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Kickstarter now legally bound to balance altruism with profit

The crowdfunding site reincorporates as public benefit company, a move that legally obliges it to pursue "a positive impact on society."

Kickstarter has become a public benefit corporation, which makes it legally bound to pursuing a better world.

Crowdfunding site Kickstarter is now legally bound to at least try to make the world a better place.

The startup, now six and a half years old, has reorganized as a public benefit corporation, a legal move showing its intention to have "a positive impact on society."

Kickstarter remains a for-profit company, but it will now have to regularly report on its social impact and its board will have to weigh public benefits when making decisions. A new corporate charter will guide the decisions for future company executives, said Kickstarter spokesman Justin Kazmark.

The Brooklyn, New York, company's legal name has changed from Kickstarter Inc., to Kickstarter PBC.

The move is part of a growing push among some startups to distance themselves from the influence of investors and shareholders. Major startups like Uber have traditionally been funded by angel investors who in exchange expect hefty profits.

"Creating a public benefit corporation will be an opportunity now for more technology companies whose founders may have wrestled with the way companies have been established in the past," said Derrick Feldmann, president of research agency Achieve, which focuses on online fundraising strategies.

According to Kickstarter, the new designation is a natural next step in its evolution toward more transparency since its founding in 2009. In 2014, Kickstarter was certified as a B Corporation -- a voluntary designation that involved meeting rigorous environmental and social-responsibility standards.

"Kickstarter is excited to join a growing list of forward-thinking organizations -- like Patagonia and This American Life -- that have taken the big step to become a benefit corporation," Kickstarter's co-founders said in a statement. "While only about .01 percent of all American businesses have done this, we believe that can and will change in the coming years. More and more voices are rejecting business as usual, and the pursuit of profit above all."

Kickstarter's founders told The New York Times that they have no intention of going public or selling the company. Yet, they said, they still must answer to investors.

Kickstarter has not always been praised for its transparency. In 2012, concerns were raised about where donors' money goes if Kickstarter projects are never finished. The company concluded then that the responsibility of refunds falls on the project creators. Under the company's terms of use, creators are now legally required to "fulfill the promises of their project" and are also obliged to "refund any backer whose reward they do not or cannot fulfill."

To date, 92,733 Kickstarter projects have been funded by more than 9.4 million people, including more than 10 million-dollar projects. The Pebble Time smartwatch is the most-funded project on Kickstarter to date with more than 78,000 backers pledging $20.3 million.