Inside the effort to turn startups into zebras, not unicorns

Zebras Unite is on track to becoming a co-op that offers founders an alternative funding route

The priorities of venture capitalists don’t always align with those of startup founders and their workers.

That’s why we’ve started to see more conversation and activity around cooperatives and the idea of Exiting to Community, spearheaded by Nathan Schneider, a professor of media studies at the University of Colorado, Boulder. Where startups can hit a roadblock, however, is around funding. Because there are fewer financial incentives for investors to fund startups that are less focused on more traditional exit routes of either selling or going public, it can be hard to attract investors. Zebras Unite, a movement and collective that formed back in 2017, is hoping to fill that need for startups.

Zebras Unite, which is on track to becoming a cooperative this year, is focused on startups that build businesses that approach issues from a social impact lens while also generating revenue. Last month, Zebras Unite announced plans to launch a fund to support underrepresented founders. The fund, which is looking to start raising money from aligned investors later this year, will be run by the co-op’s first commercial venture, Zebras Unite Capital. In partnership with SecondMuse Capital, Zebras Unite Capital will offer affordable debt and equity. As the fund invests in co-op members, those profits will be returned to the co-op and its members.

“The flawed model of venture capital has to do with the fact that only accredited investors can participate,” Zebras Unite co-founder board member Mara Zepeda tells TechCrunch. “Accredited investors are simply perpetuating the concentration of wealth, and what it really comes down to is a lack of diversity on cap tables because wealthy investors can just continue investing. That means it’s really difficult for others to break in.”

This is one reason why Zebras Unite, which recently filed its articles of incorporation, is choosing to be a cooperative. Forming a co-op allows it to serve the ecosystem in a way where people don’t have to make sacrifices around values, Zepeda says.

“It’s really exciting to think about this cooperative of zebras, which as we grow and as they succeed and as they receive financing, their successes will feed the broader ecosystem and the continuation of the broader ecosystem and not just continue to concentrate wealth,” she says.

Zebras Unite is still working out the classes of ownership, but Zepeda says she envisions one class for those who help to build the foundation of the co-op, another for companies that lend their time and talent, such as those specializing in branding and marketing, and finally, a class of general members and investors.

“It’s still a work in progress, but broadly speaking, when you create a co-op, you’re creating multiple layers of stakeholders,” Zepeda says. “And those stakeholders can contribute, not only monetarily, but in time and talent as well. So you get a more diverse convergence of, not only financial capital, but also social capital and intellectual capital in the process because it’s a far more accommodating structure that has a broader definition of value beyond whether or not you’re an accredited investor or not.”

Since Zebras Unite is on track to becoming a co-op, people will pay to become a member and one of the member benefits will be access to funding. As the fund invests in companies, which ideally will earn profits, the co-op members will also glean profits.

“So now what you’ve done is created this mutually beneficial structure where the fund itself can return profits to the people in the companies that are creating the deal flow,” she says. “So now you actually have a regenerative and mutually beneficial, and more equitable system of returns.”

In addition to the fund, Zebras Unite has other ideas for what the co-op should do. The focus of Zebras Unite is to provide zebra companies with the culture, community and capital they need. So, the fund is just one aspect of that overarching goal.

“The culture piece is huge and has a lot to do with how do you change ownership structures,” she says. “You know, changing the culture of what we define as stakeholders. The culture is changing wildly around the definition of an entrepreneur support organization looks like and moving away from this ‘go big or go home’ venture-only accelerators.”

Community is the other aspect. So far, Zebras Unite has 45 chapters across six continents. In May, when Zebras Unite hosts Dazzle Camp, they will co-design with the community what the co-op will look like, Zepeda says. Simultaneously, the conference serves as a way for those in the zebra community to connect face-to-face and support each other.

“Especially for underrepresented founders, community is — it’s not a nice to have, it’s the reason why you survive,” Zepeda says. “Zebras, you know, a herd of them is called a dazzle. They need each other to survive. So it’s not possible for underrepresented founders or values-aligned founders to just expect tens of millions of dollars that they can go blow on a ping pong table. They actually need to build the ecosystem along with their company. It’s a really different sort of service orientation towards company and ecosystem building concurrently that I think makes the zebra movement really special.”

At Dazzle Camp, there will be chapter leaders from all around the world, startup founders and aligned investors, of which there are more than Zepeda says she anticipated. These investors are looking to balance profit and purpose and are interested in contributing to the movement, she says.

“We have reached the end of something,” she says. “And we really need to figure out what the next step is and how it can be beneficial to more people. And you’re seeing that in the 2020 election with this huge focus on income inequality and wealth disparity. The venture capital system, by definition, continues to perpetuate that because of the concentration of ownership. More distributed ownership and things like Nathan [Schneider] are doing is really critical to actually put practical, tactical steps in place to address a lot of the amorphous inequity that we talk about. There are practical things we can do around ownership that fundamentally address what we mean when we say inequality.”