Building Capacity for Exit to Community

Divya Siddarth, who is creating a series of case studies in collaboration with E2C.how, interviewed Open Collective COO Alanna Irving about the company's journey toward being owned and governed by its community.

Watch the video or read the transcript below.

Why did it make sense for Open Collective to pursue an Exit to Community?

A startup is a company that's founded before anybody really knows if it's going to be successful. The traditional way is to go get funding from venture capitalist investors, who invest in lots projects in the hopes that one out of a thousand will become really huge and pay off. That kind of a business model is really set up to incentivize certain things, like growth over all else, and profit extraction over all else, which leads to the exploitative dynamics that you see in capitalistic tech startups.

Open Collective was never that kind of organization. It was started by idealistic people, activists who were in it for social impact. But, for practical reasons, you do need money to start up a company and build a software platform. So we accepted investment, but we were very picky about that investment, making sure to take it from aligned investors, and not too much. It's tempting for startup founders to take lots of investment, but then they have to cede control of the company to investors who will ensure that all decisions are made to maximize returns. Open Collective didn't do that; it took a really considered, small amount of investment from aligned investors, and therefore the founders retained control.

We knew that the traditional exit model was not for us.

An 'exit' is an event that enables the original investors to get their money back and exit the company. The traditional methods are either an IPO, like really big companies like Facebook do, or an acquisition, where a bigger company will buy the smaller company. At that moment, the investors and all the stockholders, like early employees, get a payoff. We want our investors to be able to exit. We want this to be a success story for them, because we know they're going to turn around and invest in the next generation of impact startups.

Exiting naturally came up for us when we became profitable (well, started breaking even). It's a lifecycle at that point in a company, when you go, 'OK this thing is gonna work, now we're scaling, it's time to think about our future'.

We knew that the traditional exit model was not for us. Obviously, we are very community and transparency oriented. We had aspirations for more tangible and meaningful involvement from the wider community of stakeholders in governance of the platform. But we hadn't been able to prioritize that and really do the legwork to make it the reality. Right now, the small core team that builds the platform is really making all the decisions about it, which is good, because we've needed that focused team to get to where we are. But as we are growing and maturing, we feel ready to open up more and really live up to our aspirations for collectivity.

Exit to Community is values-aligned, structurally-aligned, and financially-aligned. For us, it makes a lot of sense.

Exit to Community was a very natural fit. It's giving us a north star to orient ourselves around strategically, and helping us figure out what capacities we need to build, internally and with our community, to be set up for a successful post-E2C future. It has really helped us get aligned as a team. Exit to Community is values-aligned, structurally-aligned, financially-aligned. For us, it makes a lot of sense.

What capacities do you need to build for E2C?

Capacity-building for a successful Exit to Community is a multi-layered question. When I said that it's become a north star and for us to orient toward, I mean it's really clarified all those different layers, for me at least. I see what we need to work on. I can see where we have to get to a couple years down the track, and there's a lot of work to do, in my opinion. But it's all good things that our community needs.

Right now, our platform development priotization process is pretty internal, between our developers and designers. We have to improve our collaboration to better include non-technical people on the team, who might not feel as comfortable jumping into a GitHub issue. They have important input and perspective because they are in touch with users and understand where they get tripped up on our platform, or they have a background in legal compliance and stuff that the developers might not have a background in. As a facilitator, my goal in the near term future is to start widening the circle of platform governance.

I can see where we have to get to a couple years down the track, and there's a lot of work to do. But it's all good things that our community needs.

Open Source Collective and Open Collective Foundation are two examples of Fiscal Hosts, the legal entities that hold money on behalf of Collectives and use Open Collective, the software platform, to provide their services. Those two in particular were started by the same founders that started Open Collective the company. Those teams all work very closely together, but are not fully integrated to the level of coherence needed to support wider collective governance of the platform. So we're working on that.

Then how to do widen that even more, to Fiscal Hosts we're not as close with? And how do we involve the Collectives under those umbrellas? At Open Collective Foundation, we're thinking about how to involve our Collectives in governance of our nonprofit Fiscal Host entity, and its participation in Open Collective platform governance. If you keep zooming in, to one of the Collectives underneath the OCF umbrella, there are a lot of capacities to build there. How do individuals in a Collective collaborate, make decisions together, and do Collective governance? That's why OCF is pursuing something we're calling the Solidarity School, which is about capacity building for collaboration and collective governance. Ultimately, and this is why I say it's a north star, all of that adds up to wider successful community participation in platform governance, post-E2C.

