20VC Buffer's Joel Gascoigne on The Moment The Founder Is No Longer The Boss, The Questions Founders Must Ask Their VCs and Why We Need A Spectrum of Different Financing Mechanisms Other Than VC

Harry Stebbings hosts Joel Gascoigne, co-founder and CEO of Buffer, on "20 Minutes VC" to discuss Buffer's journey from venture-backed to a profitable, independent business. Buffer, a social media management tool, bought out majority Series A investors, emphasizing sustainable growth over traditional venture expectations. Gascoigne shares his experience with the pressures of VC funding and the importance of aligning company goals with personal values. He advocates for transparency within teams and the need for founders to ensure their work continues to inspire them. The conversation also touches on alternative funding models and the significance of maintaining control to experiment with company culture and direction.

• Joel Gascoigne is the co-founder and CEO of Buffer, a social media management tool.
• Buffer simplifies scheduling posts, analyzing performance, and managing multiple accounts for businesses and marketing teams.
• The company has raised seed and Series A rounds but bought out most Series A investors for $3.3 million, gaining more independence.
• Buffer has been profitable, with $2 million in profit in 2017 and $3 million in profit in 2018.
• Prior to Buffer, Joel co-founded OnePage and Startup Mill and worked as a web developer in the UK.
• Harry Stebbings reached out to Joel via cold email to invite him to the podcast.

"With that, I'm thrilled to welcome Joel Gascoigne, co-founder and CEO at Buffer, the social media management tool that makes it easy for businesses and marketing teams to schedule posts, analyze performance, and manage all their accounts in one place."

The quote introduces Joel Gascoigne and Buffer, highlighting the company's function and its journey towards independence and profitability.

• Harry expresses admiration for Joel's writing and contributions.
• Joel appreciates the podcast's diverse range of guests and Harry's long-standing commitment to the platform.

"Joel, it is such a pleasure to have you on the show today. I've been a big admirer of your writing for a long time, so thank you so much for joining me today."

Harry welcomes Joel to the podcast, acknowledging his respect for Joel's written insights which he has followed for a long time.

• Joel's interest in computers began early, stemming from online gaming and web development.
• He pursued computer science at the University of Warwick, knowing he wanted to start a company.
• Inspired by TechCrunch, he was fascinated by the possibility of building companies from a computer.
• Joel had a previous startup experience that was unsuccessful but educational prior to founding Buffer.
• The "aha moment" for Buffer came from Joel's desire to efficiently share content on Twitter without flooding his feed.

"And then after that, that's when I had the idea for buffer. And the initial aha moment for buffer was that I found that if I shared content on Twitter, if I shared my thoughts or articles I was reading and finding interesting, it was just a great way to meet other people and network, and sometimes I'd meet those people in person."

Joel describes the inception of Buffer, which originated from his personal need for a better way to share content on social media, leading to the creation of a tool that would space out posts automatically.

• Fundraising is often seen as central to the startup industry.
• Joel believes fundraising is a significant decision with long-term implications that founders may not fully realize.
• He discusses the loss of autonomy that can occur as investors gain more control with each funding round.
• The concept of the cost of capital is often overlooked in Silicon Valley, where the focus is on rapid growth.

"I think there's a couple of key things. One is that when you're fundraising, a lot of people don't realize that there's a point along the way in fundraising where you are no longer the boss anymore."

Joel points out a critical shift that occurs during fundraising where founders may lose control and autonomy over their company, which is an often underestimated aspect of taking on investors.

• Joel Gascoigne emphasizes the importance of considering the cost of capital when building a sustainable company.
• Founders should be aware of the implications of adding people to their cap table and introducing more shareholders.
• Shareholders have expectations for returns and specific time frames in mind.
• Joel encourages founders to ask VCs tough questions about their time horizons, the fund’s setup, and where their money originates.

"But to me, that's not necessarily thinking deeply about building a really sustainable company, because I think the thing that's missing is, what is the cost of that capital?"

This quote highlights the overlooked aspect of capital cost in the pursuit of growth, suggesting that sustainable company building requires deeper consideration of financial implications.

• Joel Gascoigne managed to retain control over his company despite pressure from investors.
• He describes a period when investors wanted to push for a quick sale, which was not aligned with his vision for the company.
• Joel's company, Buffer, conducted experiments with company culture, such as remote working and transparency, which might have been hindered by traditional investor involvement.
• By not bringing investors onto the board during funding rounds, Buffer maintained the ability to experiment and control its direction.

"But there was a moment in the year two years leading up to that that I started to feel that the investor would have liked it to be the case that I wasn't the boss anymore and that they could take over."

The quote reflects the tension between founder autonomy and investor influence, illustrating the challenges founders face in retaining control of their company's direction.

