It’s all too common to see news of companies raising several million in funding without any details from the founders on what they’ll do with the funding or how many users they’ve actually acquired on their service. Buffer, the app best known for allowing you to schedule your tweets in advance, turned the model on its head last year by explaining just how it courted investors and secured $400,000 in seed funding, and now it’s continuing that tactic of disclosure as it grows.
Even if it’s just a clever marketing tactic from a company that couldn’t get press coverage otherwise, the story of Buffer’s funding round was an interesting explanation of a process that doesn’t often get aired in public and a refreshingly candid approach to announcing the news. So it should come as no surprise that the company has been equally candid about their successes and progress so far in building their company, an approach that other startups might do well to consider. The company now sees users posting more than 1 million updates through Buffer to social media each week, and they’re open about how they got there.
Buffer automates a process that can be laborious for people — such as publishers — who have to distribute a lot of content over social media networks. But the company also targets people who consume lots of content on Pocket, Reeder or Instapaper (which all have Buffer integration), and want to share what they’re reading in manageable doses, rather than several tweets all at once.
In December 2011, when the company announced its seed funding, it had about 85,000 users and were making $20,000 a month in revenue. While individual Buffer accounts are free, the company offers premium, or “awesome” subscriptions for $10 a month for companies looking for several people to manage multiple accounts and send more updates. As of November 2012, co-founder Leo Widrich said the company is now making about $70,000 a month in revenue, and hasn’t needed to touch its seed money yet. It has about 370,000 users, with about 6,500 of those users paying for the premium subscription.
“It took us around six months to send the first 100,000 updates and now we’re sending 1 million updates a week,” he said, noting the breakdown of the posts are about 65 percent to Twitter, 20 percent to Facebook, 10 percent LinkedIn, and about 5 percent to App.net, even though many people know Buffer as an app for scheduling tweets. He said that going forward, the company is going to work to improve its native mobile apps and increase the amount of Buffer updates to Facebook, since that platforms tends to drive the most engagement with content.
And as for more fundraising? Don’t expect the Buffer founders to be knocking on VC doors any time soon. Widrich said they’ve calculated that they could grow their team from seven to 25 employees and still have seed funding in the bank, since they’re profitable each month from their subscription plan and seeing revenues increase by about 20 percent month to month. He said the team isn’t looking to fundraise further right now, since the process of fundraising is so labor and time-intensive. He pointed out that they spoke to about 150 investors when looking to raise a seed round, and ended up doing deals with 19 of them.
“The biggest thing I would say is that fundraising is a huge distraction. You can’t work on the product or helping you as a user if you’re also working to get money from investors,” he said. “There’s this saying that when you’re fundraising, you can’t do anything else. Every day, for three or four months, you fundraise. And it’s crazy, right?”