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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

#141

Post by cryptica »

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…

>> Maybe I'm too cynical

Every time I've told myself that, I later found out that I wasn't.

Under capitalism, the world always presents itself as better than it is.

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

#142

Post by maehwasu »

syntaxing wrote: post #33
tomasien wrote: post #28

Earlier quoted context omitted.

It's fine for the VCs if they can recycle and re-invest that. Otherwise it's a 0.

Can you please elaborate what you mean? The money is only useful to the VC if they can re-invest it elsewhere?

If the VC has another investment on its radar that it can't make due to capital being locked up in a stable but not explosive company like buffer, it would be fine taking the money back with some interest.

If it doesn't have that, then taking buffer's money doesn't move the needle much.

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

#143

Post by gadders »

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…

Fair play to them. I'd take this any day over "This is an exciting move for customers as we limit what we give them for more money" or the other corporate bollocks that gets spewed on the regular.

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

#144

Post by person_of_color »

tommoor wrote: post #127
dsl wrote: post #15

Earlier quoted context omitted.

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

Any other companies on this site ?

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

#145

Post by charlesdm »

tptacek wrote: post #49
dsl wrote: post #43

Earlier quoted context omitted.

When VCs (companies that make their money by betting on long shots) and two cofounders walk away, that is a really bad sign for a company. As I mentioned in another comment, if he hadn't had 45% of voting shares, the CEO would be gone. It sounds like he just wants to turn it into a lifestyle business. Which is cool, they just need to be upfront about bonuses or profit sharing, and ditch equity. Quick edit: I just re-…

No. All things being equal, the VC and cofounders leaving is a bad sign. But all things aren't equal: Buffer is so profitable that it can buy out its investors without impacting operations. That's an extraordinarily good sign, one few startups ever find themselves in a position to do. The Buffer post is extraordinarily clear (almost numbingly so) about the mechanics of their Series A and why they needed to buy their…

It's also tax efficient. Taking out $2.5m would first incur corporate tax, then dividend tax.

They initially sold equity of the business, only incurring capital gains tax in their personal name. Now they buy back shares and destroy those shares, so their stake increases again. They bought back shares with taxed capital within the company, but without incurring dividend taxes.

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

#146

Post by charlesdm »

gowld wrote: post #123
sebleon wrote: post #65

Earlier quoted context omitted.

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.

Not quite. People invest in VC funds exactly because these returns are not correlated to the market (well, they sort of still are).

It's diversification; people investing in these funds are generally NOT looking for similar returns to the public market.

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

#147

Post by jgh »

richardlblair wrote: post #55

When you give someone a pile of money you will always wonder if you get that money back, let alone see a return. Returning anything to investors should be seen as a positive. If you disagree, go give someone 6+ figures and have them lose it. You're opinion will change rather quick.

otoh me giving someone 6 figures and having them lose it is much more meaningful to me because:

1. It's my money, not money someone has given to me to invest

2. It's a pretty significant part of my net worth. If I was worth $100 million and gave someone $100k and they spent it all without any return, I doubt I'd lose much sleep over it. If I do that now it would be very hard to get over.

I'm not really disagreeing with you here, but the emotions at play are different I think.

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

#148

Post by charlesdm »

nodesocket wrote: post #79
jedberg wrote: post #72

Earlier quoted context omitted.

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.

Tell me about this 10% per year risk free investment? Owning S&P historically has returned 8% annual, by no means is risk free.

Use some moderate leverage I guess, i.e. 130% of capital.

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

#149

Post by puranjay »

sahillavingia wrote: post #103
swyx wrote: post #102

Earlier quoted context omitted.

buffer's salaries are posted here fyi https://docs.google.com/spreadsheets/d/1l3bXAv8JE5RB9siMq36-... make of it what you will but doesnt seem low

This is out of date, as Joel now lives in Boulder, CO.

Here's the updated link:

https://docs.google.com/spreadsheets/d/1l3bXAv8JE5RB9siMq36-...

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

#150

Post by charlesdm »

jedberg wrote: post #90
nodesocket wrote: post #79

Earlier quoted context omitted.

Tell me about this 10% per year risk free investment? Owning S&P historically has returned 8% annual, by no means is risk free.

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.

Real estate is also illiquid. Would you prefer 10% IRR in property, or 8% IRR in the public market? I would personally pick the second.
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