• Joel agrees with Anand Sanwal's assessment that VCs may "foie gras" startups to create synthetic growth.
• He observes that the current VC setup often leads to startups being overfunded, resulting in a high failure rate or pushing for an exit/IPO.
• Joel notes the emergence of alternative funding models that align better with founder goals, such as achieving profitability and sustainability through dividends or profit shares.

"And that to me just generally is not great for customers, not great for the team, and it feels like a really big missed opportunity in the current investor kind of ecosystem right now."

This quote expresses Joel's concern about the negative impact of the traditional VC model on customers and team members, as well as the missed opportunities for more founder-aligned investment structures.

• Joel wishes founders knew more about the structure and mechanics of VCs.
• He believes that better alignment on expectations between investors and founders could improve the funding process.
• Joel suggests that there should be a spectrum of funding models to accommodate different growth and return expectations.

"I wish that investors were more frank with founders during the process, because it is this process of both sides kind of trying to woo each other, especially if startup has traction and things."

The quote highlights the need for transparency and honesty in the investor-founder relationship to set realistic expectations and align goals.

• Joel discusses the trade-off between focusing on increasing margin and profit versus pursuing higher growth rates.
• He shares that Buffer's focus on profitability led to significant profits while also experiencing a decline in growth rates.
• Joel believes that understanding how to calibrate the company's goals is crucial for long-term strategy.

"The point when we decided to focus on profitability, within a couple of years, we went from either losses each year or just 100,000 in profit around those kind of numbers to 2 million and 3 million in profit in the last couple of years respectively."

This quote illustrates Buffer's strategic decision to prioritize profitability, which resulted in substantial financial gains even as growth rates slowed.

• Founders need to periodically reflect on their personal connection with their company's journey.
• It's crucial to maintain enthusiasm and excitement for the work, mission, and team.
• Pivotal moments come when projecting the company's future trajectory and realizing it may not align with personal excitement.
• These moments necessitate tough conversations and reassessments of goals, growth, culture, and company objectives.
• Regular realignment is essential, especially as the company grows and more people are involved, to ensure it stays true to what excites the founder.

"And it just feels like this cycle that I've settled into in a way, which is just trying to, every once in a while, maybe it's once a year or a couple of years to really try and deeply think, how are you feeling about this journey that you're on? Is it still lighting you up?"

This quote emphasizes the importance of self-reflection for founders to ensure their personal passion aligns with their company's direction.

"And there's been a few points along the way where one of the interesting things as an exercise is to kind of map out the trajectory that you feel like you're on in terms of what is the company going to look like along this path two to three years from now?"

The speaker discusses the practice of forecasting the company's future to gauge personal alignment and excitement about its direction.

• The ability to adjust what motivates a founder ("what lights you up") decreases over time, especially with a larger team and greater responsibilities.
• Profitability provides the flexibility to take risks, explore new markets, and pursue new ideas.
• A profitable company can be a vehicle for the collective passion of its employees, not just the founder.
• Rapid growth often comes at the expense of flexibility and profitability, which may not be appealing to all founders.

"I think you almost have diminishing luxury to do that as time goes on."

Joel acknowledges that the ability to change what inspires a founder diminishes as the company grows and more stakeholders are involved.

"So we can all, I like to think if buffer can be this vehicle for what lights all of us up in the company and we can keep pursuing kind of what lights us up, that is an exciting kind of vision for the company."

Joel envisions the company as a platform for all employees to pursue their passions, not just the founder's vision.

• Hearing suggestions to step down as CEO is difficult and requires careful consideration.
• Such suggestions often arise from misalignment of vision between founders and investors.
• The resolution may involve re-aligning the shareholder base with the company's direction.
• Managing a leadership team alone after co-founders leave is challenging.
• Building a network of peers and seeking an executive coach can help fill the void of a co-founder.

"I mean, I think it was one of the toughest things to hear for, you know, I guess initially in the moment, there's that level of shock and there's just thinking through, okay, what do I even say to that?"

Joel reflects on the emotional impact of being asked to consider stepping down as CEO.

"And then I think overall, stepping away from the immediate thoughts around that and reaction to it, I realized that really where that came from, this place of having quite a clear misalignment on what is the goal here, where do we want this company to go and to get to?"

Joel discusses the realization that the suggestion to step down stemmed from a fundamental misalignment of goals between him and the investor.

• Transparency should be a default approach within a company.
• There may be limitations to transparency, but generally, it is beneficial to lean towards being open.

"Yeah, when I think about leaning into transparency, I mean, really j"

The transcript is cut off, but Joel begins to address the concept of leaning into transparency, suggesting it is a guiding principle for him.

