Social media publishing startup Buffer publishes not only the salaries of its employees, but also the formula it uses to calculate them. It has made its revenue figures publicly available, as well as its equity structure.
That is already highly unusual.
It’s now being just as radically transparent about its $3.5 million fundraising round. Founders Joel Gascoigne and Leo Widrich revealed why they are raising money, their valuation, each of the investors they working with and why, and the unusual structure of the round—all in this blog post.
A whole bunch of the data that never sees the light of day during most fundraising rounds is available online. The company has also crowd-funded part of the investment, and made its term sheet publicly available:
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Buffer has been doing pretty well for itself. It’s been profitable for the past 6 months, has $4.6 million in annual recurring revenue, and 165,000 active users.
Of the money raised in this round, $2.5 million will go to providing liquidity for the founders ($2 million) and staff ($500,000), and $1 million will go back into the business. It’s enough money to avoid the temptation to sell and to accelerate the pace of investment a bit, the founders say—but not so much that they have to give up a ton of control. Carefully selecting their investors helped them accomplish that.
Buffer is trying to demonstrate a “middle way” for small companies that involves neither bootstrapping, nor tying themselves to raising successively larger rounds on a rapid, VC-pushed path to an IPO or sale. Buffer’s way creates little pressure to act more conventionally, or speed up the very slow hiring process.
The principal idea was to set a precedent that makes raising money just as transparent as the company is about salaries, equity, revenue, and even internal email. From the founders’ blog post:
One of the most exciting parts of our journey so far has been in pushing the boundaries of how transparent companies can be, both with team members and with the wider public of customers, users, blog readers and other entrepreneurs. We now feel a duty to continue to be fully transparent about everything we do, always finding areas we can be even more open.