Gumroad Q2 2021 Board Meeting

Hello everybody, let me plug in my nice fancy camera. We'll get started in just a sec, let me share. Sahil Lavingia: Slides, and then we should be good to go. Awesome. Cool. So the agenda for today, it'll be pretty simple and pretty fast. I'm going to cover the team, stuff that we've shipped, the numbers at a high level, what we're working on next, and then we'll take questions from the crowd, and then I'll post this to YouTube at some point as well. Welcome if this is your first time. It's kind of almost my first time because this is the first time we've had 7,000 investors that I'm updating on the status of the company. So exciting, but a little nerve-wracking. So first off, the team. And by the way, if you have questions, you can use the— just put them in the chat and then I'll go through them as I take breaks. But first, the team. We started with around 20 people. That's about how big we were when we raised the $6 or so million round via Republic. We're now about 35. So we've added about 15 people almost double the company in the last 3, 3 months. And our goal is to be around 50 people by the end of the year. Uh, and we are looking for more people. Uh, so if you know people who are full-stack engineers, skilled in Ruby, JavaScript, Rails, React, that sort of thing, and who wanna work in this kind of flexible way that we work, uh, please, uh, send them to jobs.gumroad.com. Obviously having more people is great because it means we can, we can ship more stuff. Here's just a small sample of the things that we shipped in the second quarter of this year. We shipped Apple Pay finally. We've now changed all profiles on Gumroad to be a lot more creator first. Now the URLs are creator first, the favicon is creator first, and we're gonna do more and more stuff. To make, to make Gumroad feel more creator, creator first. We've added product thumbnails, so now you can have product thumbnails instead of just having like a cover image that we kind of resize based on where it was. Now you can kind of say on Discover, on Library, on your profile, on any, any, any place there's kind of a grid view, you now have an option to do that. That'll show up in sort of social media previews as well. We've added a bunch of features for power sellers. If you want to kind of a deep dive in all, all of the stuff we've shipped, go to roadmap.gumroad.com. But we shipped affiliates, a bunch of stuff around affiliates. You can email your affiliates. You feel this now, have a dashboard. We're about to add a bunch more functionality there with self-service affiliates. Uh, and then we just added support for Google Analytics 4. So generally like a big focus on like, how do we help make our most, most successful creators even more successful? And we also shipped iOS and Android widgets for creators. So you can now have like your dollar amount, how much you made today or for the week or for the month, et cetera, um, on your phone, on your home screen. Uh, so last time we did a board meeting, this is one update, uh, that we made. We, we redesigned the product flow and the navigation and just made things a lot cleaner and simpler. Uh, and we've continued to do that. So we've redesigned it again. We moved our, our navigation to be vertical, gives us a lot more space to add stuff. We can highlight all of the features that Gumroad supports. Stripe does this, I think, really well, kind of exposing new features to creators as they may need them. Uh, it gives us also more space to kind of focus on whatever the primary call to action is, right? So in this case, publishing your first, your first product. And we'll continue to do more and more around onboarding soon. Last quarter we updated our homepage and our branding, and we've now moved our homepage and all of our marketing pages to Webflow. So that now Gumroad is powered by Webflow, which is awesome. Makes it so we can ship features way faster. More than just engineers can now contribute code to the marketing website. Which is like pretty, pretty, pretty awesome. So we're gonna start to see a lot more changes on our marketing website. We now have a growth team. Some of the new hires, Kyle, are outta marketing. Alex also kind of had a marketing, writes our newsletter. They're gonna be doing a lot more experimentation. We've set up a bunch of analytics, so we should be able to measure, measure our kind of conversion funnel and all of that stuff that you'd probably expect us to do, but we just haven't with such a small team. We also redesigned profiles, as I mentioned. We've made them a lot more sort of creator-centric. So that's what it used to look like. Now it looks like this to flip back and forth. We try to make the products front and center, really focus on making it minimal and getting all the functionality that is important above the fold. One thing I would like to highlight is that this doesn't, you know, I wrote an article about reflecting on my failure to build a billion-dollar company. And one of the lines that really resonated Basically the sentence or the couple sentences that really resonated from the piece more than anything else was this, which I'll just read aloud. 