The Buffer Unicorn? Review of Buffer - Hidden Unicorn in the Forest

Added as update to my Buffer review:

After receiving nearly 30+ emails and contacts about my Buffer review, I decided to update the original post :)  See below.

How Buffer Can & Will Become a Billion Dollar Company, An Open Letter for Buffer's Team

Dear Joel and Leo,

buffer-review

In the interest and goal of absolute transparency, I decided to write an open letter extolling the virtues, possibilities, and massive potential of Buffer the company, the product, and your awesome team.   As an investor in Buffer, and more importantly, a long-time customer, I completely understand your model and vision for what you're building.  And from what you'll read herein, you'll be able to see how pumped we are at Angel Kings for what Buffer's future holds. 

However, in a recent article explaining the value of options to Buffer employees,  you sold yourself - and the talented Buffer team- short, drastically.  By even suggesting that Buffer could or should ever be worth less than several billion dollars, I had to jump in to prevent you from selling too soon or not seeing your vision all the way through... as you've always said.  

In fact, I refuse to let you/Buffer sell for anything less than $2.5 billion dollars! 

Let me explain why...

With all of the insanely overhyped, startup unicorns and newly minted IPOs out there, it's time for your most amazingly built, most transparent and well-designed company to go for the grand slam winner and finally recognize what you've already created. With a team of approximately 50 people - and growing - you have created a culture that is rooted in creating a product that people love to use. 

Not only is Buffer loved, but you have become the thought leaders in social media.  In fact, with Buffer's transparent metrics, anyone can see that you're growing almost 75%+ year-to-year.  This is a phenomenal statistic; in fact, it's virtually unheard of in the SaaS industry or any industry for that matter.  I also realize, as you've said, Joel, that your growth metrics can be a blessing and a curse in so much that it makes it much hard to become a publicly-traded company, but you can do it.   

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You deserve more than an "acquihire" (those don't work anyways) and more than a $600 million dollar valuation (seriously... that's the most you think you'll be worth?)  

Let's aim for the moon, but yes grow in a way that regroups at each Basecamp (article).  

You can, and will, become a startup unicorn that has real wings!

 

So here are my 5 suggestions to making Buffer a billion-dollar company within 5 years...

 

#1 Completely Re-Think Your Pricing Model

Create Two Plans: Free or $7 per month/per social media account

 

I noticed you already offer several plans for a variety of audiences. And further in your recent update have even extended your 7-day Buffer for Business trial to 30-days to test what works best  So, I know this is a topic that matters amongst the team.  But looking at the big picture, the issue rooted in the fact of having more than 20+ paid pricing plans.  In fact, you have so many options, that you're paralyzing the customer and preventing focus.  

First, let's look at the three plans that account for the bulk of Buffer's revenue.  

buffer-pricing-plans.jpg

These plans alone account for more $6 out of 7 dollars that enter Buffer's bank account.  This is awesome.  Some of the other plans are custom tailored and vary from the little to the big (Enterprise 400 to Enterprise 700, etc).  By creating these various levels, you risk treating people differently and crushing the time of your Happiness heroes.  You've got to focus on less plans, a more-simplified structure, and democratization for the consumer.  

Less options are always better. And we know this fact: Buffer customers will want to keep every account active and sharing as much as possible, and they're absolutely willing to pay for it.

Recommendation 1:

Create only two plans.  One plan should be totally free (later I'll talk about how we pay for this), and the second plan should be tiered based on how important being able to spread the message across multiple account is for people.  

The free plan could convert after 30-days into the paid structure of $7/per media account/per month with premium options.  Or the customer could maintain the free plan and post within a newly created ad-supported platform.   You should also give the opportunity to customer to purchase a year's worth of unlimited posts/ad-free for $195.  

Why two plans?  People don't want options.  They want simple pricing and a way to pay it in advance.  By reducing the number of plans, you'll also make the customer more likely to convert.  This is a simple recommendation that will go along way to our pursuit of victory and a 2.5 Billion Dollar Valuation.

 

#2 Build the Buffer Ad-Network

I hope you realize you're sitting on a data-filled gold mine.  According to your October 2015 investor update:  each month, more than 225,000 people post on Buffer, and more than 55,000 people per day... all proliferating links which no doubt garner billions of page views each month.  Wow.  There's something here to explore...

