A lesser known fact about me is that I have invested in 9 companies. It’s something I’ve not written about yet (other than a quick mention on my /now page). So here we are.
The first investment I made was in Kate Kendall and CloudPeeps. I became an advisor to CloudPeeps fairly organically, having known Kate for many years in the industry. Being an advisor, I had a chance to chat regularly and get to know Kate. I loved the product and her approach, especially the culture and community she was carefully crafting.
Then in December 2014, I got some liquidity by selling a small number of Buffer shares in a funding round, and so I was in a position where I could invest. The timing was perfect, as CloudPeeps were fundraising and I had been advising and making introductions to help with that.
I invested $10k in CloudPeeps, and since then have gone on to invest in 8 more companies.
How I think about the financial risk and opportunity of angel investing
It’s now over 3 years since I made my first investment in a startup company, and I’m yet to see any kind of return what-so-ever. I think it’s worth noting that investing in early stage companies is one of the riskiest forms of investment that you could make.
When I took liquidity in our Series A funding, I knew that I had the option to make some investments. I didn’t know much at all about investing my money. I never had a large amount of savings growing up and so it was never something I needed to know about. When I got the liquidity, I gradually educated myself about the various types of investments I could make, and I also started making my first investments in startups.
I think about ways to invest on a spectrum:
- Low-medium risk: 401k / bonds
- Medium-high risk: stock market
- Very high risk: cryptocurrency / startup investment
While cryptocurrency has massive volatility, what makes investing in startups even more risky is that the investment is totally non-liquid. You can’t take your money out by choice at any time, you are tied to the trajectory of the company and the decisions of the founders.
It’s a well known fact that most new companies fail. Investing at the very early stages of a company, is certainly high risk high reward. It’s most likely that the company fails, but if it succeeds then the return could be high, because the investment will have been made when the company is very small.
I made a decision that I need to be comfortable losing all the money I invest into startups. This shaped my investment methodology. I am using other investment methods to try to grow my wealth. Angel investing is as much for personal fulfillment and what I want to contribute, as it is a way for me to make large financial returns.
Making investments for my own personal fulfillment
Since the earlier days of being an entrepreneur, I always had a dream that I’d like to one day help others through both advice and investment. One of the mindsets that has helped me to work through some of the tougher moments has been knowing that I can help other founders with those very issues.
I’ve also learned over time that helping others is one of the things that brings me the most happiness. I saw investing in startups as a new way to help others, with not just the financial investment but by being available as an advisor to portfolio companies.
And through my investments I am able to be involved in the early stages of companies again, something which I love. Buffer is now 7.5 years old, 70+ people and doing over $17m per year in revenue. It’s a very exciting time for us, but definitely a little different from the earliest stages.
Trying to make a small positive impact with my investments
Something I’m passionate about with Buffer and as a personal philosophy, is to try to make positive changes in the industry through the work I do. With Buffer, this is through the product and the way we operate the company. We believe that we have the opportunity and the potential to push forward how companies are run for the better.
One key example of this within Buffer is remote working. We have a fully distributed team, and this means that everyone in the company has much more freedom than they would in an ordinary organization. Team members can move for their own fulfillment or for the needs they have. Some team members have been able to travel a lot, others have had the comfort in being able to move across the country or the world for their spouse’s career. And some are able to work in their home country, where they would otherwise need to move away to make a better salary for their family.
Other examples of our efforts to contribute to a better future are through our transparency (making all of our finances, salaries and more transparent), and we also recently made our first charitable contributions as a company.
I’ve also been inspired by Clif Bar and Patagonia, whose founders have shared the idea that when we make an investment in something, be it with our time or with funds, we should challenge ourselves to think beyond desiring a financial return on investment.
At the end of the year I want to look at our balance sheet and see that we were good stewards of our business—a company that we are preparing for a long-term future. We choose how we define shareholder value, and we include product integrity, our people, the community, and the earth in the balance sheets. - Gary Erickson, Clif Bar
The return on an investment can be in the form of a resulting meaningful contribution to society or a community, through the investment helping to solve inequality, or by helping to solve environmental issues.
By making investments in startups, I am able to make a small impact on other companies too. I can help founders think through less usual and more impactful ways of running their company. I can be an investor who advocates for companies not just generating a financial return but also doing good in the world.
Helping founders achieve freedom and a maintain healthy mental wellbeing
Something I believe is not talked about or written about enough, is the toll that building a company can take on you as an individual. I’ve been through some very dark periods with Buffer, and I’ve hit some real lows along the way. I’ve been lucky to have a very caring team and family, and to be in a position where I was able to get help too. Working through challenges in this way has allowed me to have a much more balanced and healthy mindset to growing Buffer.
