Common Trust raises $2.6 million in seed funding to promote employee ownership -

Common Trust raises $2.6 million in seed funding to promote employee ownership –

Time Stamp: September 11, 2023 2:13 PM
Source Node: 2875524

Common Trust, a platform that facilitates employee ownership buyouts for small business owners, has closed $2.6 million in funding. This seed funding round was led by Crossbeam Venture Partners, with participation from Schmidt Futures and additional support from prominent investors in the sector.

Since its inception a year ago, Common Trust’s financing platform has assisted small business owners in transitioning their businesses to their employees. The company provides the necessary tools for selling owners and management to design a tailored employee ownership trust, secure capital aligned with their goals, and execute a successful transition.

Common Trust’s successful seed funding round highlights the growing interest in employee ownership as an alternative exit strategy for small business owners. With a significant portion of small business owners nearing retirement, this innovative platform offers a compelling solution that not only benefits business owners but also supports employees and communities in the long term. Employee ownership is emerging as a transformative and mission-driven approach to business transitions, and Common Trust is at the forefront of facilitating this transition for small and mid-sized businesses in the United States.

In the United States, there is a significant demographic shift among business owners, with many approaching retirement. Over the next decade, millions of small businesses are poised for sale. However, traditional exit options such as private equity and private buyers are increasingly viewed with skepticism by owners, as they often result in sales that disregard the interests of employees and the established company culture and values. As a consequence, 75% of business owners express regret about their sales within a year.

Employee ownership presents an attractive exit strategy that aligns with the legacy of selling business owners. Nonetheless, the complexity and cost associated with traditional approaches have deterred businesses from pursuing this route. Common Trust offers an alternative exit strategy by providing small and mid-sized business owners with a straightforward, appealing, and cost-effective solution through employee ownership trusts—an innovative approach for businesses to transition into employee ownership.

Unlocking Transformational Potential

In a statement, Common Trust Co-Founder and Managing Partner Zoe Schlag said: “Employee ownership can be transformational for businesses, its workers, and local communities. For many founders who are preparing to retire, exiting through employee ownership offers a pathway to get a fair value out while also ensuring that their people and community will continue to benefit from the company’s growth, even long after the sale.”

Addressing the Retirement Wave in Small Business Ownership

Ryan Morgan, Partner at Crossbeam, highlighted the critical issue of small business owners nearing retirement in the United States.

“With 40% of small business owners in the U.S. on the verge of retirement, three in five small businesses will seek a sale over the next decade, and only a small fraction of them are likely to be absorbed by buyers,” said Ryan Morgan, Partner at Crossbeam. “Common Trust’s unique, employee-centric exit strategy is transforming the space and creating positive social impact by providing small business owners an inclusive and mission-driven exit solution.”

Founded in 2022, Common Trust emerged from the combined expertise of co-founders Zoe Schlag and Derek Razo. Zoe Schlag previously worked in the shared ownership space at Schmidt Futures, an initiative established by Eric and Wendy Schmidt. Derek Razo’s background includes contributions to Purpose Foundation, a prominent think tank supporting alternative ownership and financing structures aimed at preserving mission and building community wealth.

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