How can people feel it's really worth their time to participate in collective governance?

It's not that we won't have individuals directly participating in platform governance; I definitely want that to happen. But I've done this sort of collective governance in large communities a lot, and I'm realistic. You can't jump straight to that. You have to do all the groundwork: transparency of the information people need to get the context to participate meaningfully, communications channels so that people can actually be reached and their voices can be heard, relationship building so trust is there, and the attention economy, which is probably the hardest part of the whole puzzle.

How can people feel it's really worth their time to participate in collective governance of the platform instead of focusing on their own project? The only way we're going to get there and succeed is by operating at all of these different levels of building capacity.

What's exciting people about E2C? What's concerning them?

We're very, very early in our process. We've announced it, but we haven't done the work that we're planning to do on deep consultation to really to understand those concerns more deeply. But from the perspective of being early....

To start with a negative framing, which isn't inspiring, but it's true: people know what happens on tech platforms when the governance is done by a tiny group of elites behind closed doors. People know what it feels like to be on a tech platform where they are the product instead of the ones using the product, which is the case for so much mainstream tech out there. We don't want that, and our community doesn't want that. They really see the downside. We have different sub-communities, like open source people, who deeply understand technology governance questions, and citizen movements and mutual aid groups, who really understand the downsides of messed up power dynamics in society. People know we want to avoid that.

People know what happens on tech platforms when the governance is done by a tiny group of elites behind closed doors. So what's the alternative? We all have to do governance together.

So what's the alternative? We all have to do governance together. I'm very realistic: it's a lot of work, and a lot of overheads. But I don't think it's more overheads, it's just distributed differently. I've worked in a lot of "non-hierarchical" organizations, and management or leadership do not go away. You don't succeed in that space by removing them and leaving a vacuum. You succeed by reinterpreting things like management and leadership into distributed processes, transparent roles that can rotate and are accountable back to the community at large. I'm really optimistic that we can do it, but I'm not naive about how much work it is.

People, in general, are very focused on the projects that they came into Open Collective to raise money for. That's why they're here. Most of those projects are already doing a lot with a little, and just trying to add stuff to their to-do list is not going to be successful. They pay fees to use our platform, so a small percentage of their money kind of gets taken out. My goal is to make fees feel not like a tax, but like an investment into the commons we share, control, and benefit from. If a commons is being managed successfully, individuals feel like they're getting back more than they're putting in, that the thing is more than the sum of its parts, that running it together means we have something more powerful than any of us could on our own.

My goal is to make fees feel not like a tax, but like an investment into the commons we share, control, and benefit from.

To get there, you need transparency, trust, and functional processes that are efficient, so people can participate in a meaningful way that is worth their time. The paradigm that we are trying to escape is the super transactional, capitalistic paradigm that we know, intuitively, isn't aligned with our values. The way value exchange works in a commons, in my opinion, is indirectly. If you boil it all down to very direct transactional exchanges, you will lose the real power of a commons, which shows up when you put something in and don't necessarily get something directly back, measured one to one, but you get more than what you put in, indirectly.

What might people with less experience in this kind of thing not know?

I learned all this stuff by trial and error. I could spend all day telling you about all the mistakes I've made, and frustrations, and the times I cried. It's not like I was born magically knowing how to do this stuff.

But I've been working in these kinds of spaces for a long time, and I have been around the block. I wrote a book about it, if people are really interested in delving in, called Better Work Together. Most of my content in there is also available for free on my website. I'm not trying to make a career out of being a thought-leader, or whatever. I just try to help people hopefully skip some of the mistakes that I've made.

It's hard to learn some of these lessons without personally going through it, because every community is different and unique.

It's hard to learn some of these lessons without personally going through it, because every community is different and unique. When I started at Open Collective, I was coming out of working at Enspiral and Loomio. These were very values-aligned ,and structurally somewhat similar to Open Collective, but quite different in character. They are New Zealand groups with a different background, while Open Collective is super international.

I don't even know how to explain the way it works at Open Collective.... It's very low conflict, very chill, everybody just does their work. I was used to being in groups where it was super intense, and required me to turn myself inside out as a person, which was amazing and I learned so much. But it's also really exhausting.

Open Collective is so inherently decentralized, with a team over here working on software and teams over there running nonprofits, and our users out there. There are areas for intense relationship and growth and learning, but there's also this really wonderful feeling of free flowing energy flows around the system in a really natural way.

It really depends on what kind of community you have. You'll need different processes, tones, and kinds of communication.

