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Reflecting on My Failure to Build a Billion-Dollar Company
- sixQuarks 8y agoOuch, number 2 employee at Pinterest - a $10 billion company that’s about to go public this year. He probably would have been worth an easy 100-200 million.
- sahillavingia 8y agoI prefer not to do the math.
- nemild 8y agoBased on your article, you sound pretty bad ass by having gone through the journey. I'm doubtful you'd have that by staying. It's a pretty remarkable path, and I respect you for that!
- spuderman123 8y agoMany years ago, you once mentioned that anyone who wants to build a startup should read Hacker News. I'm still here because of you. You've made an impact!
- PakG1 8y agoI can't begin to imagine what that must feel like, but I gotta say, your kind of company (i.e. non-VC-funded, don't care about the unicorn status, just serve the customers well) is the kind I'd like to do one day. The vision and values just align with me so much more than hypergrowth and whatever it takes to get there. Many hats off to you for making all the decisions you did to keep your customers first. It may not be worth much, but you have my respect forever.
- droobles 8y agoYour story speaks to my soul. I've never been too attracted to the VC-funded startup life (although I wouldn't pass it up if it was the correct move to grow my business), but reading about your commitment to your users through thick and thin gives me so much more respect for you, and that is a quality I hope to emulate someday.
- sixQuarks 8y agoHaha, sorry didn’t mean to rub it in brother. But you’re still in an incredibly fortunate situation, and it’s all about the journey anyway.
- dawhizkid 8y agoIf there a year at least vested one year of equity...?
- kickopotomus 8y agoHindsight is 20/20. A million different factors outside of your control could have led to different outcomes for both Pinterest and Gumroad. Thank you for sharing your story!
- ishjoh 8y agofor what it's worth I think you've created more value at Gumroad then you would have at Pintrest :)
- crispyporkbites 8y agoIt's crazy that you care about the money, being in your mid-20s with a company pulling in 60k USD net/month puts you squarely in the pretty much unlimited money category of the world.
- jimbokun 8y ago"It's crazy that you care about the money..." Did you read the article?
- oh_sigh 8y agoLook on the bright side - maybe Pinterest would have failed if you stayed there.
- aeriklawson 8y agoBut would you trade the amount of time spent at Pinterest before IPO with the experience you gained at Gumroad? Tough call, given the professional and personal growth you gained from it.
- Tepix 8y agoWhat's the big advantage of having 200m vs 15m or so? It's fuck-you money either way.
- deleted 8y ago[deleted]
- shereadsthenews 8y agoPinterest is a malignant tumor on the face of the Web that exists to trick people who are trying to search for images. Being rich off that would be worse that toiling in obscurity.
- locklock 8y agoPeople actually do use Pinterest to collect images, I think, but I agree with you on the other points
- deleted 8y ago[deleted]
- fsloth 8y agoUh - can you elaborate? I often search for images and sometimes from pinterest - but I don't find pinterest interfering with my searches when not using it.
- rchaud 8y agoThe poster is likely referring to how Pinterest links now dominate Google image search results. Clicking on the Pinterest link takes you to the Pinterest website, and not the actual image source. Pinterest will often block you from viewing the page unless you sign in or create an account.
- puranjay 8y agoReminds me of Noah Kagan. Employee #30, I think, at Facebook. That should be what - $200M+?
- dawhizkid 8y agoYou are vastly overestimating what even an early employee (esp a jr one) gets at a unicorn. Not that it wouldn't be substantial today, but nothing close to 1-2% of the entire value of the company.
- chosenbreed37 8y ago> You are vastly overestimating what even an early employee (esp a jr one) gets at a unicorn. Not that it wouldn't be substantial today, but nothing close to 1-2% of the entire value of the company. Mmm...based on the valuation even 0.1% would equate to $10 million...not bad ;-)
- dawhizkid 8y agoyou'd probably get around .1% as an early jr person. assuming a 4 year vest period, that .1% will have been diluted to maybe .05%, so assuming a $10b valuation it comes out to $5m. Still not bad, but a far cry from $200m.
- deleted 8y ago[deleted]
- mlevental 8y agocrunchbase says pinterest has had 15 funding rounds. certainly they weren't all complete rounds and it would've been nice equity but nowhere near the nominal 1-2% early employees get.
- austenallred 8y agoProbably a fraction of that. Dilution etc. My guess is he’ll make more from Gumroad over the long run.
- the_cat_kittles 8y agowho gives a fuck. i wish people would say this more, especially on this site. stop worshiping money. why am i saying this here, on what is a 50% get rich quick scheme site? i dont know... i somehow enjoy the downvotes. if you offered me 200 million to throw away a couple years of my life at pintrest, the thrill of saying "no" would far outweigh the benefit of being a sellout. only do stuff that is cool on its merits if you can possibly manage to. im sure almost no one here agrees with that but i find it cathartic to shout it at deaf ears.
- galfarragem 8y agoParaphrasing (probably Nietzsche): "There are only 3 kinds of people: the poor that wants to be rich, the rich that wants to continue being rich and the idealist, that using his ideals wants to be rich."
- sctb 8y agoWe've asked you many times to please stop breaking the guidelines, so we've banned the account. We're happy to unban accounts if you email us at hn@ycombinator.com and we believe you'll start posting civilly and substantively. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- the_cat_kittles 8y agono thanks
- AznHisoka 8y agoI wasn't interested in the emotional story behind this. But I did resonate with 1 line in particular here: "It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth." This is so true, in my experience. You hit a roadblock in recurring revenue, not because your product doesn't have enough features, or your team sucks, but simply: your market is smaller than you thought.
- duxup 8y agoI always think of the market as ... all those shitty services and websites I absolutely hate / or just don't like ... that i still use because I want the service. Arguably they failed to execute some of what they did (their actual app or site) very well, but it doesn't matter, they picked the right market because I can't stop using it even in the face of other things.
- kaybe 8y agoGive us some examples of what you're trying to do, maybe someone here will help you in the future.
- ikeboy 8y agoThe corollary is that you can shift the market you're in and increase growth. Clickfunnels addresses a slightly different market and has 9 figures of recurring revenue. Partly because they charge a lot more and have a lot more bells and whistles, partly because they have way more intensive marketing, but partly because they're targeting the demographic that wants those bells and whistles over the simplicity of gumroad.