Unfortunately, I believe that as much as investors often try to be advocates of founders speaking up and sharing their challenges, often they are an additional burden in difficult times. Many investors don’t take a long-term approach that allows them to believe that helping a founder through hard times will ultimately give the best return.
All too often, I’ve also seen founders become constrained and lose freedom as their companies grow. They may have grown their company to several million dollars a year in revenue, and created fulfilling jobs for dozens of people, but they are overworked, and when they reach life milestones such as having a child, struggle to have time or take money out of the business to afford a better home.
I believe founders deserve better, and investors should support freedom and making a financial return along the way. I am a big proponent on founders maintaining freedom for themselves and their team, and taking a longer term sustainable approach to startup liquidity, instead of sacrificing health, finances and relationships for some hypothetical future exit.
With Buffer, I’ve been lucky to see a few different sides of startup investment. We have both angel investors and venture capital firms who have invested in Buffer, and I’ve seen a variety of styles with which people choose to operate. By being an investor, I can be a voice at the table of companies, to push for care around these issues and to provide balance compared to more traditional approaches. I’ve decided that beyond obvious bad behavior, I will always be on the founders’ side.
My process for making investments
Some angel investors have had a large exit with a previous startup, or had some other event which has put them in a position of a lot of wealth. I haven’t sold Buffer, and have no plans to anytime soon. By selling a portion of my shares, I’ve been able to get some liquidity, however I don’t have the level of wealth that other angel investors may have. In addition, since I am still running Buffer full-time, I also don’t have a lot of time to put into my angel investing activities.
Therefore, my process for making angel investments is more hobby than professional, and one optimized for the little time I have to invest. One way I have made things easier for myself is that I have, so far, always invested $10k. This is a hard and fast rule I have given to myself and communicate with companies I am in discussions with.
I am aware from my own experiences, that $10k doesn’t go too far for a startup and that it may not be desirable to have a small investor take up another slot on the cap table. I have found that with the ups and downs I’ve been through, many founders are excited to have me on board and get the additional advice beyond my investment. I feel lucky to be able to invest in the companies that will have me, and I will not be disappointed if I am turned down for being too small of an investor.
While I don’t have a lot of time to do extensive analysis, or treat my investments as a professional endeavor, I enjoy talking with founders and helping to solve problems. I therefore make time to be able to get on a call, or answer emails for founders.
Another decision which I’ve so far made, is that I will generally always do follow-on investment, when I can. If I can afford it, I will double down my investment when I get a chance in future rounds. My thought process on this is that since most companies fail, the ones that go on to raise more funding are more likely to be gaining success (this is definitely not a completely water-tight correlation, but I think it works well enough). This allows me to maintain my equity stake in a company as it raises more funding and I would otherwise be diluted.
My startup investment portfolio and timeline
I made my first angel investment in December 2014, and my last one in August 2016. Here’s the full timeline and my portfolio:
I invested $10k in all of these companies except for a couple which were in Euros and Pounds, where I invested a little more to make it 10k in the corresponding currency.
You may notice that I made all my investments in a 1.5 year period, and I’ve not made any in the last 1.5 years. There are a few key reasons for this. In Summer 2016, we had cashflow issues at Buffer, and as part of working through it I voluntarily reduced my salary by 40% until early 2017. This was a key reason I stopped making further investments.
In 2017, we had a number of big changes at Buffer, including my co-founder and our CTO leaving the company. I got heads down to help the company through the transition and I also made a decision to invest $250k of my own money into buying Buffer stock and providing liquidity to a couple of former team members. This has put my angel investing activities on hold for the time being.
Although I have been in a holding pattern in terms of making further startup investments, I’ve very much enjoyed being an active angel investor so far. It’s been fun to be an active part of the founders’ journeys. I have so much more to learn to become a better startup investor and advisor, and I’m excited to continue this journey further. One of the key things I’ve taken away from this process is that if you don’t know much about something, one of the best ways to learn is to dive in and start doing it.
I have been lucky to have success with some of my other types of investments, and Buffer is doing great right now, so I think I will soon consider becoming more active in advising and making further startup investments.
Have you ever thought about investing in startups? Are you an active investor? I’d love to hear any thoughts you have on this article in the comments below.
Photo credit: Vitaly
We’ve been lucky at Buffer to receive a number of acquisition offers along our journey so far. When I mention this to people, a key question that often comes up is “how did you decide not to sell?”.
The earliest offer we had for Buffer was not long after we had started, and it felt fairly easy for us to say no, simply because we felt we wanted to see where further our current path leads. In many ways, the reason we haven’t accepted an acquisition offer is in order to continue on our path.