It really depends on what kind of community you have. If there's seven of you who are deeply intertwined in super intense relationships, or if it's a very big distributed, diffuse community, it'll look different. You'll need different processes, tones, and kinds of communication.

What are examples of getting back more than what you put in to a commons?

Ultimately, the non-transactional thing works on the basis of trust. You have to have trust first, before you can get that virtuous cycle going, because you have to start by giving and not knowing what you'll get back. It's something like an abundance mindset, trust in the community. But at the same time, if you give and you don't get meaningful value back, that's going to run out pretty quickly. It's about finding that balance. You need on-ramps, where you can start giving in small ways and immediately get something back that's tangible.

When a Collective joins a Fiscal Host, they get a clear service: we'll hold your money, you don't have to go get a bank account and form your own legal entity, we're going to take care of some really annoying paperwork stuff for you, and we'll give you this nice online tool that lets you share your budget transparently and pay your expenses. On the surface, you can see all of that. So people join, and they feel okay about giving a small percentage of the money they raise, because it's worthwhile. It can start there, somewhat transactional, but that's our opportunity to start to grow a trust-based relationship.

You have to have trust to get that virtuous cycle going, because you have to give without knowing what you'll get back.

Over time, we know we can trust them, because they're raising and spending money, and we can see their activities and get to know them as people. They then can come deeper into our community, through community gatherings, Zoom calls, capacity-building opportunities, or other resources. We put our services out there not knowing about uptake or if it will help us raise more money for the bottom line. We trust the community, knowing that it will come back indirectly.

One of the reasons why I use the tool of money, specifically, in my work is because it's powerful and visible in a certain way. Before working on Open Collective, I was working on this thing called Cobudget, a tool for participatory budgeting, like crowdfunding using collective money, that enables a process using software in a visual way. Which things are more important? Where does the community want to put its money? What do we want to do? Similarly, with Open Collective, simply by starting to run these processes in a transparent and participatory way, the community starts building capacities: seeing how much money we have and how much things cost. It's hard to sit there complaining about paying money if you can see it costs $300 get the accountant to file that thing we need, and that the person you enjoy talking to gets paid this much. Seeing it all transparently is quite powerful.

We need to reclaim money as something powerful for communities to use in a different way.

Money is an important heuristic for groups to measure their capacity to support their work properly and not burn people out. Money is not the be all end all, but people get really put off by how it's been so co-opted by the capitalist, extractive system that we're trying to escape. My theory of change is, instead of running away from it, we need to reclaim money as something powerful for communities and use it in a different way. Using that toolset, you can apply the same ideas to other things, like decision-making, how to have discussions, and how to be transparent and participatory. Through that, a cycle builds up of more trust, more participation, and more value being spread around in a way that really works, and, ultimately, true co-ownership and co-governance of a commons.

Do people come into Open Collective excited about governance structures?

We have the a full spectrum. We absolutely have people like me, who are massive governance nerds, who are here because we're governance nerds. A lot of our of our staff are like that, super nerdy about the same things I am (and it's wonderful to work with them).

We do have a lot of diversity in our community, which is one of the reasons why I love it so much. People come in through different doorways. Those in the open source tech community, whose starting place was being an engineer, may not have thought too much about governance, facilitation, or money. Others, who are deep in community organizing on the front lines of mutual aid, climate, and justice movements, might have incredible skills in community-building and communications, but not be strong in in technology or the more fiddly aspects of organizational governance. It's a very broad community. We need to do a good job of linking up different interest areas, skills, needs, and backgrounds. That's where successful, diverse collective governance can come from.

I'm not saying it's easy. As a facilitator, I think about these things a lot, just in terms of communication modes. If we put up a discussion on GitHub to get feedback, we'll hear from one sector of our community. If we do a series of personal calls with community group leaders, we'll get a completely different set of feedback about the same issue. It's up to us to do a good job of facilitating that well.

We're never going to be able to force participation, or force people to give us their time and attention—we have to really make it worth it.

No one in our community is super excited about putting down their main thing they're passionate about to just do governance. Builders and activists don't necessarily want to do a bunch of bureaucratic stuff. I hope we can make it feel immediate, like 'I participate and my voice is heard and it really has an influence that positively impacts me and my project that I came here passionate about'. We're never going to be able to force participation, or force people to give us their time and attention—we have to really make it worth it. If we fail, we're going to end up trying to do governance with a very small subset of our community, the people who have a lot of time, who are super loud and have the biggest opinions that are not necessarily always right, and the nerds, like me, who would just do governance all day long, if I could. But that is only that is a very small section of our community, and we have to do better than that.

