How Sahil Lavingia created the multi-million dollar company, Gumroad.

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Imagine if you have an idea and you can create that idea real quickly and now you want to sell it. Well, how do you create an online store to sell it? Most people don't know they can do this within a matter of minutes, whether it's an online course, a book, a special report, or even like a t-shirt or something you make. If you go to gumroad.com— this is not an ad, by the way. I'm— I, I— the creator of Gumroad is coming on the podcast right now. But if you go to gumroad.com, within minutes you could start selling whatever you want. It's been a long road for Gumroad, a long road of ups and downs. It's a really great entrepreneur story, but it's also a really great story about how, uh, the so-called creator economy is being develop, like you can create things and now make a living based on what you create. And all the tools are in place. Thanks to people like Sahil Lavingia, who's the creator of Gumroad. And here he is. This isn't your average business podcast, and he's not your average host.

This is the James Altucher Show.

Well, Sahil, thanks for coming on. When I was doing the research for this, I think I found out I'm actually indirectly invested in Gumroad. I didn't even realize that when I asked you on, because I'm in Kamal Ravikant's fund.

Oh, awesome. Yeah, I love Kamal. He's great. He's awesome.

So let me ask, for anyone who doesn't know, and I'll say this in the intro, Gumroad allows anyone to basically sign up within a matter of minutes to sell stuff online. And this was like a hard problem for a while. It was hard to create a store even in the '00s, even like just a little more than 10 years ago. It was hard to create your own online store, but Gumroad, you could just sign up, put stuff for sale in a few minutes. And you did that to solve your own problem, right?

Yeah, exactly. I mean, 10 years ago, 11 years ago, in 2011, not too long ago, but you know, Stripe launched I think in 2012. Yeah, selling stuff on the internet was hard, you know, and, and this weird thing started to happen where people would build audiences on the internet. So people would become famous and not have a website. That was like a very new thing. Like you needed a website to be famous on the internet. You know, before that, uh, you know, you had a blog or a newsletter or something. And so that changed. And that's really what led to the idea for Gumroad was like, well, what happens when all these people like have audiences, they want to sell stuff to that audience and they don't have websites? Like, You know what, nothing exists for that, you know, with that assumption kind of changed. And so yeah, not too long ago, people, the internet, you know, the iPhone, I think what came out in 2007, right? So people forget, like we lived a life without all these things not too long ago.

Well, but people had been selling stuff on the internet at that point for, you know, 15, 16 years. So what did people do if they wanted to create their own online store? Like, let's say I wanted to sell flowers online. What would I have done?

Yeah, I mean, most of the time you would probably buy a server or sign up for Bluehost or some service, uh, that provided you web hosting, and then you would use WordPress or some other software to build a website on that server. And then you would use PayPal typically and embed sort of some PayPal checkout experience into your website, into your WordPress website, right? And so that was like the, the flow. You needed 3 or 4 different things, you had to glue them together.

And it's not easy, like if you're not it like all of that sounds easy, but if you're not tech savvy, it's really not that easy.

Yeah. I mean, the hard part is always like figuring out how stuff goes together, right? Like if I broke down how to go to Mars, like into its atomic pieces, like any human would be able to follow those ingredients, right? Those sort of recipe steps. The hard part is figuring out like the order and the, you know, the magnitude and, and all of that stuff. Yeah. So just piecing those things together, I think, you know, most people freak out. They get fight or flight and they flight, you know? So we try to just make it easier and simple and have everything in one place so people don't have to think about it too much.

This is another interesting thing. You basically said you took just a weekend to program up the basic Gumroad, and then after that, people were, I guess, able to create stores. People don't realize a lot of times there are still simple ideas to create. It's just nobody's done it. And it's still, you know, the internet, and now with crypto, it's still fertile territory for people to execute on ideas fairly quickly. Yeah.

I had an idea yesterday that I think you could probably build in a weekend.

What's the idea?

Yeah. My mother-in-law was in town and she was helping us set up like our first kind of garden. And basically she left and she's like, just make sure that you water these plants. You know, like she, she kind of told me the schedule for watering. Right. And I'm like, this should just be an app. Like, you should just say carrots this many days, you know, whatever. And then it should just, just like a, you know, like FarmVille, except in real life. Right. I looked it up on the App Store and like there's some app from like, you know, 2007 that sucks or something, you know, like there, you could totally make a great app. I would pay $10 a month for this thing.

And it would be like a scheduler, like to tell you when to water your plants.

Yeah. It would basically just be a plant timer, right? A watering timer.

You could use the same thing for like taking pills, for instance.

Yeah. There's so many opportunities. I think like you just have to walk around and have kind of an eye for it where in the book I call them like stub your toe moments basically. But a lot of people stub their toes in life. And then move on, right? They don't really consider the fact that like, hey, I could actually make a better version of that experience that I just had. Most people just deal with their bed or their food or their commute or their city or whatever things they deal with in their life. They just assume that they're more constant than maybe they actually are, or they feel like they don't have the skill set because they don't know how they would piece these things together, right? When I tell people that Gumroad, when I launched it, it took me a weekend. You know, they often say, well, I couldn't do that. That's, you know, you have some set of magic skills that I don't have or something. And I say, well, the code is open source on GitHub, so you can like see all the code, like it's there, right? And then they say, oh, well, I can't do that that quickly. And then I say, well, I have this 15-hour video on YouTube where I livestream myself building another website just like Gumroad, like from scratch. And so you could just follow along and yeah, it might take you 30 hours or 40 hours. But that's about how long a season of Game of Thrones is, right? Like, it's doable. People have done it. Many tens of millions of people have done, have done that. And I think there's like, people just think that it's hard, but it's just time consuming, right? For example, like, people think that learning how to play piano is very difficult, but my guess is that typing English on a laptop is far harder than playing piano, right? It's just that we do it and we do it kind of instinctively, or per se it feels instinctive, but it's not. It's a learned skill that everyone kind of had to learn. It's just everyone learns it, so we don't consider it like special, right?

