How do I become an RCO?
This is the step by step guide to approach it from the bottom up. Fundamentally it is an invitation to aligning your own interests to the needs and desires of the organism you are creating.
To become an RCO is somewhat different from starting any venture. It weaves together the personal and the ‘business’ perspectives more intimately. To start this journey we have developed a canvas and this will expand on the different aspects of the canvas. You can download it so you can start filling it in as you work your way through this article.
The RCO is different than most other companies. It comes with transparency. Not just for your company but also for you. It is an invitation to come into alignment. To shift worldviews and begin shifting your stance. Beyond the mode of extraction, so common in our current economic paradigm, to one of connection, surrender, service. In the process of forming our own RCO, dealing with that programming and heritage of the culture we have been brought up in - professional, institutional and otherwise - we’ve found that the most challenging thing has been to stop lying to ourselves.
This piece is an invitation to some of the key questions that shifted us and also some of the key questions that you will have to find honest answers for, for yourself, to find your way into the RCO. This article is focused on starting the RCO from scratch or starting it based on an association. The principles are however highly applicable in therms of reshaping an existing structure as well, and some considerations might shift. (If you are trying to do that, let’s talk and hopefully we can help too). The legal structure invites a process of alignment through a high level of transparency which extends from the systemic down to the very personal. It is a realization of Peter Senge’s words “What is most systemic is most personal” and it’s an invitation to begin a journey of healing in that domain as you fulfil your (current) purpose in the form of a company while inviting communion with the others called by your endeavour.
First move: So what do you want? No really, what do you want?
That question is central to finding out if you should become an RCO. And please note the double implication of you as the you of the organization and the you of the founder. One of the key features in addressing our current predicament (since that is really what it is rather than a problem) is to bring different interests, worlds and drives into alignment. The RCO is an invitation to do just that.
The initial move into becoming and RCO is to reflect on your personal motivations. The invitation is to do this with care, slowness and do it deeply. Preferably with your co-founders or with someone you trust that will hold space for you. The first part is an Authentic Relating check in regarding Intention - Desire - Boundaries - Fears. Doing this from the personal point of view.
Intention: what are you intending to do with this venture. What job will it do for you as an individual? Who do you hope to become as a result of initiating this particular line of work? It is an invitation to look at your immediate why(s).
Desires: this inquiry is an inquiry to go deeper. To pause, to look beyond the immediate, exploring deeper into what deeper desires you are trying to fulfil as a result of engaging with the venture. This is important to take seriously, to let the question sink. In my experience these are the mechanisms that comes online as the stakes get higher in both success or failure.
Boundaries: These are the near term aspects where you are unwilling to compromise. These are show stoppers or no-go conditions for you. To this point, but no further. Where do you draw your line(s)?
Fears: These are your deeper fears. It is an invitation to really slow down and look at your past. What are the recurring patterns in your life? Why are you engaged with the venture you are currently engaged with? Was it in reaction to something, if so what? What do you absolutely wish to avoid? Fears are hard to come at alone and we strongly recommend the founding team to sit though this exploration together. It is often easier for the others to, with a loving gaze tease out what is in your backpack than for you to do it yourself.
In this inquiry, which usually will and probably should take some time the invitation is to consider the interactions between these 4 points on three levels
Tasks/functions: What is the role(s) you are assuming in the venture and how does it interact with the other roles you imagine in the venture/project?
Environment: In what environment (social, historical, cultural etc) have your opinions been formed and what are the social and cultural antecedents to your engaging with this particular project in this particular way?
Self: What identities are active for you in this project? What are the conflicting dynamics between them and how do you see/foresee/hope engagement with venture will shift/expand/modify your identity?
What we are trying to get to is the transitional nature of the RCO. It is what Dave Snowden is referring to as an Apparatik perspective. Something you cannot fully grasp unless you shift your perspective (see their work on the Estuarine mapping framework). The RCO invites and presupposes a different way of seeing the world than we are used to in the economic paradigm. Paul Chefurka’s framework “Ladder of awareness” points in this direction, as well as the 10 oxherding pictures in Buddhist tradition. My conversation with Ylva Björnberg and Alexander Crawford (part 1 / part 2) dives deeper into the nuances of this framework and why it’s important. The RCO is an invitation to see the world as an interconnected whole. It is to take seriously Tim Morton’s quip in the book Hyperobjects (paraphrasing) “In the age of hyperobjects there is no away”. Unless we spend time to train our attention and explore our wants, needs, fears and wounds these will seep into the RCO unconsciously. Therefore the first two moves are deeply personal.