What have reactions been from stakeholders to E2C?

We're still too early to say. We've put out a couple blog posts, announced the thing in our newsletter, and got some reactions. We've had people write posts about how Open Collective could be a DAO, and put that on Twitter, and then a bunch of people were arguing on Twitter, like, 'DAOs are awesome', 'No, we don't like DAOs'. That's as you'd expect.

So far, our engagement has been relatively superficial. I'm not really interested in responses to an abstract idea about Exit to Community, which is a phrase they've probably never heard until that moment. I'm more interested in doing things like a participatory budgeting round, where we give them $10 and ask them to put it toward what they think is important. Or, offering free training for Collectives to learn about distributed leadership, because they've told us they are interested in that capacity building, which focuses on what their community is here to do, and it's not about our platform. Then, when they've built capacities and created some space in their group, and that's going really well, once they've appreciated this area of learning, we can invite them to another course, where they join with other Collectives to think about bigger governance questions.

I think people will see the benefit to stepping outside their particular area if it's relevant to them. Imagine how much a group of community activists and a group of open source developers could teach each other. I think that value will be quite obvious to a lot of people. We'll get there through working on all these different levels and not expecting people to jump directly to platform governance.

Sometimes the most important stakeholders are the busiest. It's up to us to include the people we really need to include.

We will have to be careful about aligning the volume or influence that people have with their actual level of stakeholding. Sometimes the most important stakeholders are the busiest and the least likely to be first in line to respond to your online posts. It's up to us to include the people we really need to include. We're not going to be excluding community members, but some people are louder and have more time and more opinions. If we default to only listening to that, we're not doing a great job,

Do any ownership models you've looked at do a good job of aligning influence to stakeholding?

We're not ready to decide on a model yet, because we are so early. I'm keen on holding us back from making decisions too early. I want us to do much deeper learning, relationship-building, and communication this year, and probably not really decide until next year. Some people on the team are more impatient and pretty much know what they think we should do, so maybe it'll be faster, but it's important we don't rush.

We have to choose a model that can grow and evolve with our understanding.

Regardless of what model we go forward with, we need to go into it with our eyes open to the fact that our understanding will evolve. We have to choose a model that can grow and evolve with our understanding. In order to do an actual exit, the financial and legal steps require quite a lot of solidity and clarity of where money's coming from, which people get what money, and the ownership structure of a legal entity, and all that kind of stuff. We will have to be decisive at that moment. But I'm hoping that can be a moment in time and we can transition into a form that's clear enough for engagement but also has flexibility for evolution.

The world's going to continue to change. There's a question of whether distributed tech is going to be the future, like crypto stuff. Some people think it's definitely going to be the future, some people think it's a massive distraction, I think it could go either way. Maybe we should form a trust that can transition to a DAO 10 years from now, if that's where the world is. Technology is going to keep changing, and our community is going to keep changing.

We want to genuinely put the future participant-stakeholders in charge. It shouldn't be the ghosts of founders past setting the structure in 10 years.

One of the really challenging things about an E2C is how to set things in stone enough that the mission and the values persist, post ownership transition, without setting it too much in stone so cannot evolve with the times. We want to genuinely put the future participant-stakeholders in charge. It shouldn't be the ghosts of founders past setting the structure in 10 years. At the same time, unpleasant forces out there will co-opt anything they can. It will be compromised and sold out, unless we put in strong structures to keep that from happening. So, I genuinely do not know what model we should have.

What are the major risks and downsides of E2C?

There's always a risk in "non-hierarchical" groups of unseen power structures, instead of an explicit one. That's a big thing to avoid.

Design-by-committee is a real risk for a software company. It's so hard to build software, because you can literally build anything, there are infinite possibilities, so you have to have a really coherent design and product vision. I really don't think you can distribute that to thousands of people, so we have to figure out where in the system that's going to be held, and how those people can be accountable to the community at large, yet not held back in their design coherence vision.

There's what I mentioned about the mission failing to translate across time. For six years, Open Collective has had people in the center holding very strongly to a certain set of values. If those people are no longer there, where's that strength going to come from? That's difficult to design. You can see lots of examples out there of large, diverse communities who hold true to their values, but it takes work.

The whole E2C thing could just not work, when it comes to getting the money to buy out current investors and if they'll agree, or whether we'll get large-scale buy-in from the community. It's really tricky. I've been saying from the beginning, this is not going to happen overnight, it's going to take two to three years, and I'm trying to be realistic on our timescale.

What is the process to find out what the community wants?