I mean, I think like if you look at some of the apps that I use and that I get super excited about, I bet were programmed like in a day or two. Like Shazam, which is such an obvious idea. Oh, you hear music in a restaurant. Boy, I really love that song. What is it? And someone came along and made the app Shazam, which basically, I guess, listens to the lyrics, identifies the chords, has a database of all the music ever. And identifies the song. Probably wasn't that hard to do that app, is my guess.

Yeah, totally. And people think that there's some magic algorithm that's doing that sort of thing, but it's actually not that crazy. Like, you have a database of chords that— those chords are probably represented in a dataset that looks like numbers or letters or, or, or some hybrid combination. And then you have some basic algorithm that, you know, takes in your song, turns it into another data structure of numbers and letters, and then just does math. And comes up with a, oh, this song in our database has the least distance between the chords that they sent and the chords that we have. And so it's probably this song, right? And that's all algorithms do, which by the way is what humans do, right? Like if you were a human, this is how you would do it. You would go into a, let's say you had a library of millions of records, right? You would listen to the first one and you know, you would kind of build an algorithm in your head and you might sort the music by different, you know, genres or different sort of attributes. And so you could speed up your search to find the right song. And so that's all, like, literally all an algorithm does is just say, what would a human do, right? Like, what is artificial intelligence? I mean, it's just, it's just what would a human do, right? It's just that we're trying to make that human smarter over time.

Artificial intelligence is basically trying to mimic the behavior of human, not necessarily doing the same thing that a human's doing, but mimicking it. Like, when I'm trying to figure out what a song is, I probably don't go through a billion songs in my database in my head to figure it out. But maybe I intuitively go through that, like the algorithm shortcuts intuition.

Yeah, you, you do. I mean, the answer is you do. Yeah, exactly. The intuition is an algorithm, right? The better intuition you have, it's just the better of an algorithm that your brain has developed. But effectively, you are accessing those billion songs. That is exactly what your brain is doing. And so, yeah, there's no difference. I mean, there's no difference between the way an AI will eventually figure out how to do these things in a way that I think humans do. Is my guess when we figure it out.

Now, I was showing my daughters Gumroad because like one of my daughters makes t-shirts and I said, oh, why you could just sell it online? And she's like, oh, I don't know how to make an online store. No, just use this and in 5 seconds you can have an online store. It's so exciting that people can make stuff and then immediately sell it online. And I don't even know if a lot of people even know about Gumroad, even though you've been around for 10 years, like you have 600,000 users, but It's still a small portion of the people who would like to sell things online. Who actually makes the most money using Gumroad?

Yeah, I mean, it's mostly educators of various sorts, people who teach valuable skills, you know, in this kind of economy, people who teach people how to code, how to design, how to paint, how to draw, how to do animation, 3D assets, uh, resources, tutorials, you know, cooking related things, a lot of financial wealth management stuff.

Like I could see like a financial thing selling, but like a cooking class, will that sell? Like if I, if I made a cooking class, how to make, you know, this kind of food, you know, like a pro, will people buy that? Like, what will people buy?

I mean, it, it depends on who you are, right? I mean, ultimately if you have an audience willing to pay, right, they, they will. And so it depends on what you're, what you're making, but certainly there are people who are multimillionaires off of a cookbook, right? Um, it's just so that they had, you know, there was data or there was something in there that they really wanted, or there was something about owning the thing that they really wanted. Right. In the case of sort of like a coffee table cookbook or something like that. But I've talked to people who've made $10 million selling cookbooks, you know, like Nick Kokonas from Alinea because they have the best restaurant in the world. So people want that cookbook for a variety of reasons. And so yeah, they're, they're, I think you can really sell anything. It's just a question of building an audience that really wants that.

What's the sort of thing that has surprised you that it sold well on Gumroad?

I mean, the most surprising thing is just what people are into in terms of their fetishes, right? Like, we have a lot of— we don't have porn on the service, but we have a lot of like illustrative stuff and use same stuff on Patreon and Substack. And a big percentage of sort of digital content is sort of satisfying to these primal urges and I've just learned a lot about the things that people are into, and a lot of it has nothing to do with anything graphic, right? It's just like people are into hugging light poles and being stuck under beds and just like weird stuff that people—

wait, I don't understand. Well, for someone who likes being stuck under beds, what are they selling on Gumroad?

It's just videos of people who are pretending to be stuck under beds. It's very realistically— they're acting, right? Um, but yeah, they're basically 2-hour videos of people who are like, I'm stuck under a bed, help me, help me.

And other people buy that because like they're into that. Like it's like a sexual fetish.

I assume that it's a sexual fetish of some sort.

Yeah. What does a 2-hour video go for like that?

$20, $30. Wow. I mean, some of these people make, you know, they make six figures a year selling these sorts of these videos. You don't have to do OnlyFans. There's a lower hanging fruit. Uh, you know, if you find—

how many people do you think make a decent salary, like a livable salary, just using Gumroad?

Just using Gumroad? I mean, the thing is, once you're successful on Gumroad, you have an audience, so generally people will diversify, but— or add on top of— but I would say in the low hundreds of people probably make a full-time living on Gumroad. So probably a couple hundred, 200 to 300 people, maybe more. I'm using US numbers too. Like, I'm— I went to Thailand and I met a guy who's, you know, making $200 grand a year, but he was living in Uh, Chiang Mai, selling WordPress templates.