The key to a successful ad-network is volume, and you've got that already.   Look at what happens to successful ad networks just as AdMob was acquired by Google in 2009 for $750 Million way before the increase penetration of mobile we're seeing. And then there was DoubleClick for $3.1 Billion and so on.  I'm not saying you should try to be bought out by Google, but note how powerful ad networks can become as AdSense and Adwords generate billions of dollars in continued profits each year.  They're massively scalable and they also as a bonus... create revenue for all parties.   Also, I'd rather you end up acquiring companies, than being acquired!

double-click-company

I would argue though that Buffer has even better, more educated and informed content.  This content not only contains massive and untapped data, but also the opportunity to generate hundreds of millions of dollars in revenue for Buffer.   Furthermore, by creating an ad-network with an already existing user base, you also diversify your revenue stream and rely less on the mundane valuations of SaaS companies.  

Before your team says, wow we don't want to deliver ads - or ads suck - which they can, let me explain this recommendation further as we can do it in a better, more innovative way.  

The ad-network model will exponentially increase Buffer's revenue, and will utilize the power of the Buffer ecosystem/brilliant customers who are posting every day.  We've got to get your company away from the objective market comparisons to SaaS companies.  

You're  good enough...smart enough, and doggone people love Buffer!

You're  good enough...smart enough, and doggone people love Buffer!

You are not a SaaS company.  period.  You're much more than that.  HELLLOOO!

 

Recommendation 2:

First, update your terms of service once your new pricing model is tested.  I believe strongly in the power and transparency of building companies that are straight forward.   And updating your terms of service will give you the opportunity to be transparent about new monetization, from day one.  

Then the Buffer ecosystem/ad content will be delivered in 3 ways:   

outbrain-business-model

(A) Content provides embed Buffer into site for recommended articles.  Create javascript embeddable code which Buffer evangelists can include on their websites, forums, and blogs or anywhere else.  Split revenue with the content providers.  Not unlike Outbrain or Taboola (worth billions) you will be able to leverage and recommend contents while further promoting the Buffer ecosystem.  You've got some super smart engineers there, right?  No doubt, they can build out this recommendation algorithm and even harness the tetrabytes (or Petabytes) of Buffer data that already exists.  

 

viglink-business

(B) Link & purchasing revenue.  As a good portion of "content" in the Buffer ecosystem are links to pages where people can purchase someone's items, you could also work with sites like VigLink who already work with companies like Pinterest and make a percentage off of every thing purchased in the site.  It's amazing that Pinterest has a valuation of $10 Billion, and they have no where near as many professionals selling good/services as Buffer has.   You could make 1.0% to 3% off each link where someone ends up buying the product.  Think about the possibilities there... 

 

(C) Advertisers can sponsor posts from Buffer influencers.  Not unlike Linkedin who has "Influencers," you no doubt have a sub-set of power Buffer users who could be turned into an advertiser's dream promoter.  Consider contacting your top 100 users (and celebrities) on Buffer and offering them a revenue share with some of your top advertisers.  This could be done later as step #3.   As a side note, I would be curious to see how many of these top 100 users are promoting the bulk of content and clicks.   Joel, why not publish the superstar Bufferizers on your homepage?  

**

By creating an ad-network with the hundreds of thousands of awesome Buffer users, you will create a new paradigm in your valuation process.   No longer will you get the typical SaaS , 1 to 2x ARR valuations. We're talking in the 50 to 100x multiples.  

 

#3 Pablo 2.0 - Let's go all in.  

Pablo-Buffer

When I first saw Pablo 2.0 on Product Hunt, I was excited by its potential for Buffer's growth.  I immediately saw what looks to be a new revenue component tucked into content.  I realize you probably built this to get ready for your Instagram integration (coming soon, right?) and that you now the power of visuals in marketing to consumers. An excellent idea, indeed.  

However, Pablo 2.0 represents an opportunity to brand yourself further as more than just a social media sharing site.  It also gives you an additional plan to create viral grow and to increase your revenue at higher multiples.   

Consider that possibility for Pablo 2.0.  

Recommendation 3:

Include "Created at/by Buffer.com" in photos.

Include "Created at/by Buffer.com" in photos.

Embed a small watermark logo said "Created at/by Buffer" in the bottom right of every free image in your Pablo library.  Just as Hotmail created the brilliant signature on emails (Remember the "Want a Free Email?") campaign brand and make their product viral, Pablo needs this boost.  