We have to use a combination of different approaches, because different kinds of people need to be reached in different ways. We have to do a good job of transparency and synthesis in that process.

You could imagine a well-designed, broad stakeholder engagement process including online discussions and voting. I made a thing called Loomio for collaborative decision-making. There are other tools for doing sentiment analysis on large data sets.... I don't know if we'll get into that scale. You also have to do the things that don't scale: workshops, human conversations, pieces of research where you identify a question, do the legwork to gather the information, and present it to people in a way that they can reasonably absorb in the time that they have to engage, so they can meaningfully participate. That takes a lot of work.

Seeing the different layers of participation in the Open Collective structure, to me as a facilitator, gives me a lot of hope that it's possible.

Recently, Nathan Schneider shared a vision for Open Collective's E2C, and I was like, that sounds really cool, and to achieve that, we'll have to be a company of half developers and half facilitators. If we don't have the half that's facilitators, there's no way we can successfully do the collaborative version of feeding into the development process. So it's going to be about investing in that facilitation capacity, and experimentation. We will not know ahead of time what's going to work, so we have to leave ourselves open to iteration.

Seeing the different layers of participation in the Open Collective structure, to me as a facilitator, gives me a lot of hope that it's possible. It's really hard to jump straight from zero to engaging a community of thousands. But I can imagine Open Collective the platform having really functional communication and engagement processes with the admins of our large Fiscal Hosts; there's not that many of them. I can imagine each of those Hosts running functional and achievable processes for their Collectives to participate in Host governance, and facilitating processes that output into platform governance. Zooming into the level of a Collective, I can imagine Collective leaders and facilitators jumping not just to people participating on Open Collective, but to their much wider community, who they serve with their project, and gathering input. I can imagine zooming in and zooming out, and it actually working.

What in your story might be useful to others interested in E2C?

This whole E2C thing is on our minds, and we are orienting toward it in the long term, but the biggest success factor for our Exit to Community will be having a successful community, business, and product in the first place. That challenge is not significantly different to any company, organization, or community just trying get their thing to work in the world. Right now, our thing is working, we are growing, we are scaling. I feel a great sense of responsibility to fully realize that momentum to the next level.

The biggest success factor for our Exit to Community will be having a successful community, business, and product. We have to make sure it's actually worth the effort to govern.

I've been around people and communities who are enamored with structures in the abstract, of how governance can work, and tooling for governance. But if you don't have anything to govern, there's really no point spending all your time figuring out the perfect system. So we have to make sure that our thing is actually worth the effort to govern. That means we keep growing, serve communities, welcome new people, start new Fiscal Hosts that can reach different countries or topic areas, support our Collectives to raise money and do their thing in the world. We are here to support their impact. We can't lose sight of the fact that Exit to Community only makes sense in service to the bigger mission and impact of what we are in the world.

I really hope Open Collective can become a case study for the E2C community and for startups and tech companies. I want to tell a different story, and I want it to be a success story. Not just because I want Open Collective to be successful, but because I see it as a bigger story about alternative ways of doing business, helping communities function at a higher level, and use money in really powerful ways.

If we're going to have any hope of shifting the conversation about what's normal to a different paradigm, we have to tell different stories, live different stories, and make these stories successful.

If you think about it, in our world, how much incredible weight, energy, and attention goes into that other, capitalist paradigm: every MBA program all around the world teaching however many case studies, every business news channel, every story about the stock market. If we're going to have any hope of shifting the conversation about what's normal to a different paradigm, we have to tell different stories, live different stories, and make these stories successful.

I can't say if Open Collective is going to be a massive success, because nobody knows, it's a startup, anything could happen. But I hope we can be one of many real success stories that can start to change things. We can't change the world by focusing only on dismantling, we have to really build up the alternative and show that it can work in a different way, and radicalize people, not through convincing them of the rightness of an ideology, but through their lived experience of true participation, of the collective power of livelihood in a non-capitalist paradigm.

We have to radicalize people, not through convincing them of the rightness of an ideology, but through their lived experience of true participation, of the collective power of livelihood in a non-capitalist paradigm.

I read a lot of science fiction, and I try to read utopian science fiction, which, by the way, is really hard to find. I want us to be writing more of these utopian sci-fi stories, because that's my dream, living in that post-capitalist Star Trek world. We can start in the world that we live in now, creating little bubbles of that new future, really living it, and inviting more and more people to live in that different reality with us, in a in a deeply real, moving way.

Follow along as Open Collective learns in public on its E2C journey, and look out for more case studies from E2C.how, which, by the way, is accepting donations on Open Collective!