC, but was curious about how I could set it up to be a member or worker-owned company. Has anyone done anything like that from the beginning? Should I just worry about this later?

With licensing, the typical model has been to make your core permissive, and keep the hosting / billing application private. Has anyone made even that part of their SaaS open? I know that would make is really easy to fork the business, but was thinking something like a time-gated Functional Source License (FSL) might work?

I'm open to ideas. I don't see this discussed commonly on HN, so figured it was a good topic.

100 comments

yochaigal · 2 days ago

I work at a worker-owned IT company that has offices in three states and has been in existence for 20 years. We do not provide any kind of SaaS service but I can assure you it is possible! My suggestion is to reach out to the Tech Worker Coop Peer Network for the USFWC:

https://www.usworker.coop/programs/peer-networks/

They will probably have ideas. Good luck!

PS an LLC is definitely a good way to go, but some states (e.g. NY, MA, CA, MN, etc) have dedicated worker coop company types you can create.

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herrherrmann · 2 days ago

You might be interested in Subvert, a group of people (formerly?) from Bandcamp that are now founding a worker-/artist-owned version of Bandcamp and launching the platform soon. They basically want to avoid running into the same issues that came with Bandcamp’s recent ownership changes and the instability and worker-facing hostilities around it.

They also published a magazine explaining their thinking behind the setup, etc. – you can find out more on their website: https://subvert.fm/

Could be interesting to check out, even if just for inspiration or fun.

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perfmode · 2 days ago

I established a limited liability company (LLC) for a business venture initiated with friends. My objective was to ensure that all contributors received a fair share of the equity while maintaining a simplified structure for tax purposes. Additionally, I wanted to ensure that equity shares did not confer voting rights, functioning instead as profit-sharing interests. Legal counsel assisted in structuring the entity as a single-member LLC, where I am the sole owner, with profit-sharing units allocated to other contributors. This arrangement entitles contributors to a defined percentage of the company’s profits and proceeds from events such as a sale of the company.

My only regret is that I spent a lot of money on legal fees and the company ended up not being profitable so a lot of the work went to waste. But now I can re-use the structure again if I wish to create a new venture.

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pavlov · 2 days ago

I think the co-op structure makes more sense if your business is local.

For example, I’d love to have a local alternative to Uber/Doordash that was a co-op owned by the drivers and the customers together. 95% of my taxi trips and food delivery are within my home town. I’d love to support a company owned by the drivers who live here, instead of a massive multinational.

Co-ops are pretty successful in many European countries. In Finland, both the largest bank and largest grocery store chain are national co-ops owned by customers. It’s a model that can scale far, even though the big co-ops do develop internal politics very similar to any traditional corporation.

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tnjm · 2 days ago

I developed a SaaS business to fund a nonprofit foundation, which is a little different from your situation.

The key thing was to keep the SaaS-y bit as boring as possible, which meant a corporation. This is in Europe but the equivalent would be Delaware C corp.

Shares in the corporation were then given to the wrapping organization (in my case the foundation, but this could be more-or-less any legal structure that can have assets). Downside is two sets of accounts, upsides are that M&A gets a ton easier later on, and taking on employees is simple and not colored by the legal quirks of the parent organization. The potential complexity of SaaS accounting (revenue recognition, R&D credits, etc) is also kept inside a simple, normal corporation which every CPA is super-familiar with, so you're not consulting niche experts every time something new comes up.

I advise a quick consult with a tax lawyer before doing anything, because it's easy to say you'll deal with this later but some changes have unforeseen implications if not done at the outset. (I punted on some of the setup for a year while I focused on finding product/market fit, and that turned out to be a mistake that the lawyers had to fix at some cost. A year more and it might have become unfixable.)