Our colleagues from Camplight, a software cooperative in Bulgaria, have just launched Assista.io - a time-tracking bot for Trello. We highly recommend this blog post which follows Assista´s funding and development.
Traditional forms of funding software products
When it comes to software product startups, there are a few different paths for their funding and development. The prevailing funding model is probably the equity financing path, where the startup that needs funding raises investment from venture capital investors (VCs) and/or angel investors in exchange for equity in the startup. This approach has the benefit of getting more funding early on and focusing on growth and building the product faster. The downside is the dynamics that come with ownership - the company is now owned by both the people that make the product and the investors that invested in it. This means decisions about the company are taken not solely by the product team, but also by a board of directors consisting of also outside investors. Of course, this dynamic by itself is not a bad thing and is probably the best way for some companies to get their product off the ground.
Another approach is to abandon external funding altogether and keep full ownership over the company and the company decisions, by choosing to self-fund. A method known as “bootstrapping”. The downside is that it usually takes much longer to build the product this way because it relies on organic growth and this is hard to accelerate.
Funding of software in cooperatives
When it comes to cooperatives though, the VC funding approach is most often not the right fit for either side. There are multiple reasons for that. One of them is that cooperatives are collectively owned companies and funding such company creates complexities around the cap table. VC investors are most often warry of having a big cap table because the decision-making rights are in the hands of too many people. This makes taking decisions slower and sometimes really hard. So naturally, investors tend to avoid it. Another reason is the way VC funds work. In order for the fund to be profitable, it needs to invest in many different companies in the hopes that at least 1% of them becomes a billion-dollar company. This naturally leads to the fund choosing only to invest in companies that can become a billion-dollar company and pass on companies that don’t fit these criteria. But there are many small software companies that are profitable and sustainable, yet are relatively small in terms of revenue. So the best option for cooperatives is usually bootstrapping, but that as we said can be very slow and sometimes ineffective.
What many cooperatives do when they want to develop their own software product is fund it through so-called “co-budgets”, where members of the cooperative pitch in and participate in financing the product in the form of donations. This approach sometimes works and many software products are born this way, but it relies on the goodwill of the participants as the co-budgets are often gathered on a per-need basis and are not guaranteed that they will fulfill the needs of the product. As a result, often products developed this way are left a bit neglected.
Both approaches have pros and cons - the equity funding route gives the company a lot of boost at the beginning for the price of less ownership and decision-making rights over the product and the company. Bootstrapping gives the company full control over the product and the company decisions, but for the price of much slower growth. Is there another approach that combines the good parts of both approaches and at the same time mostly eliminates the negatives?
Camplight and transition to platform coop
Camplight - a 20 member software cooperative from Bulgaria has tried a different approach. A year ago, they restructured the cooperative to something they call “Platform Cooperative”. Before the transition, members of the cooperative worked on different software projects with their partners, and all the revenue from the work was forwarded directly to the individual members working on the project. Now, with the new structure, 10% of the revenue that comes from projects is being kept in the Camplight network in one single bucket.
Then all members of the cooperative decide and vote on what are the most pressing needs of the organization, what opportunities they see arising, and how to redistribute the funds in the platform coop bucket to those needs, and opportunities.
One such product is Assista - a time-tracking bot for Trello. It was born out of necessity to track the time spent on projects that Camplight members work on and bill partners based on that. In Camplight each project uses Trello for project management and it is only natural that the time-tracking system they use works with their project management tool of choice.
Originally Assista was created just for internal use because there were no solutions that existed at the time that integrated well with the Kanban method of work adopted by the team. When Camplight works on a specific project, the team creates a Trello board for that project with several standardized lists - Todo, Doing, and Done. When a member wants to work on a specific task, they drag the card associated with that task in the “Doing” list and when the work is done, they drag it into the Done list. Most time-tracking solutions require people to separate the work that is done in the project management tool from the work that is being tracked in the time-tracking software. This creates redundancy as the data is duplicated in two different places. Another bizarre thing that most time-tracking applications do is ask you to press start and stop buttons and time yourself when you start or stop working on a specific task. So Camplight wanted a solution that will automatically detect when someone moves a card to a “Doing” list and starts a timer for them without the need to manually do that every time, which let’s face it nobody loves to do anyway. In 2020 Camplight decided that it would be interesting to try and open the product for outside users as well. If it was useful for everyone at Camplight, then it might be useful for other Trello users working in a similar way. It became open in the Trello power-up marketplace and anyone that wanted to track time inside Trello could do that. It gained traction very fast and has been growing the userbase ever since.
Camplight’s “rolling fund” model
So how did Camplight fund the development of Assista? With the Platform Cooperative structure, it was now possible to do something that wasn’t easily achievable before. The 10% of the revenue that is being kept by the cooperative serves as a capital for something like a “rolling fund”. A rolling fund is a new type of investment vehicle that allows the investors to subscribe to investment opportunities on a quarterly basis. The difference with traditional VC funds is that instead of gathering the capital beforehand and then executing a series of investments, the rolling fund acquires the capital as monthly subscriptions and executes the investments continuously. Hence the word “rolling”. In Camplight, the members of the cooperative decide how to invest this capital together and part of the investment goes to the development of Assista. Different types of contributions to the platform coop ecosystem are tracked by an approach similar to the Fair Shares model. There are three types of contributions that exist - capital investments, which convert to “investor shares”, voluntary labor contributions, which convert to “labor shares” and risk contributions which convert to “founder shares”. These shares are dynamic (they change in real-time) and are being tracked by Assista and another internal software product called “Moneyflow”.
Because of this way of funding, in the last several months, the Assista team was able to revamp the whole UI/UX of the product and launch a brand new version of it with many new features that simplify but also enhance time-tracking inside Trello. It took several months of development and the team consisted of one backend developer, one frontend developer, a designer, and a product person.