Yesterday Kickstarter Inc. announced it would become Kickstarter PBC. Nearly six-and-a-half years after it was founded as a corporate entity, the crowdfunding platform is changing its charter, transitioning from a traditional corporation to something called a "public benefit corporation." So how will that change Kickstarter? How will that influence the types of projects it hosts on its site? And what should backers expect going forward?
Polygon sat down with co-founder and CEO Yancey Strickler to find out more. Along the way, we discuss hot button issues specific to the gaming world — from litigation against a Kickstarter campaign in the state of Washington, to massive successes like Shenmue 3 and Star Citizen, to the rise of equity crowdfunding.
What's in a name?
So what exactly is a public benefit corporation? It's a new kind of corporate entity, officially recognized in the state of Delaware (where Kickstarter is incorporated) in 2013. Now available as an option for companies in 27 different states, Strickler says it falls somewhere on the spectrum between a corporation and a true non-profit.
"A benefit corporation has a legal responsibility to perform a social good, to provide a benefit to society," Strickler said from the library of the Kickstarter headquarters in Brooklyn, New York last week.
"A company that is a benefit corporation has the opportunity to inscribe legally into their founding corporate documents what those benefits actually are. Rather than just being a company that does good in its practices — and that's something that can change with time — this hard codes that into the deepest possible fabric of the corporate structure. And so it's a very different way of thinking about how a for-profit company would operate.
Kickstarter co-founder Charles Adler, creator and chairman Perry Chen and co-founder and CEO Yancey Strickler.
"The goal is to be a sustainable, profitable company but you are required to balance that with the social good that you provide and the impact you'll have on those around you."
Kickstarter's new charter, at a little over 500 words, is a surprisingly light document. But it includes directives that you'll not find in the founding principles at other organizations. Among them are explicit promises that Kickstarter will "defend the privacy rights and personal data of the people who use the service," and that they will "not lobby or campaign for public policies unless they align with its mission and values, regardless of possible economic benefits to the company." One even prohibits the use of "loopholes or other esoteric but legal tax management strategies to reduce its tax burden."
The core of it, however — and the part that Stickler is especially proud of — is Kickstarter's "5 percent pledge," in which the company will annually donate 5 percent of "its after-tax profit towards arts and music education, and to organizations fighting to end systemic inequality." At least half of that money will be earmarked for underserved communities in New York City itself.
The meaning behind these changes is clear: Kickstarter wants to continue to grow as a successful company, but it also wants to provide a public good with an emphasis on supporting the city where it is headquartered. It wants to be a good neighbor, and that desire was important enough to cast in stone — or, in this case, the legal framework of the company itself.
"There was not a single dissenting vote in that process," Stickler said, referring to the approximately 30 voting shareholders in the private company. "Everyone voted yes that we would do this.
"We're publishing that charter, showing how we should be held publicly accountable. And also, trying to embrace this as a growing movement of companies. When you normally think of corporate responsibility and social good I think you immediately go to granola, crunchy sort of concepts. But I think this is much more progressive and futuristic. And, you know, this provision as a part of corporate law has only been in existence for a few years, but we join companies like Patagonia, This American Life in becoming a benefit corporation.
"For us it's taking the values and the mission that are core to Kickstarter and just making sure that every part of our company reflects those, so that it's very clear what we stand for and how we want to act as a company. And that goes all the way down to the legal documents that are our incorporation."
Line forms to the right
So how will this change things for those hoping to launch a project on Kickstarter? Not all that much, Strickler admits. If anything, it makes projects more appealing to socially conscious consumers. Funding through Kickstarter aligns creators with the public good the platform itself provides.
"It ties your actions as an artist or a creator to a larger movement," Strickler said, "one that is attempting to have a more broadly positive impact on society. It's the same way that you may shop at a certain store because of you're aware of what they stand for.
"It's our belief that there are a lot of people out there, and a lot of people in the creative communities in particular, who feel similarly about these things. Their desire to live in a society where there is a greater search for equality, there is a greater commitment to values, that are thinking about things beyond our self interests. And so, those are some of the foundations of our company, and always has been."