When the content audience sees this "Created at Buffer.com" as a watermark in the images, they'll be intrigued and you'll begin spreading the Buffer brand.  

Allow photographers and content producers to embed upload their own images to the Pablo library.  Not unlike stock photos or images, you can offer these downloads for free to Buffer users or charge a monthly fee for unlimited library access ($10) and integration and a revenue split for these starving artists!  

(BTW, notice the built-in branding in the bottom right?)

(BTW, notice the built-in branding in the bottom right?)

The purpose of Pablo 2.0 should be multi-fold:  add to a growing awesome product (including the latest social calendar), expand your viewership, and begin branding your company.

Side note:  I often times brag about having invested in Buffer, but then people look at me and say, "what's Buffer?".  No more.  

We're doing it live this time!

 

#4 Foreign Expansion and Language Processing

One of my other venture capital investments, Verbalizeit, has created a very cool way to do on-demand language translation services, using their fast-growing language processing API.   In addition, mega giants like Facebook have also included an on-demand translation component within their comments section.  

I want Buffer to start thinking globally.  Just as the majority of Facebook's audience is outside of the United States, the majority of Buffer's is likely too.  The rest of the world needs to see the ecosystem you're creating with Buffer.  

verbalizeit-review

Further, you would drastically increase traffic If you were to included a translate into X.... within the Buffer dashboard.  Not only would this content be optimized for SEO searches (which does matter), but the rest of the world that doesn't speak English would be able to access Buffer's vast distribution network. 

Happy to make an introduction to the Verbalizeit team.  They're pretty awesome too. 

 

#5 The Buffer Incubator

First, let me say I completely respect the fact that you promote a distributed work force.  Clearly it's working to the extent that revenue is increasing and your team is uber happy.  In fact, so impressed that thousands of people apply to Buffer every month.  Very cool.

However, here's my point blank question:  how many billion dollar companies were in distributed work forces?  Automattic and Github, maybe?  But the bulk of billion dollar companies & teams are in the same location at one time for at least part of the year.  I've written extensively about startups, investing and my teams in the book Kings Over Aces, and I can tell you we studied thousands of startup teams, but never saw one with a completely distributed work force that went public.  Happy to be proven wrong though!

         gratuitous image of unicorn.

         gratuitous image of unicorn.

The easiest rebuttal to this might be that times are changing and that the concept is too new to accurately reflect future outcomes.  Or further that "our team is happy" and we don't want to change interfere with these freedoms.  Perhaps you're correct.   But let me suggest a perfect combination - a hybrid model - that will promote your workforce and bring together the brilliant minds at Buffer:

 

Introducing... The new Buffer Incubator.  

  • All team members have at least a three-month stay at a new location each year.  I would recommend an Olympics-style selection process (but keep it fair and legit, ok?) where at least 33% of the Buffer team is in one building, one place, at one time of the year.  
  • During this Buffer Incubator process, you'd hear the voices, ideas, and product suggestions flowing.  You could also invite companies who want to build on top of your ecosystem like Quuu to join your team.  
  • The new incubator would be a natural extension of your model of once-per-year meeting in cool places.  But as your team grows to 50+, I predict you're going to hit a breaking point where it's impossible to fit enough people in a Slack messaging forum, or video conference, to get things done.  

I would recommend going t0 the top-fastest growing cities for Buffer each year.  Tapping into the local startup ecosystem, and meeting with new entrepreneurs who share Buffer's enthusiasm for getting things done.  You could also partner with Y-Combinator, 500 Startups, or other incubators during the first year as a way to save precious overhead expenses.  

I do support the move from the Buffer HQ, but believe at some point this distributed work flow model will hit a breaking point and you'll need to be ready to adapt.   Be pro-active about this and consider an "incubator-meets-talent-model" that will bring these minds together in one place.  Could be pretty amazing!

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Now... Buffer Should Raise $20 Million to Pay for This Expansion:

To pay for potentially free accounts, the first big recommendation, and any additional costs of hiring, I would recommend raising a $20 million dollar round in 2016 at a $200 million post-valuation.  With a frugal burn rate, added revenue streams mentioned, and continued growth, Buffer has more than doubled its valuation from last year's raise.  