- Novashi 8y agoThat's really more for market leaders. If someone stops by your site and starts comparing it to other businesses and their features, you're not likely to shift the market soon. Even if you do shift the market, you might not get the growth as your well-funded competitors copy your features. It'd have to be some ground-breaking technology that essentially propels you to market leader overnight.
- amelius 8y agoRefreshing. I'd like to see more "anti-survivor" articles so the survivor bias gets toned down.
- abraae 8y agoYep, I was braced for more failed-but-really-succeeded porn. This is a great read, and clearly from the heart.
- randlet 8y ago> was braced for more failed-but-really-succeeded porn. Isn't that what this is though? Sure he failed to build a billion dollar business, but his business is still way more successful than most. Lots of people would certainly kill to attain this level of failure. I certainly recognise failure is a very personal thing, but from the outside looking in this looks like a success overall, even though I'm sure it was completely gut wrenching along the way.
- bduerst 8y agoKind of. Usually these trope-filled stories make a mountain out of some small setback, but this story genuinely feels like the company had some major setbacks.
- deleted 8y ago[deleted]
- holman 8y agoReally love this post. My favorite line is: > Every month of less than 20% growth should have been a red flag. I think that's pretty insightful. 20% growth is great for a normal business, of course; for a VC-backed startup it can show some warning signs about future hard decisions you might have to face. I think there's certainly lots of discussion that has been had — and should be had — about "should I or shouldn't I raise money?", but there still are plenty of companies and founders who will raise VC, and paying attention to those early warning signs are important if that's the choice you make. It's important to worry about it each month and each week rather than the two months surrounding the raise of your next round.
- will_brown 8y agoThese “metrics” are exactly why you see these venture backed SV companies engage in the behavior we saw posted all over the front page of HN yesterday (I.e. silently apply workers tips to their “guaranteed” pay and pocket the difference). But hey it’s an HN/SV unicorn, so there is too much investment that needs to be made back to fail now...and they have the perfect back story, rejected from YC until they personally delivered PG a 6 pack of beer and pretended they had a functional product. It allows them to continue to make the representations of growth to future investors, the more buy in have from investors, the more you can continue these market/marketing manipulations (e.g. the fyer festival). Of course the entire SV ethos encourages this behavior: move fast and break things, growth hacking, and fake it till you make it. It’s also built into the system that 9 out of 10 of these scams will fail, but every 10th scam can be offloaded to the public through an IPO.
- hedvig 8y agoExactly - having enough capital to waste in this way IS a morality issue.
- duxup 8y agoYeah it appears this is a perfectly fine and successful business... it just went through an odd route for someone to figure that out. Those charts and numbers, all pretty good IMO. If someone came to me and said "Hey I (or we) made this thing here is what it does and the numbers." I'd be all about high fives and such. And yet at times they didn't think so based on the route they went, very interesting. I always wonder if there is value lost in companies that are shuttered because something isn't the next big hit, or some private equity decides they want to cash out / break up a company that otherwise... would be just fine and would have continued contribute.
- sahillavingia 8y agoHey, #1 on Hacker News! I don't think that's happened since...I launched Gumroad back in 2011: https://news.ycombinator.com/item?id=2406614 https://news.ycombinator.com/item?id=2406614 Thanks HN for being a part of my journey!
- jrochkind1 8y agoI hadn't heard of Gumroad before -- it actually looks like a really good product, and one that I would have occasion to recommend to people. To what do you attribute the challenges? Were you building a product there wasn't a market for, what you were delivering wasn't what people wanted? Or, a marketting failure, inability to get enough people to know about it, and to understand how it would fit their needs? Or, what I think I get from your post, is maybe you think neither of these -- rather you just tried to grow _too quickly_, quicker than the market/product could bear, and then had to deal with that. Do you think if from the start you had _not_ tried to create a "billion dollar company", stayed smaller, accepted less investment with clearer expectations, had fewer employees, etc. -- you would have still been able to get to where you are now, but quicker and with less pain? You still would have been able to get _enough_ investment, and with the investment you had still would have been able to build the product succesfully? I think maybe that's what your essay is implying you are suggesting, but I'm not totally sure if that's what you mean to be suggesting; or maybe you don't mean to be "diagnosing" it at all and aren't interested in these questions of what-could-have-been at this point. :)
- sahillavingia 8y agoI really tried to avoid being prescriptive about the solutions. It's a lot easier to talk about the problems :) > aren't interested in these questions of what-could-have-been at this point Exactly. If we shipped this or that feature... If we raised more, or less.. If I stayed at Pinterest... If I invested in Bitcoin... I'm just not sure I gain a lot from thoughts like that!
- mrskitch 8y agoThanks for sharing this. It's really important not to give too much thought to hypotheticals as they're purely that: a hypothetical.
- deleted 8y ago[deleted]
- NelsonMinar 8y agoGrateful to read such a personal and detailed post. I had a startup that failed myself, back in the long ago, and in retrospect I'm glad that if failed quickly and cleanly. I admire this alternate path though of working your way to a new equilibrium. The offer from KPCB to let you off the hook for the venture financing is amazing. Is that a common thing to happen? I get why they just wanted to write it off and be done with it, but it still seems like a generous outcome. An undo button!
- puranjay 8y agoI remember when Gumroad first launched. I was 24 at that time and just couldn't believe that a kid that young could be so good at making such polished products. To that end, I considered Sahil - and people like him - to be my model of success: being able to bring your vision to life.
- the_other_guy 8y agoI am not sure whether he's really serious or this is a long false modesty article about himself
- bdcravens 8y agoI've had some interactions with @shl on Twitter where he seemed a bit full of himself (a few years ago - I didn't realize he was so young, so that probably had a lot to do with it). However, he could, and most would, have cut and run and found the next opportunity. Not doing so probably cost him millions of dollars; that's pretty authentic in my book.
- sahillavingia 8y agoI'm sorry you had those interactions with me in the past! I think I've grown since, but it still sucks to hear that about past-me.