The second move: breaking the domination of the economic paradigm
The second move which is perhaps less consequential once you are fully engaged with the first is to move to a multi capital model. If you have not been brought up in a capitalist society this step may be unnecessary, I do however believe that anyone who has had prolonged exposure to the culture that goes under the flag of ‘western civilization’ will need to move through this step in a focused manner.
There are of course many models of multi-capital. We have settled for one with 4 dimensions in our work. We highlight Financial, Intellectual, Spiritual, Relational (Social).
Two unconventional uses of this model is perhaps:
A dimension often included in these is Natural capital - we are not working with that particular model as we believe that natural capital is a fallacy. It underpins all the capitals mentioned here and is therefore included. However it is important to think about the long term consequences and with that also pay close attention to what resources and institutions we are relying on in planning our venture as well as how we account for that implied use of resources.
Quantification fallacy: although there is an invitation to look at these different capitals we are not proposing to denominate these in terms of money or financial capital but rather take a multi currency approach alongside the multi-capital one. The risk of dominating everything in money or starting to exchange tokens in return for e.g. relational capital (help from your friends) is that we devalue these and introduce game theoretic dynamics there as well. The other forms of capital becomes another arena to act out our collective habits rather than a path to start winding down our destructive habits in favor of regenerative ones.
The multi capital model is a scaffold for shifting worldviews, it helps us to orient ourselves not only towards the financial / monetary but also to other modes of exchange and value that exist around us. It can also be a scaffold in the other direction, for those coming in form the non-profit or community sector asking the question why you are NOT exchanging also financial capital may be a generative endeavour. Taking seriously that it depends on the context whether that mode of exchange is suitable or not.
Once you have identified which different currencies and exchanges you are expecting and in which type of capital you place them, the invitation is to rank order capitals. I.e. to feel into which forms of capital holds the most emotional charge for you and why? To have an internal map for those will give us a possibility to navigate more skilfully as the process of co-creating the venture progresses.
Finally there is an invitation to consider your timeline. Really feel into how long you are in this for. As well as what the different transition points that you foresee. Either these are in terms of days, weeks, months or years or perhaps a valuation or other milestones. These are going to be very important in later stages as we start looking at transition points in the life cycle of the RCO.
By the end of this move we have explored ourselves (1st move) and we have explored how we envision our own relationships linking the economical, bio-physical and perhaps even spiritual world we inhabit. It is based on these moves that we will be able to start piecing out our path forward in a new form, as a jointly created organism.
The third move: Coming together and start conceiving a new organism
Depending on your point of departure this is the time to circle. To truly sit together in vulnerability to share what you found in your individual exploration. To give an overview of what our individual maps look like going in. To take a look like reinforcing and opposing intentions, desires, boundaries and fears. Making explicit that we are there to walk one another home and that the personal carries equal weight to the organizational or organismical. This is an invitation to invite a deeper knowing of each other and ourselves as well as making explicit our internal prioritisations.
The second inquiry to bring into the circle is to come together on our purpose as an organism. What is the nature of the predicament that we are addressing? How do our individual and collective why(s) overlap and align? Stepping into the depths of task at hand and looking back at ourselves as a founding team - where are potential blind spots? What are we missing as a collective? What is not being said? To spend some time prior to defining explicitly what we are aiming to do, feel into the dark corners of what it is we are reluctant to see and be in relationship to our undertaking. Feeling into our collective abyss or shadow is typically generative, sometimes unpleasant and if we can hold that tension increasing our potential. In a way one could frame this part of the process as being in the abyss together with as much love and grace as we can muster, looking around to see what we can find. Both what we find easily and what takes some work to excavate.
The purpose is of course to invite the possibility of a deeper alignment between the personal, organizational and societal. By making our own drivers visible to the best of our ability we have something to compare to as we engage in the work. As we progress we have a point of reference that we can return to and evolve. It is an ambition to document where we are and create possibilities for conscious movements going forward.
This is the point when we engage in the business canvas. Here is a brief outline of the various boxes as defined:
Purpose: What is the purpose the RCO centers around? What are you trying to accomplish? What part of the predicament will you be focusing on?
Calling question: What is THE question that those engaging in the company and the association feel called by?
Company’s activity / Association’s activity: What is the purpose of the association (larger purpose) vs the company (commercial/for-profit business contribution to purpose)? Who are the members of the association?
Principles: By what principles will you operate? Burning man’s 10 guiding principles or the agile manifesto can be used to provide some initial inspiration. Keep in mind that less is more and we recommend that you make them operational. I.e. these are heuristics that can give us direction when we are lost. The best principles are observable behaviours for anyone interacting with the organization - so be open to modifying these as you move from you planning phase into execution. In other words stay away from what you could or should do and stick to what you actually do - trust that it is good enough.
