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Gumroad raises $5M from Crowd SAFE in first 24 hours
- Zealotux 6y agoGumroad is such a great model of company in my opinion: https://sahillavingia.com/work https://sahillavingia.com/work HN dicussion back then: https://news.ycombinator.com/item?id=25673275 https://news.ycombinator.com/item?id=25673275
- santiagobasulto 6y agoThere was a pretty incendiary flame war on Twitter about this: https://twitter.com/nathanbarry/status/1371549184701067265 https://twitter.com/nathanbarry/status/1371549184701067265
- paulgb 6y agoMy only relationship to any of this is as a gumroad customer but this seems like a cheap shot? Nathan alleges mismanagement but doesn’t go into details as far as I can tell. To me the story seems to be that investors were ready to leave gumroad for dead, Sahil made some hard decisions and managed a very unlikely comeback.
- gadders 6y agoI think Nathan has put a slightly negative spin on what happened to Gumroad- maybe implying that it was intended all along - but he does have a bit of a point.
- duxup 6y ago>he does have a bit of a point Whats the point? Really though, I'm having trouble figuring it out.
- gadders 6y agoThat Gumroad states it is "for creators" but the original Gumroad creators will not benefit from the new funding round.
- duxup 6y agoIIRC 'creators' as far as Grumroad's tagline is concerned are their customers.
- gadders 6y agoYes, understood, but I guess Nathan Barry's point would be why treat your company co-creators differently than your customer-creators.
- duxup 6y agoCall me crazy but I think the deal between the two is dramatically different up front, even what everyone does. End customer's don't have any equity... in the end neither did the employees. That's the same, unfortunately. But they're the same that way. I think those are two dramatically different deals you're making with people, pretending they should be the same seems oblivious to the actual relationships.
- ceilingcorner 6y agoRead the top comment on this article.
- duxup 6y agoWhat's up with the references to 'tanking' and 'mismanagement'? It's like the worst of twitter right there, just a bunch of tweet / word salad and accusations without anything to explain what any of that is / back up the meat of the accusations ...
- kjakm 6y agoSomething I didn't realise until a while after reading this was that the author of the tweets was previously a large Gumroad customer + now runs a competing business (ConvertKit Commerce). I believe the events he's talking about are also very public (I think the Gumroad founder wrote a blog post about it that was on HN not that long ago).
- dharmon 6y agoWorse than feeling overly cynical is then having your cynicism validated. I recognized this guy's name, so skimming over the twitter thread my cynical thought was "I bet ConvertKit is working on a Gumroad competitor", and sure enough, they already have one.
- joshmanders 6y agoHim being a competitor really doesn't change the shitty things Shl did.
- duxup 6y ago>the shitty things Shl did. What? I asked earlier about 'mismanagement' and other accusations but nobody defines this stuff.
- joshmanders 6y agoGood job downvoting instead of doing some self research. It's not hard to find stuff. The stuff Nathan talks about isn't even the worst. He never mentions Shl's attempt to monetize racial injustice and then telling a black woman she doesn't qualify for the promotion because her skin isn't dark enough, then blocking everyone who says what he did/said was not cool, and instead of acknowledging and fixing his fuckups, he just goes silent until the uproar dies down and then goes on with business.
- duxup 6y ago>It's not hard to find stuff. What stuff? The rest of your post sounds like some personal conflict about some unrelated topic.... it's about racial injustice now? Are you saying the dude who posted that twitter thread is concerned about that?
- smalter 6y agoa plug: we did a research report on gumroad's financials to give potential investors a deeper look at the company: https://sacra.com/research/gumroad-android-creator-economy/ https://sacra.com/research/gumroad-android-creator-economy/ here are 3 key points: 1. gumroad experienced major covid tailwinds. whereas the company's five-year compound annual growth rate is 37%, it grow 94% from 2019 to 2020. they've been profitable since 2017. 2. gumroad's core customer base is creators making less than $10k/yr. gumroad is best positioned as an entry point for novice creators to start selling quickly and easily online. as creators cross the $10k/yr threshold, they become a churn risk because all-in-one products like kajabi and podia offer a more fully-featured product at the same price. 3. at the campaign's $100m pre-money valuation, gumroad will need to grow 40% yoy for 10 years to return double digit IRR. check out our report for a full breakdown of financials, competition and more: https://sacra.com/research/gumroad-android-creator-economy/ https://sacra.com/research/gumroad-android-creator-economy/
- eigenvalue 6y agoSounds like a terrible investment at a $100mm valuation. Probably worth closer to $35mm or $40mm tops.
- tinyhouse 6y agoWhat do investors get? First time I hear about this site Republic.
- smalter 6y agothe instrument is called a crowd SAFE: https://republic.co/learn/investors/crowdsafe https://republic.co/learn/investors/crowdsafe republic is an angellist spinoff: https://republic.co/help/how-is-republic-part-of-a-family-of-startup-platforms-1 https://republic.co/help/how-is-republic-part-of-a-family-of...
- tinyhouse 6y agoThanks, that's cool. I see Gumroad capped investments to $1000 once they saw the demand. That's not that interesting. It's great to have the opportunity to invest in private companies. I will keep an eye on it.
- vmception 6y agothey get something slightly above what all your local restuarants asked for on gofundme when they boosted your email from the square point of sale system: something close to non-dilutive financing and still hilariously opportunistic
- kgwgk 6y agohttps://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_safes https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_sa... "A SAFE (“Simple Agreement for Future Equity”) is very different from traditional common stock and it is important to understand these differences in order to make an informed investment decision that is right for you. "A SAFE is an agreement between you, the investor, and the company in which the company generally promises to give you a future equity stake in the company if certain trigger events occur. Not all SAFEs are the same and the very important terms governing when you may get the future equity may vary across the SAFEs being offered in different crowdfunding offerings. Despite its name, a SAFE may not be “simple” or “safe.”