- writepub 8y agoWhy does his behavior on Twitter, good or bad, need mentioning here? What does it have to do with the article? It feels like the new normal is for absolutely everyone to be in everyone else's good books. I'm sure a TON of people in the wild think they had bad interactions with you, online or offline. Does that really matter? Can one reduce you to any one of those singular opinions? Is one not allowed to make a mistake, because, the last I checked, humans were imperfect. Why make these trivialities a topic of conversation?
- deleted 8y ago[deleted]
- bdcravens 8y ago> The next year was not fun: I shrunk the company from twenty employees to five. We struggled to find a new tenant for our $25,000/month office and focused all of our remaining resources on launching a premium service. Ouch. Even at 20 employees, $25k a month is insane when you have no profit. I'm sure it was a pretty office, the kind that attracts good developers in a competitive market.
- eeeeeeeeeeeee 8y agoI thought the same thing. There are tons of people all over the world, or even spread out in America, that want to work on an interesting idea with interesting people. The office really does not matter. It feels like so much of the VC funding goes to creating buzz and cool-factor (cool office, free lunch, potential lucrative exit), which can obviously be great marketing, but it really limits your runway and obviously the control you have over your idea. Still insane to me that more companies do not embrace remote work.
- johnvanatta 8y agoEhh. It doesn't matter up until the point it does. I quit my last job partly because we moved from a nice area in a dumpy building to an awful space (no natural light) for ~10 months. My health suffered, I felt depleted, and the entire team was on edge. How easy to commute to ($$) and how nice it is are definitely things I consider. Free food gets an outsized return too, if we're talking >100k salaries--I'd bet $4000 in free food gets more goodwill than a 5% pay bump. Agree that remote should be more widely used, especially in software.
- giarc 8y agoThey probably leased a space with growth in mind. I've read about a lot of companies that continually move because they keep out growing their space and it's incredible distributive.
- evanweaver 8y agoAmazing and poignant story; thank you for sharing. I do wonder if there was a path for Gumroad to become a Shopify killer, instead of focusing on sellers too small and unsophisticated for Shopify, which limited the addressable market.
- Eric_WVGG 8y agoThey're not really congruent products… if anything Gumroad is more similar to Stripe. But to take your question seriously, I'd far rather hack together a shopping site and use Gumroad for payments than grapple with Shopify again, they give me a migraine. Gumroad is also going to have some new opportunities if Patreon continues to struggle with their similar deal-with-the-devil. +1 Gumroad, glad to see it's found a way to thrive.
- KaoruAoiShiho 8y agoYes I'm confused why Gumroad didn't become more like stripe or patreon. That would've been a natural development. It must be execution problems.
- stillworks 8y agoThis bit is interesting... "I am following up our conversation a few months ago. KP would like to sell our ownership back to Gumroad for $1. Can we discuss this week?" ...do founders discuss a Plan-B exit strategy/costs with the VCs ? Do VCs (or their lawyers) give this option or offer to discuss. For Gumroad, it sounds as if this was a lottery or a happy coincidence. But I am interested in finding out if VCs actually only are interested in outright discussion of the up side (similarly for the founders... but that's kind of apparent from observation, and ... well also reading your article :-) )
- uptownfunk 8y agoThis brings me back to a few lessons I’ve learned from other friends: +One of the CEOs main roles is to raise money +Rich or King? Know which one you wanna be. +How much is your friendship really worth? Think carefully about this before you get in business with them.
- scriptkiddy 8y agoI have to say, this was a very pleasant read. I expected it to be a thinly vield ad for some new business, but it was actually very insightful. Seems to me like the author's failure taught them a valuable lesson about what they actually valued vs. what they thought they valued. I would like to see more tech companies like Gumroad; that is companies whose focus is not on IPO and quick aquisition, but instead, on the quality of their product/service and the prosperity of the customers/users.
- lancesells 8y agoI've always liked Gumroad as a product and service but this line kind of bothers me: > There is, of course, the $178,000,000 we have sent to creators This money wasn't sent to creators. They sold products worth $178M + Gumroad fees through the service. The creators made the products, marketed the products, acquired the customers, etc. When I use Paypal to sell something they aren't "sending me money".
- vishnu_ks 8y agohttps://news.ycombinator.com/item?id=19106780 https://news.ycombinator.com/item?id=19106780
- themagician 8y agoYou could say the same thing about Uber, Lyft, Airbnb, Etsy, TaskRabbit, etc.. When you sit down and think about it you start to realize just how “temporary” all these so-called unicorns are, as they are just middleware services with no real differentiating benefits other than size and brand recognition and maybe some vague “guarantee” to the customer. You’ve got to get big fast, because what you actually do is easily replicated.
- benatkin 8y agoUber and Lyft are middlemen, but because they interface directly with the consumer, they also create demand. I deleted my apps when I realized that I was spending a hundred bucks a month compared with twenty bucks a month if I had used cabs, and getting little real benefit out of it. It just feels so convenient, but the fares add up quickly. I bet if they sent weekly or monthly summaries people would use them less.
- marcinzm 8y ago>because what you actually do is easily replicated. Not really for Lyft/Uber, at not now that it's flat fee and ride pooling instead of a traditional per minute/mile fee structure. To achieve those thing efficiently you need data and until you get that data you're burning through a lot of money.
- 8y ago
- wishinghand 8y agoI wonder if this issue they had is why they went from charging 5% per sale to a monthly flat fee instead.
- jordinl 8y agoI'm sure it's been a very tough experience and the author learned a lot during the time. But I would expect that if you fail to build a billion dollar company you end up at least with a $100 million company...
- beering 8y agoUnfortunately failing to build a billion dollar company often means ending up with a $0 company. Like the OP said, VC too often comes with the pressure to either succeed in a big way or pack everything up and go home. And when your liquidation preferences are greater than the current value of your company, as a founder it's not very compelling to keep moving forward.
- austenallred 8y agoI’m incredibly grateful for Gumroad - Lambda School (YC S17) wouldn’t exist without it. We threw up a my book on Gumroad because why not/it was easy, and now I believe we’re sitting north of $100k in sales. I don’t think we would have put it anywhere else - wasn’t worth the effort. I often think about how important it is to remove even the slightest amount of friction as a result. I also find the move from KPCB admirable. They gave up their interest in the company (it was a loss for them anyway) and allowed the company to flourish. Hats off for that.
