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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

#121

Post by gowld »

dcole2929 wrote: post #80
freeone3000 wrote: post #75

Earlier quoted context omitted.

This is a completely legitimate way to run a company. Heck, I wish more did this.

Agreed, but the question is if that is how he sold the company to investors and to employees? Employees at this point all know, or should know that stock grants are lottery tickets. But that said there is a very clear distinction between working for a company for that lottery ticket and working for the same company where management is actively negating the value of that ticket. Not to mention he slashed salaries 8 mo…

Buffer is a nice app, not a world changing invention with any kind of technical or business moat. No one went in hoping to become a Buffer Billionaire.

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

#122

Post by gowld »

sebleon wrote: post #58
tptacek wrote: post #52

Earlier quoted context omitted.

How exactly does offering an immediate return to those early investors throw them under the bus? Buffer put together a deal and their investors took it. For them to "buy" their equity, it had to be "for sale", and it turns out it was. The normal story of what happens when a company takes an investment planning for hypergrowth and that doesn't pan out is that the company "pivots" to some usually-less-promising hypergr…

Ah, to clarify: Buffer threw the seed investors under the bus when they inked a deal with the Series A investors. However, kudos to the founders for fixing this mistake later on. While their intentions at Series A were questionable (raising to pay themselves), they made things right later on, though they did pay the price of a co-founder and CTO departure. Everyone makes mistakes, but true character can be seen when…

Seed investors offered a deal. They weren't spring chickens.

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

#123

Post by gowld »

sebleon wrote: post #65
erikpukinskis wrote: post #56

Earlier quoted context omitted.

It means the three that have a liquidity event only need to cover 5/10 instead of 7/10. Is that not a helpful result?

Ha, venture math is pretty hilarious. VCs basically need to give back their investors a 300% return in 10 years to make up for the risk they handle. Eg. For a $40M fund that's trying to grow to $120M, $1M here and there doesn't really move the needle.

The public NASDAQ has grown to 4x over the last 10 years. VC should do better or go home.

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

#124

Post by wslack »

rdlecler1 wrote: post #62

If I remember correctly, these guys were proud and very public about building Buffer as a lifestyle business as were the VCs that backed them. At the end the VCs would came out with a negative IRR which was not unexpected—a lesson into why VCs don’t invest in lifestyle businesses.

I find it strange that being this profitable is labeled a "lifestyle business." The hypergrowth/unicorn exit isn't a healthy outcome for many businesses.

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

#125

Post by pilote »

paragpatelone wrote: post #109
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 think it is a bold move. In their situation it seems like the right move. I am seeing a lot of sentiment on HN that feels sorry for VCs. VC already get paid above 200k/year; no need to feel sorry for them. People should feel sorry for the founders & the employees who did all the work. Now if they get liquidation, then that is good.

It's not just a return for the VCs, but all the contributors that gave their money to the VCs to invest, like your university's endowment fund, retirement and pension funds, etc.

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

#127

Post by tommoor »

dsl wrote: post #15
alberth wrote: post #2

I’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.

It’s real data, anonymized

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

#128

Post by jedberg »

timavr wrote: post #98
jedberg wrote: post #90

Earlier quoted context omitted.

Real estate. There are plenty of multi-unit dwellings in the country with a 10% IRR. If you have a few million cash to buy one, you'll get 10% a year on the rent fairly risk free, depending on the market.

Family for 30 years in rental property business. Anything which involves rent is by far not risk free. Very cycle driven, heavy on litigation and management has to be perfect to make returns.

I’ve been doing real estate for about 25 years and haven’t seen much risk at all. Biggest risks have been vacancy and maintenance. Vacancy is solved by setting the right rent and maintenance is a 10% reserve fund.

Also I said “almost risk free”. :)

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

#129

Post by ttul »

hkmurakami wrote: post #59
robhunter wrote: post #48

Earlier quoted context omitted.

Wasn't a significant amount of the VC money for Buffer allocated to founder liquidity?

$2.5M out of $3.5M raised.

Oooooooooh. That’s interesting... So the founders got theirs already. Nicely de-risked.

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

#130

Post by godzillabrennus »

paragpatelone wrote: post #109
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 think it is a bold move. In their situation it seems like the right move. I am seeing a lot of sentiment on HN that feels sorry for VCs. VC already get paid above 200k/year; no need to feel sorry for them. People should feel sorry for the founders & the employees who did all the work. Now if they get liquidation, then that is good.

Big VC funds pay like that.

Entrepreneurs turned VC often don’t have the dry powder to pay themselves well when they use their own cash to start fund 1.

Not all Vc’s are equal.

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