- Gelob 6y agoI'm just waiting for youtube-dl to support gumroad https://github.com/ytdl-org/youtube-dl/issues/26874 https://github.com/ytdl-org/youtube-dl/issues/26874
- andygcook 6y agoThe investment is being done on a SAFE with a $100M valuation cap, not a $100M valuation with equity grants. That means theoretically Gumroad could never have a qualifying event by selling, going public, or raising a properly priced round by accredited investors. And therefore, investors never get an ROI. Dividends also require actual equity, not promissory notes. I’d imagine even if all investors did convert, paying dividends would be a non-starter given their company size and the number of investors. Using a SEAL or the Indie.VC V3 terms seems more inline with how they want to run the company because it includes an instrument for investors to get an ROI with a payback clause if you choose never to sell. I’d imagine there will be almost no pressure to sell because to my knowledge, no past employees or current contractors have equity, nor do they have outside institutional investors that want a return for LPs. I’d be curious to hear what the board structure is for oversight as well around important topics like salary comp, potential acquisitions, etc. There isn’t much stopping the founder or a group of people from pulling out all the profits for themselves or just paying outsized salaries. Anyways, not dunking on it and just stating how some of the structures work from what I understand. The Gumroad story is an interesting one and I appreciate how they publicly share the experiments about how they’re running too. Will be interesting to follow over the years. [edit: grammar]
- luckylion 6y agoThe $1000 maximum investment will probably mean that it won't be professional investors, but individuals who will likely not understand the risk and the potential for misuse. Nicely sized to fit into the stimulus check.
- duxup 6y agoI'm concerned about the risk there as well, but I feel like you can spin that both ways. There's a weird intersection with opening investment to anyone and concerns about folks making ill informed choices.
- luckylion 6y agoThat's true, but I think something like SAFE is very different from crowdfunding for equity (and much more risky and misnamed, it can be neither simple nor safe). That intersection you mention will be an interesting place in the time to come. I don't think we've found the sweet spot between "only professionals can invest", "the retail investors take on huge risks and aren't aware because of wild models with strange names" and "the company can't raise medium amounts because the regulation surrounding the process would cost much more than they would get", but I'm sure somebody is working on it.
- PragmaticPulp 6y agoGumroad is an interesting cautionary tale for employee equity compensation. The company was declared to have failed several years ago. Employees were laid off and the investors released the IP (built by the early employees) to the founder as a token of goodwill. Presumably, they thought he might use it to start a new company. Story here: https://www.businessinsider.com/startup-failure-gumroad-why-startup-failed-2019-2 https://www.businessinsider.com/startup-failure-gumroad-why-... However, he continued running the company with new part-time employees, minus original investors and minus the early employees who built the company. Apparently the company succeeded enough that it’s now worth $100 million. Early employees who built the original site presumably don’t have equity because they were laid off and their options expired worthless as they were told the company had failed. On one hand, it’s great to see a founder persevere and rise from the ashes. On the other hand, watching the early employees lose out on their equity because they were told the company was a failure is not cool. I’ve made some money from startup options through my career so I won’t agree that they’re worthless as often claimed. However, this is a good reminder that the game is very stacked against the employees.
- duxup 6y agoI like the idea that a startup that fails to be a unicorn can still be something. The alternative are these companies vanish because they're not worth an enormous amount in a short time.. I'd argue the first issue is not being more direct / everyone understanding what it means to be an employee at a start up as it is equity wise. I'm not sure some token Grumroad tidbits thrown old employees way really would change much / I'd argue obligations like that would complicate any such resurrections.
- PragmaticPulp 6y ago> I like the idea that a startup that fails to be a unicorn can still be something. The problem isn’t that the company failed to be a unicorn. The problem is that the company was declared to be worthless and was given away to the founder (but not employees who built it), but it obviously wasn’t worthless as it’s currently valued at $100 million. Early employee equity was wiped out in the process. The point is that you can work for a $100mm company, build the foundation of a $100mm company, yet walk away with nothing because the investors and founders can play games with your equity. Unlikely to happen again given how this played out. However it must hurt to be an early Gumroad employee doing the math on what their equity would have been worth today after being told the company was worthless.
- rollover 6y agoThis company is a disaster. They are even too stupid to understand the concept of account deletion. "How to delete your Gumroad account: From your Advanced Settings page, scroll to the bottom of the page, then click Delete your Gumroad account? After you've deleted your account, if you try to log back in, Gumroad will make your account "live" once again. Therefore, if you really want to delete your account, click Delete your Gumroad account? and don't log in again. Just... just go." WTF? That's not DELETION, that's SCAM and a GDPR violation. https://help.gumroad.com/article/37-how-to-delete-your-gumroad-account https://help.gumroad.com/article/37-how-to-delete-your-gumro...
- thecleaner 6y agoHow is this stupid ? Facebook does the same thing.
- maigret 6y agoInteresting, this exposes them to lawsuits which would be a liability for investors indeed.
- ketamine__ 6y agoIs it just me or are most of the crowd funding opportunities horrible? Valuations too high, terms suck, company sucks.
- vmception 6y agoNot just you, I've wasted a lot of time with founding teams that don't have access to venture capital due to lack of network, they so often also have a lack of awareness on what a good deal looks like, opting for completely arbitrary sweeteners that just make them look desparate and further uninvestible. Hope the deal flow improves.
- greenie_beans 6y agoWhew, love some good HN cynicism this early in the morning! Usually means there is something good.