Sahil Lavingia updates Gumroad's Q2 2022 progress: a brand redesign, shift toward website-builder tools, and new internal software Flexile for contractor management. He shares financial metrics, discusses the creator economy outlook, and offers two fundraising options for existing investors.
Chapters
So welcome everybody to the June 2022 update. It's been a little while. I think the last one was in January, um, or actually no, I think we might have done one in March. So you know, the goal is to kind of every 3 to 6 months, um, provide an update when we have interesting things to talk about. Uh, and we do, we do have a lot of interesting things to talk about. The market has kind of done its own crazy thing. We've been working on a bunch of stuff internally, um, and we will probably— the goal is to kind of do another one probably in October So hopefully all the stuff that we talk about will be sort of live and shipped by then. But yeah, I mean, the first sort of big update, I guess, is that like when everyone invested in Govern in 2021, this was the logo. It had been the logo for, you know, since 2012 or something like that. I worked on it. It's like this weird pastel thing. It worked pretty nicely. I don't think anyone was like heavily criticizing it, but I thought it could be a lot better. And so we completely redesigned our brand. This was kind of, had been our plan. And when we did the crowdfunder, it was, I thought, a good idea to kind of make that the first kind of big project that we started on. And so we launched this last year. I think it's way better, way cleaner, and just way more memorable. It works better in print, you know, the icon scale at small sizes. Like it's just far more professional. And it was a good opportunity to basically like rebuild Gumroad almost, you know, literally from the kind of the ground up. Like we kind of started from scratch, CSS, HTML, like our design system is completely new. So we deleted something like 75% of the CSS. It was a pretty awesome move because I think it just allows us to move a lot faster. We also, Gumroad is a relatively old company and from 2015 to 2018, 2, 3 years, we didn't really even have a strong, we had a strong team, but a very small strong team, right? Mostly trying to keep the lights on. Obviously COVID, we accelerated past that and things are looking a lot better for Gumroad, but We have sort of those 2 to 3 years of mostly front-end debt that we had to kind of have, you know, have been working out of. And so the, the sort of design system was like a good opportunity to say, okay, like where do we want to be? And how do we actually get there? And so I'm gonna talk a little bit about the numbers, talk about some of the stuff that we shipped and then talk about a totally new product that we're working on. And then, and then of course kind of fundraise options. Obviously the market has kind of changed. Significantly. So I don't think it makes sense to do another public fundraise via Republic, but there are a couple options that I'll share on how, if you want to double down on Gumroad, how I would suggest you do so. So yeah, yearly GMV has gone up and to the right. 2022 is— the first quarter was roughly flat, but this is pretty kind of expected. I think what's going to be really indicative for us is going to be the second half of this year, which starts in a month. Generally, like, we see most of the growth happen the second half, especially the last quarter. This is pretty typical if you look at kind of Shopify numbers, etc. Shopify has also kind of seen like a plateauing. COVID was kind of crazy. We're starting to see this kind of plateau, and then hopefully things kind of return to like our sort of prior trajectory, which, you know, pre-COVID was about 20 to 30% year-over-year growth. And so I think we should be able to get back there with Gumroad. And sort of notably, we raised a $5 million round at a $100 million pre-money valuation in March, actually $6, because we did $1 million from a couple other folks. And then we raised a little bit more money via private fundraise after that at a $250 million valuation, which I'll talk a little bit about at the end. But more importantly, like numbers are cool, but what I get excited about is actually improving the product quality. And so this is what Gumroad looked like roughly when we did the fundraise, though I think we had a horizontal nav. We switched to a vertical nav vertical nav, and now this is kind of what Gumroad looks like. And so we took that brand aesthetic and we kind of applied it everywhere and we can kind of continue to do so. We took the, you know, we applied it to the product pages there and the profile pages, they're a lot stronger, they're a lot more flexible. So we're gonna be able to do a lot more customization to these pages going forward. You're gonna be able to add sections, you're gonna be able to add pages. And the goal is over the next year or so that Gumroad evolves much more into a website builder. Versus more of just like a digital products selling tool. And there's a bunch of things that we need to