I believe the massive potential, the ecosystem, and continued growth rate merits a large up round.  By raising $20 million dollars and not having to give up too much equity (only give up 10%), you will show you're ready for the big leagues.  Plus, the $20 million dollars will support hiring more sales, support, and happiness heroes to continue growing your business.  I would say as a side note to this equity round, you should aim to have a per employee revenue model that is higher than Twitter and closer to Facebook's per employee, at $1,000,000, by the time you too go Public or have a 2.5 billion + exit.  

Raising $20 Million should support up 75 employees and continued product expansion until the billion dollar valuation is crossed.  

Remember, always be raising... and let's get started before those unicorns without wings fall from the sky and valuations start dropping.  

Why $2.5 Billion+ Valuation?

Buffer — the Next Billion Dollar Startup.

As you can tell, I’ve done quite a bit of research on the potential of Buffer to make it into unicorn/mega-startup territory. This won’t be easy, and frankly to get to this level you’ll have to become an acquirer… and not the acquired.

After adding the additional revenue streams mentioned above, then raising $20 million dollars next year at a higher up round valuation, you should have at least $25MM in ARR, cash in the bank, and a higher equity multiple. Therefore, your stock will be worth much more.

Options for Buffer, post-raise:

Become the Acquirer…

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A. At this point, you should acquire several of the smaller companies that are building on top of your ecosystem. Not unlike Twitter who acquisition/hired Vine you will have plenty of ammunition to increase your free cash flow, growth rate, on top of the ad network I’ve recommended.

B. Mobilize the forces: create an all-mobile team and dedicated at least 1/2 of all employees into a mobile strategy. You could continue to create iOS and Android apps that leverage new verticals such as payment processing for content producers and retailers, and online news/content publication. You could even consider creating a product that allows Buffer customers to link up with people in the same career/industry (maybe take LinkedIn on!).

The possibilities are endless once the new revenue streams have been added and you have an “acquire vs. be acquired” mentality.

 

*****

***UPDATE TO BUFFER.COM REVIEW ***

After my original post herein on Buffer, I received phenomenal responses from the Buffer community. Many product fanatics and people who love using the Buffer product.  (Very cool!)  

What I realized in getting these people excited about my product ideas for Buffer, was just how much people care about this company, its people and its values.  

Nuzzel connects your community of people with an elegantly simple model.  

Nuzzel connects your community of people with an elegantly simple model.  

However, I realized something even greater... and had a Buffer-product epiphany... why not give the people sharing content every day through Buffer, the opportunity to connect with likeminded Buffer community members?

Case in point: I recently downloaded an app called "Nuzzel" - which allows people to share content and see content from their closest friends.  The Nuzzel App isn't perfect, but it's an interesting take on what Flipboard tried to do in building out content catalogs for likeminded individuals.  Regardless of what they're doing... I realized that Buffer has an even more powerful and potentially massive platform for gathering friends and industry leaders together.  

By no means am I saying Buffer should copy this model.  In fact, there is no doubt a million great permutations Buffer (and CTO Sunil Sadasivan) could do in creating a way to unite the collective body of people.  

Being that the audience of Buffer users is likely more sophisticated and more skilled than most audiences, and by creating an ability for people to share, collect, and follow other Buffer members, you'll create business opportunities for all.... that's powerful... and valuable for sales generation, marketing leads, content providers, and education. 

Think about it.  Perhaps on a team retreat - make the thoughts above more cohesive and build a great extension to your product.  :)

  
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... I have some other ideas like Buffer Profiles, Vanity URLs for businesses (vanity URLs = $10/month, example, buffer.com/angel-kings), etc, but these 5 things above are what I know will make Buffer the mega, billion-dollar company that it deserves to be.  

Joel and Leo, you both continue to work hard and you've created a brilliant product that people love.  Congrats. But I recommend you expand your product innovation, think big (with small steps as you recently wrote Joel) and never... ever sell for less than 2.5 Billion dollars (...or just go Public).  And, as you know... I'm always here to help you.  

 

With Buffer love, and to my future Unicorn with wings,

buffer-the-company-review

Ross D. Blankenship

CEO/Managing Partner, AngelKings

Author, Kings Over Aces

P.S.   As an investor in Buffer, I was going to privately email this, but then thought it goes against every notion of what Buffer's transparent philosophy.  But you know how to contact me :)