You are here

Kickstarter Just Did Something Tech Startups Never Do: It Paid a Dividend

In early March, Kickstarter quietly sent shareholders a dividend. In the wider world of business, such an action would be unremarkable. More than 80 percent of the companies in the S&P 500 pay dividends, and many smaller companies do, too. But divvying up quarterly profits with shareholders is unheard of among tech startups. People who follow the venture capital industry were hard-pressed to come up with a single example of a VC-backed startup that has ever paid regular dividends. Doing so would be a rejection of the industry's basic math. VCs bet that they can find the few companies that will generate enormous payouts by going public or getting acquired; the rest fail. There's not supposed to be anything in between.  "It sounds strange for a VC-backed company as it means they're taking out and distributing money versus investing it in the business," said Anand Sanwal, the chief executive officer of research firm CB Insights.

Paying a dividend, which the company didn't make public, is just the latest example of Kickstarter's heterodoxy. Last year, the company became a public benefit corporation, officially making the greater good part of its mission. Kickstarter has promised to allocate five percent of profits to charitable ventures and pledged not to use loopholes or other legal strategies to reduce its tax burden. Furthermore, the founders say they have no intention of taking the company public. “More and more voices are rejecting business as usual, and the pursuit of profit above all,” they wrote in a blog post at the time. 

Read Complete Article