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.
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.
I don't want to say getting VC was a mistake for Buffer because I can see it might have had an upside of connections and advice for what was an inexperienced team, and I think at that time the management team was more bought into the VC model. Buffer has definitely transitioned away from the VC model, though, and buying out the investors now is the right decision IMO.
A lot of comments in this thread are quite harsh. I applaud Joel for having the courage to honestly share his experiences so others can learn from them.
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 take a chance on growth.
Maybe I'm too cynical, but I admit I'd be tempted to do the same thing.
Meanwhile, if the investor didn't want to sell at the number they came up with, they could presumably just say "no".
You are, yes, probably being too cynical here.
I wouldn't imagine that's the case. Especially if the investor came up with the number and agreed to it in a legally binding contract. It'd be an uphill battle in court to get around that. (yeah, you still need the funds to defend your company...)
Also, my anecdata says that most corporations have in their corporate bylaws (or whatever the right document is) the provision that they can forcibly recall shares at any time (presumably for current fair market value/409A valuation.)
It would be pretty funny if the legal norm among startups was that they can acquire their own equity back from investors based on their 409A valuation.
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.
Again: it would be really weird if companies could simply demand their equity back. The whole point of investing in a startup is that their equity will end up wildly more valuable --- not 40% more, but 10x more --- than the money put in.
At any rate: they bought out their investors years before interest became due. It was a negotiated sale.
I guarantee you this has annoyed you more than a few times as a user of their products.
In a market where VC style multi billion dollar exists just isn't going to happen, trying to force it is just going to ruin everything good about your product and company.
And VCs would rather see you ruin it, with a tiny chance of succeeding, than see you have a successful small/medium sized company.
Employees obviously I can't know but the article includes him telling investors there might not be an exit.
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.
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.