Kickstarter, the well-known crowdfunding website, recently made news by announcing that it has become a Delaware “public benefit corporation” under that state’s new (2013) PBC statute. For example, a New York Times headline on September 21st declared that “Kickstarter Focuses Its Mission on Altruism Over Profit,” which certainly sounds impressive. The Times article went on to quote Kickstarter’s CEO, Yancy Strickler, as saying,
“We don’t ever want to sell or go public. That would push the company to make choices that we don’t think are in the best interests of the company.”
For many readers, this begs the following question: What is a public benefit corporation anyway?
Summary of Delaware’s statute…
Sections 361 through 368 of the Delaware General Corporation Law allow the formation of for-profit corporations that are “intended to produce a public benefit…and to operate in a responsible and sustainable manner.” Here are the key components of a Delaware PBC:
Response to Delaware’s new designation…
Despite the altruistic appeal of the designation, there has not yet been a flood of PBCs. In fact, the number of such corporations in Delaware at this time can be measured in the dozens, though it is worth noting that many other states have adopted similar statutes and the numbers are increasing over time.
Obviously, a PBC designation may make it more difficult to attract traditional investors who are focused solely on the pecuniary value of their investment. It is possible, however, that as the concept takes hold, a significant sub-group of investors may emerge to provide capital to such companies. And while the statute does not preclude a publicly held PBC, we are unlikely to see one anytime soon. Nevertheless, Kickstarter’s announcement and the new Delaware law make for interesting reading.