I'm not in the US, so I can't comment on the options for Nebula, but where I live coops are a specific type of legal company which would encompass what Nebula want - a company where profit is divided between members in proportion to their contribution. As part of that the only owners allowed are contributors, and the only people who can receive a profit share are the owners. If you want to stop contributing you have to stop owning, and there's no value to the shares.

So you can't take on equity funding, only debt.

This structure seems to be made to work around that, structuring it like a regular stock company but with a sale trap to make it unappealing to sell for a quick return.

Is this a huge problem?

It depends on what the company is trying to build.

The dollar amount of debt a company can take is limited by its revenue because it requires ongoing payments to service that debt. Whether it's debt from a bank business loan or by issuing corporate bonds, they both require real revenue to make those payments.

Equity investments don't have a ceiling capped by the company's present day earnings. This is important if the company has ambitions to build something that can't get any meaningful revenue on day 1. Instead, they need the money to pay salaries, cloud bills, office rent, etc to build the product and hope the later revenues will justify the investment. E.g. the early Google startup in 1998 took $25 million VC investment and didn't have meaningful revenue until +4 years later in 2002. A company with $0 revenue can't get a $25 million loan with a 4-year deferred payment plan. Yes, there's such a thing as "convertible debt-to-equity" but that's a financial vehicle for investors that doesn't apply to co-operatives.

An external party could agree to debt funding with deferred repayments, but they can't link repayments to profit.

Hence the structure of Nebula - a regular stock LLC with a constitution that has an exit trap.

You can totally scale this type of ownership.

For smaller co-ops that don't bring in members very often or who are just getting started they often create an LLC and put in the articles of incorporation that all future members will receive an equal share and equal voting rights. This does require filing paperwork for every new member, but keeps taxes easy.

For co-ops that expect to have lots of members rapidly (consumer co-ops that sell shares in their store to whomever wants one, for example) they normally form a corporation and allocate a certain number of shares up front and indicate that any member has equal voting rights, etc. this makes the taxes harder, but is a lot less paperwork since you have to file stuff about the number of shares sold at the end of the quarter (or whenever, I forget the exact reporting details, been a while since I've done this) but not every single time you add a member.

Georgia (and a lot of other states) also have specific laws for EMCs and other specific types of co-ops, so it's really fragmented. Take this with a grain of salt, it's just two examples of how a lot of smaller co-ops do things.

A co-op is structurally as much about ensuring that employees can’t transfer their equity to non-employees as it is about ensuring that employees have equity. You can’t get the semantics of a co-op ownership structure just by doing regular things with a C-corp; you need extra hacks, like these bylaws.

Ownership is a nuanced concept, and taking a hard line on just one feature of ownership is not necessarily the right choice in general discussion.

In the case of startups, which are not yet public companies, even less so, as those shares can be dilluted, etc.

In the case of public conpanies I see them much in the same way I see shares of conpanies I buy in the stock market. I have no meaningful ownership of the company in those cases, it is just where I park some money looking for a return in investment.

A coop is actually a form of ownership, even if ironically you can't sell that ownership.

They have to explicitly restrict selling of the shares through contract means. That's because ownership is the legal right to possess, use, or give away (sell) a thing. Likewise, Nebula has to explicitly restrict selling of partial ownership through contract means.

No, you don't own stock when you own stock options. A stock option is a right to purchase stock at a particular price, and you own that right. Just like owning, say, an easement on a piece of land, doesn't mean you own the land. (And both a stock option and an easement have a value, and you may be able to sell those things themselves — but the value they have, and their sale price, is often disconnected from that of the underlying asset the right exercises against.)

You know how you can very easily tell when you own something? Because governments almost always tax transfer of ownership of a thing. You don't pay taxes when you acquire options, because you haven't yet acquired ownership over anything. You do pay taxes when you exercise those options — exercise that right to acquire stock at that price — because now you do own something you didn't before.

Another way to tell that you own a thing, is that you have the ability to directly pledge that thing as collateral on a loan. You can pledge stock, but you can't pledge options[1]. This is because you can contractually grant the bank the ability to confiscate your stock in event of default on the loan, in a way that guarantees that they will succeed in this confiscation. But you can't contractually grant the bank the ability to confiscate your options, in a way that is guaranteed to succeed.

And that's for exactly the reasons you outline: there may be contractual stipulation on the exercise of the options, that mean that the bank can't immediately liquidate the options, and thereby can't balance the loss-of-lendable-assets coming from your default and/or might risk the company's share-price falling, or even the company going bankrupt, before the options may be exercised.

Also, sometimes the bank wouldn't want to exercise a contingent asset they've acquired, but just wants to sell that contingent asset on to someone else who wants to hold and exercise it at a future date. ESOPs in particular usually have voidability clauses that say that not only can't you transfer the option, you can't even build a financial instrument around the option that has the semantics of transferability. Banks very much do not appreciate restrictions like that.

---

[1] Yes, you can show your holding of options as a demonstration of assets, to increase the amount a bank is willing to lend you. But this, like any other demonstration of assets — e.g. a demonstration of employment, or of ownership of revenue-generating assets — goes into a Net Present Value-adjusted future-cashflow projection calculation that the bank does, to determine how likely you will be to be able to make your regular loan payments when everything is going well for you. In the breach, they still need collateral to be pledged out of stuff you actually own — i.e. can guarantee them the right to as a creditor.

Many people do, in fact, pay taxes when they acquire options. You seem to be saying that people who have filed an 83(b) election own options, but people who haven't don't. This is not correct.

In general, your error appears to be that you either own something or you do not. This is not generally how proprietary rights work.

Ownership is a bundle of rights that is not uniform across property or time.

Honestly Nebula always felt off to me because of this marketing. They never sold it as a place where creators had a more equitable share, or where they had more creative freedom and control (which seem to be true), but they used the idea that they were "fighting the man" by going at it alone. It always felt like a half truth which, turns out, it is.

Also the price always felt too good to be true to me so I always suspected some sort of investment from somewhere to create a loss leader. Though the jury's still out on that. But having worked on video streaming online myself I know first hand how expensive it can get so I wonder how profitable the company is.

According to the blog post, they get 50% of the profit which would be much lower than 50% of the revenue. This is worse than other profit-sharing platforms. But hey, you own 50% of a shadow equity or whatever that means.