How much more learning could you have if you keep going?
However, after we said no the first time, we noticed something quite incredible happen. In the months that followed, we had several brand new learnings and experiences about growing a company. For example, after our first offer we soon established the values of the Buffer culture, chose to commit to being a distributed team, and I found myself in a position where I needed to learn how to let people go. These were all priceless business and life experiences. Learning to fire people was not easy, but I feel very thankful to now have this experience.
This is one of the most important considerations for us now. If you sell your company, you will sacrifice upcoming learnings. Of course, you will learn many valuable things as part of a new company. A framework I have created in my head for this, however, is to think about when I will have the same opportunity again.
When can you get back to that same level of learning again?
If you are 2 years into your startup and have found traction, and then you sell your company, when will you next be 2 years into a startup? When will you be able to experience the learning that happens in the 3rd year of a startup? I think that doing a full cycle and selling a company will be valuable, and I like to think that with that experience I could perhaps grow a company faster in the future. However, it will still take some time. In addition, you will likely work at the acquirer for a couple of years. For me, in this scenario, I would expect to work at the acquirer a couple of years, then it might take a year to find a good idea which can gain product/market fit, and then you have the 2 years to reach the same stage.
So, all in all, if I sell my 2 year old company, it could be 5 years before I am able to next experience the learnings that come in the 3rd year of a startup. We don’t have many 5 year periods in our lives to wait to have another chance for incredible experiences.
The second time we turned down an acquisition offer, we grew to around 15 people and started to feel like we went beyond a product towards an actual company. Many new learnings came with this, like thinking about how to structure a company with more people, and the true importance of culture. And interestingly, the most recent time we chose not to sell, we have found ourselves on a magical journey of removing hierarchy and managers, embracing self-management and striving to create a truly fulfilling workplace where a foundation of trust and freedom means that everyone can work on what they are passionate about.
Focusing on learning and experiences rather than money
Money will come and go, but experiences and learning is what I define as true wealth. This is why we try to frame a decision of whether to sell around the opportunities for learning and experience in each path.
Our advisor Hiten asked us perhaps the most simple and useful question when we discussed the topic of selling with him:
“Are you done? No? Then don’t sell.” - Hiten Shah
Sometimes founders may be tired, lacking the motivation they once had. Maybe then it can make sense to sell. We’re not done yet, and I’m excited to see where this path leads.
Photo credit: Cindee Snider Re
I think I’ve just about got to that point with Buffer where sometimes when I stop to reflect on things I think “wow, we’ve actually been doing this for a while now”. It’s about 3.5 years since I started Buffer as a very simple Minimum Viable Product, and we’re now 23 people and doing over $3m in annual revenue. We still have a lot to do and in many ways it feels like just the beginning, but we’ve been at it for some time now.
We have some fairly consistent growth now in new customers, revenue and in people joining the team. In many ways, I think that up until now, everything we have been doing has been innovation. When I first had the idea for Buffer, I didn’t realize at the time but looking back it’s clear that was innovation in social media. The idea of a rolling schedule of posts was not something that existed in all the products. I wasn’t the only one to come up with that idea, but it’s now a feature of most products out there.
These days, with a little more stability, I’ve started to think about innovation again. There are a lot of interesting things happening in the social media tools and marketing space, and I think we need to keep moving and try out new ideas.
The challenge of innovating as you start to grow
One of the interesting things we’ve witnessed at Buffer is that as we’ve started to grow, it is increasingly difficult to do risky experiments.
I think the key reason it’s hard is that we’re in this situation where we’re still struggling to grow the team as fast as we want to. We still have more roles than people, and we’re all wearing many hats. We have an endless list of product enhancements, bug fixes and a/b tests, without even thinking about the crazier ideas we want to try. Also, everything we have on our list is somewhat validated, whereas the innovative ideas will most likely fail (but could have huge rewards if they succeed).
As a result of this situation and challenge, I think we’ve only done somewhat innovative things in the last year. At one point I concluded that we should have a “year of execution” and then eventually be at a point where we can focus on innovation. I think that’s risky, because we will never have completed everything we want to do for the core of the product and may never get to innovating.
A framework from LinkedIn to stay innovative
I was recently watching a fascinating conversation between Reid Hoffman and Matt Mullenweg. I can highly recommend it, they talk about many interesting topics. One of the things that caught my attention was something Reid mentioned in the middle of the conversation which Matt asked him to expand upon. It’s the framework they use at LinkedIn to stay innovative.