Wow. Okay. And again, like you say, you don't sell porn on the site, but has there ever been a problem where, you know, something you didn't want to be sold was sold on the site? Have you had issues with that?

Yeah, I mean, there's a variety of things that sort of we don't like being sold on the website, right? There are personal preferences, then there's professional preferences, and then there's like legal preferences, right? And so obviously the legal stuff is like you know, child porn or things like that. Obviously there's a process to deal with that. Then there's like the professional stuff, which is like things that are like, like Nazi comics, which are technically free speech, but like we may not want to support. And that's where most of the gray area, the deplatforming stuff that people talk about, uh, generally is about those sorts of topics. Um, and then there's personal preferences. Um, like there's things that I don't like being sold on the platform. Uh, like at one point, this is many years ago, we had someone who was selling blueprints for like how to print, uh, how to 3D print a gun. Uh, and I just emailed him and I was like, this is just too weird, like, for me. I don't know if I want to be associated— like, I don't want to, you know, end up in some article some, you know, someday. So, um, he was nice about it. But yeah, generally it's honestly not been an issue. And what's funny is that it was a huge issue when Trump was president, but I think ever since he's, he's kind of no longer on Twitter and no longer president, like, people seem to care less about getting rid of that type of content. Which is interesting.

Yeah, why do you think that is?

You know, I think it's because people are fighting a war, uh, right? They're trying to win something. In this case, it would be, you know, the president of the United States. And so generally, people start to care more about certain kinds of issues that maybe they don't care deeply about that specific issue, but it helps them fight this larger war, right? And so they may not care about, uh, climate change or the environment, or they didn't care about the environment, but now climate change gives them angle at something or another that they may care about, they all of a sudden care a lot more about this issue. Um, or NFTs, or like, you know, people are looking for ammo basically, right, in their war. Um, and I think they can find it in cases of someone selling weird content on Gumroad, whether it be people on the right who say, hey, there's like weird people selling like stuff that, you know, look like, I don't know, some weird sexual fetish stuff. We see a lot of that. That was like the core free, you know, free speech issue of the internet, like 20 years ago. Um, it's kind of all coming from that side, and now it's kind of the opposite side, right, where you have a lot of people who are saying, oh, this stuff is like racist, homophobic, sexist, xenophobe, you know, all the, all the, all those sorts of words. Um, and, and that might lead to, you know, harm of some sort. And so we need to kind of get that content off the, off the internet. Um, or, or that money may be used for bad things, or, you know, it's, it's complicated, the, the decision-making is often vague, right? They generally, they want the content gone. Uh, I think the explanation for why is a little bit fuzzier.

And for someone who wants to sell stuff on via Gumroad, and again, you could sell anything, you sell t-shirts, you could sell a course or whatever, newsletter. A, they could sign up for Gumroad, they put their items up, now they have a store. What are techniques for them to learn how to like market the stuff they're selling? Like how do they get people to the Gumroad link?

Yeah, I mean, I think in this environment I would basically recommend everyone pick a social media platform and start talking, uh, and then probably pick a community and start contributing and do those two things like in sync, right? So for me, for example, when I was getting into the tech industry, I picked Hacker News and Twitter. And so I was like contributing a lot of comments and stuff on Hacker News, and then people would follow me on Twitter, and then I would write blog posts and put them on Hacker News and put them on Twitter. And there was this nice symbiotic thing, and I kind of built my following to like a few thousand people. And once you have a few thousand people, like you have the, the algorithm and the retweets and all that kind of stuff starts to, to flywheel. I think a lot of people, they go straight to social media and they're like, I don't No one's listening to me talk. And it's like, yeah, you have zero followers. Like, no one cares about you on social media. You have to go find a group of people who will have to listen to you when you're an nobody, right? Like a church, you know, like a real community of people, a physical meetup. I think a lot of people underrate these days moving. We live in this world of remote work and all these great things, and I fully embrace that sort of stuff. But I think when you're beginning your career, when you're trying to maximize your serendipity, like you're, you know, putting your body in a place to maximize those local interactions is probably a pretty big deal, right? Like if you're a musician and you're choosing not to move to LA, that's an active, you know, you should think about that, right? Um, your chances of being successful as a musician in LA probably go up, and there's some correlation, there's some causation mixed in there. But I think generally I would, I would be, you know, I would be skeptical of someone who says they really care and want to be successful and then isn't moving, right? Like, what is the statistical chance that you're in the right physical place? Um, probably pretty low, right? There's a lot of, a lot of places out there.

So your point is though, uh, also moving to the right social media platform, like, and being a part of that community. So, and, and I think people underestimate how powerful it is, but it also, it takes time. Like, you can't just—

it's a job, you know? Yeah, I mean, I think people have to think of it like a job. They have to think of it like a job that you're doing for yourself, maybe for your future self as your boss or something like that. But ultimately you are putting in 10, 20, 30 hours a week making content, you know, and that doesn't happen in some passive way. It doesn't happen when like you're going for a walk and inspiration is, you know, like, you know, trying to wait for inspiration to strike or going out for, you know, beers with your friends. Like it generally happens like when you're like in a room by yourself. Like staring at a screen, uh, churning out stuff, like, you know, producing things out of your head. Um, and that's often a very, like, painful, stressful, anxiety sort of ridden process. And so I find a lot of people who, like, struggle to become full-time creators or even go down that path, like, they're thinking of it like a hobby. Capitalism is brutal, right? Capitalism is this sport that we all play to, like, provide value more than other people can provide value, and that's how we make money. And so to think that you can do it as a hobby, it just requires a huge ego, right? Like, to be able to make money on the side to a significant scale is hard. If it was easy, you know, more people would do it.

Well, how did you get people first to use Gumroad?