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. And that is sort of, I still really believe in that. You know, we are shipping all of these things, but I think the way to think about it is kind of like lottery tickets. We're making a bunch of bets. We hope that they grow the product faster, but like roughly the creator economy is gonna grow at a certain rate and we hope to kind of be, one of the premier options there. But to talk a little bit about the numbers, because that is ultimately important, we are building a business here. This is what our GMV looked like up until the beginning of 2021, which is pretty crazy. Obviously COVID sort of did a big spike, but we've kind of been growing 15 to 40% year over year without COVID. Q2 2021 metrics definitely have sort of seen the COVID sort of bump taper off. We did almost $50 million in GMV, so you can 4x that roughly to get our annual run rate of around $200 million. Revenue, almost $3 million, and we're profitable. But yeah, definitely have seen a big slowdown, growing 80% year over year is very different than growing 30%, growing year over year. So we have a lot of stuff that we have planned to inflect this graph further, But just to be open and transparent, we've definitely seen the creator economy kind of— I think COVID summer, people are having fun. I'm hopeful that this winter, which is generally the second half of the year, is the strongest part of the year for us where most of our growth happens. So I'm so optimistic, but it'll be interesting to see with the public stock like Shopify and Square and stuff if they see similar quarter over quarter. Numbers. My guess is that they will. Revenue is similar. This has seen more of a kind of a deadening, even though actually our gross profit is doing better because we made some changes with PayPal and we no longer absorb all the PayPal fees and then pay PayPal on the back. We now allow creators to connect PayPal directly, which means our, our sort of revenues fall, right, because we're not charging the whole, like, inclusive of the PayPal fees. Um, but our gross profit ends up doing, doing much better, which you can see here. Uh, so we are continuing, you know, as a business, the business is incredibly healthy, still profitable, even though we've added 15 people. I think we can add another 15 before even getting close to breakeven, which like we have, you know, we just raised $6 million. So like we probably should be spending money a little bit faster. So that's, that's kind of my big, my big focus. Uh, so what's next? Next up, uh, self-paced courses is a big focus. For us, we want, you know, people already kind of use Gumroad for this use case and we just wanna make it better and feel more native and intuitive, adding integrations. So you'll be able to automatically add people who buy your product or sign up for your membership or subscription newsletter, et cetera, to Slack or Discord. You support completion UI. So you'll be able to see like, you know, these are the 3 videos you watched and supporting folders as well. So just simple things to like incrementally make Gumroad a better and better fit for courses. We're also changing our pricing. This is kind of breaking news. We're gonna update our pricing to be a lot simpler. We're also gonna revamp our onboarding as part of that. Um, that's gonna allow us to add native product types. So you will no longer be creating just a product, but you'll be able to say, hey, this is a podcast or this is a newsletter, and we'll be able to like serve the content in the best possible way, both on the web and via the apps. And that will feed into Discover. Discover is like a really big deal for us in the coming year. We just hired Vip, who's a dedicated, uh, PM for Discover. Discovered is around almost $1 million a month, of which we take 10% with around 100% gross margin. So we end up, you know, adds around $100,000 a month to our bottom line. So you think we can make that probably pretty darn meaningful and really use that to grow sort of the cash flow of the business. So it's kind of a nice cascading effect of these things that I think we'll build on top of each other. Here's some UI to kind of help people visualize what that looks like. This is what, of course, may look like on Gumroad, hopefully not too long from now. And new pricing, pretty crazy, but we're gonna revisit our pricing. We think this is gonna be pretty disruptive. You know, to start Gumroad, we're gonna get rid of our premium plan. We're gonna make it super simple. There's gonna be one option, which is you sign up for Gumroad. It