This is an excellent piece and kudos for being transparent. This is possibly a story of virtually every startup that doesn't quite make it to 10X: You get funding and expand team rapidly but then revenues are not keeping up so you cut down and then wonder where you go from here. For many startups there is a path of being sustainable profitable business that perhaps will never become unicorn but then investors aren't happy with that. I think buying out investors is an excellent idea in this situation and every founder should always think about this possibility when signing the term sheets.
We Spent $3.3M Buying Out Investors: Why and How We Did It
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Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#12Seems like Joel is quite stubborn regarding his values and vision for Buffer, which i believe is a good thing but i can see how it can lead to differences with co-founders and investors once the vision does not align anymore. Felt like it was all over for him when they asked him to eventually step down and from that point he planned to remove them. In the end it also means that their investors most likely lost their…
Came to the comments to say the exact same thing: this is basically just a vote of no confidence in management.
I can't imagine any employee joining this company from this point forward without demanding all-cash compensation. Management and the investors have effectively set the value of restricted shares at zero.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#13> $2.5m of $3.5m was for founders and early team [of Series A money]
Terms:
> Series A class of shares included a protective provision which meant that Buffer was unable to offer liquidity for other shareholders
> a return of 9 percent annual interest on their investment at any point
So... the founders raised a series A mostly to give themselves liquidity, at the expense of a high interest loan that also threw their early investors under the bus? Well, they definitely achieved their vision of putting together an atypical round.
Given their lack of interest in going down the VC-startup path (high growth at all costs, keep raising, aim for IPO, etc), it's unclear what their motivations were to raise a VC round in the first place.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#14Article explains somewhat about the hows but not really the why, other than alluding to “differences in vision.” Maintaining transparency about these things is a bit tricky!
In any other situation it would be the CEO leaving. The investors clearly didn't have enough votes to boot him, and took a cashout to avoid it being a total loss.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#15I’m confused. The article says Buffer is doing $4.6M in annual revenue. But Buffers own dashboard says they are doing ~$15m https://buffer.baremetrics.com
Look at the "Live Stream" on the lower right. It is all placeholder data. I think its just a demo page for whatever baremetrics is.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#16Seems like Joel is quite stubborn regarding his values and vision for Buffer, which i believe is a good thing but i can see how it can lead to differences with co-founders and investors once the vision does not align anymore. Felt like it was all over for him when they asked him to eventually step down and from that point he planned to remove them. In the end it also means that their investors most likely lost their…
Came to the comments to say the exact same thing: this is basically just a vote of no confidence in management. I can't imagine any employee joining this company from this point forward without demanding all-cash compensation. Management and the investors have effectively set the value of restricted shares at zero.
Personally, I think you should treat all stock options/common stock as a lottery ticket with near zero value anyway when joining a startup. In 99% of situations, cash is all you're going to get.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#17There's a lot of negativity here.
I give Buffer a lot of credit. They seem to deeply internalize the idea of "realistic expectations" and it sounds like the buy-out was a win-win solution where everyone got (mostly) what they wanted.
As he says, the investors might not have been happy about it, but at least he has the backbone to resist trying to squeeze growth out of a market where there's none to be had (in the short term). Most CEOs wouldn't be as courageous, preferring to try to spend like crazy in the search for growth, which just torches investor capital even as it adds little long-term value to the business's equity.
In short, a bold move by a very honest guy who's in it for the long term.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#18> $2.5m of $3.5m was for founders and early team [of Series A money] Terms: > Series A class of shares included a protective provision which meant that Buffer was unable to offer liquidity for other shareholders > a return of 9 percent annual interest on their investment at any point So... the founders raised a series A mostly to give themselves liquidity, at the expense of a high interest loan that also threw their…
Not everybody is perfect. Sometimes goals change and you realize what you wanted before isn't what you want today. Plus, he did mention his cofounders left, so maybe his ex-cofounders wanted the VC route.
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#19Seems like Joel is quite stubborn regarding his values and vision for Buffer, which i believe is a good thing but i can see how it can lead to differences with co-founders and investors once the vision does not align anymore. Felt like it was all over for him when they asked him to eventually step down and from that point he planned to remove them. In the end it also means that their investors most likely lost their…
Why is he stubborn? Isn't he just running his company his way?
Re: We Spent $3.3M Buying Out Investors: Why and How We Did It
#20Seems like Joel is quite stubborn regarding his values and vision for Buffer, which i believe is a good thing but i can see how it can lead to differences with co-founders and investors once the vision does not align anymore. Felt like it was all over for him when they asked him to eventually step down and from that point he planned to remove them. In the end it also means that their investors most likely lost their…
Why is he stubborn? Isn't he just running his company his way?
You are permitted to run the company your way when you are wildly successful and can raise money at obscene valuations (see Facebook). Otherwise it is a delicate dance with the investors.