Toronto startup Buf Technologies raises more than $ 100 million with 18 employees and no income – but big plans
Some of the biggest names in global venture capital have invested more than $ 100 million in a Toronto startup by the name of the city of Buffalo with 18 employees, no income – and big plans to transform the way software is developed.
Buf Technologies Inc. announced last week that it had raised US $ 93.4 million in four separate financings since its inception 22 months ago, including a US $ 68 million financing last month co-led by the New York funds Lux Capital and Tiger Global.
Other investors include US venture capital firms Amplify Partners, Lightspeed Venture Partners, Addition, Haystack Ventures, Abstraction Capital, Greenoaks Capital Partners and Canadian Garage Capital.
This is the fourth investment this fall in Canada led or co-led by Tiger Global, one of the world’s largest and most prolific start-up investors known for delivering big bucks at rich valuations to young companies in growth with fast closing times and no demand for board seats or other conditions typically set by venture capital firms.
Buf’s early successes in attracting money stand in stark contrast to the startup scene in Canada a decade ago, when many founders here were told by US backers that they would have to move south to receive funding. Many did.
By contrast, Buf was founded and built in Toronto by American software engineer Peter Edge, after quitting his previous job at Uber Technologies in the city, which saw a massive influx of global tech giants and a proliferation of startups that flourished without having to relocate. “The team could have built this business anywhere,” said Mike McCauley, managing partner of Garage Capital, based in Waterloo, Ont. “But they chose to build it in Toronto… because that’s where they believe it’s the best place to attract the world’s best talent.
Mr. Edge named the company both as a nod to his hometown of Buffalo (which is technically the company’s headquarters) and also to the area of software development it focuses on, known as the name of Protocol Buffers (or ProtoBuf) built on open-source tools first developed by Google.
In a clearer language, Buf strives to facilitate communication between machines and software. Developers typically create and use software tools called APIs (Application Programming Interface) that allow different digital technologies to interact. While some of the biggest digital companies have adopted technologies like ProtoBuf to streamline the development process, much of this work is done by everyone using less advanced open source programming tools. This is a laborious process which, Mr. Edge said in an interview, consumes up to 20% of his engineering working time.
“None of us really add business value” by doing this, said Mr. Edge. “Much of the industry has struggled to deliver it to everyone in an easy to consume way, and we believe we have the global experts to actually do it. If we can eliminate a lot of that code base that you have to write … it effectively cuts down on the time your engineers have to spend on all of these ancillary tasks. With every business becoming a software company, if you can give back time to software engineering, you are giving back to a business one of its most valuable assets.
The company’s head of business development, Ahron Seeman, a former management consultant, explains his approach is to build “pattern-driven” tools “similar to Lego.” You know what the interface between two bricks will be, so you can build a chimney before you build a roof because you know exactly how they should connect. Google and Facebook have been doing this for years. The value of Buf is to create software to help [other] businesses are doing it in a more accessible way.
Mr Edge, who studied computer science and math at Carnegie Mellon University in Pittsburgh, has recruited at least six of his former colleagues from ride-sharing giant Uber. Other buffers have previously worked at leading tech companies, Stripe, GitHub, Cisco, and Autodesk.
Mr McCauley said that “What intrigued us the most about this story was that the team encountered the exact problem they were looking for in some of the most respected engineering companies … and realized that this that she built would be useful to everyone, but no one had built her for everyone yet.
Silicon Valley-based Lightspeed partner Guru Chahal, who led Buf’s $ 3.7 million funding round in September 2020, said when meeting with the company that he was “very clear. that the potential here is huge, because there is a lot of pain every software team in the world goes through these open source projects and makes them usable for the team. If you solved that you would get paid for it.
Buf released a free open source program called Buf CLI last year which it claims has been downloaded by over a million developers. In recent months, he has focused on building his paid tool, called Buf Schema Registry. Several early customers are now testing it; Mr. Seeman describes them as “big companies, public companies and household names” but will not disclose their identities.
“I expect that we will have our first income very soon,” said Mr. Edge, although he added: “Significant revenues, to the point where they have a major impact on the business, are not not our main concern as a 2022 target. “
For now, the focus is on staffing up to 100 people next year, accelerating development and building the user base.
While the idea of giving away a product for years is foreign to many industries, it is common in the world of software tool development; other companies valued at billions of dollars have deployed similar strategies, including Grafana Labs Inc., backed by Lightspeed, and publicly traded Confluent Inc., Elastic NV and HashiCorp Inc..
“Our experience is that if you create and deliver value to the engineering teams, there is enough budget for them to pay” for a version with more support and functionality, “said Chahal.
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