We Spent $3.3M Buying Out Investors: Why and How We Did It

Post by dahdum » Wed, Aug 29, 2018, 9:34 PM UTC

eldavido wrote: post #17

There'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 sho…

Post by JackFr » Wed, Aug 29, 2018, 9:42 PM UTC

jjeaff wrote: post #44

TAForObvReasons wrote: post #20

Earlier quoted context omitted.

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.

You can run your company however you please until you no longer have 51% voting control. And don't think for a second that your investors won't do whatever the heck they please once they have controlling interest, up to and including kicking you out of your own company if it serves them better.

Post by freeone3000 » Wed, Aug 29, 2018, 9:47 PM UTC

dahdum wrote: post #71

eldavido wrote: post #17

There'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 sho…

I don't think this sounds like a win-win, the founder moved the goalposts and bought the Series A out for the minimum possible (9%) so he could start paying himself. I read the fluff around core values, but my first thought is that Joel would rather not risk his personal fortune by growing the company further. Better to ride the 25% margin as long as possible, giving himself enough liquidity to retire wealthy, than t…

Post by nodesocket » Wed, Aug 29, 2018, 9:55 PM UTC

zminjie wrote: post #37

syntaxing wrote: post #24

So investors put $2.3M into the company and got back $3.3M. They essentially have a ROI of 1M over a span of four years. Am I crazy to think that this is a pretty good deal for the investors?! If someone gives me a ~40% return on a crapshoot investments (like how most start ups are), I would be pretty happy!

You are thinking from the perspective of an individual investor. For VCs, this kind of return is abysmal since it won't cover the 7/10 companies that went completely bust. In order to VCs to take high risks on early stage companies, they need the winners to return 100x so the fund even makes financial sense. It's one of the main reasons why VCs constantly push startups for hyper growth. This is certainly better than…

Post by nodesocket » Wed, Aug 29, 2018, 9:56 PM UTC

jedberg wrote: post #72

gnu8 wrote: post #54

Earlier quoted context omitted.

There’s no reason on earth why anyone would consider having their money returned plus a mil a “bad investment,” even if they are a VC looking for 100x unicorn returns.

I would. The whole point of a risky investment like that would be to get a better return. 10% per year is something I can get almost risk free, if I'm starting with $2MM.