I would cold email people all day, every day, right? Like 40, 60 hours a week. Like, I built the product over a weekend, right? That's the easy part. And then I had to sell the thing. And so I would basically just spend every day going on Twitter, going on Instagram, going on Reddit, just like going on the internet, finding people selling digital products online who, you know, who've done the whole process of hooking up a website and WordPress and PayPal and emailing them, right? Finding their email or contact form and saying, hey, and I would never copy paste. I would just write an email. I'd say, hey, I created this thing called Gumroad. I saw that you're selling this like cookbook recipes. You probably, I assume, email everyone manually. You know, I built this little thing that like automates it. It, you know, costs like 5%. It's about roughly the same price as PayPal. And, you know, I want to build some stuff later. So it'll do more things over time in this vein, right? And so you just do that hundreds and hundreds and hundreds of times. And like, your conversion rate is probably between 1% and 5% of people who will actually try the thing. And then, you know, make some money. And then you do that for, you know, probably 4 or 5 years until you really have like real organic momentum. I think it takes a long time for people, you know, if you think about what people do with Gumroad, like, they're betting their business, they're betting their income on Gumroad, right? Um, and there's a lot of options out there. And so, um, it's not, you know, the chance of someone like organically, you know, saying, hey, I have a problem, this problem cost me a lot of money, or would make me a lot of money if I figured it out, I'm going to go Google the answer, find Gumroad, and use it and make money. Like, that's just crazy pipeline, right? To your point, like, we have a ton of users, we're pretty successful, most people don't know who we are. It's really hard to, to to do that. And so I think sales is often like, you know, you gotta build something to sell and then you have to sell the thing. And then once you have sales, then I think marketing is a lot easier, right? Because then your marketing is mostly check out our customers, right? Check out how successful our customers are. You know, it's a lot harder to kind of market something that doesn't yet exist, in my opinion.

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You were the number 2 employee at Pinterest, right? So this must have given you a lot of, As Pinterest grew, you probably saw how that network grew, and you probably applied a lot of those principles to Gumroad. But what's the story there? How did you get to be the number 2 employee at Pinterest? How long did you stay? What did you do there?

Yeah, so I joined Pinterest in 2010. I was employee number 2. I was, I believe, 18.

You were 18 years old?

Yeah. Yeah, I was a freshman at US. So I grew up in Singapore to sort of Indian parents, and then I went to the US for college, went to USC, uh, and then started doing contract freelance work for like startups that I, you know, found on Hacker News and things. Um, I realized when I went to USC, you know, there's a sort of a freshman computer science class of about 300 people, and only one other person knew what Hacker News was. And so very quickly I realized like, holy crap, like if I want to get into startups, like USC is not the right place to be. And, and so I started doing contract work for YC startups. I went to startup school. I met with a bunch of YC founders. You know, I could design and code and build my own stuff. I had a bunch of apps in the App Store, and so I could effectively do the job, right? There's like full proof that I can do whatever job they give me without them having to even talk to me.

What apps did you have in the App Store?

Yeah, I had a few. I mean, I had an app called Taxi Law, which was like an app for Singaporeans to call cabs on their phone. I shipped that before Uber. And then I built, uh, ColorStream, which is like a color palette mixer thing on your iPhone. I built a thing called Data, which was like, allowed you to catalog like numerical data points in your life. So, you know, how many glasses of water you drank or steps a day or whatever back in the day. Um, so just stuff that's like random mini things to solve my own problem. You know, if you want to spend 20, 30 hours a week, like imagine a content creator spending 20, 30 hours a week on, you know, making TikTok videos. Like you can make an app a week, right? Like there's a lot of stuff you can build. And so I built probably 20, 30 things. You know, many things didn't work, a few did, but that gave me the confidence and the ability You know, you need both.

Was anything generating good money? Like anything generating a stream you could live on?

Oh yeah, I was financially independent like by 16 or 17 years old. I mean, nothing crazy, but like probably making like $3,000 or $4,000 a month off the iPhone app sales and other freelance I was doing on the side, doing web design and stuff. So yeah, and then so then Pinterest actually emailed me. They saw one of my apps on the front page of Hacker News. Ben, formerly now the CEO of Pinterest, sent me an email saying, hey, we're working on this thing. We don't have an iPhone app. We need one. Like every startup needed one at the time. And you seem like you can make apps. Like, would you be interested? So I, you know, I sort of started doing freelance for them and I, that sort of turned into full-time job offers, uh, from, from them and, and some other startups. And, and I picked Pinterest and joined, uh, joined them, employee number 2 in, in January of 2011. And then I was there for not too long, about 8 months or 9 months. Um, and I built Pinterest for iPhone, uh, and I also made it red. Um, those are two of the things that I did there.

Why would people use Pinterest instead of Instagram? I never really kind of figured out Pinterest.

Yeah, I mean, the biggest thing is that it's not social, right? So it's not a social network. I think a lot of people think that it's like Instagram or, uh, or Twitter or something like that. It's not about following your friends. It's really about following boards, following topics and interests. Um, and so it's really great for people who are like very functionally looking for something, right? So if you're planning a wedding or if you're decorating a house or if you need recipe organization or if you're a digital artist and you're working on the next Marvel movie and you need a mood board, right? It's a very functional product. It solves a real problem for a lot of people, 92% of which I believe are women in terms of who uses Pinterest. So it definitely has a sort of gender bias, which is interesting.

And did you, uh, if you don't mind my asking, did you make money from Pinterest?

I mean, I made my salary, but I did not vest any of the equity. So I owned, when I left, I owned about, or I was entitled to 0.75% of Pinterest, but I didn't vest any of it because I left before my cliff. I was a little stupid and immature.