- randall 8y agoIndie.vc is built to make this not admirable, but the norm. I think KPCB is amazing and should be totally shouted out for this, but indie.vc is building an entire model so that founders don't have to choose.
- jondubois 8y agoIt's interesting how Lambda School was able to capitalize on investors pumping cash into and hyping up Gumroad. It's a smart move to capture some of that VC money without having to pitch anything to them.
- austenallred 8y agoNot sure that entirely follows; Gumroad may have existed whether VCs pumped money in or not, but I hear what you're saying. In a way every time you ride in an Uber or Lyft you're capitalizing on investors pumping cash into companies. Luckily the winners make enough to pay for all the losses of the losers.
- jondubois 8y agoI'm starting to think that you can't achieve anything these days unless you're riding some kind of well capitalized trend.
- austenallred 8y ago
- adamesque 8y agoReminds me a lot of Bandcamp, which serves a similar market and has a similar and very refreshing ethos: in it for the long haul, dedicated to serve their audience because (likely) nobody else will, because there's not and never will be VC-sized 100x upside.
- jiveturkey 8y agoNice story, but: > It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth. This is just a cop-out. The market will limit, not determine, your growth. It's up to you to hit that maximum, and use marketing/sales to extend that maximum. That is called creating a market. And overall it's called execution. OTOH, Sahil isn't wrong. Some markets are either not that ripe (timing is important), don't have enough support, are too niche, and a thousand other factors. But as a generalization, "Product doesn't matter" is just wrong.
- rhizome 8y agoThis story seemed inside-out to me. With the "you just have to find the right pre-existing market" logic, as well as the (much more significant to me) "but we were venture-funded, which was like playing a game of double-or-nothing," buried as an aside. I think these are the real stories in this story: basically stable and relevant, coupled with irrational growth pressure. I get it, though: the personal journey through the wilds of Sand Hill Road, doing battle with market forces with an army of unknown strength, and so I would have liked to see some spotlight on the mistake of taking VC. In this way, we also see this conclusion about halfway through the essay, "[s]o instead of pretending to be some sort of product visionary, trying to build a billion-dollar company, I’m just focused on making Gumroad better and better for our existing creators. Because they are the ones that have kept us alive." I remember hearing a lot about Gumroad! People in the UK(? Aus?) used it a lot! In that way, this incredible journey appears as another log on the fire when it could have been part of a nice house. Or something like that. Everything about this story signals a decent business that was killed by VC.
- rossdavidh 8y agoI think what he meant was, there is no product so amazing that it will give you growth enough to satisfy your VC investors, if the market you're in is not big enough or growing fast enough. Could have been worded more precisely, but in the context of the article it was pretty clear.
- deleted 8y ago[deleted]
- eanzenberg 8y agoJesus this part sucks: "In those nine months, when the whole team knew that we were fighting for our company’s life, not a single person left Gumroad. From “this is gonna be hard,” to “yep, turns out it was,” every single person worked harder than ever." Did everyone one of these people have significant equity in the company? I'd expect people who love their jobs and who work on something crucial, such as researching new medicines or making more efficient batteries to want and be able to do this. No offense, but if this ultimatum was handed out and I wasn't vested like the top guys I'd bail.
- eshyong 8y agoThe author mentions hiring a lot of good friends, so I assume they did it because they believed in him and the mission.
- nine_k 8y agoThis is exactly why I won't hire good friends. The personal relations would skew business sense then, on both sides in order to stay loyal to your friends. This skew can be dangerous for business, and thus for the well-being of those who are involved and bet on its success.
- crispyporkbites 8y agoIf gumroad became a billion dollar company you'd be retiring on that 9 months of work with even a tiny bit of equity. I bet there are plenty of people that bailed out of google, facebook or other similarly positioned startups at that stage and regret it.
- nabnob 8y agoThis is the type of reasoning that startups use to justify making employees work 60+ hour weeks for a tiny amount of equity and below-market pay. Most startups will not become billion dollar companies.
- 8y ago
- jshowa3 8y agoHonestly doesn't seem like he failed at all. Sounded like just bad times for the business. I mean 2 years of difficulty seems like a minor thing in the grand scheme of the business lifetime. Not only that, the business literally keeps growing if the graphs are to be believed. Failing is when you can't come back and you close the business.
- rchaud 8y agoI think that's the point the author is making. The benchmarks for "success" are different if you're in the SV VC-funded startup world. What may be a sustainable 10-person staff e-commerce business would be seen as a failure in some circles because it didn't grow fast enough to IPO, which is all VCs care about.
- gfodor 8y agoI'm pretty sure this is the best post I've ever read on Hacker News, because of its potential positive impact on others. It's one thing to give advice, it's another to back it up with detailed life experience. The lessons shared here are invaluable ones, and if writing this story helps others learn them without having to go through as many trials to get there, you have done a great service. Bravo.
- robterrin 8y agoOff topic, but Sahil, love your drawings and paintings on your IG. I've thought about the idea of moving to a place like Provo from NYC, but I work in cybersecurity, and I don't think there's a client base anywhere but DC, NYC or maybe SF.
- ttul 8y agoThis is totally awesome, @sahillavingia. For a young guy, you have learned some incredible lessons about business in a VERY short time. You are positioned well to build that billion dollar venture that you originally dreamed of. It might not be called Gumroad, but who cares? "It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth." This is so utterly, absolutely, painfully true. We hear stories of hypergrowth as if you can just choose that path and it magically happens. Reality is: most companies never get to hypergrowth. Your only real option is to pick a large potential market with a reasonable hypothesis for getting there. And then see what happens.
- YeahSureWhyNot 8y agothis was a nice and soothing read...
- theptip 8y ago> It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth. For better or worse, Gumroad grew at roughly the same rate almost every month because that’s how quickly the market determined we would grow. This seems like a simplification, and perhaps overly fatalistic. A company's growth rate is a function with many parameters, and at most points, one parameter will be the limiting factor. An amazing product is (usually) a necessary, but not sufficient condition for rapid growth. It sounds like Gumroad built a product that delighted their users, but there just wasn't a level of market demand to hit the growth numbers that they were hoping for. (Though I consider their end state a big success; being a unicorn isn't the only way to add value to your users' lives.) In a different market, with enough pent up demand for the product, the story could have gone another way; "We kept on getting new users, but ultimately couldn't keep users because our product wasn't awesome enough."
