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 way out of it. They had two structural problems:

(1) the terms of their A round included a strong incentive to liquidate the whole company early, in the form of a perpetual 9% annual interest payment due to the A round investors after 5 years.

(2) the terms of their A round forbade them from extending liquidity to other shareholders, including employee equity holders, without the approval of the A-round lead investor.

Unsurprisingly, Buffer's A-round investors needed to be talked into accepting the buyout, which they took at a substantial premium to their investment in the company.

I do not think the logic you're employing to value these shares is sound. Early exits are usually bad for employees (the lower the exit valuation, the less money is likely to trickle down to employees). Profitability gives Buffer lots of options to maximize returns to long-term shareholders, which is what employees are. To my eyes, Buffer's employee equity is more valuable given this information, not less.

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.

Thanks for taking the time to explain to this guy the big obvious perspective he is missing here. So frustrating reading one-sided comments like that.

Can we please stop using “lifestyle business” as a pejorative for everything but hyper-growth companies? Outside our bubble that’s pretty much just what everyone else calls a business.

There are way too many commenting as if a profitable business is actually a negative thing.

It's because we are growing up with VCs teaching us that you have to burn money for 10 years before you can be profitable.

Honestly, I'd sign with my blood if I could get my business to make £5M a year in profit and own nothing to VCs or banks.

Out of curiosity, can you lay out yearly (or monthly) revenue and profit ranges for what you consider a "lifestyle business"?

To me it sounds like he's trying to establish Buffer as a business, and not a startup. Let's make that distinction, and drop the "lifestyle" part.

> When VCs [...] walk away, that is a really bad sign for a company.

VCs eventually need to post cash-on-cash returns to their LPs if they want to raise their next fund. It doesn't matter if they think the company can do another 10x or another 100x, eventually they just need to exit their positions and mark the book. Now granted maybe it's a sign that they don't think the business will do 10x in the next year, but that doesn't have much to do with the scale on which the business will ultimately succeed.