With luck, Strickler says, the desire to do good will rub off on those who participate in the platform.
"If the end result of this is someone launches a Kickstarter project and that turns into a business, well maybe they think about starting their business as a benefit corporation. That could be a great outcome. … We're not doing this for marketing reasons or things along those lines, but I do think that the idealism that is exhibited here is something shared by a lot of people."
But at the end of the day, Kickstarter isn't in the business of supplying locally-sourced food or hand-dyed, sustainable organic fabric. Neither are they making widgets or trying to cure cancer. Kickstarter is about raising capital, and in the last few years they've gotten quite good at it.
"There was a certain point early in our existence," Stickler said, "where you could say, '$100,000 has been pledged to projects on Kickstarter.' And that would turn heads. This isn't some cute, adorable thing. This is real. … And obviously where we are now is quite an impressive number. I mean, in three weeks or so will cross $2 billion lifetime having been pledged to Kickstarters. We crossed a billion dollars lifetime last March, so that first billion dollars was 5 years. The second billion was 19 months or something. It's pretty absurd."
"We crossed a billion dollars lifetime last March, so that first billion dollars was 5 years. The second billion was 19 months or something. It's pretty absurd."
The turn to a PBC structure will refocus the company, which with its first few billion under its belt, is less concerned these days about promoting how much money it's raised than how many people it's helped. The most recent platform update from March of this year stripped the dollar amount from the most funded list entirely. Instead, Kickstarter has begun to promote the size of the communities it's helping to create, marveling at the scale of the groups of passionate people that believe in an idea and want to help make it a reality.
"You have to have those sorts of ways to quickly communicate the legitimacy of what you are doing, especially at the early stages of an idea," Strickler said. "And so [for Kickstarter] money was that. Money communicated that a lot better than the number of projects or something like that. But what I really think about is how many new games were made; how many iOS games, how many tabletop games. How many games on Steam right now got their start on Kickstarter and would not have existed without this kind of tool? That's what I would really look at."
Strickler says their focus is, and always has been, about how many individuals they can involve and, ultimately, how many projects they can help to reach completion. Their new charter simply enhances that mission.
Too big to fail
There's no denying the important part Kickstarter plays in the games industry right now. But, while Kickstarter maintains an outsized role in the landscape, its own data shows that in 2014 games projects saw less money overall. More troubling is the fact that the average successfully funded game in 2014 received far less of that money than it did in 2013 — $71,000 versus just $38,000.
And yet, of the top 20 highest-earning Kickstarters of all time seven come from the gaming category, including five electronic games, two tabletop games and even one game console. This year has already seen several spectacularly successful campaigns. Kogi Igarashi's Bloodstained brought in more the $5.5 million, while the campaign for Shenmue 3 earned more than $6.3 million.
Some have begun to wonder if these high-profile campaigns are appropriate for Kickstarter. Some go so far as to blame these so-called "big indies" or "triple-i" games for actually hurting the platform for smaller developers.
But it's not an issue specific to gaming. Pebble, already a successful consumer electronics manufacturer earning revenue online and at retail, elected to launch their newest product on Kickstarter. In March of this year the campaign for the Pebble Time became the biggest Kickstarter ever, earning more than $20 million.
Broadly speaking, Strickler calls this sort of thing "corporate crowdfunding."
"We have been approached in the past by very large, very famous corporations seeking to launch projects on Kickstarter and we have turned those down," Strickler said. "We've said that we hadn't thought that was in the best interests of our platform, and in a couple of cases where it was a large company wanting to do a project for something that an employee within the company had made within the company's operations we've suggested the we would consider it if they would allow the employee to own the intellectual property of the work rather than the company. But of course, that's not how these things tend to go.
"We have been approached in the past by very large, very famous corporations seeking to launch projects on Kickstarter and we have turned those down."
"But I view the work of a game designer or the work of a film maker — like say the work of the Veronica Mars movie — as being something different than GE launching a project or something like that. So, I think in the cultural space and in commercial art forms I think there's some gray areas that are... sort of special cases."