And, but you started at the same time you started Gumroad so that, you know, Gumroad, you have equity and obviously it's your company.

Yeah. Yeah. My Gumroad, I don't know what the math is now, now that they both have a kind of like relatively public valuation. So what the math actually would be, but. I think my Gumroad equity would be worth more.

With Gumroad, you, again, you wrote a book about the minimalist entrepreneur. You know, there was one point where you had employees in the office, right? But you laid— yeah, you were going through, I think it was in 2013, you were going through some stuff. You had to lay off some employees. What was going on then?

Yeah, so it was 2015. So we raised our A, our Series A from Kleiner. We raised $7 million. Um, and it was really just me at the time. And so we had like 3 years of runway before we really had to kind of go knocking on the VC doors again. And so when we did that, you know, basically the resounding feedback was like, you're not growing fast enough to raise more money. And so we did a bridge with Kleiner. It was a $2 million bridge at a 4x pref, which basically for listeners who don't know, that means that we'd have to pay back $4 for every dollar invested, which basically would, you know, it's hard, took the company underwater for a while. Yeah, it was hard. Yeah. And basically, you know, kind of de facto killed the company. But we spent 9, 12 months trying to make it work, trying to get to profitability, uh, effectively try to prove the metrics out to VCs, whatnot, and weren't able to. Uh, and one lesson I have from those days is like, if you weren't able to figure it out in 3 years, like an extra 9 months is unlikely to be the secret, you know, weapon that you needed. The Hail Mary pass often doesn't work, you know. Uh, doesn't go viral either though. Um, anyway, I, uh, yeah, I had to do a round of layoffs. So we went from 20 people down to 5, and then 5 just down to me. Over the course of like 6 months or so. And then I ran the business basically by myself for like a year and a half or so, 2 years maybe, uh, from like 2015, '16 to 2017, '18.

And so what were some of the metrics then? Like, were you— so this is just you. How many users were there? Like, what were— yeah, you know, what were the revenues?

Yeah, we were doing about $2.5, I believe, million a month in volume, right? And we were taking about 5% of that or so. And so we were making, you know, a couple hundred, you We have like $100K or so a month, right? In top line, maybe a little bit more than that. Uh, but we were burning like $400K on people, right? And so we basically had to take that $400K down to zero, as close to zero as possible. Um, because that—

was that your main cost was people?

Uh, I guess that would be server costs, but yeah, I mean, everything else scales basically with revenue, right? Because everything else is going to basically get more expensive as you need more servers for more activity. You know, they're effectively all energy based, right? Uh, and so anything to do with people, it's really just people, right? Uh, there's maybe $50 a month for Notion or $20 a month for Figma or whatever. But generally the vast majority of our OpEx, like for example, I can tell you now our OpEx is about $275,000 or something like that. And probably like $255,000 of that are, you know, people, right? Um, like a huge percent. Um, and that's kind of why layoffs suck is because everyone kind of knows like what happens in a layoff, right? Is like the the number one cost structure of a business that is not contributing to revenue, gotta go. And that's R&D, that's basically all of the creative people. But I like to think of it like the people who always do well are the people who are always necessary, right? And so the support people are going to be just as needed pre and post, whereas the engineers actually go from super valuable to not valuable at all, which I think is kind of an interesting kind of pro and con of being one, one versus the other.

And so, so you laid off all these people, you're kind of like treading water, um, The site was, was growing, I assume. And when did you know, okay, it was time to rehire?

Yeah. Well, basically what happened was about 2 years later, Kleiner sends me an email. Actually, I sent them an email initially saying, hey, you know, Gumroad is just an update. You know, this is what's happening. I'm running the business. It's, it's like breakeven. Like it'll keep doing its thing. We have, you know, the bridge and all this money that we raised before that. Right. So we have $16 million. In preferences that we have to pay off eventually for me to, and, and anyone else to see a dollar. And then, you know, on top of that, grow beyond that. And, you know, the business was doing $1 million, $2 million a year, right? So not really close to that. And they said, we're not interested. And then 6 months later, randomly, they reply back and say, hey, we actually are interested. We'd love to write off the whole investment that we made for $1. Effectively, you can buy back our position on the bridge and the A for $1.

Oh my gosh. So 16 million in preferences you could buy back for a dollar.

Yeah. I mean, they weren't all of it, but they were like 14 of it.

Yeah.

So they basically, they, they wrote it off and, uh, I don't know why exactly, if they're writing, you know, cleaning up their books or whatever, but I wasn't one to complain. They, they did an amazing thing and they actually, you know, without that, I think Gumroad, who knows, right? Like I would still just be, you know, treading water today. Who knows?

But like, because just because just so people understand, like you would have had to sell the company. I don't know what the valuation was, the Kleiner Did their—

yeah, the A was $28 million, and so the bridge around $28 million too.

Yeah. So you would have had to sell for over $100 million for you, because of the 4x preference, for you to even see $1 from this company?

Yeah, basic— I mean, basically there's— there was no sight. I mean, there was no real— with, with, with the preferences, there was no real sight. Um, yeah, no way.

What do you mean no sight? There was no—

no, no, like, yeah, like no line of sight to an exit that would have paid off the preferences, the 4x, and returned any real, you know, made me—

and you're servicing like 100,000 customers or so. Like, was this— so you didn't want to shut the thing down, obviously. Was this depressing?

Yeah, some people would use that word, you know. I mean, I think it was definitely— it was weird because I felt like I didn't know what to do, right? I was, I was like— and it was hard to— like, I wasn't complaining, right? I was like, sort of like, you know, I was able to run this business. It was able— you know, I didn't have to be in a specific place at a certain time, so I could travel and kind of take a break from life and And, you know, I was working, you know, for 5 years pretty hard before that. And so I kind of traveled a bit and, and I just, yeah, I was, I just, but it was, it was definitely like I couldn't do anything else. Right. That was like difficult. And so I probably would have shut the business down or sold it for like, you know, a few million bucks or something at some point.

