Why Laureate Education’s IPO Matters to Silicon Valley

Laureate Education just made it safe for entrepreneurs, lawyers and venture capitalists to incorporate and build startups as benefit corporations.

After 18 months in registration, Laureate Education went public on February 1, 2017 as the first publicly listed benefit corporation.

By completing its IPO and raising $490 million, Laureate Education legitimized this seven year old corporate form. With Credit Suisse, Morgan Stanley and Barcley’s as lead underwriters, Wall Street has now accepted the benefit corporation. Laureate’s lead investor, a consortium of private equity firms, including Kohlberg Kravis Roberts & Co. L.P., Point 72 Asset Management, Bregal Investments,  StepStone Group,  Sterling Partners,  and Snow Phipps Group, signal other private equity and venture capital investors that the benefit corporation is a legitimate and safe investment vehicle.

Hats off to Laureate’s board for having had the courage to debut the benefit corporation in the public market and for paving the way for other benefit corporations to follow.

What Laureate’s IPO means for Impact Investors

The benefit corporation form signals impact investors that a company has opted out of business as usual and is serious about creating positive social and environmental impact. Laureate, for example, has committed to “operate in a responsible and sustainable manner” as a Delaware public benefit corporation and its directors must balance the pecuniary interests of stockholders with the interests of those affected by corporate conduct and its chosen public benefit. As the first publicly traded benefit corporation, Laureate sets a new standard for corporate governance. Laureate is also the third publicly traded U.S. Certified B Corporation, following Etsy and Rally Software.

By placing its chosen public benefit to “produce a positive effect (or a reduction of negative effects) for society and persons by offering diverse education programs delivered online and on premises operated in the communities that we serve”, Laureate’s directors are not constrained by the only legitimate corporate purpose under prevailing Delaware corporate law – maximizing stockholder welfare – from focusing on the welfare of its students and the communities it serves. As a benefit corporation, Laureate’s pursuit of social good no longer puts it at odds with the prevailing corporate law and frees its directors from having to demonstrate that its social goals are a direct means to the sole legitimate corporate purpose of maximizing stockholder welfare.

As the universe of publicly traded benefit corporations grows, impact investors will increasingly have a real choice between investing in corporations that exist solely to maximize profit for stockholders and those that are committed to being a profitable force for good.

 

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