Software Worker Owned Coop startup to $3.1 million exit sale

Small Systems Guild – a Software Worker Owned Coop in the 1980’s & an example of financing a startup with sweat equity.

We Wanted to be Like a Medieval Craftsman’s Guild and the local Food Coop

I was a co-founder and the Executive Director of “small systems guild” (yes, all lower case) in Ann Arbor, Michigan (1986 – 88). We were modeled after the Guilds of Medieval craftsmen. We were about 60 Macintosh programmers, who also liked the philosophy of the Ann Arbor Food Coop. Our group had been mostly individual freelancers and 2 person consultancies. We decided to rent about 10,000 square feet of warehouse space and came together to form a worker owned cooperative that would present itself to clients as a much bigger enterprise than any of us would have been able to do on our own. At that time The University of Michigan, Ann Arbor had the largest number of Macintosh computers anywhere on the planet, and our group came together from having been members of the “MacTechnics” Macintosh Users Group.

Auspicious Beginnings

In 1986, no one used the word coworking. The spirit and practice of coworking was a part of what we built, but we went much further. We became a democratically run worker owned cooperative. We were able to do things that none of us would have been able to accomplish in our previous small consultancies or freelancer positions. 

• SSG (small systems guild) organized the third National Apple User Group conference in Ann Arbor in 1988. Attendance more than doubled 1987’s total. Bill Gates was seen writing down suggestions, after he gave a demo of the beta version of Excel. Other attendees included Mitch Kapor (VisiCalc & Lotus – forerunners to Excel), Alan Kay (co-inventor of Smalltalk), Ted Nelson (He coined the terms hypertext and hypermedia in 1963) and many other notable folks.
• SSG got contracts with Apple to develop curricula for Macintosh programmer training.
• SSG flew people around the country to deliver Macintosh programmer training classes.
• SSG was a 4th Dimension partner (popular Mac relational database) and published a monthly newsletter that came with code on a floppy disk and was distributed internationally.
• SSG had a large contract with Dayton Power & Light that created a hypermedia process monitoring system on Macs for a coal fired electric power plant. Plant operators could scan in a plant diagram and then select from a filterable list of 10,000 data points (temperature, pressure, voltages, amps, etc.) to drag and drop them onto the diagram, which would display live data when reopening that diagram. The hyperlinked multimedia interface that SSG built in 1988 was very much like what we would see years later in web browsers. I would never work for a coal plant today.
  

Guild Points Earned Ownership Shares

Another kind of digital equity: Guild Points were in essence, tracking $equity in a digital sense, since these points were entered into our network of Macintosh computers, using 4th Dimension, a then popular relational database for the Mac. Essentially, we tokenized time spent volunteering so that it converted into ownership.

All of the infrastructure was run by members logging hours when answering the phone, emptying the trash, creating marketing materials, etc. These hours were unpaid, but a member earned one guild point for every hour worked, regardless of the type of work. Your member ownership percentage in the guild was equal to your total guild points divided by the total number of outstanding guild points of all the membership. Profits at the end of the year were to be distributed to members based on the percentage of ownership. When decisions were made during group meetings, votes were cast with guild points, giving you voting power as a function of how many points you had earned.

Billable Hours

Members only earned dollars when we were able to bill a client in a 3 tier price point system of (1) $20/hour, (2) $50/hour, (3) $100/hour. SSG took 10% to pay for infrastructure and members got to get 90% of the billable rate.

What Went Wrong?

We never made a profit because a 10% margin was not enough to pay for the infrastructure. So, no profit sharing at the end of the year was possible. Many of the members who earned guild points answering phones, etc. never got above the $20/hour billable rate and didn’t get enough of those hours. We should have taken 20 – 30% margin for infrastructure and used that to pay a decent wage for infrastructure support staff (we had many heated debates about this that weren’t much different than a psychology encounter group). We failed to write non-compete contracts for people and some members left the group, taking business with them.

What Went Right?

We got amazing experience for our resumes. When the cooperative structure was about to implode in 1988, I paid $30,000 to buy the company, we downsized to 3 people and we successfully finished the Dayton Power & Light contract, which funded us for the next two years. This was probably higher than the marketplace would have paid for what was left at that time. I determined the price by multiplying the number of outstanding guild points by minimum wage at the time in Michigan. By finally offering compensation, to those who had worked for free, I earned the loyalty of many for years to come. Many of the original guild members came to work for me at Arbor Intelligent Systems, Inc. which I sold in 1998 for $3.1 million. During those years I gave stock in the company to our employees and while we were no longer a democratically run worker owned cooperative, I always tried to listen to my staff, pay people to develop software products when consultants did not have billable hours with clients and we kept much of the cooperative spirit going.

What does our AI bot think?

User:

How do cooperatives help to address digital equity for broadband Internet access?

AI:

Cooperatives can play an important role in addressing digital equity for broadband Internet access in several ways:

• Providing affordable broadband services: Cooperatives are typically community-based organizations that are owned and operated by their members. This structure allows them to prioritize community needs over profits, and often results in more affordable broadband services for residents in underserved areas.
• Expanding broadband infrastructure: Cooperatives can also help to expand broadband infrastructure in rural or other underserved areas. They can work with local governments and other organizations to secure funding and develop plans for building out broadband networks that serve the needs of the community.
• Offering broadband education and training: Cooperatives can provide education and training to their members on how to effectively use broadband technologies and applications. This can help to bridge the digital divide by providing access to the tools and skills needed to fully participate in the digital economy.
• Addressing local digital equity issues: Cooperatives can work with local organizations and community leaders to identify and address digital equity issues specific to their community. For example, they may develop programs to provide low-income families with affordable broadband services, or work with local schools to provide students with access to the Internet and devices needed for remote learning.

Overall, cooperatives have the potential to play a significant role in addressing digital equity for broadband Internet access. By prioritizing community needs and working collaboratively with local stakeholders, they can help to ensure that all members of the community have access to affordable, reliable, and high-quality broadband services.