RR Phantom
Location : Wasted Space
Job/hobbies : Cayman Islands Actuary
 |  Subject: Kickstarter becomes a 'public benefit corporation'  Thu Sep 24, 2015 1:08 am | |
| Many technology start-ups aim to become "unicorns", the companies that get valued at $US1 billion or more on their way to probable vast riches. Yancey Strickler and Perry Chen have no interest in that.
As the co-founders of Kickstarter, the popular online crowd-funding website that lets people raise money to help fund all manner of projects, including cooking gadgets and movies, Strickler and Chen could have tried to take their company public or sell it, earning millions of dollars for themselves and other shareholders.
Instead, they announced on Sunday that Kickstarter was reincorporating as a "public benefit corporation", a legal change they said would ensure that money — or the promise of it — would not corrupt their company's mission of enabling creative projects to be funded.
"We don't ever want to sell or go public," said Strickler, Kickstarter's chief executive. "That would push the company to make choices that we don't think are in the best interest of the company."
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Public benefit corporations are a relatively new designation that has been signed into US law by a number of states. Delaware, where Kickstarter is reincorporating, began allowing public benefit corporations in 2013.
Under the designation, companies must aim to do something that would aid the public (such as Kickstarter's mission to "help bring creative projects to life") and include that goal in their corporate charter. Board members must also take that public benefit into account when making decisions, and the company has to report on its social effect.
"Public benefit corporations will harness the power of private enterprise to create public benefit," Governor Jack Markell of Delaware said in 2013, adding that such companies "consider profit to be the means — not the exclusive end goal — of their business".
Kickstarter's move builds upon its decision last year to become a B Corporation, a voluntary designation certified by a nonprofit group called B Lab. To become a B Corp, companies must meet rigorous environmental and social-responsibility standards, which they report annually to shareholders — though taking on the status has no legal effect. Other companies, including the e-commerce site Etsy, which went public in April, and Warby Parker, the eyeglasses retailer, have also opted to become B Corps.
All of this stands in stark contrast to the behaviour of many tech startups these days. With money having flowed freely into tech enterprises in recent years, businesses like the ride-hailing company Uber, the room-rental startup Airbnb and the online storage service Dropbox have all raised billions from venture capitalists and big money managers, with the aim of large profits.
For other companies, some of the stipulations Kickstarter put into its charter as a public benefit corporation would be anathema. Kickstarter is exceptionally charitable, for instance, donating 5 per cent of after-tax profits to causes that support the arts and combat inequality. Kickstarter has also agreed to "not use loopholes or other esoteric but legal tax management strategies to reduce its tax burden."
Kickstarter decided to become a public benefit corporation because "there's a huge difference between a values document and the legal foundation of your company," said Chen, who serves as chairman but focuses on making art.
Kickstarter still has investors to answer to. While the company has not yet raised much money less than $US15 million, with the founders retaining majority ownership some well-known tech investors have backed it. They include Chris Sacca, a former Google executive who became a big investor in Twitter, as well as Union Square Ventures, a venture capital firm based in New York, and Jack Dorsey, co-founder of Twitter and Square.
Some of the investors said they knew what they were getting into, as Chen and Strickler made it clear early on that they were not looking for a massive payday from Kickstarter. Sacca said he believed there were other ways for shareholders to see returns from their investment in Kickstarter besides an acquisition or an initial public offering.
Chen and Strickler said their ultimate hope was that becoming a public benefit corporation would set an example for the next generation of entrepreneurs.
"As younger companies come up and think about how they operate and how they want to be structured, maybe they won't be so easily be swept up by all the usual choices," Chen said. "Maybe they'll be thinking long term, thinking about how to look after the things they care about."
http://www.smh.com.au/it-pro/business-it/kickstarter-becomes-a-public-benefit-corporation-20150921-gjr6o9.html#ixzz3md6KzZTn |
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