starts off at 9% plus 30 cents, which is tiny, tiny bit higher than what it currently is. But I think 8.5% plus 9%, it's basically the same. And then the cool thing, the thing that we're introducing is that fee is actually going to go down over time. So when you make $1,000 on Gumroad lifetime, which I think is pretty feasible, it goes down to 7% and then 5% at $10,000 and then 3% at $100,000. And if you're familiar with Stripe, which is basically the cheapest you're going to find on the market because they're the payments provider for basically everybody else, they charge 2.9% plus $0.30. So effectively what we're saying is when you make $100,000, you're basically Gumroad costs 0.1%. So if you're making $100,000 a year, Gumroad is costing you whatever the math is on that, $100, I think, which is pretty awesome, I would say. And the pitch that we kind of want to be making is that Gumroad is really amazing to get started. It's kind of the on-ramp to the creator economy, the online economy for creators and entrepreneurs. And so like, that's what we're really good at. Like, let's charge on that. Let's focus on, you know, making it so that we make most of our money helping people get started. And then once people are doing really, really well, We're not making as much money from them. And then business strategy-wise, which because ultimately this is going to almost definitely hurt our revenues, it's going to lower it, but I'm really hopeful that people are already turning off of Gumroad when they get really large. I think this will continue to happen in the creator economy. The rents are too damn high. It's a big topic with Apple and Google's 30%. So I think this can set the tone of really, really, really creator-friendly pricing that actually rewards creators for doing better and better. Um, so we'll see how this goes. And, you know, Gumroad starts out cheaper than Substack and Patreon at the best possible tier when you first get started, and then it only gets better and better from there. So pretty, pretty darn excited about this. This will go live, uh, hopefully in the next couple months. We'll announce it officially to our creators pretty, pretty, pretty soon. Uh, and as I mentioned, this kind of all builds on top of each other. I love this meme. I use it all the time in my head and now visually from 2011 to 2020, tiny, tiny things, obviously a ton of effort, but that's all, you know, very early in terms of what we want to go do. We just switched from, as I mentioned, the marketing website from our own stack to Webflow, which allows us to iterate a lot quicker, reduce our code base drastically so we can ship a lot faster. All the app has moved to app.gumroad.com. Everything on Webflow is gonna make it easier to do things like the new pricing updates. Uh, once we get that in place, we can simplify the different, you know, right now it's like, do you go here? Do you, are you this kind of person or this, you know, which tier do you want? Gonna get rid of all that. That's gonna make onboarding a lot simpler and easier. Once we do that, that's gonna give us the space to tackle native product types like podcasts, newsletters, a variety of other things. And then once we do that, I think we can revamp the discovery experience, probably 2 to 3x that volume, hopefully in the coming year. That'll give us, you know, 10 to 20 new engineers worth of cash flow that we could bring on to make the product better and better and better. We have a lot more stuff coming up, but I really just wanted to focus on what's happening in the short term. In the coming couple of years, I think you'll see a lot more cool stuff that hopefully I can share in upcoming board meetings. But that is basically the gist of, of, of of what we've been up to, and I can take some questions, which I see already there are a few. So let me look at the questions. And I guess now that— actually, how do I get to the questions? Let me stop sharing my screen, and now I can see all the questions. Great. A few weeks ago, you removed everyone's profile customizations. We didn't. We actually— we left everyone's profile customizations and implemented forced dark mode. Yeah, we did. That definitely was a little bit of an oversight. I can take blame for that because that was my, my code and design stuff. So yeah, we are working on— we just hired Pedro, who's going to lead up our community efforts. We'll do a better job keeping creators in the loop as we make these changes. I do believe it's really important to move fast because I want to ship great new features to help creators make more money. I do think that dark— having dark mode sort of natively is generally a good change, but we can definitely improve sort of our ability to ship these. We're also adding a Slack channel. One of the cool things with that tier— new tier structure, by the way, is we'll effectively have, you know, these kind