- randall 8y agoMarket determines your growth almost always. I have enough data points now to basically say this with enough certainty. Friendster is the countercase where the technology couldn't scale, and their execution was poor, and they focused on revenue at the expense of growth, but generally like... now-a-days with modern web stack market is basically all that matters.
- theptip 8y agoIs your claim "for most companies the quality is already sufficient, and so it's not the limiting factor (even though it would be if the quality was insufficient)"? Or literally "the TAM matters, your app's quality doesn't"?
- randall 8y agoThe prior. Now-a-days, the majority of developers can build a quality app since infrastructure and tooling (heroku etc) are widely available, that you can paper over most completely horrible / unacceptable experiences by limiting features early on. If you pick a huge market and have simply 1-2 compelling features, you can go from nothing to something within 90 days typically, and then use that to become unstoppable.
- rossdavidh 8y agoNot that you asked, but as a word of advice from a random person on the internet: if you do go the open-source it like Wordpress route, it would be good if you made an easy path back in to your product. Some people who start off self-hosting WP, Prestashop, or whatever, then decide after a few years they would rather have somebody else do it. Oddly, it is often not a marketing focus for the company that makes the software. If I had a self-hosted, open-source Gumroad setup, and a couple years later wanted to pay someone else to host/manage it, I would want a clear and easy article on your website about how I could turn it over to you and pay you to do that.
- Terretta 8y agoI’m curious: why open source at all in this particular business model at this particular stage?
- wtmt 8y ago> On top of that, our product ideas, like our credit card form and inline-checkout experience, have proliferated the web, ... I've used Gumroad several years ago (as a customer), and the simplicity of the transaction and this interface was something refreshing. You also say that you'd make Gumroad open source soon. May we know what the tech stack behind it is?
- oddevan 8y agoFrom their calls for part-time/contract devs, I think it's largely a Rails stack.
- jim-greer 8y agoMy experience with Kongregate was different, but I did feel some of the same things. We became a vehicle for many indie game creators to make a living, which I'm very proud of. In our case we also had a sale that was very profitable for the founders and early employees, and also profitable for our investors. But the weird thing is that if our VC investors had known at the outset that they would have a 3x return on their money in three years, they probably wouldn't have made the investment. A 50% annual rate of return is not worth their time. That's not what their LPs are looking for. The angels made more like 6.5x and put in less time - most of them would take that deal all day long. I'm an angel now, and I definitely would. So perhaps startups that need capital but aren't looking to be billion dollar companies should consider just raising a seed round from angels... The difficulty there is that angels do want an exit, not dividends from a profitable company that stays private forever.
- dennisgorelik 8y ago> if our VC investors had known at the outset that they would have a 3x return on their money in three years, they probably wouldn't have made the investment. Of course they would have made an investment. Any guaranteed return above bank interest rate -- is appealing for investors. Guaranteed return of 50%/year is an amazing investment opportunity. What you probably meant is that if investors knew that the return cannot be more than 3x, but also has high probability of failure -- then the investors probably would not make the investment.
- jim-greer 8y agoLook at it this way. A VC fund has a finite number of investments to make. Typically a partner gets to say yes once or twice a year. They usually take a board seat and spend lots of time helping the company. Knowing that many of those investments will be worthless, they want to maximize the number of shots they get towards a billion dollar company. If 1/3 of their companies are a 3x return, and the rest become worthless, the fund has failed. They’re all aiming for the one company that will deliver the big returns that offset all the failures (and the high fees they charge LPs.) Seed stage investors are different. YC, for instance, spends much less time with each company, and therefore can take lots of shots. Growth stage venture is different too. They aim to invest a few years before a company goes public, and are fine with a 3x-5x return. They are taking much less risk. The VC model also creates a fundamental tension with the founder. Founders get one shot at a time. $50M exits represent life-changing money for them (as long as they didn’t raise too much money.) VCs pressure them to take greater risks than are rational for the founder. This is why you want to look for VCs that will truly put the founder first. Or keep control of your board. Joel Spolsky explained this well 15 years ago, so we knew about it going in and chose a founder-first VC firm. Here’s that post: https://www.joelonsoftware.com/2003/06/03/fixing-venture-capital/ https://www.joelonsoftware.com/2003/06/03/fixing-venture-cap... Thoughtful VCs will do what’s right for the founder. It’s rational because their reputation matters so much when competing for investments. This has changed for the better since Joel’s post.
- deleted 8y ago[deleted]
- Animats 8y agoWants a login.
- weehobbes 8y agoI'm really surprised that Gumroad has such low gross margins. For April 2018 $65k gp on $273k revenue is 24% gm. It looks better in December $135k gp on $341k revenue is 40%, but still lower that what I would have thought. Is it credit card processing fees? Server costs? What am I missing?
- wheredTheyGo 8y agoCool story! Makes me think I should write my own up someday. However, one thing I find odd. The story talks about the creators and how important they are. But when I go to gumroad.com looking to see all these creators, I see how to sign up as a creator, but don't actually find the pages of other creators. Where are they all? After reading the article, I don't get how the business works, I guess. The article led me to believe it was similar to Etsy where creators sell their wares. Is that not the case here?
- WilliamEdward 8y agoThe bigger, separate issue, is that billion dollar companies fit a certain mold, not one you should ever strive for to be honest. Just do a quick manual analysis of the top companies of the world and you will pick up patterns in them that Gumroad would never have had.
- lbj 8y agoReading about a 19 year old kid, grinding through that incredible ordeal is just awe inspiring. I think his constant re-focusing on creating value for creators and employees first has been his guardrail against total failure in toughest of times - I'm glad to see he powered through.
- lquist 8y agoOn the one hand I applaud KPCB for giving up their interest in a founder friendly way, but this also leaves a bad taste in my mouth and seems a bit “Heads I win, Tails you lose” from Sahil’s pov. The VC investment let him build a fully fledged product capable of breaking out. But it didn’t and he still got to keep the company without much liquidation preference. This is an example of a true VC subsidy.
- super-serial 8y agoI wonder if an entrepreneur with less connections and not a part of YC would get that $1 buyout deal. I would think the default would be ousting the founder and selling the assets. Then the founder would be left with nothing. They'd have no lifestyle business, even though they could have had one if they never took VC.