These kinds of high-profile crowdfunding campaigns are not the norm at Kickstarter, Strickler said. And going forward, there's nothing in the new charter that would prohibit them.
"The provisions in the PBC are about the value set at the core of our business," Strickler said, "and those things are really looped in to our commitment to arts and culture, a commitment to operating on values and not profit motivations, and a commitment to fighting inequality and to furthering arts and music education in our community. And that those are topics, those are debates in which we're putting a stake in the ground about what it is that we feel. It doesn't get into the sorts of things that you might see in our guidelines or things like that, but yeah. Corporate crowdfunding … I mean the cases you talk about, Pebble or Shenmue, I think are interesting edge cases."
What's more, Strickler feels he has a thing or two to learn about crowdfunding from these most successful campaigns.
"We claim no ownership of any project, in any sort of way," Strickler said. "We don't try to control independent creators and we're not going to behave in that sort of way. And so, in the case of a Star Citizen or a Shenmue, I think that's fantastic. I think it's phenomenal that these creators are able to support their work and to have a sustainable existence producing something that people love. And as a platform, I look at those campaigns and I think there's a lot for me to learn from them."
In for a penny
Recently, a new competitor to Kickstarter has launched. Called Fig, it's a crowdfunding platform specifically designed for games. User interface improvements aside, the hook is that Fig allows participants to purchase an equity stake in the games it brings to market. And in the near future, its founders say, that kind of equity investment will be available to anyone, not just accredited investors.
Kickstarter has been clear on the fact that it does not plan to offer an equity option for funding campaigns. The reason, Strickler says, is simple; the expectation of a financial return changes the kinds of projects, and the kind of backers, that a platform attracts.
"I think that an equity-driven model of cultural production results in the same world we've been stuck in," Strickler said, "where if a new idea is asked to justify itself by its potential profitability, I think that restricts the amount of innovation and new ideas that come into the world. To me, that is a world of sequels, of less original content, of people not taking chances because when you're asking an audience to look at it through the filter of 'is this a good investment or not' and I think that's often a poor fit with the world of art and culture."
Strickler sees Kickstarter as an island in a sea of traditional, profit-motivated businesses. The move to a PBC, a move to entrench explicit public good into its mission, matches his company's vision of providing more than just a return on investment. That other organizations have sought to exploit the crowdfunding model that Kickstarter pioneered comes as no surprise to him.
"We absolutely saw that this was a potentiality that may happen," Strickler said, "that the same forces that have always existed would try and apply themselves to the new model that we've created. And so we've always anticipated that this would come. But we feel quite confident in Kickstarter's focus in ideas being able to come to life just because an audience is excited for them and not because they're looking for a potential financial upside.
"We thought about there being a world where ideas could exist just because people were excited about them."
"When we created Kickstarter we explicitly thought about this. We thought about there being a world where ideas could exist just because people were excited about them. They didn't have to provide an economic justification for their existence. … A universe where audiences who were excited had the power to make something happen. And you didn't need to add those other justifications to fund something.
"David Lynch should be able to make a new movie because David Lynch wants to make a new movie. He shouldn't have to go take some oil baron out to dinner to convince him that his $100,000 investment would be worth the money. I understand that that's how many parts of the business world works. We explicitly wanted to create a universe that didn't operate that way.
When it comes to games, the bottom-line goal for Strickler is to grow the category on Kickstarter. That means more campaigns, not bigger ones.
"Unequivocally," he said, "I want to see more games successfully funded. … I'm not losing sight of what it is that creators need and what it is that they're coming for, and our mission is to help bring creative projects to life. But our vision for what we want to do is to help artists and creators have a sustainable, creative existence.
"In terms of what matters — what stat matters — I would go to the number of projects funded. My sense is that the games community has a high degree of sophistication around Kickstarter, that people really understand the platform very, very well. It's probably our strongest community, and people in that community we really listen to. We really pay a lot of attention to read the comments, listen to what the issue of the day is, and really care quite deeply."
Update: We've edited this story slightly to clarify Strickler's comments.