Well done to Yancey Strickler and Perry Chen, two of Kickstarter’s co-founders who have officially reclassified their company as a Public Benefit Corporation (PBC).
Under the terms of their new charter, Kickstarter has a mission—“to help bring creative projects to life”—and the company judges its performance on how well it achieves that mission, rather than on how much profit it makes. Kickstarter will continue to be a for-profit company, but it’s now a for-profit company which is quite explicitly not for sale: Strickler says that he and his partner “don’t ever want to sell or go public.” When Kickstarter makes money, and it's been profitable for years, it’s going to do so the old-fashioned way, by providing a valuable service a lot of people find worth paying for, and, by keeping its expenses lower than its revenue.
So, what’s going on here? Is Kickstarter now focused on “altruism over profit,” as the New York Times headline has it? Not really. After all, the move was warmly embraced by Fred Wilson, a venture capitalist who owns a substantial chunk of the company, and who has fiduciary obligations to the investors in his funds:
Companies that align their values with their customers and communities will benefit over the long term, not suffer. And that alignment can produce value for shareholders sustainably and profitably. It is worth noting that not one of Kickstarter’s angel investors, venture investors, employees, and board members who own shares in Kickstarter dissented on the vote to convert to a PBC.
Wilson would never be able to say this if Kickstarter had, say, converted to being a non-profit. But, as an investor in Etsy—a Certified B Corporation which went public and is now listed on the Nasdaq stock exchange—he knows full well that there’s no conflict between doing good and making lots of money.
Yes, Etsy went public, and nothing in its new charter prevents Kickstarter from doing the same. But Kickstarter is controlled by its two co-founders, and they have said very clearly that they don’t want to go public, so an IPO is very unlikely to ever happen. After all, going public sucks, especially for founders. Strickler and Chen have a clear vision for what Kickstarter should be, and if they took their company public, their company would be partially owned by thousands of investors who did not share that vision and who might even be utterly opposed to it. Much better to keep Kickstarter closely-held, by a group of investors and employees who all believe in the long-term mission of the company, and who aren’t trying to flip their shares for a quick profit.
If you take your company public, or sell it, then you can get rich quick. But Strickler, Chen, and Kickstarter’s investors have no particular need to get rich quick. They have a superior alternative, which is to get even richer slowly. Charlie Munger, the billionaire vice-chairman of Berkshire Hathaway, has said that “I don’t have any advice for young people who want to get rich. Basically, I think the desire to get rich fast is pretty dangerous. My own system was to get rich slow.” If you sell your company, you’re basically selling your upside; what’s more, you lose the ability to use the firm you founded to shape the world for the better.
The world’s oldest companies are invariably family-owned. If you want your company to exist for centuries, like say Antinori wine (founded in 1385), or Zildjian Cymbal (founded in 1623), or Kikkoman soy sauce (founded in 1630), then it’s best to tightly control the ownership. A good company with a sensible, sustainable business model will support many more generations of your heirs than any amount of cash, as well as giving them a real purpose in life.
Wonderfully, a Benefit Corporation manages to combine the profit motive with more philanthropic goals in a single entity which can last more or less in perpetuity. In that sense, it’s much more attractive than, say, a for-profit organization which first spins out part of its business as a non-profit, and then gets acquired. The company that was Wordnik no longer exists; all that’s left is a non-profit which is hustling to raise money on Kickstarter, plus a subsidiary of a larger for-profit. Life as a non-profit is very hard, and requires constantly cultivating fickle donors. Much better to support a given mission by building that mission directly into a profitable company.
Where does this leave Kickstarter’s small investors who have no say in its management decisions? Probably in a reasonably good position.
We’re in a world where private companies are worth more than public companies, where time horizons have never been longer, and where a lot of individuals and families are looking for exactly the kind of thing that Kickstarter equity represents: a good long-term investment that makes the world a better place and can be held for decades or more. If and when Kickstarter’s investors and employees need actual money in place of their illiquid stock, Kickstarter can help them sell their shares to other, carefully hand-picked investors. The world is full of rich, socially-conscious individuals. Stakes in Kickstarter, and private companies like it, might even, eventually, become a significant asset class in their own right.