- mdonahoe 8y agoIf he only did a series A, I doubt he gave up enough control to get ousted.
- jessaustin 8y agoLooking back, I’m glad we didn’t hit those numbers. If we doubled down, raised more money, and appeared in the headlines again, there was a very real possibility it would only lead to a more spectacular failure. Hmmm, reading between the lines, you seem to have a point...
- mrskitch 8y agoAfter having founded a non-VC backed company (browserless.io), my anecdotal experience is that most potential creators out there need more encouragement to stand out on their own two feet. The maker market has huge potential, but there are so many barriers to entry that it does stifle growth. It takes almost a perfect storm of potential, communication, determination and timing to birth a successful company/product. I think it's just what our "startup" environment tends to favor, and how the ecosystem just works, for better or worse. If we had more companies like Gumroad, Atlas, and IndieHackers I think that there'd be a proliferation of growth in the creator space. Even just getting decent health insurance as a single-person LLC/company is a frightening thing, and that's just _one_ obstacle! I also think that, once more and more folks awake to the idea that you don't need VC funding to get something off the ground (and that it's really an achilles heel in many regards), that more products will start getting out there. It's also a conflict of interest many times: they want a return on their capital, whereas you want that _and_ to make something of value. Sure, VC is necessary in many regards, but it also isn't in a lot of cases. I'm really happy that Gumroad stuck it out and is fighting for creators. Just the notion of them _not_ closing for financial reasons is comforting to me. Means that they cared that much about their users and the bigger picture, rather than just money.
- jmrobertson 8y ago"Every month of less than 20% growth should have been a red flag." It's concerning that this is the state of affairs for expected business growth
- robterrin 8y agoVenture capital is broken. Plenty of other good businesses to create out there that don't have to do 20% month over month.
- jmrobertson 8y ago"Every month of less than 20% growth should have been a red flag" It's mildly concerning that this is expected business growth. Endstate is what's happening now- how to get the public IPO to value my $1bil co at $1bil
- pmarsh 8y agoI had not known about gumroad and took a look. Would you ever introduce more of a product browsing store front experience? I see all these great categories in the search drop-down, but no way to just take a peak into what was available. Great read and glad you are enjoying your journey.
- aboutruby 8y agoI'm pretty sure I saw that graph of the CEO not working much correlating with low growth like a year ago
- ThomPete 8y agoThe lesson. Don't take VC money before you've built something (anything) and tested it out. You don't want to give away equity to invent your product. I am aware it was way harder to build something in the payment space back then but still. Great story and while I definitely am happy Gumroad is doing well it's also great to know that good things can end well with a fizzle rather than a big bang.
- mixmastamyk 8y agoSounds like the story of a young person who drank the VC cool-aid. The company should have been bootstrapped from the get-go... $25k/mo office, …doh. Yep, easy to say as a greybeard and hindsight. But I remember Joel on Software articles on this subject circa 2000, so some information was out there. Between the lines I feel a lot of self-punishment going on. Well, I'd love to have $10k+ of "failure" coming in every month, with the satisfaction of helping the little guy/gal no less. Perhaps you'd consider selling to someone who believes in the mission and hates dark patterns? I don't have a lot of capital laying around, but some, and perhaps something else could be arranged?
- phkahler 8y agoI struggle to see how this story is one of failure. A kid launched a business that is still going 8 years later. He learned that VC funding is a double edged sword and was able to shed some of that burden - buying them out for $1. In the beginning he speaks of building this thing and having it be his lifes work - which it may well be if he keeps going. And yet there was all this talk of being a billion dollar company and an IPO - which is actually as exit strategy. I was floored by the notion that only 20 percent monthly growth was a red flag. 'du fuk you people think you're doing? Launching a rocket? Oh right... SV, VC, etc... In the end this guy learned a bunch of hard lessons about business, finance, and life. I hope he continues at least until he finds a new adventure, and stops calling it a failure. It may turn out to be exactly what he said he wanted in the beginning: "what I thought would be my life’s work."
- rement 8y agoHe "failed" to build a billion dollar company.
- adventured 8y agoThe most interesting thing about the setup premise, is that it should have a "yet" attached to it somewhere. Unless something terrible has happened in the last few months, their recent November 2018 numbers indicate that at a continued reasonable rate of growth over another decade, they'll have a sizable business and a large number of creators utilizing it (which is one of his goals). It would be worth at least a hundred million dollars. If the growth spikes upward even a bit on average (maybe they garner more interest with scale or the market expands faster), it could get them to between a $500m and $1b valuation a decade out. Modest compounded growth with even a small kicker, from where they're already at, will produce a big outcome over time. So he'd be a sub 40 year old with an extremely valuable company and a lot of people that use what he created (and which I assume he owns a large part of at this juncture). Given time and their history of slow but steady growth, Gum is more likely than not to produce a homerun. The continued growth over many years is a stellar signal that they're already winning as a business. You can get there slow or fast. The VCs want it fast, Sahil can afford to take his time, he's still quite young and Gum is his.
- giantsloth 8y agoThis idea that “people think billionaires are evil” is such a toxic straw man. “People” think that no one person is generating a billion dollars in value, and while being heavily rewarded for your decisions is fine, it’s not fine when it is at the expense of our politics (lobbying/super pacs), small businesses/innovation (Bill Gates tried to DESTROY open source, and many smaller companies) and providing for our people fairly. It’s also ridiculous that Bill Gates gets to decide when and where we donate our money and to what causes. These billionaires need to be taxed and their money needs to be democratically distributed. Also, look at every major players wiki... they all call themselves philanthropists, it’s a grift.
- goatherders 8y agoI think its hilarious that so many of the comments are calculating how much money he can make from Gumroad when the ENTIRE point of the piece is that "hey there is plenty of success to be found in non monetary ways."
- DVassallo 8y agoBusinesses have a right size, and growth for growth's sake is cancer. Venture capital fuels the cancer.
- lordnacho 8y agoWhy would KPCB sell back their stake for $1? Why not just hang on to the stock just in case it turned around? The explanation that they didn't want the overhead of appointing a board member sounds strange. If you don't like the company, send a junior person who can learn board membering in an unimportant firm.
