Supported by The Co‑operative Bank
How to finance your platform co‑op start-up
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Set-up: Phase 2 – founding

You’ve decided the co‑op model is the best way of developing your platform and you have co-founders ready to take the next steps with you (co‑op Companies and LLPs must have at least two founding members, while a Societies must have three). 

You are now ready to set up as a co‑op and start running your business. Co‑operatives UK provides a handy step-by-step tool for this phase, as well as useful resources, such as Simply Legal and Simply Governance.

In this phase platform co‑ops tend to raise around £10,000-30,000. This is used to cover the set-up costs and some of the time founders spend working on the business.

Available funding

  • Since you now are a legal entity, but are not yet revenue generating, this is the ideal time to launch a donation based, or reward based crowdfunder.
  • You can also formalise agreements with your team on how everyone's input in the organisation will be rewarded at a later stage through sweat equity.
  • As a legal entity, you are now in a better position to apply for grant funding. Consult UnFound’s database of #TechForGood funders.
  • Apply for early stage accelerators and business support programmes, some of which also offer small development grants too. Co‑operatives UK offers business support on an ongoing basis via The Hive and specifically runs an accelerator programme via UnFound.
  • You might want to consider a favourable overdraft when opening your bank account to allow for variations in your cash flow. However this should be considered carefully as it can be quite expensive due to the high interest rates.
  • Consider leasing equipment or paying for it in instalments. Though this will be more expensive than buying equipment outright, when setting up, this might be the only way to pay for the equipment you need.
  • You will still be relying on most of the funding streams of the previous phase: 
    • Your own savings and other income sources you already have.
    • Support from friends and family.
    • Support in kind.

What you need before you start raising funds

Fundamental

  • An agreed name for your business and an updated mission statement. 
  • A clear governance structure, identifying who the founding members are, how new members join and the democractic processes that guarantee that the co‑op is accountable to its members.
  • Incorporation as a legal entity. Choose the most appropriate legal form and co‑op model for your business and register your co‑op.
  • A business case describing the specific outputs or transaction that will advance the mission of the business. It should indicate: 
    • The benefit to the customer, compared to other similar transactions or output.
    • The process by which the outputs are delivered.
    • The inputs from which the outputs are generated.
    • The ways in which these things contribute to the mission.
  • Market research that proves the need for your business.
  • A business plan, which is a plan of how your business will be set-up and developed. It describes in detail the  “who, what, why, when, where, how”  of your business set up and operations. It will also include your first financial projections.
  • Once you are incorporated you will need to set up a bank account to accept funds and pay for your expenses. The Co‑operative Bank, which supports The Hive and UnFound, offers a bank account for co‑ops.

Ideal

  • A website explaining more in detail your business idea, with clear contact details and a form to collect expressions of interest from potential users.
  • A regular newsletter to keep your supporters informed.
  • An increased online presence and supporter group.

Case study: The Bristol Cable’s successful grant funding

The Bristol Cable is a media co‑op created and owned by people in the city of Bristol. It is a platform for people to engage with their communities and hold power to account in their city and wider society.

Since 2013 when it was founded, the Bristol Cable has raised more than £880,000 in grant funding. For the first years, the grants obtained were in the order of £1,000-5,000 and were used for core funding and market research (Lush, Nesta, Moondance foundation). 

From autumn 2015 onwards they were able to raise ever larger grant funds to cover their core costs, going from £80,000 for two years in 2015 (Reva and David Logan Foundation), to £350,000 for three years in 2020 (Luminate). 

At the same time they raised smaller project-based grants from Nesta (£41,000), Centre for Investigative Journalism (£5,000), Joseph Ronwtree Reform Trust (£6,500).

The Bristol Cable is now transitioning towards a more sustainable business model which is less reliant on external finance, and instead generates income via membership subscriptions and ethical advertising. 

As of May 2020, these streams accounted for 37% of their income including 2100 membership subscriptions. The Bristol Cable is a Community Benefit Society and was supported by Co‑operatives UK through the Carnegie Trust’s media innovation fund.