Will Kickstarter's transparency change the game for other companies?

The crowdfunding website is now legally a 'public benefit corporation,' a status that requires stringent dedication to social and environmental responsibilities. 

Unlike some of its tech-startup cohorts, popular online crowdfunding site Kickstarter is not going public. Nor will it be acquired for millions of dollars. Instead, co-founders Yancey Strickler and Perry Chen are pledging to hold their company to a higher standard – a moral standard.

“Kickstarter’s mission is to help bring creative projects to life. We measure our success as a company by how well we achieve that mission, not by the size of our profits,” the company website says. “That’s why we reincorporated Kickstarter as a Benefit Corporation in 2015.”

So, what exactly is a “public benefit” corporation?

It’s a special type of corporate designation, under which companies’ foremost mission is to aid the public, a priority that board members must take into consideration for every decision. Although Kickstarter will remain a for-profit entity, the legal designation ensures exactly what the company promises: that money would not interfere with the company’s purpose of positive public impact.

A relatively new concept adopted at the state level, the public benefit designation doesn’t prevent a company from going public or being sold. However, Strickler, the chief executive, is determined that neither will happen any time soon.

“We don’t ever want to sell or go public,” Strickler tells The New York Times. “That would push the company to make choices that we don’t think are in the best interest of the company.”

Enacted in Kickstarter’s filing state of Delaware in 2013, the legal classification requires the company to release social and environmental performance reports to its shareholders. But beyond the status of public benefit, Kickstarter is also a B Corporation, a voluntary certification from the nonprofit organization B Lab. In order to qualify for the accreditation, companies must meet demanding standards in social and environmental responsibility.

In its official charter, Kickstarter even goes as far as committing to donate 5 percent of its after-tax profit towards arts education and combating systemic inequality.

“Half of Kickstarter’s 5 percent pledge will be devoted to arts and music programs for children and young adults, with a primary focus on underserved communities in New York City,” the charter reads. The other half “will primarily focus such contributions on 501(c)(3) organizations fighting to end prejudices against and increase opportunities for people of color, women, and LGBTQ individuals.”

Kickstarter’s social devotion is a departure from the profit-driven attitudes of businesses like ride-hailing company Uber or the online storage site DropBox, both of which have raised billions from venture capitalists in the hopes of large profits.

Still, Kickstarter has its own investors to answer to, some of which are quite high-profile. Investor Chris Sacca, a former Google executive who invested in Twitter, says he’s not worried about seeing returns on his investment.

“It is a fast-growing, highly profitable enterprise. So, as an owner of the stock, I feel comfortable that I will be rewarded for that,” Sacca tells The Times. “When the time is right, I’m confident that Kickstarter will return cash to their loyal shareholders.”

At the end of the day, Chen and Strickler are not concerned about earnings. They say their ultimate hope is to inspire a next generation of businesses to pursue the ideals of social impact.

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