- beatpanda 8y agoDavid Heinemeier Hansson gave this speech at one of the early YC startup schools and he's still right about everything. This feels like such an impossible relic now that YC is firmly part of the grow-like-cancer VC universe. How things change. https://www.youtube.com/watch?v=0CDXJ6bMkMY https://www.youtube.com/watch?v=0CDXJ6bMkMY
- johnmarcus 8y agopoor guy, only making millions since 19. let me get my violin out.
- galfarragem 8y agoMore relevant than the cliché striptease of a failure, specially when told by a youngster, is this tidbit hidden in the article: To me, happiness is so much about an expectation of positive change.
- jameane 8y agoIt's sad building a sustainable "lifestyle" business isn't good enough in go go go Silicon alley culture. At the end of the day, our communities do not need dozens of Amazons who grow too big to actually participate in a meaningful way in the local community and motivated by stock price and not impact. The country would work a lot better if everyone who wanted to could build a lifestyle business. And sustain themselves, their families and maybe a couple of employees.
- codazoda 8y agoI started using Gumroad to sell zines that teach you how to program by creating generative art (https://gumroad.com/l/splashofcode https://gumroad.com/l/splashofcode). I love their product and I enjoyed reading this post about their journey. I'm also excited that they plan to open source the product, providing a perfect alternative if they were ever to be sold or shut down.
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- Quanttek 8y agoStupid question, but what does gross profit mean here? How can the costs be so high to provide one more gumroad installation?
- codinger 8y agohumble brag
- cityzen 8y agoBiggest lesson I learned from my failure to build even a million-dollar company was the same... You can't engineer your way out of a marketing problem.
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- mlthoughts2018 8y agoSuggested title change: “Reflecting on My Failure to Win the Lottery”
- coupdejarnac 8y agoI use gumroad and like it. This reminds me of the Patreon founder claiming a few days ago that he didn't have a sustainable business. Did Patreon or Gumroad need $10 million of VC money? Do they need to be located in the bay area? These seem like sustainable businesses that shoot themselves in the foot with unnecessarily high operating expenses and unreasonable expectations from VCs.
- misterprime 8y agoThank you for writing that up. Is there a healthier, less painful path you've identified for a company such as Gumroad to come into existence and get to the point it's at today? Perhaps a traditional business loan from a bank and a smaller team from the start? Would it be possible to aquire new users at a similar rate without the VC headlines?
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- ilamont 8y agoI was basically alone. I didn’t have a team, nor an office. And San Francisco was full of startups raising gobs more money, building amazing teams, and shipping great products. Some of my friends became billionaires. Meanwhile, I had to run a “measly” lifestyle business. It wasn’t what I wanted to do, but I had to keep the ship from sinking. There's that term again, "lifestyle business." Uttered like a dirty word, when in fact Sahil has an actual product that many thousands of people use and pay for. I'm one of them. Meanwhile, many startups aren’t true businesses – they book no revenue, and they may not even have a sellable product. That’s fine, because almost all businesses start with an idea or a dream or a need or pure desperation, and it’s up to the founders to make it work. They may even need investment, too – sometimes a lot of it. And that’s fine, too. But when people from the startup world use the term “lifestyle business” to describe real businesses that aren’t pure tech, have solo founders, don’t take VC money, don’t intend to scale to a billion users, or whatever other qualities are not worthy of investor consideration, I find it condescending and misguided. Some startups could actually learn a thing or two from the vendor who sells hot dogs in the park, the person who starts up a specialist marketing agency, the partnership that builds a ceramics factory, or the solo founder running a media distribution and sales platform. They have products or services to sell. They have customers. They book revenue, pay their employees and suppliers, and if they do things right, may even become really successful. In short, people who run small businesses are not hobbyists or dilettantes. They’re entrepreneurs doing real business selling something, often with limited capital and without the glamor or hype. Kudos to Sahil for what he's accomplished. But for the love of Pete, please stop using the term "lifestyle business."
- keerthiko 8y agoI think this comment is an unfair treatment of Sahil's opinion. He disclaimers all this at the start with the following: > Now, it may look like I am in an enviable position, running a profitable, growing, and low-maintenance software business with customers who adore us. But for years, I considered myself a failure. At my lowest point, I had to lay off 75% of my company, including many of my best friends. I had failed. > I no longer feel shame in the path I took to get to where I am today. It took me years to realize that I was misguided from the outset. This is that journey, from the beginning. He acknowledges that he is grateful and proud of his lifestyle business. There's nothing wrong with the phrase itself. I run a lifestyle tech business as well. I'm proud of it. I switch between "small business", "sustainable long-term business" and "lifestyle business" depending on my audience. "lifestyle business" doesn't have to be a dirty word if you don't use it as one.
- newyearnewyou 8y agoIf you're given $8M, how hard are you really struggling? I think many people here on HN believe they could build a tremendously successful company with $8M. It's frustrating that I cannot get money for my ideas, which I believe are more impactful.
- aazarshad 8y agoThank you :)
- anderspitman 8y agoHe links another post he made a year ago about moving from SF to one of the most conservative/religious cities in America[0]. Both were great reads. [0] https://medium.com/@shl/from-bubble-to-bubble-21d86195e178 https://medium.com/@shl/from-bubble-to-bubble-21d86195e178
- anxman 8y agoAmazing post.
- bluquark 8y agoIt seems to me the acquihire option was rather summarily dismissed in this post, and I’m not sure why. It would’ve been better for employees and investors, and the customers at worst would’ve gotten a clean, slow wind-down with time to find alternatives. The idea that large companies are horrible places to work and where good products go to die is another stereotype spread by VCs to convince people to go hard into billion-dollar companies.
- jumpingdeeps 8y agoAgree--definitely a better outcome for all the stakeholders, including Salil (given the opportunity cost of building a lifestyle business). It didn't even have to be an acquihire. He had enough of a product and/or business that a buyer with the right strategic market need for it would have bought the company for more than x per developer.