(Unfortunately, the transcript ends abruptly without a complete sentence or further context to elaborate on the theme of transparency in leadership.)

• Joel Gascoigne emphasizes the importance of sharing information with the team, including goals, financials, and market insights.
• Being transparent can be challenging and against human nature, which prefers to withhold information.
• Transparency can alleviate the pressure on founders by distributing the burden across the team.
• Treating team members as capable adults who can handle tough information is crucial.

"Just challenging yourself with, can you share more with your team? Can you be more open with them about what the goals are and about the numbers, the revenue numbers, how much cash is in the bank, the real state of the business, the growth rates, the way the market's changing, just being open, laying it all out there."

This quote underlines the challenge leaders face in deciding how much information to share with their teams, advocating for complete openness about the company's status and goals.

"I think sometimes, as leaders, we almost treat our team as children or something. They can't handle those details or that truth or something. And I think that's just really a disservice to everyone that you've brought on board."

Joel criticizes the tendency of leaders to underestimate their team's ability to handle difficult information, suggesting that this approach is not respectful to the team's capabilities.

• Harry Stebbings agrees with Joel about the importance of openness and suggests it fosters a sense of ownership among team members.

"Absolutely. And I think it's so important in terms of kind of engendering a sense of ownership within everyone, within the organization."

Harry concurs with Joel's views, highlighting that transparency contributes to a feeling of ownership among employees, which is beneficial to the organization.

• "Joy at Work" by Dennis Becky is Joel's favorite because it discusses maintaining values over growth for long-term company culture and performance.
• The book contains honest accounts of difficult moments in building a substantial company.

"A book called Joy at work by Dennis Becky. And the reason is because it's really a tale of someone building a very substantial company, a public company, and the challenges of staying true to the values that they've put in place and kind of placing values above growth in order to gain long term sustainability of the culture and performance."

Joel explains why "Joy at Work" is his favorite book, focusing on the balance between upholding company values and pursuing growth.

• A remote-first attitude is essential, ensuring information and decisions flow freely regardless of location.
• Avoiding the creation of "second-class citizens" in the organization is critical.

"Just really try hard to make information, data, ideas, and decisions flow freely regardless of where someone is, and really just try to avoid having any sense of a second class citizen within the organization, usually someone that's not in the office."

Joel advises that a remote-first approach is key to successful remote teams, emphasizing equal access to information and inclusion for all team members.

• Joel often reflects on the Ralph Waldo Emerson quote about forging new paths and leaving a trail.
• Questioning the status quo is a valued approach for Joel.

"The current key one that I've been referring back to for a few years now is the Ralph Waldo Emerson quote, which is do not go where the path may lead, go instead where there is no path and leave a trail."

This quote represents Joel's personal motto, encouraging innovation and leadership by venturing into uncharted territory.

• Joel shares multiple inflection points: earning from a hobby at age 15, shifting from service to product revenue in college, and adopting a sustainability mentality for Buffer.

"In college I had the inflection point of shifting from service revenue to product revenue and escaping that hourly kind of wage."

Joel recounts a significant change in his life when he transitioned from earning hourly wages to generating product revenue, which was a pivotal moment in his career.

• Joel suggests Silicon Valley needs more fundraising options beyond VC and greater diversity within companies.

"Two things. One is fundraising, which I think there really needs to be more of a spectrum of options there rather than just the VC approach."

Joel proposes that Silicon Valley should offer a broader range of fundraising mechanisms, not limited to traditional venture capital.

• Buffer aims to diversify products and revenue streams, become more sustainable, and differentiate in the market.
• Commitment to growth and profitability, with the possibility of dividends and increased profit sharing.
• A goal for Buffer is to become more self-owned and control its destiny.

"And then I think over time we'll be able to create this situation where everyone in the company can really benefit. From the great work that we're doing together."

Joel outlines Buffer's future plans, which include shared success and benefits for all company members through profit sharing and dividends.

• Harry Stebbings thanks Joel Gascoigne for his openness and shares admiration for Joel's journey.
• Harry promotes Stripe for its valuable resources for technology companies.
• Intercom is highlighted as a key tool for engaging customers and accelerating growth.
• Cooley is recognized for its expertise in representing VC-backed companies.

"I just want to take a minute to say two things, really. First, a huge thank you to Joel for being willing to be so open and honest."

Harry expresses gratitude towards Joel for his candidness during the podcast, which contributed to a remarkable episode.

"Stripe has built those resources for you. Whether you'd like to learn how to run a pricing experiment or build a knockout landing page, Stripe gives you the information you need to start, run, and scale a technology company."

Harry provides a recommendation for Stripe's resources as a valuable asset for technology entrepreneurs looking for guidance and best practices.