What needs nurture? What are the activities, stances or aspects of the business that need special care and attention?
What needs protection? What are the aspects that you absolutely must protect in this venture? What are the collective boundaries that you are not willing to compromise on? What are the critical innovations or values that you (intend to) create that must not get into ‘the wrong hands’?
Company’s governance structure: Here is an invitation to outline the company’s governance structure. We believe that many organizations will thrive through employing governance structures that empower employees and are geared towards collective intelligence. Yet the ‘right’ structure depends on the task at hand and depending on the world and business model dogmatic focus on decentralized governance might be a mistake.
Resource need / Funding strategy: How do you intend to fund the company? What are the capitals that are crucial for you to secure? Is money financial resources primary or are there other resources that we can acquire or employ without having to engage with financial investors?
Transition points in the life cycle: The life cycle is based on introducing steps of the way, points when we would like to shift focus. The first step is when we have grown enough to stop focusing solely on growth and would like to start funding other aspects of resourcing our evolutionary purpose (at it is enacted through the association). The second step is to look at when we need to start considering some sort of succession: either splitting entities up in different parts or transitioning ownership. We believe that the transition into the death or decay phase will be obvious when it occurs. The first transition point is particularly important as it will be a point of departure for negotiations between financial investors, founders and other shareholders.
Revenue streams: What are the intended revenue streams? This will of course have to be outlined in more or less detail in a business plan or similar (depending on the funding strategy that you intend to use). This will also say something about the nature of the relationship between the company and the association.
An important stance in this work is to give priority to what is actually being done. Be aspirational and dare to look at what actually is. Very elaborate schemas or processes for meetings are not necessary, rather focus on documenting what you are actually doing and then modulate based on that. A clear seeing of how things are, a high level of self awareness is often more conducive to building regenerative organizations than much else. There are many ways things that could be but to live with what is and to make sure that we help each other forming regenerative habits is some of the most important aspects of this work. Ideas, ideology, philosophy and metaphysics are still important and have their place but the practice of building the RCO is probably more tactile, more haptic, more direct. As Peter Senge put’s it “What is most personal is most systemic.”
The fourth move: Formalization phase.
Once you have completed the first 3 moves with care, exploration and creativity you are ready to start formalizing the documentation. You work now needs to be concentrated and translated into the Source Code and the 3 main legal documents. If you have clarity on the aspects we’ve touched upon in the first 3 moves, this part will not be too hard. Setting a tonality that allows for the members, collaborators and co-creators to engage and feel into what you are trying to achieve is important. These documents should be understandable and feel accessible. There are mechanisms for evolution suggested in all of them and initially, before your venture grows it is quite easy to change them. If you are implementing this in an existing structure, the principle of starting from where you are now, mapping possible paths forward based on what is and modulate from there is important. Any shift of the things you are currently doing is potentially a change of habit for someone. Changes of habit require a clear understanding of why I should change and then consistent practice over time in community.
The three documents and their relationship to oneanother.
The source code is the fundamental document that deals with setting the scene for this entire organism. In our application we’ve covered it in 4 main chapters or paragraphs: Essence and Purpose, Guiding Principles, Key structures (incl organizational design, ownership and board seats, alignment of pledged companies, pledging process, life cycle, boards in the RCO) and Key Processes (Governance design/Operational design, Memberships, Decision making at the AGM of the Association, Evolution of the Source Code). The source code has to be in alignment with the other documents and the legal requirements as it is referred to in the formal founding documents described below. It is a central document around which the entire RCO pivots.
Shareholder agreements are usually not transparent in the way they are in the RCO. It is the agreement between shareholders (usually founders and financial investors) on rights and obligations as it pertains to the company they are running together. In conventional companies these tend to be laden with a secrecy clause preventing anyone other than the parties to take part of it. The RCO opens this up to all it’s members as they are also owners of one of the shareholders. The shareholder agreement is the document that trumps the bylaws of the association and the company in current practice.
A shareholder agreement can be changed fully as long as all shareholders are in agreement. It means that this is only fixed if founders and shareholders (including the association) cannot agree. As long as all parties are in agreement the shareholder agreement can be changed. It also means that as you are involving financial investors in your company it is important to make sure that they are aligned with the values in the source code (which they are only partially bound by from a legal point of view) and to see that they are only legally bound by the clauses in the shareholders agreement. Conflict in this domain is common, especially if timelines are extended or if business plans require more money - with that said our recommendation would be to regulate as much as is needed and as little as possible.