Um, without that, were you getting offers, but they, but they couldn't work it out?

Yeah. I mean, we talked to, you know, Stripe. And, uh, you know, Kickstarter made an offer and they were low, right? It was not saying that like they're amazing offers or anything, but they were like in the low millions, I believe. Um, but it just was like, you know, Kleiner's going to want this and it's just not, it wasn't really worth the conversation. Uh, and so really like what changed everything was when Kleiner wrote it off. And then all of a sudden our preference stack went from 16, including the 4X down to 2. And then 2, you know, when we were doing a million or 2 million in revenue, maybe like $300,000 or $400,000 in profit or something like that at that time. All of a sudden it's like, oh yeah, I could, you know, I could turn this into like a, you know, $3 or $4 million revenue business, sell it, you know, in 3 or 4 years and then eventually make, you know, $4 or $5 million bucks or whatever and then do my next thing. And like, I at least saw an outcome. Like, it wasn't like some amazing outcome, but it at least gave me a sense of like, oh, this is a target, you know, a light at the end of the tunnel that I can move toward and is happening, right? Like the cool thing about this whole story is that I didn't actually change anything, right? Like I think that's one of the interesting things about this story and why I think it resonated with a lot of people is because it's kind of like an emotional rollercoaster, right? In terms of like, you're on paper, like, you know, you, you, I was like, you know, 17 in high school in Singapore and then I had a, you know, $8 million Series A and C from Kleiner Perkins as solo founder, super young. And then I like burned it all and like almost failed. And then I like,, you know, had a great business and then COVID happened. So now it's kind of up again and who knows what's going to happen next. Right. But ultimately, like, if you're an alien looking at this story, it's just like, I was staring in front of my, you know, I was like at my laptop, like just, you know, like doing this, right. And like, which I kind of like a lot. Like, I think it kind of, I don't know, I like to think that it keeps me humble in the sense that like a lot of the games that we get up to in the tech industry are made up. They're games, right? People are rich on paper and then they're poor on paper and everyone gets super happy and super sad. And it's kind of nice to know, like, actually that's all kind of made up. Like, did I go for a walk this morning is like the number one correlation with like how happy I am, right? Everything else is kind of secondary to that.

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So 2017, you start generating a profit, you got rid of all these preferences, you did crowdfunding where you raised $5 million in a day. I don't know what valuation that was. And then I guess, have you raised money since then?

Yeah, just, just that and a little bit on top of that. We raised, so we ended up raising about 7 or 8 at like 100 pre.

Hundred pre. So now you're going for it. Like you want to, you know, you want a big outcome.

I mean, we'll see what happens. I mean, we're at $12 million in revenue. So I think, you know, a 10x multiple is like a pretty great business or a healthy, you know, it's, it's a healthy business. I think it's worth roughly about $100 million or so, uh, given the market right now. And we'll see what happens. I mean, for me, I'm going to keep running this thing. I have fun doing it. I'm experimenting with the model, with the way that we work and, you know, crowdfunding and. At some point I would like to issue dividends to shareholders. That's when I will consider my sort of the Gumroad journey done. Like I think until there are dividends to investors, like I don't consider— I sort of want to get there now. Like that's my light at the end of the tunnel that I'm excited about. And I think there's a huge opportunity to kind of figure that out because I think right now the path is yeah, go IPO, right? But like we're doing $12 million in revenue. Like, are we going to IPO? Is that possible? Can we? Uh, we can, you know, we can go talk to NASDAQ and spend $250,000 a year being a public company. But is there a way to do, you know, to do dividends privately with the 7,000 to 8,000 investors that we have? Can we raise more money privately and just add them into this, this cycle? And so I think there's a lot of experimentation that we'll do, but I'll keep—

I offer more services. I mean, could you, could you, I mean, is there ways to grow bigger by, I mean, right, you have the kind of core service, which is still have a lot of people to create an online store within seconds. Uh, I don't, I forget. Do you have. Newsletter subscriptions like Substack?

We do have newsletters, which we shipped a couple years ago, which are doing good. But yeah, basically there's two efforts that we're making. It's less about growth and more about like, I want to just do more stuff. I get bored pretty easily, and so we're building a website builder. And so we're going to build a free website builder, kind of like Notion. Uh, so Gumroad is going to kind of broaden from just like being a sort of sales page builder to like a whole website builder. And so that's kind of an angle that we'll see if we can compete with like the, you know, Wix and and those sorts of folks, Squarespace, et cetera. And then we're also building a completely new product. So that new product is called Flexile, F-L-E-X-I-L-E.com, basically means flexible. Um, but that's like basically a way to, uh, take the way that we work and how we do contractor invoicing, onboarding payments, tax compliance. We, you know, we have a company that's like 40 contractors and no employees. And so we basically built a service that kind of does that sort of gusto for contractors. And so we'll see, you know, I'm excited about like using the base that we have with Gumroad. Like Gumroad will probably always be profitable. It'll always sustain a team of 20, 30, 40, 50 amazing, amazing engineers and designers and support people. And if Gumroad doesn't keep growing like this, like, or if it does, but it doesn't actually require a ton of, you know, of maintenance, um, which is the beauty of software, then like I can go build new products. And so I think we're going to try this one out, see how it does. Uh, you know, we're kind of doing the same thing. We're solving our own problem. We already use it internally and we'll kind of try to sell it by the end of the year, see how people resonate with it. We might keep that under Gumroad. We might spin it out and raise crowdfunding. Who knows, like the direction we take with it. Um, but yeah, I try not to think too far in advance, uh, cause I find that like I tried that in 2019 and then COVID happened and yeah, planning sucks.

