Phase 6: Scaling
With conventional platform businesses, scaling rapidly seems to be a prerequisite for success.
This might be the case for platform co‑ops too, but not necessarily for all. Some might be set up to cater for a niche market and user base, others might prefer to grow steadily at a slower less risky rate. However, some platform co‑ops might only succeed if they are able to scale rapidly enough, for example to provide a valid enough alternative to an existing conventional platform business.
In this case, fundraising will need to go hand in hand with their ambition to scale.
Platform co‑ops in this stage will be aiming to raise around £1-5 million.
There are very few examples of platform co‑ops at this stage, so these are still uncharted territories. Co‑ops can still use a combination of the methods mentioned up to now, but they could also explore new options like the ones listed below.
Available funding
- There are grants available for this scale of funding, but not for every sector or purpose. You might find tech related grants that want to push a certain agenda, or large grants available for ideas organisations radical solutions to the climate or health crisis. This is also a good moment to try to access government grants in the realm of innovation or high growth businesses.
- Now that you have a good track record of generating revenue you can consider accessing Revenue Based Finance.
- If you are able to guarantee future income you could also consider issuing community bonds.
What you need before you start raising funds
- A track record of good reliable revenue from your current products and services.
- Market research to prove there is untapped demand for your product or service.
- A new business plan to define the next phase of your business’s growth.
- An updated funding runway for each step of the scaling process.
- Teams and processes that can manage rapid growth.
- Technology that is fit for rapid growth.
- Democractic processes that are able to adapt to rapid growth.
Ideal
- Good and ongoing relationships with potential investors
Case study: Savvy.coop raises Revenue Based Finance from VCs
Savvy.coop is a US-based patient led health data platform co‑op. The co‑op gives patients direct ways to share their experiences with health innovators and advocates so that they are fairly compensated for their contributions.
In April 2020 they raised their first round of financing in the form of Revenue Based Finance from Indie.vc becoming the first platform co‑op to raise funding from VCs.
The Revenue Based Finance offered by Indie.vc came in the form of equity because the investment came with the caveat that should the co‑op decide to issue shares, the funders would have a right to transform their investment into equity. However Indie.vc preferred not to be involved in the governance of the co‑op, so Savvy.coop modified its governing document to include a specific investor class with shares that gave no voting rights.
The successful raise was the result of a few years of interaction with Indie.vc where the funders were able to learn more about the co‑op and its founders and to build trust in the company. Before raising Revenue Based Funding, Savvy.coop has been supported by Start.coop, a US-based business support programme for co‑ops with the aim to scale.