From Pinterest Employee #2 to Gumroad Founder & CEO: Sahil Lavingia
How Sahil Lavingia discovered the key to Gumroad's success was to not be a unicorn
We often hear about those college dropout billionaire CEOs in Silicon Valley - the Mark Zuckerberg and Richard Hendricks of the world. In 2011, Sahil Lavingia dreamed of being that.
He was 19 years old and was the second employee at Pinterest, but he had always wanted to start his own unicorn. While working at Pinterest, he had an idea for a product to enable creators to sell digital products directly to their audience.
After one weekend of hacking together his idea, Gumroad was created. Later that year, he left Pinterest, without vesting his shares, and successfully raised VC funding.
But Sahil soon realized his dream was misguided. And despite generating millions of dollars, Gumroad had to lay off nearly all of its staff at one point and even lost investors.
Today, Gumroad operates completely differently:
No full-time employees (all contractors), meetings, or deadlines
Focused on profitability and staying small over growth
$11 million ARR growing 85% YoY
Completely transparent financials
Here's how Sahil Lavingia turned his failure into a sustainable, growing business.
After creating Gumroad, Sahil decided to launch his product through forums and press releases such as Hacker News. While this got tens of thousands of people to his website, not many signed up. After all, you'd need to be a creator willing to sell a digital product.
Instead, Sahil targeted these users the old fashion way: by cold-emailing them. Thousands of them actually. He'd scour the web through prospective candidates (searching Twitter profiles, subreddits, etc) and then got them to use Gumroad.
For a 19-year founder with no connections or legitimacy, Sahil felt that this was the only way.
VC-backed and layoffs
A few years after launching, Gumroad saw positive growth. The team expanded to 20 people and creator earnings topped $2 million/mo.
But in 2015, they had months of stagnation. For some companies, that might not be a big deal while doing $100k/mo. But Gumroad wasn't any company. They were trying to be a hyper-growth, billion-dollar company, and the months of stagnation led to a high burn rate and operating at a 6 figure monthly loss.
Gumroad failed to raise a Series B, and Sahil had to make a choice to lay off 15 of his 20 employees. Eventually, the rest of his employees left with him.
Shift in focus
Things changed in 2017 when KPCB, the lead investor, decided to sell their ownership of Gumroad for $1 (investors do this to help their taxes). Others began to follow, and Gumroad no longer was the billion-dollar company that Sahil dreamed of.
At first, this crushed Sahil. After all, that's how he equated success. But he realized this caused him to burn out and saw his mental/physical health at an all-time low.
Most importantly, Gumroad lost track of what was important. Creating a business that empowers creators. Up until this point, Gumroad's main focus was becoming a billion-dollar company.
With the investors leaving, Sahil took Gumroad on a path of becoming an independent business focused on creating value instead of capturing it through market cap. His "growth at all costs" mantra became freedom at all costs.
This meant keeping the product profitable, reducing expenses, focusing only on necessary features, and even opening up Gumroad financials to help other founders - something startups seeking VC would never do!
Gumroad in September 2020:
Volume processed: $12.9M (up 97% YOY)
Revenue: $819K (up 77% YOY)
Gross / net profit: $288K / $16K
10 creators made over $100K
192 made over $10K
1,657 made over $1K
6,682 made over $100
19,480 made something!
Let me know if you have questions.
— Sahil Lavingia (@shl)
Oct 22, 2020
Gumroad even operates completely without meetings, deadlines, or full-time employees (all contractors). They even encourage their contractors to build out their own side projects. After all, the company is all about enabling creators.
But most importantly, Sahil discovered the business that made him happy and "successful".
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