If you are starting up a new venture and incorporating as an RCO it is useful to see the shareholders agreement as a starting point for negotiations with financial investors. The life cycle in the RCO could be used to implement quantified thresholds around when to propagate the organisation into new ‘life cycle’ stages and that could depend for instance on the return requirement of the shareholders (e.g. 5 or 10x of their investment) or some specific impact (1 million people reached etc). Once this is achieved (sprouting phase) the company could redirect excess resources into the ecosystem and start building value for the ecosystem.
This value is built through an investment company set up under the non-profit association that the company (and perhaps also aligned investors that have proven themselves in the companies) can gain access to investing in. This would mean a similar negotiation of initial profit and then a capped possibility for value extraction with a higher share invested back into the ecosystem i.e. in efforts that are expanding the cake. This is attractive due to the diminished risk by investors as they are investing in a portfolio, potentially one with a fund structure, yet one that support different aspects of the shared purpose.
The shareholder agreement is central to the governance of the company. It has to mirror the bylaws of the company and association and anything that might be a source for conflict, or that is important to the founders to protect compared to the existing economic logic should be specifically outlined. The shareholder agreement is the only document that legally bind the shareholders of the company, so getting this right in relation to which investors you have on board is crucial. While, as mentioned, remembering that in practice this is probably the document that will be renegotiated most often and is easy to change - as long as all shareholders are in agreement.
Bylaws of the company and association
These bylaws are more or less straightforward. They bind the company and the association respectively. It is also here where we determine the scope of responsibility for the board of directors. They are public which means that anyone can find them in the public registry. For these we rely on the practice that B-corps has mainstreamed to include people, planet and profit in the description of the purpose as well as committing the company to ethical principles of how these entities shall operate (UN Earth charter and the Global compact in the case of Innerworks). In addition we make an unconventional move to make board members of both associations responsible for the financial as well as purpose and ethical actions and performance of these organizations. This is fundamental. We believe that boards should be invited to be attentive on how the company is achieving its financial goals as well as that they are achieving them. These documents also cover the basics on how the board should work together and/or governance models etc for the companies. Since these are registered and public it is useful to keep them to a minimum, setting a direction and still creating a lot of space for the different assemblies (AGM’s and boards) in the organizations to shape themselves in response to generative prompts rather than ‘deciding and restricting’ the organizations movements.
As we develop them templates and suggestions for these documents will become available on the RCO.life page. If you are already getting incorporated feel free to reach out. We’ll be happy to share what we’ve worked on.
Fifth move: Registry och realization.
At this point you would like to find a lawyer. Let them review the documents and then move ahead to get incorporated.
Additional documents that you will need in the near term is a commitment of the founders to, after the interim period, will give 10 of their shares to the association. If it possible to give then that works, in most cases however you could put a contract for the sale at the nominal value at the time of making the commitment. Doing this before there are any financial values in the company means no or very little tax consequences. It is also important to look at how one is allowed to transfer shares to an association. (E.g. in the case of Innerworks that is incorporating in Sweden: In Sweden, Swedish citizens and residents can transfer shares below cost to an association while companies cannot, non-Swedish residents cannot transfer shares below their value either.) It is therefore important to keep these aspects in mind when you distribute the shareholdings.
Board instructions, code of conduct and similar documents should be developed when needed pacing with the growth and development of both organizations. These should of course be aligned with the principles and guidance specified in the Source Code.
Now all that’s left to do is to actually realize all those things that you dreamt up. Moving out of the stack of papers and into the real world.
This concludes the basic RCO manual in 4 parts. The moves you make are to look at your personal needs, to your personal deeper needs and then setting up the conditions for the organism. This process is deep work and the more personal and authentic you can be with one-another, really zooming in on the roughness and mismatches the smoother your actual building and realizing of your vision will be. Did you know that ⅔ of ventures fail due to founder conflict? This process is an invitation to reduce that number. To do some of the hard work upfront and it’s designed from the many ventures and projects we’ve been part of designing and starting in our careers.
The RCO is concerned with “what is enough”. To set metrics that allow for ‘temporal comparison’ with oneself, with your desires, dreams and goals rather than being caught up in the rat race of comparing to ‘all the other startups’ or more commonly getting caught up in an financial investors agenda. Most of us are still very much based in what Keagan calls the Socialised mind, even if we have access to other levels as well - and this makes it important to create reference points that we can revisit. Points that are somewhat fixed so we can take stock of how far we’ve come.
A lot of this can seem excessive. Our experience is however that you have to do it at one point or the other. Taking the time to do it upfront when spirits are high and we are motivated to build this thing might save you much time, lawyers’ fees and disappointments later. At the end of the day it is an invitation to become a little more aware, to direct your attention a little more consciously with the assumption that moving in that way is a key element in doing things a little differently. And our world desperately needs us to start doing things a little differently.