171–177 of 177 posts
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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.
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True, and the risk here would probably make this a "bad investment" in reality.
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.
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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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"...at the number they came up with..." Maybe I've misread you here. Is this not a number the investors came up with? As for the 9% interest rate, that starts sounding more like debt than ownership.
Yes. That is the idea. As downside protection, Collaborative Fund's investment was to begin behaving as if it were debt (issuing interest, that is) after 5 years. I assume the expectation was that if Buffer maintained hypergrowth and reached the inevitable Series B, part of the series B negotiation would eliminate that downside protection clause. But they didn't; they charted a course that didn't involve an imminent…
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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.
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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.
Because you aren't building a business. You are creating an asset you can sell. Businesses are great and I don't think most people are trying to talk down about them. But VCs are trying to build an asset they can sell. Because when you sell an company that has a high rate of projected growth you get all that money now as opposed to waiting 20 years. There are plenty of investments that pay out solid returns for 20+ y…