No one in like 2016 when asked like, where do you see yourself in 5 years? Said, well, I'm going to be. Locked in my room all day wearing a mask and trying to enjoy life that way. No one said that. So it's harder— it's hard to predict things. But, uh, how did you do— like, even though you built the site in the weekend, how did you deal with relatively complicated issues like, you know, different sales taxes in every state, different sales taxes in every country, potential for fraud, uh, and chargebacks? Like, how did you deal with like these kind of— like, chargeback— like, like, let's say somebody, um, bought a ton of an item And then suddenly that retailer who's on your platform, uh, gets all these chargebacks. You don't know where there's fraud and the credit card companies get upset. Like, how did you deal with all this stuff?

Yeah. I mean, you know, you kind of just deal with it as it happens. There's this, I think of it like, uh, you know, building a car where there's a great book about sort of, I think Hyundai or something. And basically the way you build a car is you build one car and then you figure it out how to build two cars and, you you kind of just build a factory as you need it, you know? Um, no, what— there's no like school you can go to for like how to build a car factory, right? Tesla did their own stuff and had to figure out their own way. And so I kind of think of it like that, where you just have to start, you know? And like things like chargebacks, things like disputes, things like sales tax, even today, you know, or now we have to deal with these problems where like the EU will say, hey, all of a sudden, you know, if you're making this, you know, selling this product in this place, and you know, you have to deal with this. And then there's like Russian sanctions because of the war and like it's just a cost and it's getting worse, right? It's not like every country is getting easier to deal with. Every country is getting more and more sort of, uh, you know, their burden is increasing. And so it just, it's just kind of, you start the company, you, you, you commit to it. You have like a Slack log of every transaction that happens and you have a lot of anxiety for a few years as you just hope that you are smarter than the fraudsters, right? Because basically fraud is just cat and mouse, right? You just have to be smarter than the enemy and luckily you're on defense, so you have a little bit more maybe home court advantage in terms of like, you, you know what data you're using. They don't know what data you're using, but it's just, yeah, it's kind of scary to be honest. I mean, like you, you hire fast and well and you hope that you are able to brace any, but you, you will get hit. I mean, I remember when I was talking, I won't name the company, but I was talking to another creator economy company and they were, they, I don't think they hired as well as we had. And so they were struggling with, they were doing like. Probably the same scale, about $2.5 million in volume. And they were doing about— I think they were losing about $50,000 to $150,000 a month in just fraud. Wow. And so, yeah, it's like if you're not venture-backed, you're going to die, right? I mean, that's like $50,000 a month is a huge amount of money that fraudsters are just taking out of your bottom line. But every business again has to deal with this, right? You start a grocery store, about 3 to 4% of your margin goes just to shoplifting, basically. Um, And theft, et cetera. So, you know, this is a problem. Anytime you sell stuff or help people sell stuff, like, you know, people will try to manipulate that, um, to make money. Right. It's kind of like part of capitalism, I think.

You know, I would think that, you know, you've been doing this for almost 10 years or over 10 years and, you know, you raise money at $100 million pre. I would think at some point I would want to move on. Like, why didn't you just sell the company for like $25 million, say? Because again, yeah, your preferences were got, you got rid of them. You probably, you probably were getting offers. You were doing decently. Why don't you just cash out?

Yeah.

You had most of the equity.

Yeah. I mean, to be honest, I don't know what I would do with like $10, $20 million in my bank account. Like, I just don't like money. I think money scares me. And so I try to deploy that capital, like, as soon as I get it. Every time I, you know, a startup investment returns like $100 grand or more, I just reinvest it right back into startups. And so I just don't like to have any— I like to live in my head. Like, I don't like— I like to like have nothing that I own. And so. You know, Gumroad, like if I sold Gumroad, then I would need to start a new company, you know, like I would need to fill the time somehow and I'd start Flexile, right? So now I can have my cake and eat it too, where I can keep running Gumroad. Gumroad's gonna grow hopefully 10+ percent a month, or sorry, a year. Um, you know, and that's better than basically any market could perform for me, right? And so effectively I have like 80, 90% of my net worth in a single asset, but it's growing 10, 20%. I can control it. I can hire engineers that can create value. That's far better than any other investment that I, that I feel like I could make. Um, and so, yeah, I just, I just find that.

Do you feel government services could become a commodity? Like essentially, let's say, let's say Google makes an extension where you just have to fill out a few things, upload some pictures, and you could start selling in a few seconds.

I mean, I think it's possible, right? I mean, I do, I do think, let's say we're doing about $200 million in GMV a year. We're making about $12 million in revenue off that. Let's say we're making $3 or $4 million in profit if we wanted to, probably about that much off that, right? So that's $3 or $4 million. Cash flow, right? So you can value the business purely based on that. That could certainly go down, right? Um, it could also go up, I think, in equal measure. And I think the beauty of hiring engineers and designers is you can always react, you can always build new things. So I think, I think it's much more likely that, for example, Flexile gets to $10 million or $12 million in revenue and Outrise $24 million total than like we zero out. Um, but even in like a death case scenario, right, if you model out, okay, what, let's, let's say like Stripe launches Gumroad, right? Like a perfect Gumroad clone at Stripe. Everyone loves it. Um, there's enough volume on Gumroad that I really believe we could like probably sustain on, you know, we might get cut in half or something, right? In an extreme case, but then that's still $100 million a year. That's still $6 million in revenue. That's still enough to do whatever I want with, right? And so I don't know. I just feel like I, what I value is I value my time and happiness. Uh, and I, and Gumroad allows me to do whatever the hell I want with my time and my location.

