The archive · Developer & Business Tools · Financial decision · 2014
Buffer raised $3.5M the 'middle way': founder liquidity, no board seat, at $60M
Scheduling startup Buffer raised $3.5M at $60M post-money: founder liquidity, public syndicates, and investors chosen for values.
Buffer
What the business is
Buffer is a social-media publishing and analytics platform that lets individuals and teams schedule posts and measure performance across Twitter, Facebook, LinkedIn and Google+, sold through monthly Awesome and Business plans.
Starting capital：A $450k seed at a $5m valuation in 2011, then a $3.5m round at a $60m post-money valuation ($56.5m pre-money) announced on 2014-10-27.
How it started
Buffer started almost four years before the post, from a bedroom in Birmingham, UK, generating $1k per month in revenue, and it kept charging from launch week. By October 2014 it had grown into a full social publishing and analytics platform with 1.8M registered users, 165k monthly actives, 28k paying customers, $4.6M in annual recurring revenue (about $385k a month), a fully distributed team of 24, $1m in the bank and six months of profitability - all after only a $450k seed at a $5m valuation.
What happened
Buffer had begun receiving acquisition offers it found hard to refuse, so the founders designed what they called the middle way: raise $3.5m at a $60m post-money valuation without giving up a board seat or the 20-30% equity a standard VC round would want. Collaborative Fund led with $1.5m, Red Swan committed $600k, VegasTechFund and angels including Scott Bannister, Gokul Rajaram, Eric Ries and Hiten Shah joined, and Buffer publicly syndicated the rest on AngelList with its full term sheet published (1x liquidation preference plus a 9% cumulative dividend). About $2.5m of the round went to founder and early-team liquidity; about $1m was added to the bank, sized to a worst case the founders mapped: if social networks stopped letting developers build on them and revenue halved overnight, Buffer could survive 18-24 months.
How it ended up
By the post's second update on 2014-10-27 all public AngelList syndicates were oversubscribed and closed and the full $3.5m was committed; the founders said only due diligence with lead investor Collaborative Fund remained before the money was wired.
Background
Buffer is a social-media publishing and analytics platform that grew out of a bedroom in Birmingham, UK into a fully distributed company of 24 people. By October 2014 it reported 1.8M registered users, 165k monthly actives, 28k paying customers on its Awesome or Business plans, $4.6m in annual recurring revenue and about $385k in monthly revenue - profitable for six months with $1m in the bank, after raising only $450k at a $5m valuation three years earlier.
The founders Joel Gascoigne and Leo Widrich said Buffer kept receiving acquisition offers, some of which made them think hard, and they realized they wanted to keep building for another 5-10 years. Rather than take a conventional venture round or sell, they chose what they called the middle way: raise $3.5m at a $60m post-money valuation without a board seat or the equity give-up a standard round would demand, with about $2.5m going to founder and early-team liquidity so they could say no to premature exits.
The round was assembled unusually: Collaborative Fund led with $1.5m, Red Swan committed $600k, VegasTechFund and angels such as Scott Bannister, Gokul Rajaram, Eric Ries and Hiten Shah joined, and the remaining money was syndicated publicly on AngelList with Buffer's full term sheet published. By the second update on the announcement day, all public syndicates were oversubscribed and the full $3.5m was committed, with only due diligence with Collaborative Fund left before the money was wired.
What has to be true
- Being profitable and in control let Buffer refuse standard VC terms and design a round around its own constraints: no board seat, no 20-30% dilution and no IPO clock.
- Founder liquidity of roughly $2.5m removed the temptation of the acquisition offers that kept arriving, so the founders could commit to building for 5-10 more years.
- Buffer screened investors for alignment with its radical transparency and remote culture before money, and found firms like Collaborative Fund and Red Swan willing to accept an unusual structure.
- Publishing the term sheet and raising through public AngelList syndicates turned the fundraise itself into proof of the transparency movement Buffer was known for, and demand oversubscribed.
- The $1m added to the bank was sized to a mapped worst case: if social networks cut off developers and revenue halved overnight, the company could survive 18-24 months.
What can be applied
A founder who wants to keep building independently can buy that option: a small values-aligned round with founder liquidity and no board seat eases the pressure to sell.
Aftermath
As of 2014-10-27 Buffer had committed the full $3.5m round at a $60m post-money valuation, with public AngelList syndicates oversubscribed and closed and due diligence with Collaborative Fund still to finish. The company continued its stated plan: a fully distributed team, published salaries and open SaaS metrics, and no intention of an exit, betting that a transparent company funded by aligned investors could keep compounding for 5-10 more years.
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