of cohorts of creators that we can kind of say, hey, anyone that is in this cohort, you're now in our Slack and you can now give us feedback on all the stuff that we're working on as, you know, as we go. So I think that will be— that will be some fun stuff to experiment with. Um, does the product intend to compete with niche platforms like Teachable? Teachable is bigger than Gumroad, uh, by I think 2 to 3, maybe even more, X. So Teachable's— I mean, Gumroad is far more niche, uh, than, than Teachable. But yeah, I think we'll, we'll sort of head into that world a little bit more, uh, in education, online education. Um, But yeah, I would, I would say it's, it's not niche for sure. Another question. Do you have, and this is my cat. Do you have a rough breakdown of percentage of people in different cohorts and tiers? We do internally, but we have not shared that publicly. We do, we do share publicly the categories that people are a part of. But it's very much a power law. There's nothing too crazy or surprising about it. We have people who make hundreds of thousands of dollars a month, and then that kind of tapers off, which is another reason we want to introduce this new pricing is to kind of reward those people for doing really well instead of building a business that relies on a few hundred creators that make the vast majority of the revenues. Justin asks, outside of Gumroad fees, do you know what other reasons cause the highest earners on Gumroad to churn from the platform? It's mostly functionality. It's mostly customizability, things that we don't support yet because we just have a small team. So, you know, we are— the way that I kind of think about this long-term is to focus on the onboarding experience because that's where most people need help and where, you know, soon we're going to make most of our profit margin and then have like an ongoing discussion with the people who churn. We're now just putting in sort of these automated emails to get that kind of feedback. But most of, you know, so far what I've been doing for the last 10 years is just reaching out to people manually, uh, and it's mostly sort of non-regrettable churn, uh, but hopefully as we have a bigger team, we'll be able to tackle some of the big reasons that people leave. Multi-account support, well, you know, team support, um, Stripe Connect, lower fees, I think will solve quite a few of these problems, uh, for us. If you consider them problems, I think graduation is also a necessary part of a creator's life cycle and it's okay. There's nothing wrong necessarily with a creator deciding that government is no longer for them. Someone asks, "Projected revenue for 2022?" I don't do projected revenue. I think it's basically bogus. What you can do if you want is you can basically take our Q2 and just multiply it by our yearly growth rate and do the math on where you think things will end up. But anyone can do that. So It's not, I don't think there's really worth, it's really worth, and it doesn't change our behavior either, like projecting 20% or 30% or 50% year over year growth. Doesn't really matter. Anonymous attendee says, any update or color on how you see your day-to-day role within Gumroad versus angel investing? Not really. It's basically the same as it was in March when I did the crowdfund raise, which is Gumroad is The company that I run day to day, even though it's profitable, we have a great team, we work in this asynchronous way, so it doesn't require me to be staring at a screen from 9 to 5 and being available 24/7, etc. We have roughly a 24-hour SLA, so it allows me to do a lot of these other things that I want to do, including angel investing. But yeah, I don't think either has suffered yet. Though that may change, who knows? Maybe a year from now, I will no longer be Gumroad CEO, because someone in the company is amazing and I want to go do a bunch of other stuff. But we'll see about that. Gumroad is still— there's enough interesting stuff that we're working on that like it keeps me excited. Vando asks, is there anything in the roadmap related to cryptos or NFTs? Our roadmap is public, so just go to roadmap.gumroad.com to see what's in our roadmap. But spoiler alert, nothing to do with crypto or NFTs currently on the roadmap. Uh, Adam asks, are you making creator-friendly fees in order to attract more creators and hope to make up for that revenue with increased revenue from Discover? Um, I— attracting more creators, maybe. I think that's sort of a big question. We'll see if that pans out for us. But I think it's mostly around churn. It's mostly around as creators get bigger, they start thinking about, oh, I could save 1 to 5% of fees if I use Stripe directly or something like that. And so it's mostly around that. And definitely, yeah, discovery being a primary revenue driver for us, I think is really important because I think providing distribution