Core, Expand, Venture Projects
That’s the wording that LinkedIn use to describe the 3 key areas of activity which they try to balance. Here’s how we’ve tried to take this idea and translate it into what makes sense for us at Buffer:
Core: For us, core means to work on what Buffer already is. It’s to improve our onboarding flow, to fix bugs and figure out where we can make the experience smoother for people who use the product. This also includes lots of ongoing a/b tests to improve the landing page, pricing pages or increase activation rate of new users.
Expand: This is the term for any projects worked on which are logical expansions of what the product already is. For example, adding analytics broken down by team members for the social posts you share, or a calendar view, or better reporting on the business plans. These are all things we want to get to soon, and they’re fairly validated.
Venture Projects: We’re calling this Labs, we’ll probably create “Buffer Labs” in the same way that HubSpot and MailChimp have Labs. This is the area we’ve been neglecting for some time (or maybe just the time wasn’t right until now), and we want to make room for now on an ongoing basis. This is for crazy ideas that we want to just try and see what happens. We’ll always approach these super lean to avoid waste, but we have to take the leap somewhat too. If successful, these projects could move to “Expands”.
I think the idea here is to try and shoot for a good balance between these 3 areas, and to always be working on all 3. It feels like a useful framework to follow. For us, it is probably going to be a 50:30:20 ratio right now. We’ll be sure to share our progress on Core, Expands and Labs through the Open Blog and on Dribbble. It’ll be fun to see how this works. Want to be part of working on any of these areas? We’re always looking for people to join the ride.
Photo credit: M Glasgow
One of the incredible side-effects of doing retreats 3 times a year with my startup is that I get the opportunity to travel and experience completely different cultures.
On top of spending a week and a half with the rest of the Buffer team on retreats, in the last two occasions I have made a decision to stay or continue traveling in the same area beyond the end of the retreat.
For our latest retreat at the start of the month, 16 of us were together in Cape Town and I have stayed here 2 weeks so far beyond the retreat. I’m not sure yet whether I will continue to stay longer, or whether I will return to San Francisco. This uncertainty in itself is an example of a new way of traveling which I’ve been experimenting with.
How I’ve adjusted my traveling in the last few years
I’ve been very lucky to be born in a time where there is such a thing as work that doesn’t depend on where you are. We’ve set up Buffer as a completely distributed team (now 20 people across 18 cities in 5 continents), and I’ve had the opportunity to travel a lot already during the Buffer journey.
Leo and I started Buffer in the UK, and after 8 months we moved to San Francisco. We spent 6 months in San Francisco, then 6 months in Hong Kong, and then 3 months in Tel Aviv. After that I lived in San Francisco again for the last year and a half, with a little traveling at time.
The result, for me, of traveling to so many different places is that I started to carry much less with me to each subsequent place. I realized that you really don’t need much to travel, or even to live. In fact, you don’t need much in life at all. I’ve become a big fan of one bag living.
In addition, these experiences were the first time I’d experienced “living” in a place rather than “visiting” a place. Being able to stay 3 months or 6 months meant that I could make new friends, discover the culture in a deeper way and experience working and living there. It relieved a lot of the pressure of “seeing all the sights” in a short space of time, and even on shorter trips now I don’t try to cram too much in.
Traveling around Asia
Our second Buffer retreat was in Thailand in December last year. 10 of us stayed in Bangkok for a few days and then in 2 villas in Pattaya for a week where we worked together and went on a boat trip to a nearby island.
After the retreat, I decided to experiment with traveling by myself, something which I hadn’t properly done before. It was an incredible experience, so freeing for everything to be in your control. Even just the fact that it’s down to only you to get around is interesting, you have to be the one to ask directions or make the effort to meet others, rather than relying on a friend (which I sometimes do).
When we do a retreat, it’s quite a busy time and we fit a lot into the week, not to mention the natural excitement and pressure of meeting people, sometimes for the first time. After Thailand, I decided to travel to Singapore for 6 days, then Taipei for 4 days and then make my way to Japan for Christmas to see my brother, his wife and my little nephew.
It was a great experience to see all these different places in the space of a few weeks. At the same time, I didn’t manage to feel a part of any of these places, I didn’t get past experiencing things on the surface.
Staying in Cape Town
My recent experience in Cape Town is in contrast somewhat to that of traveling around Asia. Rather than visiting other countries in Africa (which would be a lot of fun) I decided to simply stay in the retreat location of Cape Town for a few extra weeks. After the week of retreat, I found an AirBnB place and I could start to build my early morning routine go to the gym again. I found a few coffee shops and a co-working space, and I got to know some people. I did a speaking event and met the startup community here.
