How Kickstarter became a public benefit corporation

Plenty of companies claim to have a greater purpose than making money. In our local tech scene, we have at least one that’s legally codified it.

In 2015, Kickstarter became a public benefit corporation, or PBC, a legal designation that allows companies to give equal weight to social impact as financial gain in its activities. (Being a PBC is distinct from gaining certification as a B Corp, which has no legal standing. Kickstarter is also certified as a B Corp, as is Etsy.) Generally speaking, corporations are legally bound to maximize value for their shareholders before all else. That often makes it difficult for them to make moves that benefit employees and customers but end up cutting into profits.

Kickstarter cofounders Perry Chen and Yancey Strickler wanted to avoid that fate. In a feature in Fast Company, they divulged exactly how they went about the process of doing so. Interestingly enough, it was one of the company’s investors, Albert Wenger of Union Square Ventures, who tipped them off to the possibility of converting the company into a public benefit corporation. It’s a particularly striking detail given that Chen has expressed a desire for Kickstarter to remain independent and privately held. (How will the company’s investors achieve returns? Through dividend payouts, as Bloomberg reported last June.)

Though Fast Company characterizes Kickstarter’s conversion as a decision that “ended up changing the company forever,” according to the employees interviewed for the story, the company has largely remained the same. “There is a belief within the company that the PBC charter was a codification (three people used this word) of a set of values that had always existed,” author Michael Thomas wrote.

But laying out those values explicitly has been beneficial to the company as it’s grown, director of community support Katherine Pan said:

This ties into how startups have to change organizationally at a certain size. I was employee No. 37, and we were a very small, tight-knit group of people. There weren’t any codified rules or processes. I guess we were lucky in that we all seemed to be on the same page. But what I do appreciate about the PBC is that we can articulate what we’re about and what our priorities are.

Last month, Kickstarter released its first-ever annual benefit statement. The statement provides a detailed overview of the company’s social impact, from the economic activity the campaigns on its site has generated to the gender and racial representation among its staff. As we’ve covered recently, for instance, the company has been quite vocal in its support of friendly immigration policy. Among the highlights in the report:

• There’s a relatively small gap between CEO Strickler’s pay and that of his staff: he makes less than six times the median pay of non-founder employees. By contrast, the average CEO makes 204 as much as the median employee, according to Glassdoor.
• The majority of Kickstarter’s employees are women. Women also comprise half of the executive team and a majority of the senior team — which puts Kickstarter in rarefied air when it comes to gender parity in tech. (The company could do certainly better at recruiting more Black and Latino employees, however: just 4 percent of its employees are Latino, and 2 percent are Black.)
• The company paid a combined (federal, state and local) effective tax rate of 25 percent, slightly higher than that of similar U.S. corporations. Notably, Kickstarter lays out exactly which programs got it to that rate. A sizable chunk of its tax benefits come from its 2013 move to Greenpoint: under the New York City Relocation and Employment Assistance Program, it receives a 12-year credit.

Kickstarter’s external social impact initiatives also get plenty of ink in its report. In its charter, the company has pledged to donate 5 percent of its after-tax profits to organizations focused on providing arts and music education and addressing societal inequalities. Last year, it donated to six such organizations: DreamYard, Coalition for Queens, Willie Mae Rock Camp for Girls, New York Civil Liberties Union, Brooklyn Community Bail Fund and Film Society Kids. Last year’s Summer Festival, an event featuring games, performances and workshops from Kickstarter-funded projects and companies, also got a nod.

That event, in fact, led our lead reporter Tyler Woods to shout out Kickstarter as “a great example of how tech companies can be an asset to the places where they’re located, and not a detractor.” This latest feature and report provide even more evidence for that claim.