Joining and Scenarios
Collective Equity Ownership is a simple innovative service developed for entrepreneurs to share the benefits of owning their business.
Below is an example that explains the process of joining, and two case studies:
Below is an example that explains the process of joining, and two case studies:
Use My Car Ltd.
Adam Smith is the founder of Use My Car Ltd. (UMC) a start-up that enables people to rent their car to other trusted users. Having secured a Series A funding round, UMC is now worth $10M dollars. As the founder, Adam owns 50% of the company’s shares and decides to join Collective Equity Ownership.
Adam Smith is the founder of Use My Car Ltd. (UMC) a start-up that enables people to rent their car to other trusted users. Having secured a Series A funding round, UMC is now worth $10M dollars. As the founder, Adam owns 50% of the company’s shares and decides to join Collective Equity Ownership.
Joining
Since joining is free, and the participants deposit only future returns on their shares, Adam decides to participate by contributing the equivalent of 10% of the shares he owns, a total of 5% of the shares of UMC. These shares are valued at $500,000. In return he receives a quota of the pool.
The pool Adam joins already has three other founders of start-ups that have also raised external capital. The total value of the pool, with him joining is $1M.
Since joining is free, and the participants deposit only future returns on their shares, Adam decides to participate by contributing the equivalent of 10% of the shares he owns, a total of 5% of the shares of UMC. These shares are valued at $500,000. In return he receives a quota of the pool.
The pool Adam joins already has three other founders of start-ups that have also raised external capital. The total value of the pool, with him joining is $1M.
Participant |
Value of Equivalent Shares Contributed |
Quota |
Adam Smith |
$ 500,000 |
5 / 10 |
Participant 1 |
$ 300,000 |
3 / 10 |
Participant 2 |
$ 100,000 |
1 / 10 |
Participant 3 |
$ 100,000 |
1 / 10 |
TOTAL |
$ 1,000,000 |
1 |
Case 1: Success
Two years later, Use My Car Ltd. is doing extremely well. They have been able to expand their client base in other European cities, people rent cars through their platform for short and long trips, and customers see extra earnings by sharing their car. This was Adam's dream, to help the invisible hand reallocate resources. One morning Adam receives a call from BlaBlaCar, a French ride-sharing unicorn start-up, with an offer to buy the company for $50M cash. He decides that this has been a great ride for him, and takes the offer.
Since Adam owns 50% of the shares, and like him all other shareholders had common shares, Adam receives $25M from the sale of UMC.
The agreement with Collective Equity Ownership is such that after he receives the earnings from the sale, Adam deposits 10% of what he received to the pool, equal to $2.5M. This sum is then re-distributed pro-Quota to every participant, as shown in the table below.
Once the quota is re-distributed, Adam will still own his quota of the pool, until all the participants have had an exit, or end being operative. The exit of other participants in the future will also re-distributed pro-quota.
Amount deposited: $ 2.5M
Two years later, Use My Car Ltd. is doing extremely well. They have been able to expand their client base in other European cities, people rent cars through their platform for short and long trips, and customers see extra earnings by sharing their car. This was Adam's dream, to help the invisible hand reallocate resources. One morning Adam receives a call from BlaBlaCar, a French ride-sharing unicorn start-up, with an offer to buy the company for $50M cash. He decides that this has been a great ride for him, and takes the offer.
Since Adam owns 50% of the shares, and like him all other shareholders had common shares, Adam receives $25M from the sale of UMC.
The agreement with Collective Equity Ownership is such that after he receives the earnings from the sale, Adam deposits 10% of what he received to the pool, equal to $2.5M. This sum is then re-distributed pro-Quota to every participant, as shown in the table below.
Once the quota is re-distributed, Adam will still own his quota of the pool, until all the participants have had an exit, or end being operative. The exit of other participants in the future will also re-distributed pro-quota.
Amount deposited: $ 2.5M
Participant |
Quota |
Amount Received |
Adam Smith |
5 / 10 |
$ 1,250,000 |
Participant 1 |
3 / 10 |
$ 750,000 |
Participant 2 |
1 / 10 |
$ 250,000 |
Participant 3 |
1 / 10 |
$ 250,000 |
TOTAL |
1 |
$ 2,500,000 |
Case 2: Unforeseen Event
Sometimes things don’t go as planned, and an unforeseen event outside your control turns the tide on your growth.
Although Use My Car Ltd. was growing, a news story came out showing drug dealers using the cars rented through UMC's platform to smuggle contraband between towns. A series of investigations began into the company to ensure they were obscure to this. Also, customers started fearing what users were doing with their cars, and unsubscribed from the platform. Through word of mouth people were dissuading others from listing their cars on the platform. Although Adam's faithful customers were still using it, the revenue from their rentals was not enough to cover the operational costs, and UMC was therefore forced to close. Although Adam learned valuable lessons, developed new skills and created his own network, he invested time, money and effort in his startup, and now his shares are worth nothing.
By joining Collective Equity Ownership, we understand the risks associated with running and owning a business, which is why, even if you fail, you will still own your full Quota of the Pool.
Sometimes things don’t go as planned, and an unforeseen event outside your control turns the tide on your growth.
Although Use My Car Ltd. was growing, a news story came out showing drug dealers using the cars rented through UMC's platform to smuggle contraband between towns. A series of investigations began into the company to ensure they were obscure to this. Also, customers started fearing what users were doing with their cars, and unsubscribed from the platform. Through word of mouth people were dissuading others from listing their cars on the platform. Although Adam's faithful customers were still using it, the revenue from their rentals was not enough to cover the operational costs, and UMC was therefore forced to close. Although Adam learned valuable lessons, developed new skills and created his own network, he invested time, money and effort in his startup, and now his shares are worth nothing.
By joining Collective Equity Ownership, we understand the risks associated with running and owning a business, which is why, even if you fail, you will still own your full Quota of the Pool.