for creators is something that they would pay a lot of money for, much more than a marginal fee on payments, which is getting more and more commodified over time. So yeah, I definitely think if Gumroad can become a discovery place, a place to discover creators and help maybe learn from and support creators, maybe Amazon for intangibles or for the creator economy or something like that, might be interesting. So we'll experiment with that. Sid asks, "What will it take for Gumroad to reach a $25 million valuation?" Well, we just raised a $100 million valuation, so it would take some bad things to happen. And frankly, it won't happen because we're profitable, so we would never need to raise money. In that sort of situation. Alpesh asks, what are the top 3 near-term risks you see for Gumroad in the next 12 months? I assume you meant to say. I think Stripe payment links is kind of interesting. I think just broadly, seeing a lot of this stuff get commodified, as I just mentioned, is a risk. I don't know if that's near-term. I think we constantly have to be innovating. Webflow and other services are adding more and more payments functionality generally. So I think we'll get squeezed just from every direction. Generally, sort of tech consolidates. The big companies kind of do more and more and become these kind of super apps over time. And so I think we'll see that happen in the creator economy eventually, and hopefully we're on the right side of that. Lucas asks, what is Gumroad's main marketing channel? Just organic. It's just creators, you know, the beauty of Gumroad is that to use Gumroad, you have to share with your audience. So we've never had a huge problem in terms of awareness of the product. Mateo asks, if you are planning to do another crowdfund, what platform will it be on? We do plan probably via Republic again. We were pretty pleased with them and I'm an investor in Republic, so I will continue to be an avid supporter. Of, of Republic. So yeah, a quick overview of Discover for those of us that aren't familiar. Just go to discover.gumroad.com and you will see, see what Discover is. And then someone asks, have you closed the Discover PM role? We have actually. I don't know if I have told him that his trial period was over successfully, but I will do that right after this call if I haven't. But yes, we have closed, closed that role and we don't plan to hire any PMs anymore for a while. Have you considered financial services for creators? Considered, yeah, I guess, you know, we've kind of considered everything. It's kind of what you do as CEO of a company. But yeah, nothing has struck. I think creators are just humans and there's a lot of financial services for humans. So I don't think there's something uniquely that we could offer that seems really captivating, but maybe one day. We're close with Stripe, and so we have a lot of conversations with them as they have new ideas and new things in the works. So we'll see about that. But I think we're probably 5 to 10x in terms of GMB and growth to get to a point where it starts to make sense to offer these financial services to creators. Zach asks, but— Beware of questions that begin with but. It's a leading question. But I'll keep it to honor your question. But if you wanted to Drive more GMV than you are achieving now, and there is a lot of money in the bank. Why not drive more paid acquisition of new users rather than just organic? We've tried a little bit of paid acquisition. Honestly, for Gumroad's business model, it just doesn't work. Like, I think paid acquisition makes a lot of sense when you have like a really clear order value size, you know, sort of the D2C model works really well when you're capturing most of the revenue, etc., etc. But when you're a marketplace model, it doesn't really work. You don't really see ads recommending Uber to drivers or to riders, right? Like it just, the, the model doesn't really make as much sense with the way that our take rate works. Anton asks, any plans to allow SaaS payments? That is provide the ability to charge users from within my app similar to Stripe. Use Stripe. Stripe's better for this. Sean asks, what is your annual salary that Gumroad pays you? So it is $180,000. $100,000 a year, up from $120,000 when I raised the crowdfunding round, which is mostly because I just work a lot more hours than I used to. At Gumroad, we pay everybody hourly, or not kind of, we do. So I think my hourly rate is like $250 or something like that, I would have to check. BW, Sahil Lavingia asks, when are you likely to raise the next round and do you have a figure? The goal, so the soonest we can do a Reg CF round, which is basically my only plan going forward is to raise money from people, not from VCs. I get a lot of emails from VCs all the time, virtually every week. The answer is I'd rather just give my allocation if I have any to CreatorStart