Why We Raised Venture Capital to Help Workers Create Unions
Unit is a platform to help workers unionize using a combination of software and human labor organizing advice. We released the first public version in December, and it’s being used by more and more people every day. We owe it to worker-organizers everywhere, those in the labor movement who advise and support us, and those holding us accountable to tell the full story of our fundraising process and status.
Our first thought when we looked at venture capital (VC) as a funding source was, “Are we really going to raise venture capitalist money to help workers unionize? That sounds contradictory.” “Vulture Capitalism” has been known for some terrible moral choices over the years — and unions stand to protect workers against the abuses of the boss, abuses of capital.
So why did we choose to incorporate as a for-profit and raise venture money instead of incorporating as a nonprofit and raising donations?
It Takes Money to Make Unionizing Software
To further our mission as quickly as possible, we need to create a platform that can grow from filing 100 union election petitions to filing 100,000 in five years. Our plan for making this a reality involves creating software to empower worker-organizers and catalyze (not replace) the important coworker relationships that make real change. Software isn’t cheap to design and implement. It’s even more expensive to scale quickly. We need a financing model that can reliably keep up with this plan.
Foundation funding may be unreliable year to year, whereas VC money tracks with expected revenue. Because of our promise to only have workers, not bosses, as customers and a refund if a union isn’t happy with our service, 100% of our VC interest will depend on how well we serve workers and how many workers we serve.
Unit is a Platform for Unionizing, Not a Union
Fundamentally, we are creating the tools that modern worker-organizers deserve, a response to the tools being used by well-funded companies to dissuade unionizing today. We prefer this relationship with workers rather than a membership or donation-based model because it means they only pay us if they get something out of it, and they quit paying us if we aren’t doing a good job.
Unions are nonprofit organizations for a good reason — they have members which democratically run the organization and distribute dues. We aren’t a union. We help workers set up a union, affiliate, or federate, but they don’t affiliate directly with us and as such have no lock-in with Unit. We aren’t part of the governance of the worker unions we support. This leaves them free and clear to choose another advisor or platform with no strings attached.
Ultimately, this puts more agile power in the hands of workers, and leaves Unit with the legal ability to finance the creation of better tools for workers.
Venture Money is Made for Risky Ventures
We would rather see venture money go toward something more socially beneficial than see charitable donations go toward something more risky. I’m not pretending to be Robin Hood, stealing from the rich — our investors know exactly what they are getting into by funding a worker-centered company. But if our crazy dream to empower worker-organizers fails, it will largely only hurt wealthy individuals and leave foundation funds for other endeavors. If it succeeds, it will benefit everyone.
There are other sources of business financing other than VC, but none match the ability to fund quickly during periods of rapid growth — and rapid growth is our dream for the US unionization movement.
Additionally, our familiarity with venture structure allows us to better support workers organizing at startups and other venture-backed companies. To those startup workers out there: Collective bargaining is one of the most effective lasting cultural changes you can make in your company, no matter how small or fast-growing. An empowered workplace and economy is more likely to succeed in every way — this is just as true today as it was in the ’60s.
But Why For-Profit?
Nonprofits cannot take money from investors and there are a range of restrictions for fundraising as a worker cooperative, so the choice to finance the company through VC means that it must be structured as a for-profit. Note that for-profit companies may have chartered, legally recognized missions (our does, see below) and nonprofits may have donors that influence their choices just as investors influence for-profit companies. The big difference is financing, and for charitable nonprofits, accountability (see below for more on accountability).
Who Invested in Us?
In July 2020, Unit of Work, Inc. closed $1.4 million in financing to support our mission to help workers exercise their right to organize for a better workplace. This money came from venture capital (VC) institutions and angel investors.
In order of descending amount:
- Bloomberg Beta
- Draper Associates
- Schlaf Angel Fund
- Gutter Capital
Bloomberg Beta made up over half the investment in this round, so I’ll briefly focus on the decision to work with them. I met Head of Bloomberg Beta Roy Bahat in 2019, when I was doing research on software for union automation. Roy told me he had always wanted to invest in a company that would create tools to help build more worker power. He self-proclaims on his bio, “Work has to serve everyone, if it’s going to serve anyone,” and walks the walk by serving on the California Future of Work Commission alongside co-chair Mary Kay Henry, president of the SEIU. I didn’t follow up with him regarding fundraising until Spring 2020, but by that time he had introduced me to several labor leaders and advisors who still support us today.
I’ve been very impressed with Bloomberg Beta’s transparency, and the hands-off support they and our other investors/advisors have provided to-date. That said, our trust in these individuals is not why we ultimately got comfortable raising VC funding.
How Do We Stay True to Our Mission?
Regardless of why we took VC money, we worry about the effects investors will have on our mission. If a portfolio company is unionizing with Unit, will they try to exert their influence on us? Will our thinking and advice be swayed by their participation, however well-intentioned? Will their LPs (the people that fund the VCs) strong-arm them into not supporting us? My personal judgment of every individual that led the Unit of Work investment says that won’t happen. But what if these individuals are replaced?
Right now, investors own roughly one-fifth of Unit of Work, Inc., a fairly normal cut for an early-stage startup. The largest single investor owns less than one-eighth. It is crucial to our mission that we closely monitor the ownership of investor groups and individual investors over time to make sure that, while getting the cash we need to move fast, our decisions are never overly influenced by their ownership. Our investors recognize this too, and it’s in their best financial interest not to obtain or exert control, potentially losing the trust of our users.
What about that share the investors own? They expect to one day be bought out of their ownership for much more than they spent. In typical companies, this would be through an IPO or a private sale, where a larger organization buys the product and team.
But this is not a typical company, and depending on the buyer, a sale would be detrimental to the users we serve. My dream is that the unions we support provide us with the ability to buy out our investors over time, allowing us to turn Unit into a customer-owned co-op (think REI or a credit union).
Unit of Work is currently structured as a Delaware public benefit corporation, and has the following public benefit written into our charter: “supporting the rights of workers to organize to improve their places of work.”
A public benefit corporation (PBC) is significantly different from a standard corporation. In a standard corporation, the fiduciary responsibility of a director is to maximize the value of the corporation; however, in a PBC the fiduciary responsibility of directors is to balance the public benefit of the corporation with the financial interest of the stockholders. Importantly, an investor cannot sue us simply because we choose to take an action pursuant to our stated purpose at the expense of shareholder value. We can only be sued for failing to properly balance those responsibilities.
We can say all of these things, but none of it means anything unless we are accountable for our actions. I’m outlining some steps below that we are taking or will take to remain accountable.
The Unit app and advice is not under any type of non-disclosure, so workers’ satisfaction using Unit will ultimately be our primary form of accountability and feedback on the usefulness of the toolkit.
We will report future financings to you sooner than this one. Some info is publicly available via the SEC’s Form D system, but not the details. We will continue to report who is involved in the company, like in this article.
We will plan for and pursue B Corporation certification once we have more than $100k in annual revenue. This will keep our operations accountable to a third party while transparently reporting on our impact.
We keep our doors open. This mission is going to take a lot of people who care, coming around the table to advise, help, and spread the word. If you see we are doing something untrue to our mission or a way we could achieve it better, get in touch with us. We actually respond to firstname.lastname@example.org.