With each day that passed, I felt like I got some extra insights into how things work here. I met locals and learned some of the Afrikaans words and some of the differences in how they speak English, too. I quickly stopped feeling like a tourist, although I have been on Safari, hiked to the Lion’s Head and had a kitesurfing lesson. During the week I’ve worked just like I would anywhere else.
I’ve become much more spontaneous with my plans and let things flow based on who I meet and how I feel. I have accommodation for only a couple more days here in Cape Town, so this afternoon I’ll start looking on AirBnB again for the next part of the city to experience.
In the future, I think I’ll take every opportunity to stay a few weeks or even a few months in a place, rather than trying to visit as many places as possible. I’ve found it much more fulfilling to become part of a place rather than simply seeing a place, even if it I’m only temporarily part of it.
Photo credit: Dimitry B
I’ve always found it interesting to think about co-founder relationships. I’ve been in a few myself, some which were not completely successful and then more recently working with Leo for the last 3 years has been an absolute joy. It’s fascinating to me how co-founders need to be different in many ways and at the same time have shared values they are aligned on. It’s a real art to find someone who you work well with and trust.
I recently watched a video of an interview with DHH from Basecamp and found the audience question on co-founders interesting and very in-line with my own experiences on what makes a good match.
Complementing each other in skill-set
"When two men in business always agree, one of them is unnecessary." - William Wrigley Jr
I think it’s super valuable to have different strengths as founders. I often see fantastic products from great engineers and product people, where I believe the product should be used by far more people. It’s probably because the founders are not naturally inclined to do marketing, and so keep working on the product.
"I see a number of startups where the founders are too alike. Either they agree on everything or even worse they do the same thing. Like starting a company with two programmers - I don’t think that’s a good idea. I think you need skills, and you need mentality, to complement each other." - DHH
In the early days of Buffer, I reached a point with the product where it had a couple hundred users and some paying customers, and I knew in my head that I needed to switch to marketing. There was validation that the product in the exact form it was in, was already useful to people. There was clearly more people out there who would find it valuable as well. However as a developer it was a real challenge to be effective at switching to marketing instead of fixing bugs or building out new features. Luckily for me, that’s when Leo came on board as my co-founder and had a massive impact since he was a great marketer.
It’s also useful to have different mindsets on the business aspects too:
"For me and Jason on skills, Jason was all about design and I was all about programming. So that was just a natural fit right there. On running the business, Jason is more of a risk-taker and I’m more conservative. I’m more about running the numbers and making sure everything’s alright, and Jason’s more like let’s just rip away everything and try something new and take a leap. I think you need both of those things to pull the business in the right way." - DHH
For me and Leo, we’re both scrappy and take the lean mindset. At the same time, Leo is probably more inclined to push something out of the door extremely early, whereas I like to be a little more calculated and logical and get the best balance of learning and not wasting time by building something out without validation, but still shipping something quite polished.
One of the most interesting ways Leo and I complement each other is on “doing” vs “reflecting”. I often joke that if Leo and I each have a daily todo list with 5 items on it, there is absolutely no question that Leo will get through his 5 tasks. For me, I struggle at times to get through everything. I work hard to be productive, however I also like to take time to reflect on the direction we’re going and ponder changes. We both aspire to be more like each other in this regard: I’d love to just crank through more, and Leo says to me he’d like to reflect more and sometimes realize not to do some tasks. We talk very regularly and help each other, and we end up at a nice equilibrium.
Aligned with each other on values and vision
"At the same time, you have to have some overlap too. Jason and I obviously share a lot of opinions about how to run a business and what is important and our values are incredibly alike, in terms of creating a sustainable long-term business that does well for both its customers and its employees. So you can’t just be polar opposites and expect that everything’s going to be daisy. There’s got to be overlap on important cultural values in the company, but outside of that seek as much diversity as you can." - DHH
The hard part of finding a great co-founder is that you want to sufficiently complement each other, but at the same time it’s vital to agree on fundamental values and what you want to do with the company. If one of you wants to flip the company within a couple of years and the other wants to make it their life’s work, it’s going to be difficult to agree on key decisions.
From an early stage it became clear that Leo and I were very aligned on many of the values which became the Buffer culture. I introduced Leo to How to Win Friends and Influence People and we spent countless hours discussing the principles and examples. Leo has always had tremendous gratitude for the opportunities he has had and is one of the most positive and happy people I know, and that was something I aspired to focus on more. I always enjoyed being very open and transparent about my learnings and progress and this came completely naturally to Leo too and he enjoyed pushing us further in that direction.
How did you meet your co-founder and what are the key ways in which you complement each other? I’d love to hear about your experiences
P.S. We need help with many areas of Buffer right now, to complement the existing great team. Check out our openings