Common Trust, a company specializing in employee ownership buyouts for small business owners, has successfully raised $2.6 million in seed funding. This investment will enable Common Trust to expand its services and help more businesses transition to employee ownership.
Key Takeaway
Common Trust has raised $2.6 million in seed funding to support its efforts in assisting small business owners with employee-focused succession plans.
Seed Funding Led by Crossbeam Venture Partners
The seed funding round was led by Crossbeam Venture Partners, a leading venture capital firm. The round also saw participation from Schmidt Futures, an organization focused on accelerating social impact, and a group of additional investors who prefer to remain unnamed.
Founders with Extensive Experience in Shared Ownership
Common Trust was founded in 2022 by Zoe Schlag and Derek Razo, who have a strong background in the shared ownership space. Prior to starting Common Trust, Schlag and Razo were involved in shared ownership initiatives at Schmidt Futures and Purpose Foundation, respectively.
Helping Business Owners Transition to Employee Ownership
Common Trust works closely with business owners to design, finance, and execute employee ownership buyouts. This gives owners and investors the opportunity to access liquidity by selling their businesses to their employees.
According to statistics, three in five small businesses are expected to seek a sale within the next decade. While traditional buyers such as private equity firms and brokers are available, they can only acquire a limited number of businesses. Additionally, these buyers may not prioritize the interests of the employees or the existing company culture.
Zoe Schlag emphasizes that employee ownership is a scalable solution to address this market demand. It allows for the preservation of generational businesses and high-quality jobs across various cities and towns in the United States. Furthermore, Common Trust’s approach is cost-effective, unlike brokers who typically charge around 10% of the transaction.
Common Trust utilizes employee ownership trusts, specifically perpetual purpose trusts customized for employee ownership buyouts, to facilitate the transition process. This enables small businesses to exit while maintaining their independence.
In its first year of operation, Common Trust has successfully assisted numerous business owners, management teams, and investors in transitioning to employee ownership. One example is Clegg Auto, a family-owned auto shop that utilized Common Trust’s services for its buyout. Since becoming employee-owned, Clegg Auto has seen a doubling of profits, achieved its highest customer service ratings to date, and recorded record profit-sharing with its employees.
With the recent seed funding, Common Trust is well-positioned to continue its mission of promoting employee-focused succession plans and helping small businesses thrive under employee ownership.