customers first. But yeah, March 15th is the soonest we could do that. There's a 1-year limit. So we raised March 15th, 2021, and so March 15th, 2022 would be the soonest. Ballpark range, it would be tough to say, but roughly I would say a 15 to 20x multiple on revenue, whatever our revenue ends up being at that point. There may be other things that come up in between now and then. But assuming we're growing 25 to 40%, let's say our revenue is $15 million or $18 million or something like that. My guess is $300 or so million valuation. Also, this massively depends on where the public markets are at. I will just do a comp with what the market is. I would just pick a fair price roughly in the middle and raise probably another $5 million. If we see crazy growth, we launch a whole new product and it does really well, Who knows what could happen, you know, in the next 9 months. That's a long time in, in, in, you know, internet e-commerce years. Um, that may change, uh, quite significantly. Uh, awesome. I think I answered everyone's questions so far. We'll do it until, uh, 10:30. Um, so I will continue to answer for the next 3 minutes. Our CAC is zero. Active users, we have around 20,000 creators per month who make at least one download. One sale, I think, ends up being around, I would have to look, but if you go to the Gumroad Twitter account, we actually tweet this every week. So you can actually just see how much money people are making. That's the best way. And if you wanna subscribe to our newsletter, which I highly recommend, go to gumroad.gumroad.com. We use Gumroad for our own newsletter. Partnership pipeline, not really. I believe the best partnerships are just people using each other's APIs. So yeah, that's it. Likeliest exit for Gumroad, just run it independently and then ultimately IPO the company. And yeah, that's where I see things going. I don't think we'll sell the business anytime. Soon, if ever. Gumroad is definitely attracting A-level engineers because we're one of the very few to work in this way that we work. So yeah, we have phenomenal, phenomenal engineers based all over the world and we pay everyone, by the way, the same regardless. Gasper asks, if you were to leave Gumroad to pursue other more fun activities, in what capacity would you stay involved? And what would Gumroad need to do or achieve for you to want to not want to leave it? Hmm. Nothing really. I don't know. There's a bunch of, I don't think about it like, what would it have to do for me not to want to leave it? Because that implies that like my default is to leave it. My default is to not leave it. And something else has to be sufficiently interesting outside of Gumroad, for me to want to go do something else. Right. Um, so yeah, I don't have any, like, there's, there's, there's enough cool, exciting stuff at Gumroad. If we run out of those things, then maybe. Um, uh, but looking at our internals, like there's years worth of cool stuff to do. So, um, unfortunately I can't talk about all this cuz I want to bundle these things together and do these big, nice surprise launches. Um, But just wait and see. The pricing will be a big one. I'm really excited about that. I think that'll be pretty darn meaningful. One of the cool things about running a company in this way at some scale is we can actually influence the way that the creator economy may develop over time. And so I think our pricing will be one example of that. And as long as we can keep doing that, we can keep having an impact, I'll keep running Gumroad as long as it's fun, but it's my company. So if it's not fun, that's my fault. These are all things that I can generally fix, I think. Um, so yeah, but yeah, for folks who are curious, um, I did, uh, walk through kind of the important stuff, but if you go to roadmap.gumroad.com, you'll be able to see our roadmap and our changelog and all of the things we've shipped and plan to ship. Um, and then you can also, um, I believe link to there. Um, but this is kind of like the stuff that I look at, which, you know, it's all the numbers I've shared. I do do kind of projections to answer that question, but it's literally just like I take the year and extrapolate it. So it's like not useful in my opinion. It's just there to kind of, I don't know, gauge. Um, but you, you can kind of see our creator earnings and revenue here, definitely trending in the right direction, but I think we can do, do a lot better. You can kind of see the COVID bump has kind of come in and tapered off. Um, but we're still doing better than we were doing, but I think we can, we can get back to probably 40-50%. Um, GMB, et cetera, et cetera. So yeah, hopefully that was useful to people. Um, you all probably know where to find me, uh, Sahil Lavingia at hey.com, @shl on Twitter. I'll be posting this to YouTube soon, and we will see each other in around a month's time. Thanks everybody. Bye.