Sharetribe is a marketplace software for entrepreneurs. Its business model focuses on democratising platform ownership.
01 | Brief Summary and Key Facts
Sharetribe is a marketplace software for entrepreneurs. Its business model focuses on democratising platform ownership by making marketplace technology accessible to everyone. Sharetribe builds software that allows founders anywhere to build and run their own marketplace platforms with no code or low code.
Location: Helsinki, Finland
Founded: 2011 by Juho Makkonen, Antti Virolainen and Niklas Begley
Main products/services: marketplace software for founders
Highlight of their unique approach
They support socially driven founders, especially those focused on the circular economy, with solutions that help us get the most out of our existing resources. They help these founders launch their marketplaces, putting purpose before profit through differentiated pricing (forgoing higher margins for themselves) and democratising platform ownership
Highlight of their unique design
Sharetribe is steward-owned, and is undergoing a process of facilitating the exit of investors over ten years so they can eventually reinvest 100% profits into enabling the purpose.
Sharetribe
02 | Founding Story + Industry Context
In 2008, Juho Makkonen and Antti Virolainen started building sharing platforms. This coincided with the rise of successful platforms like Etsy (2005) and Airbnb (2007). In addition to all being platform economy companies, their business ideas were often conceived from a genuine desire to address societal problems. For instance, Etsy was created in response to a world dominated by mass-produced consumer goods. It encouraged more people to purchase hand-crafted items while providing income to micro-entrepreneur crafters. Airbnb aimed to use the additional space available in people's apartments. Uber and Lyft wanted to reduce the number of cars on the roads.
In providing software solutions for such platform businesses, the founders of Sharetribe noticed that although these companies would ideally align their goals and profits as they grow, in reality, growth often causes conflicts between them. This happens because when these two conflict, shareholders and investors prioritise profits and development over the company's social mission - often by choosing to grow sales and margins even where this undermines any social purpose. The experience for many businesses in the platform economy is that when they take on mainstream venture capital and later get listed on the stock exchange, pressure from investors often weakens their ability to prioritise their social mission.
The global sharing economy market was valued at $381 billion in 2022 and is projected to reach $827 billion by 2032. Global giants like Airbnb, Etsy, Uber, and Fiverr primarily dominate it.
In contrast to these players, Sharetribe provides an affordable alternative for founders looking to create sharing marketplaces and peer-to-peer platforms. Its technology enables individuals to leverage the positive aspects of sharing marketplaces while ensuring that the value created is distributed fairly. Today, the company provides services to over 1,000 customers across 70+ countries.
03 | Regenerative & Distributive Strategies and Actions
Sharetribe attempts to prioritise its purpose over achieving ever-higher profits. This approach allows Sharetribe to support socially driven founders with limited budgets to launch their marketplace. However, Sharetribe has identified two challenges of its social-mission-driven founders compared to other startups. First, there is a need for more investment approaches (especially from venture capital) that support startups in prioritising their social purpose over maximising their growth. Second, some social-mission-driven founders require additional support in building more effective business strategies. Sharetribe has responded to these challenges by providing free advice and training on platform strategies for its customers.
Sharetribe’s investors challenged this strategy, as they felt Sharetribe could make more money by focusing on large enterprise customers building marketplaces for retailers selling new products. By transitioning to steward ownership, Sharetribe was able to pursue its mission-driven approach, allowing it to achieve sufficient profits while significantly benefiting social-mission-driven businesses.
One of Sharetribe’s early customers is The Octopus Club, a marketplace for preloved baby, kids, and maternity items based in the UK. Its Founder, Ana Estrougo, started the company after she realised there were no dedicated platforms for parents to buy and sell, only generic marketplaces which didn't have a community feel and were purely transactional.
"Becoming a parent is a huge shift, and I felt the need to make new connections, being part of a village, and knowing where my baby's cherished items were going next - and that I was buying from parents who cared about the items they were selling. We all want the best for our children, and second-hand is not second best."
When Ana discovered Sharetribe, the company was more focused on marketplaces for rentals and services, so Ana got some custom development done on top of Sharetribe's APIs to add features for selling pre-owned products and launched The Octopus Club. Since then, Sharetribe has grown into a leading buy-and-sell marketplace provider specialising in supporting Impact Founders. Ana’s Founder’s story is an excellent example of the customer-centricity and co-design mentality driving Sharetribe culture.
“Since launching, we have had very little development (coding) because Sharetribe enables customers to focus on their community and demand, which is vital for marketplaces. At the same time, new features are available on the back end. The fact that Sharetribe is very customisable allowed me, as a Founder, to think about what the community wants. We are a customer-centric solution, so our community decides what we will develop next. We cater to their needs, creating a product that is useful for them.“ – Ana Rachel Estrougo, Founder of The Octopus Club.
Thanks to Sharetribe, early-stage Founders like Ana run their platforms without a tech team, which helps minimise their start-up costs. At the same time, Sharetribe’s infrastructure is incredibly close to their requirements, so they are able to have the functionality they need without the costs and development time required to build their own.
