A growing number of startups have achieved the much-coveted “unicorn” status that is conferred upon companies with buckets of venture capital and a valuation of more than $1 billion — but Kickstarter has a different corporate strategy.
Founded out of New York in 2009, Kickstarter has facilitated crowdfunding to the tune of $2 billion to date, with more than 10 million people plowing their cash into often weird and wacky projects.
Kickstarter could easily have been a so-called unicorn itself by now, but it hasn’t followed the traditional route to growth. The company has been profitable for five years, and has never been hot on chasing VC money, though it did actually raise a round (rumored to be $10 million) shortly after launch, from Union Square Ventures, Fred Wilson, Jack Dorsey, Chris Sacca, Katerina Fake, and other notable names.
Two months back, Kickstarter Inc. was consigned to the history books and replaced by Kickstarter PBC, a public benefit corporation with ethics built into its constitution. This metamorphosis followed a similar shift by social network Ello almost twelve months earlier, a move designed to demonstrate Ello’s commitment to never selling ads or user data. (Ello thereby sought to further position itself as the very antithesis of Facebook.)
Essentially, PBCs are legal entities that allow companies to protect their for-profit credentials while addressing the needs of the wider society, rather than just answering to shareholders. Kickstarter’s move to PBC status reflects the company’s longtime directive, said cofounder and CEO Yancey Strickler at the Dublin Web Summit yesterday.
“We’ve always approached Kickstarter from a very ideological perspective; it’s who we are,” he said. “We believe a universe driven only by profit maximization can be poisonous. It’s important there’s a diversity of models, and concepts, about how an entrepreneur, business, artist, or creator can operate. We need to make ourselves ‘example one’ for how to do that.”
As part of the process of becoming a PBC, Kickstarter drafted this charter that lists more than a dozen commitments, such as:
- Kickstarter will never sell user data to third parties. It will zealously defend the privacy rights and personal data of the people who use its service, including in its dealings with government entities.
- Kickstarter will not use loopholes or other esoteric but legal tax management strategies to reduce its tax burden. Kickstarter will be transparent in reporting the percentage of taxes it pays and explaining the many factors that affect its tax calculation.
- Kickstarter will seek to limit environmental impact. It will invest in green infrastructure, support green commuting methods, and factor environmental impact when choosing vendors. Additionally, Kickstarter will provide recommendations and resources that help creators make environmentally conscious decisions on tasks, like shipping and packaging, that are common to the use of its services.
- Kickstarter will annually donate 5% of its after-tax profit towards arts and music education, and to organizations fighting to end systemic inequality.
By referencing the selling of user data and “esoteric but legal tax management strategies,” it’s clear that Kickstarter is defining itself against well-known companies that have carried out ethically questionable activities — and continue to do so. While Strickler is adamant that publicly shaming corporations isn’t part of the motivation, he also acknowledged that as companies grow, they can often lose their way.
“Every giant corporation starts as a small company, but at some point they lose their soul,” he said. “I don’t know when that happens. But by doing a move like this [becoming a PBC], it’s putting your idealism at the very beginning and ensuring it’s always part of the company.”
Social impact over valuations
In becoming a PBC, Kickstarter wants to set a new example for other emerging tech companies to follow.
“I think there are other entrepreneurs, people like us, who want to do something more than just survive and get rich,” said Strickler. “I think there is a lack of models to follow. And if you look around the world of technology, there’s a lot of talk of valuations, and growth rates. But there’s not as much talk about impact or corporate responsiblity or stuff like that.”
Though the company hasn’t raised silly amounts of cash from VCs, as noted already, it has raised some. So surely its investors were against this shift to PBC status? Well, it seems not. As shareholders, they were all given a vote, and not a single one, according to Strickler, voted against the move. “I think they similarly feel excited about there being other models for entrepreneurs to pursue,” he said.
While these principles are commendable, how does this impact the company’s ability to hire top talent? After all, there is often an expectation that top recruits will receive company shares, with a longer-term view of cashing in, as part of their hiring package.
“The way we think about this, after five years of profitability, is that each year we want to provide a dividend, or some profit-sharing,” said Strickler. “When the company does well, all the stakeholders do well — if the company does not do well, we all feel the pain. But you are constantly aligned with the performance of your business and how well it’s meeting your customers’ needs. There shouldn’t just be a ‘everyone just gets rich and stops caring’.”
So employees do get real money on top of their salary each year if the company does well. They just won’t get what Strickler refers to as “the big lottery ticket.”
“We’re very open with people, about how we think about things, what our goals are,” he continued. “The level of talent we have at Kickstarter is extreme, because a lot of people feel weary of the constant chasing of the lottery ticket. They want to be in a place where the work they do every day, they can feel proud of six years from now.”
F*** the monoculture
All employees joining Kickstarter are given a booklet that details the company’s mission and philosophy, and one part of it says: “We believe in art and culture, fuck the monoculture.”
But what is the “monoculture”?
“It’s just the same-same, the world that gets created — everyone is trying to optimize for money,” Strickler explained. “Monoculture is a world of chains and banks and every top 40 hit written by the same four people. We all need to fight for a more diverse culture.”