Stapelstein®'s Transition to Steward-Ownership
Ever wondered why our economy is spiraling into climate chaos, skyrocketing inequality, and a concentration of power? It's driven by one dominant idea at the core of our economy: companies exist solely to maximize shareholder value. But what if there's a game-changing way to flip the script and rethink the purpose of companies to create an economy that puts people and the planet first?
Enter the world of corporate ownership. It may sound dull, but it's the secret sauce that determines whether a company can truly serve its purpose or just chase profits. Many entrepreneurs ask themselves: Why pour your soul into a sustainable product if the company structure and culture are exploitative?
Discover how a shift in ownership structure can transform businesses from profit-focused operations into purpose-driven pioneers and why aligning a company’s ownership with its purpose is crucial for creating a truly sustainable and equitable economy.
The origins of Stapelstein®
Today, Stephan Schenk and Hannah König are in full control of their company, Stapelstein®. But it hasn’t always been this way.
Stapelstein® began as an idea in a university project by design student Stephan. He noticed that children have an incredible urge to move but lack options and incentives to become active. So Stephan conceived the idea of the Stapelstein® — a simple, stackable, colorful, and robust element with infinite possibilities for play, movement, and design.
Instead of selling the design concept, Stephan chose to bring Stapelstein® to market as an entrepreneur, founding joboo GmbH at 21 to ensure Stapelstein® would remain central to a sustainable and fair company dedicated to fostering creative freedom for children and adults.
Initial struggles with traditional ownership
Like most entrepreneurs, Stephan needed money to develop and launch the first Stapelstein® products. He sought business angels to support his business financially and provide guidance in building the operational structure. Stephan felt validated and thrilled when two business angels showed interest and took them on as shareholders. In return, they each received a third of the shares of the company: voting and dividend rights were evenly shared among Stephan and the investors. This gave them the majority of voting rights and the power to dismiss Stephan from the company. However, back in 2016, Stephan did not understand the implications his structure would have.
During the exciting early days, everyone looked forward to growing this new venture. The collaboration helped establish the company's initial structure, something Stephan had not learned at university. At the same time, the investors left Stephan with all other decisions, trusting him to do what was right for Stapelstein®. During this go-to-market phase, Hannah joined the company as a co-founder.
Stapelstein® recorded its first profits in 2019. With profits on the table, it became clear that Stephan, Hannah, and the business angels had different visions for the future of Stapelstein®.
While the co-founders believed profits should be reinvested to pursue Stapelstein®’s mission, the business angels opted for dividend payments. With a combined two-thirds of the voting rights, they outvoted Stephan. This was the moment when Stephan and Hannah realized the problem with their initially naively created ownership structure for them and the future of the company.
Discovering Steward-Ownership
Determined to regain control over Stapelstein®, Stephan and Hannah researched ways to do so and discovered steward-ownership. This model is a legal framework for the type of company they intuitively wanted to build. They decided that if given a chance, they would strive for the legal implementation of steward-ownership to ensure the long-term independence and purpose orientation of Stapelstein®.
Predictably, the co-owning business angels were not fond of transitioning their shares into a steward-ownership structure. They would have needed to transition their shares into financing instruments that ensured the repayment of their investment with a capped upside and without voting rights. Stephan and Hannah were not able to proceed with the business angels owning the majority of voting rights. Seemingly a dead end – and an incredibly tough and emotional situation for them.
Steward-Ownership: An alternative form of ownership
Steward-ownership is an alternative form of ownership that enables a company to prioritize purpose. In traditional companies, money often equals power: the more money one invests, the greater influence one wields. Consequently, shareholder value becomes the primary focus of most companies. However, steward-ownership challenges this paradigm by asking the brave questions: "Who should have power and why?" and "How much is enough?"
Steward-owned companies separate money from power, ensuring two fundamental principles:
- Self-Governance – The company’s steering wheel, or the voting rights, rests with people who are directly connected to the company. Voting rights cannot be sold speculatively or inherited automatically; instead, they are passed on to stewards who are responsible for upholding the company's purpose.
- Purpose Orientation – The value of the company and its profits cannot be privately extracted but rather serve the long-term development of the company. Profits are therefore reinvested, used to cover capital costs, or used for charitable purposes.
The roadblocks to transition
It was necessary for all participants to find a joint solution: If Stephan and Hannah could provide the capital, the business angels were potentially willing to sell their shares back to the company. This meant finding a way to buy out the investors and then transition the company into steward-ownership.
As Stapelstein® was highly profitable, Stephan and Hannah were able to buy out one of the business angels in 2019, using financial resources from the company. The shares, including dividend rights and voting rights, were divided equally between Stephan and the remaining business angel.
Now the conflict heated up as the second investor continued to be reluctant to sell, and the company’s financial resources were not sufficient yet. With voting rights split 1:1 and the investor’s son established as CEO next to Stephan, they had arrived at a stalemate. Many decisions were put on hold. With completely different visions for the company’s development and use of profits, they were neither able to move forward nor back.
A painful and somewhat traumatizing situation, particularly considering the high growth phase that Stapelstein® was in, with the share value – and thus the price for buying back the company – increasing every quarter. While Hannah and Stephan worked continuously for the purpose of Stapelstein®, they knew that everything great they were working for would be reflected in the shareholder value for the business angel.
Securing ethical investment
To resolve this stalemate and move forward with the company, it was indispensable to buy out the remaining business angel. Even though the necessity to separate was clear to all participants, the company was already quite valuable, and the investor insisted on a purchase price based on the conventional valuation of the company, resulting in a very significant multiple for the investors. Profits generated within Stapelstein® could only make up part of the total sum needed to buy the investor out, so Stephan and Hannah had to look for other financing options.
While many investors offered their help, it became clear early in the exchanges that most would only provide financing in return for voting rights. But Stephan and Hannah were looking for financing options in which investors would receive a financial return but no controlling power over the company.
They were excited to find investors willing to provide steward-ownership-aligned financing: Investments in which investors are enablers of the company who provide financial means for an adequate return that suits both their needs and the company's, while control over the company remains with those actively involved and connected to it – its stewards.
Finalizing the Steward-Ownership transformation
After considering their options, Stephan and Hannah decided to collaborate with the capital providers Purpose Ventures and Purpose Evergreen Capital, both focused on investments in companies in steward-ownership. One condition attached to the investments was that Stapelstein® had to complete their transformation to a steward-owned company in the forthcoming months.
After settling the terms and conditions of the investments, the financing deal was completed in 2022 using redeemable shares. With capital from the new investments (58%) and available profits (42%), the second business angel was finally bought out in 2022 – a giant success after long and delicate negotiations.
The final amount of the repurchase price was more than double the initial offering during the negotiation period, but Stephan and Hannah agreed to it as it was foreseeable that the price would only grow further. Looking back, a buyout would have been possible at one-tenth of the price only 1.5 years earlier, but it was impossible to reach an agreement in several previous negotiation rounds.
Lessons learned: The importance of aligned partners
Even though the repurchase price was painfully high, it might always grow further if the company is successful. The long-lasting conflict that Stephan and Hannah endured was worth it as they were able to reclaim the organization. They are back in full power and resolved to make the best out of it! And they learned the hard way about the relevance of considering ownership and financing from the very beginning – and of choosing the most aligned partners.
In 2023, Stapelstein® completed its transformation into a steward-owned company by implementing a golden share model. This model involves creating different classes of shares to separate economic rights from voting rights, ensuring that control remains with those actively engaged in the company.
You can read the full case study on Stapelstein®'s transition to steward-ownership here.