“Through Sharetribe, service fees can be split between buyers and sellers; which creates a shared responsibility, a club feeling. This is a big business decision, as it takes time for the community to work with a new model. It's a new set up we are planning to test..", adds Ana Rachel Estrougo.
An innovative proposition of The Octopus Club is the pro-seller program, which connects people who want to sell items but don’t have time with people who have. The program enables resellers to start small businesses, grow demand, reduce waste, and embrace the community aspect and female empowerment.
04 | How the Deep Design Enables Strategies and Actions
While Sharetribe was growing, its founders saw the impact they could have on entrepreneurs with a social mission but who often needed more capital to get started. They wanted to continue focusing on early stage impact-driven bootstrapping founders with low budgets. Meanwhile, their investors felt there was a bigger opportunity in larger enterprise customers..
Sharetribe realized that if it wanted to continue remain mission-driven, it needed a different company structure that would preserve its independence. Therefore in 2018, the team decided to transition Sharetribe’s governance structure towards steward ownership.
To complete the transition, Sharetribe's existing VC investors required it to buy back their shares. To do this, Sharetribe raised an equity crowdfunding round with an investment model more aligned with its current impact focus. The new investors will get their returns from Sharetribe's profits. The returns are capped: the maximum is 5X the original investment. Sharetribe aims to complete these buybacks by 2028.
After the buybacks have been completed, Sharetribe will be in a situation where it's fully owned by its working team and funded by its customers. At this point, it can decide to use 100% of its profits in any way the team feels it best supports its mission. This could mean investing in building new adjacent products, donating or investing in non-profits or other steward-owned companies, or lowering its prices to make its software more accessible to founders with low incomes.
For Sharetribe, the steward-ownership structure means it’s in the management’s best interest to prioritise its social mission, even if that means slowing down growth or reducing margins to better serve entrepreneurs from low-income regions. Everyone working at Sharetribe is incentivised to make decisions that benefit not just the company's investors or working team but all stakeholders, including the environment, and the society at large. CEO Juho Makkonen confidently stated that since transitioning, Sharetribe will always be a force for good in society.
Steward Ownership Structure
All steward ownership models share the same two fundamental principles of self-governance and profits serving a purpose. They ensure that business control is passed down from one generation of trusted stewards to the next and that the company’s mission is protected over the long term. Unlike many other forms of business ownership, where voting and economic rights are typically passed on to blood relatives or to the highest bidder, those who control steward-owned companies are generally selected based on involvement in the company and alignment with its values. Critically, steward-owned companies decommodify corporate control to ensure long-term independence.
Sharetribe chose the Golden Share model, one of several possible structures. It ensures that the company is stewarded by people involved in or connected to the business. As the following graphics showcase, ShareTribe’s Golden Share structure includes four share classes, separating economic value from voting rights while enabling the company to take on external investment. As in all steward-ownership structures, stewards must pass their voting rights onto capable successors or return them to the company when they leave their roles. A “golden share” can veto any attempts to unwind the structure or undermine the company’s public commitment.
Purpose Economy, Steward Ownership - Rethinking Ownership in the 21st Century
Purpose Economy, Steward Ownership - Rethinking Ownership in the 21st Century
05 | Reflections and Lessons for other Businesses
The Sharetribe story is an excellent example of how steward ownership can embed a company's purpose. However, transitioning to a stewardship model can briefly slow down a company's impact because investors must be paid back before the business can focus all its energy and profits again on the primary purpose.
Nonetheless, many other examples demonstrate that converting to steward ownership is possible. For instance, recently, the three founders of the German Food Franchise Haferkater announced that they want to take their company off the market and become steward-owned with the help of their customers, offering an annual 8.5 percent interest rate over seven years. The crowdfunding campaign to help finance this transition reached its target of €3.5 million in only three months, far faster than had been expected. This underpins the interest in investing in new forms of governance models. In this process, the support of their key investor Balsen was crucial for Haferkater.
Finance and investors are vital in shaping what businesses can do and be in the world. Many socially-driven startups struggle to find investors that support their genuine social purpose, which may entail slower growth for the business and the deployment of alternative ownership models. Sharetribe and Haferkater exemplify different paths to executing the financial transition towards steward ownership. The company's structure, key players, and customers must be considered to find the right model. The Purpose Foundation has advised both companies on their transition. They offer great resources and advice for any company considering steward ownership.
Globally, steward ownership is helping drive new discussions and models for corporate purposes. Policy-makers are also taking note. In Germany, a new legal form is envisaged to facilitate the founding of steward-owned businesses. Historically, companies like Bosch, John Lewis and Zeiss are examples of steward ownership companies. These recent developments look like a fresh wave of startups and established players alike engaging with steward ownership to embrace a purpose-led model.
This case study was researched and written by Vanessa Rosenthal in collaboration with DEAL.
