Kickstarter places public good over profits, is now a “public benefit corporation”
Kickstarter rejects IPO, restructures to become “public benefit corporation”
Kickstarter has no interest in becoming a “unicorn”, the term for companies that soar to valuations of US$1 billion or more. Instead, it has announced that it is reincorporating as a “public benefit corporation”, a change that would legally oblige it to consider the potential impact of its decisions on society and the public.
In addition, Kickstarter would have to make aiding the public one of its goals, and include that in its official corporate charter.
This represents a stark but refreshing departure from the race to hit the coveted US$1 billion valuation mark. Companies like Uber, Airbnb, and Dropbox have raised billions from venture capitalists, with the ultimate goal of large profits in mind. To the traditional money-minded startup, Kickstarter’s goals would appear counter-intuitive.
Public benefit corporations are actually a relatively new designation that has only been signed into law by a handful of states in the US. Kickstarter will be reincorporating in Delaware, where public benefit corporations were first allowed in 2013.
Kickstarter co-founders Perry Chen and Yancey Strickler decided on the move because they wanted to ensure that the promise of lucrative profits would not corrupt Kickstarter’s mission of providing creative projects with a pathway to funding. By undertaking this legal restructuring, Kickstarter is explicitly rejecting the notion of being beholden to shareholders and stopping itself from going down the rabbit hole where profit-making is considered a means and end in itself.
It’s easy to see why Kickstarter’s co-founders would be concerned about the company losing sight of its original mission. Kickstarter has been quite a resounding success, having funded several high-profile products like the Pebble smartwatches and the Oculus Rift. The latter eventually went on to be acquired by Facebook.
Becoming a public benefit corporation would also allow Kickstarter to distinguish itself from firms that merely talk about social responsibility, and set itself up as a company that has made a legal commitment to benefiting the public.
The company has also committed 5% of its post-tax profits to arts education and organizations fighting inequality.
There’s no question that Kickstarter is profitable – it has been making between US$5 and 10 million per year for the past three years and has the potential to make even more – but with the legal restructuring, Kickstarter is sending a clear message that its focus is still on serving artists, creators, and the general public.
Source: Kickstarter via The New York Times