Originally published on LinkedIn.com on May 10, 2016 By John Battelle
When Kickstarter announced its conversion to a public benefit company last fall, there was a general murmur of appreciation around the Internet industry — the company had always been unique, and its commitment to more than profits seemed consistent with its quirky image and its founders’ passion for the arts. Most coverage noted that Kickstarter was joining a small but growing group of funky Internet startups like Warby Parker, Etsy, and the Honest Company that proudly fly their “B Corp” flags.
But you’ll get a rise from Kickstarter co-founder Perry Chen if you lump Kickstarter in with those other B Corps, no matter how well-intentioned they might be. There’s a profound distinction between a “public benefit corporation,” or PBC, and a “B Corp,” Chen told me during a recent visit to Kickstarter’s Brooklyn headquarters. Both are for-profit companies who wear their missions on their sleeves, but B Corps have no legal responsibility to uphold their values. PBCs, on the other hand, have a legally binding duty to provide benefits to society. One is an accreditation, like “Fair Trade,” the other is an entirely rethought corporate structure.
Kickstarter serves as inspiration for a
generation of entrepreneurs and investors
who want more than to just get rich. (Click to tweet this)
Put another way, if a PBC puts maximization of shareholder value — the true north of Wall Street — ahead of the public benefits it declares in its charter, it can be sued by its shareholders.
“A value is only a value if it’s non-negotiable,” Chen told me. Kickstarter’s values are now codified in a legally binding document. They’re literally non negotiable.
Public Benefit Companies are a relatively new legal entity — Delaware, where many fast-growth startups incorporate, created PBCs just three years ago. Besides defining a public benefit as “a positive effect (or reduction of negative effects) on one or more more categories of persons, entities, communities or interests (other than stockholders in their capacities as stockholders),” Delaware’s code allows new PBCs to make “further commitments” beyond the state’s legal definition.
And boy, did Kickstarter go further.
A close study of Kickstarter’s charter makes for fascinating reading. It begins with a succinct mission: “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.” Take that, Milton Friedman.
Then it gets really interesting. Kickstarter’s charter is laid out in five sections, each worthy of note. In section one, the company restates its mission — thereby enshrining that mission in its legal foundation. The second sections lays out the company’s values, taking aim at five highly political corporate issues: Selling user data to third parties (it never will, unlike Google, Facebook, and pretty much most of the Internet), clarity in “terms of services” (it won’t seek legal gains just because it can, unlike, well, pretty much the entire Internet), political lobbying (it won’t lobby unless the issues aligns with its values, regardless of potential monetary gain — unlike … you get the picture), taxation (it won’t employ the “esoteric tax management strategies” beloved by giants like Apple, Uber, et al), and environment (the company is committed to reducing its impact across the board).
Any one of these is worth a deeper dive, but taken together, it’s one rather large middle finger at standard operating procedure for most of corporate America. F-you, Kickstarter has said in its very constitution, we’re going to pay our taxes and not complain, we’re not going to screw our users out of their data and their rights, we’re not going to play politics, and we’re going to clean up after ourselves.
Section three commits the company — legally, remember — to donate 5% of its profits to arts and music education, as well as to organizations that fight systemic inequality (racial, income, gender, sexual). Section four canonizes Kickstarter’s commitment to the arts and to its own employees. And section five lays out the company’s commitment to fighting inequality in tangible ways — by embedding time off for employees who work on the issue, by reporting on executive pay, and by focusing its charitable giving toward organizations that address inequality.
Kickstarter will report out progress on its first two years as a PBC in February of next year, as required by law. I can’t wait to read all about it. While it may be an outlier, the company has been profitable since 2010, regularly dropping $5 to $10 million to the bottom line, according to company representatives. It’s funded more than $2 billion worth of creative products in the past seven years, and that count is growing each year. While Kickstarter will never go public or become a “unicorn,” it certainly serves as an inspiration for a new generation of entrepreneurs and investors who want to do more than just get rich. I, for one, am cheering them on.
Founder, EIC, CEO, NewCo, San Francisco Bay Area|Internet
I think by writing, which often leads to new projects and new companies. I invest as well, a relatively new endeavor – have about 20 investments, mostly in seed or Series A companies in media, technology, and consumer mobile. I do a fair bit of stagework, as an interlocutor and producer of events.