- woogiewonka 8y agoThanks for sharing your story. There are many valuable lessons there and I certainly wish you all the best. I am familiar with Gumroad as someone who has used it to buy things. From what I recall, the UX was smooth but left me wondering about the ease of cancellations / ways to handle refunds. I recall not feeling like the product lacked something critical - perhaps it was Paypal integration, but I don't remember. Something about it didn't sit right with me as a customer. From a UX perspective, I feel that some of the commenters here are onto something. The website does not make it clear what the product does. Looking a bit into it, it feels like there are two products in one - payments and audience building - something that I would expect to be separate. It's like the product is trying to do 2 things well instead of 1 thing really well. Of course, this is my personal opinion which could be harsh and unfair seeing how I am not really qualified to give advice. In all, you know your customers and their needs best and it's great to hear you havent given up on gumroad. I hope things go your way and you accomplish everything you set out to do.
- aiisahik 8y agoFor the employees of a VC backed company, the liquidation preference of its investors is cage - a cage that you can't break out of unless you become a billion dollar business. This is a wonderful story and I have such enormous respect for Sahil for sticking it out. I wonder if the story would be different if the investors didn't give up the keys to cage. Here's a challenge to VCs: do you really want to strangle us if we turn out not to be the billion dollar business you hoped for? And if you don't want to strangle us, put your money where your mouth is and do away with the preference. Better still, buy common stock :)
- snake117 8y agoThis was a really insightful read, so first of all thank you to Sahil for writing and sharing this. I think this is a perfect read for anyone contemplating on starting their own business as this clearly illustrates that not every startup is destined to become a unicorn and/or should be heavily backed by VCs. Moreover, if that is the only reason why you are pursuing your venture, then you will most likely experience heavy turbulence, possibly face the brink of total failure, and possibly just have to accept failure. All that being said, I really enjoyed the end of the post, where he was explaining his change in outlook and open-sourcing the service. This could lead to wider adoption and potentially open new sources of revenue, similar to Discourse and how they can create and manage your forum for a fee even though the product itself is open-sourced. The reality is, sometimes people need the middle-man and it is nice to have the option available if you are in that situation. Thanks again for sharing your experiences. I wish Sahil and the Gumroad team all the best :)
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- sytelus 8y agoThis is very inspiring and kudos to author for being so transparent to share the experiences. However I really wonder if he actually did any analysis on market sizing and if there is something preventing them to capture the share. I visited Gumroad website, explored it around and even signed up as user and still I have very little clue how exactly does it work. Yes, I can see it "helps" me sell something but I absolutely don't see anything available for purchase. There are no sign of marketplace. So where am I selling? How does the listing look like? What is exactly going on here? If myself as a geek can't figure this out within 30 seconds of landing, there is little hope for non-tech customers. As an uninformed person in this domain, I think this market is huge. There are dozens of websites like Etsy enabling creators everyday and doing pretty well. However on those websites I know how exactly things works within a minute of encounter. On Gumroad, I can spend same time to encounter those annoying marketing jumbotrones that doesn't go in to any specifics. Being a lifestyle business is great and I love it but sometimes lack of growth is few simple issues like above and one should probably not confuse it with topping out market.
- boyband6666 8y agoI was thinking the same thing. I really enjoyed reading a candid perspective of the process, but think there's more that can be done. You almost need a second page 'GumroadTunes' where I can browse all the products. I strongly suspect there is a lot I'd be interested in, but it isn't in one place. The website justifiably focusses on the product for creators, but since there are a lot of thinm, it also feels like you could be driving more traffic/sales to them, and by extension yourself. Again though, thanks for the interesting read (and the comments too - also interesting to read).
- Waterluvian 8y agoTo some money is a tool. To others it's a high score.
- ncmncm 8y agoIt was an interesting read until his admiration for Bill Gates soured it. Besides milking the world of untold billions in unearned profits by illegally enforcing a monopoly on OSes, Gates personally held back progress in development of computer software by easily fifteen years. (Youngsters who never suffered Windows 9x might not know that Microsoft singlehandedly changed the meaning of "crashed" from "I need to restart my program" to "I need to re-install my OS".) It was only the explosion of smart phones that knocked his jackboot off the world's throat. Now he is putting drips and drabs into philanthropy to try to salvage his reputation. Inspired by Bill Gates? No thanks.
- imetatroll 8y agoThis is quite the inspirational read believe it or not. It is really good to hear about success that is actually a matter of redefining perspective.
- jsonne 8y ago"Man reflects on horror of being millionaire instead of billionaire." Should we start a Gofundme for him? What an unimaginable fate to befall someone.
- enimodas 8y agoWhile slaving away his employees who most likely don't share in his millions now.
- shruubi 8y agoYou think you failed because you got to quit your comfortable job with high-valued stock options to chase your dream and turn it into a profitable business? To me that sounds like someone who is in it for possibly the wrong reasons.
- wespiser_2018 8y agoGreat story. At the end of the day, we all need to be building something we can be satisfied with.
- echan00 8y agoIncredible article. Thank you for taking the time to share and educate the world (and me) about your experience as a startup founder. I'm so happy and proud of you to hear that you've found your way as an entrepreneur, who you are in life and what you want to do with it. Good job!
- netwanderer3 8y agoSeriously can any company in this world even sustain a 20% monthly growth rate? That seems like an impossible target to achieve and set you up for failure right from the beginning. I have come across Gumroad a number of times as a customer and unfortunately some of the products sold through there were often either low quality or grossly overpriced. After numerous occasions, eventually any products that use Gumroad would immediately appear as a turn off for me. This was just my personal experience.
- bdibs 8y agoSpending $2 to make $1 with VC money is a pretty easy way to boost growth and see numbers like those.
- tempodox 8y agoWhat a nice mirror. Narcissus would be enthralled.
- Tucanix 8y agoThis guy is self absorbed, delusional, and pretentious. I can't believe what I'm reading. This guy is wiping his tears with cash and drowning his sorrows in caviar and champagne. This kind of entitlement deserves REAL defeat. This guy deserves a real life lesson instead of pretending to be a failure on the internet. Look at me and the millions I made by myself, wont you feel sorry for me buuuh huuuh. Give me a break.
- jayalpha 8y ago"In 2011 I left my job as the second employee at Pinterest" Does this shitty website have a business model besides spamming google picture search? Sorry for the rant.
- luord 8y agoThis is one of the best examples I've seen on "fighting for the users", the rule that every developer should follow.
- anthony90 8y agono more hackers