I'm not accountable to anybody.

Um, I do public board meetings and I'm open and transparent. So I hope that people, you know, give me feedback so I can improve as a CEO. And as a— but I believe I have a sort of fiduciary responsibility to this, you know, $100 million valuation. I want to grow that to $200, $250. I would love for Gumroad to, you know, be a public company, you know, worth a billion dollars. But I'm in no rush, right? Like if this takes 10 years from now, I'm okay with that. I think most, most startups die by suicide, right? Most startups die because the founders run out of energy. And if you look at the trillion-dollar companies, they took 20, 30, 40 years to get to where they are today. Apple is not a young company. Amazon is not a young company. Google is not a young company.

What makes you happy outside of Gumroad? What are the things you do that make you happy?

Walking in the sun, talking to friends and family, playing with my cats, reading books, thinking about books.

You invest though. Like you, you're an investor, I noticed, in, uh, Clubhouse, for instance. So you, you actively invest. What's going on with Clubhouse? They like shot up to— seemed like it was going to be the next billion-dollar huge social media, and then now nobody talks about it.

Yeah, I mean, I think Clubhouse sort of had their Foursquare moment, except instead of South by Southwest, they had like a year or more of COVID right, where they just had the perfect environment for them to succeed. Uh, and now people learn that they like hanging out with people in person more than they like talking to people on the phone. And so we'll see what they end up doing over the long term. I still believe in them strongly because they have such an amazing product and such an amazing team, and I love Paul, um, and Rohan. But yeah, they definitely kind of, you know, hit their phenotypical sort of genetic potential very early, um, and now are now kind of going to spend years trying to get back to that. But if they succeed, then they'll be a multi-billion dollar company again.

What do you look for in a private investment? Like Clubhouse was very speculative, for instance. Like nobody knew for sure whether an audio-based social network would succeed. It was like an interesting idea. So, so you, so, so it's more speculative than the average angel investment, I would say.

Yeah. I mean, I, I, I invest mostly for like to mitigate my psychological FOMO, right? So like, like imagine 10, 20, 30 years from now. I'm 40, 50, 60 years old and I look back and say, oh wow, I could have been part of this journey to lead, you know, that created the next Facebook, the Amazon, Google, and I wasn't able to learn as much as I would have been able to and make friends with these kinds of people. And so it's really just a FOMO mitigation technique. So when I talk to somebody, my angel investment is purely like, well, does this have a chance at being generational? And that is mostly a person decision because it's like, how, like, is this personal generational, right? Like, does this person have that quality? And Luckily, I was employee number 2 at Pinterest, so I saw it in Ben. I was one of the first users of Stripe, so I saw it in John. You know, I've seen a few examples of this. And so I've seen people go from people who didn't, you know, weren't super well known to people who are running multibillion-dollar companies. And so that's kind of what I look for, right? It's like, do you fit? Could I imagine you in a lineup with these people in certain attributes? Right. Um, and the hard part is knowing which attributes do you want to pattern match against, right? Um, and that kind of gets into this whole conversation around diversity, equity, inclusion, and bias and all these sorts of things. But ultimately you are pattern matching, right? It's just, I just believe that I have a better algorithm because I have better data because I've been there, done that, you know, a little bit more than I think some of my peers have.

You know, also you see a lot of entrepreneurs because of Gumroad, because Gumroad allows entrepreneurs to sell their goods. Like, have you— have any of those entrepreneurs gone on to like, you know, huge success out of the— I mean, you have 600,000 users right now.

Yeah, totally. I mean, some of them profoundly successful. Um, like for example, Lambda School or the Bloom Institute of Technology. Austin Allred was— had sold a book on Gumroad before. Um, there's a guy, Kyle Webster, who— he's responsible for all the brushes in Photoshop. Um, he started out, um, selling brushes, you know, Photoshop. Brushpack on Gumroad, and now he works for Adobe. Um, so there's a, there's a lot of, you know, Nathan Barry from ConvertKit. He started off selling ebooks. I mean, he was doing stuff before that freelance and stuff, but he started, he sold a book on Gumroad. Uh, one of our first kind of success stories. Now he has ConvertKit, which I don't know, they're like 26, 30-something millionaire. Um, so there, there's a lot of those examples. Um, people who, you know, and I, I assume that the vast majority of people, I have no idea. Like every once in a while I meet up with a founder who's like, oh yeah, like I sold an ebook or I did this, or. You know, just like when I started, like the, you know, as a kid in Singapore, you know, I wanted to make some money on the internet. So I wanted to sell something and what I had was my time. And so I learned a skill, which was web design so I could make, you know, some money on the internet so I could buy Xbox games, you know? Um, and so that's really like Gumroad, like, and maybe that's why I still run Gumroad today. I could sell it, someone else could do it. I could make some money, but like I get to control that experience for like Maybe more people, right? And maybe I believe I can do that better than others may be able to.

Well, you certainly had a unique path and it's a great company that hundreds of thousands of people use to sell their stuff. And like I said, I think the opportunity is still there because many people still don't know how to sell their things online. They don't know Gumroad exists. Yeah.

It's still early days.

Yeah. It's still early days really where people are still selling their t-shirts at the beach instead of going online and creating an online store in a few minutes. So Sahil, thank you so much for coming on the podcast. Is there any social media that you want people to follow you on?

Yeah, the best one is my Twitter, which is @shlshl.

Yeah. How'd you get a 3-letter Twitter handle?

A former Gumroad employee of mine used to work at Twitter, so he was able to help out with that.

Excellent. Well, thanks so much, Sahil. Thanks for coming on the podcast.

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