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Comment by jancsika | Hacker News Reader

This is brilliant.

Instead of saving on labor costs by pretending your employees are contractors like Uber and friends, they go in the opposite direction. You're not a contractor, or even an employee, but an owner.

Just imagine how big your milkshake will be once you all own 80% of the business! Admittedly, a business where this company has slurped out most of the value and saddled you with various software license fees or whatever in perpetuity. But a business nonetheless.

And now when the business goes belly up and these owners are destitute, the HN logic applies-- hey man, most businesses fail. So why not just learn some python and code up some nice fintech that extracts value from other rubes?

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Replying to my own comment because I just can't get over how ingenious this is.

On HN we're used to FOSS devs acting quickly when, say, a proposed or implemented license change turns project X into project X'. Upon reading the diff, they'll fork from X and continue on with a new org, and X' dies on the vine. We've seen it recently on HN.

Employees of a mom and pops have specialized skills either in the frontend or backend of the business but typically only a basic idea of the fundamental business model. If they were to become owners in X it would take them at least a year and probably longer to learn the ins and out. E.g., how a change to even a few vendors can have a large effect on the bottom line. If they think they are getting X but instead get X', they won't know for awhile. In fact, if were talking about succession then the owner may be gone and they'll never know.

Perhaps I'm being cynical and fintech really is here to help the little guy. But something tells me that's unlikely.

I still can't tell whether you're being cynical or not. These businesses are mostly going to just shutter if PE doesn't take over. The ones left to a family member aren't necessarily going to do well for that succession either: that bequest can be an act of love more than business smarts. Furthermore, just because there may be important subtleties about which vendors to use, branding, and service processes that are vital to how things work, it does not mean that the prior owners were at all savvy about the nuts and bolts of modern financial products, and could have really been held back by traditional banks preying on that ignorance and ensnaring them in less than ideal solutions.

The important cog in this wheel is the one you haven't touched on, namely, that president Teamshares installs - wish they'd explain more about that. Teamshares' investors aren't stupid. They know very well the risk on their money if the company comes in like a bull in a china shop, quickly destroying the businesses it buys. There aren't going to be consolidation options and economies of scale like you see with medical practices - each of these mom 'n pop shops are somewhat special snowflakes.

Being an owner in a business is a typical way to route around labor laws completely.

If you're a restaurant or retailer that needs your staff to work 14 hour days 7 days a week, giving ownership is a fairly common scheme to CYA against future lawsuits. The ownership shares are usually miserly and forced-transferrable upon leaving.

Not saying that's what's happening here, but it could be.

Labor laws are for employer-employee relationships. You cannot simply “give” some of your employees shares and then disregard labor laws.

If someone wants to work 14 hour days 7 days a week so that their shares are worth more, that is their choice.

They never get classified as employees. They start as owners to begin with. This is what cults like Twelve Tribes do with the Yellow Deli in Boulder, CO. The whole place operates on unpaid labor because they're all "owners".

Them setting terms for insurance and likely de-facto cotrolling all the firms' financial capabilities through their mandated fintech services surely helps hedging the risk, too.

The brilliance depends on whether it’s a scaled version of a Berkshire Hathaway like business, or some sort of reverse franchise. It sounds to me like the latter - a scheme to create captive customers for preferred source vendors who are close to the beneficial owners. This also sounds like medical consolidators like Schweiger dermatology who soak up independent dermatology practices. Similar models exist for dentists and attorneys as well.

I’m cynical because Buffet’s goal was very clear - he needs to generate cash flow forever to make more money. A venture capital entity has a different vision of success, which I can’t see being aligned with the “owners” of these companies.

It feels like marketing sleight-of-hand. Like "you own the house, but you have to rent the walls from us".

Or the real world situation that happens to people, you own the domicile, but we own the land it is on

That's my feeling, too. It reminds me of a scene in "The Founder", the movie about McDonalds: "You're not in the burger business. You're in the real estate business."

> the HN logic applies-- hey man, most businesses fail. So why not just learn some python and code up some nice fintech that extracts value from other rubes?

I haven't really seen this here. Is there any need to perpetuate such silly stereotypes?

Right, I would more ascribe that viewpoint to some journos on Twitter. I think if that viewpoint is referenced on HN, it is done so derisively.

It was a big thing ten years ago - why not learn to code if your job has gone overseas? At the point Mayor Bloomberg tweeted something about learning to code, it seems Jeff Atwood felt it was time to weigh in[0].

[0] https://blog.codinghorror.com/please-dont-learn-to-code

I think the point is that it wasn’t big on HN.

I was saying it wasn't just some "journos on Twitter".

Saying "learn to code" is different from "oh, you got laid off of your trucking job? Learn to code"

It is, but it was the latter that was being said, IIRC.

But not by Bloomberg. He was saying a version of "Everyone should know how to code!"

Fair.

It’s a whole 6th viral growth method. Buy companies and force them to use your product before spinning them off.

(Emmet Shear’s 5 viral growth methods: https://twitter.com/eshear/status/1402449655208632321)

Past the window where I can edit the comment, but Emmett (like Matthias) has two T’s.

> saddled you with various software license fees or whatever in perpetuity

Are they necessarily forced into it for perpetuity? Once they transition to 80% employee ownership (or 51%), don't the employee-owners decide whether to continue? Unless there's some kind of non-voting ownership stake or contract that never expires or something.

Plus, 20 years is the timeline to transition to employee ownership. So for the first 10 years, if the acquired business pays software license fees, the parent company is mostly paying itself, which isn't revenue. More importantly, that means whatever tech stuff they supply to the acquired companies needs to actually pull its weight.

It seems more likely they just want to keep proven businesses going so they can tap into that established revenue year after year. Giving ownership to the employees probably helps with retention and continuity so that the company doesn't fail after being sold. The corner pizza shop's customers still see familiar faces, the plumbing company's customers still recommend them to neighbors, etc. People don't say, "It used to be good, but it's not the same since it was bought." The point of handing over 80% is keeping the goose healthy to keep laying golden eggs.

Yes, being a supplier to these companies you own 20% of is some nice gravy. But you also want the revenue (and expansion), so you really can't bleed them dry.

Unfortunately, most mom-and-pop businesses are around because they've built a clientele, hired good employees, and mastered the basic economics in their local economy, which is all they need. Sophisticated fintech for them is just a frippery, as is big-time professional management.

I would bet the weaknesses of most mom and pops, and where professional management excels, is in the efficiency and vendor relationships. Lots of small mom and pop places pay exorbitant amounts for things like credit card processing, cash management and banking, tech, inventory management, etc.

If team shares can be a good partner to complement the strengths of the small business owners, they can increase the profitability significantly. By leaving the community element in place, theoretically it could be the best of both worlds.

"theoretically" doing a lot of work there.

Also: "Lots of small mom and pop places pay exorbitant amounts for things like credit card processing, cash management and banking, tech, inventory management, etc." is totally unsubstantiated. Like they're too stupid to know what they're doing?

We'll have no trouble at all finding stories of old businesses that changed ownership to a soulless group of MBA's, the customers heard about it, complained that it wasn't the same anymore, and quit coming. I doubt you can find many stories going the other direction.

Edit, never mind, prefer not to engage here.

>Admittedly, a business where this company has slurped out most of the value and saddled you with various software license fees or whatever in perpetuity. But a business nonetheless.

didn't I see an episode of The Sopranos where this was the plot, albeit in mafia dress.

What's the difference between this and a franchise?

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