do in order to like sort of make that transition over time, but we're starting with sort of two big things now, right? One is switching to what we call a dynamic content editor. So right now, if you're familiar, actually I'll go into that second. The second thing is add to cart, right? So both of these things I think are sort of prerequisites to building like a much more fully sort of extensible website builder. And all of these things should work for course creators, it should work for everyone that uses Gumroad today, but it should be a lot more flexible in the types of things you should be able to do. And it should really kind of hopefully grow and extend Gumroad beyond just a place where people come to upload and sell digital files, which are kind of too skeuomorphic these days, kind of like the download button. Like, what does that mean anymore? Um, and should set us up for, I think, like a much more interesting future in which people come to Gumroad and can kind of create these content experiences and then attach price tags to them. Uh, so what does that kind of transition look like? So this is what Gumroad looks like, uh, what we're working on now, which is adding a new content tab to every single product page. So currently content is kind of a subsection of product, right? It's, it's sort of not considered as fundamental as, as the rest of, of the, of the, of the UI. Uh, and so we're breaking that out into a separate page. We're giving it its own, just like the product page, marketing page has a WYSIWYG, sort of what you see is what you get editor. You'll get that, uh, here as well. So you'll be able to like, just, you know, give you more space to kind of actually preview what folks are going to get. Um, but that really just leads the way into this big change, which is a huge, I mean, this is like a sort of fundamental, I think Gumroad, you know, it makes sense. I think that we have a totally new logo and everything. Because this is like a completely different, I think, way of onboarding and getting started with Gumroad, where instead of saying, hey, I'm selling a course, I'm gonna upload, you know, 5 MP4s and it's gonna cost $50. What you're actually gonna do is you're gonna build a course within Gumroad, just like, you know, if you're familiar with Notion or something else like that, you're gonna actually build the sort of experience within. And if you wanna upload files and videos and all of these sorts of things, you will do that just by dragging and dropping Um, and everything will still work. You'll still be able to do all the things that you were able to do before, um, but it's going to live within this— these pages, right? And it's going to be a lot easier, uh, once we do this to say, hey, if you bought this product, you could get access to these sorts of pages, um, and, and, you know, we'll automatically build these sections on the side, and, and we'll be able to track completion and all of these sorts of things that you— when you download, you kind of like are done with Gumroad, right? And I think the way that everything seems to be headed is like No, this is all kind of living in the web. It's all kind of freeform and dynamic. And I've, generally with files, one thing that we've seen is that once you upload, once you create a product on Gumroad, you're kind of done. You can of course go in and upload, change the files, edit, et cetera, and many people do, but it's kind of a pain, right? Because you basically, let's say you upload a video and you wanna change something, you have to kind of like download the video, change the video, save the video, export the video, re-upload the video, right? At creating, allowing more and more of that to actually live within Gumroad where you can just go in and just update it and there's no save button, right? It just works. I think it's gonna just level up the kind of like the ability of, of the content offerings that people are able, going to be able to provide, which I'm pretty excited about. The other big change is add to cart. And so we're gonna add add to cart into Gumroad. We had like a light version of this, but we're really building it out. It just turns out that the things that people really need for us to kind of keep scaling and keep supporting larger and larger creators as they scale themselves is just a lot more functionality, right? So you're gonna see something that looks much more dynamic and allows for things like discount code application, quantity, you know, changing of tiers, all of these sorts of things. The other thing that's sort of changing on a macro level is all of these Countries and the EU are sort of getting, you know, having more and more sort of guidelines, constraints, restrictions around what you can show, privacy, tax, taxation, things like that. And so we kind of need a place where we can put all of this. The other unlock that this gets is once we move, once we have a dedicated page that contains checkout, we can get kind of get rid of all of this stuff from the actual product pages, which should make them a lot faster. Uh, and that should also allow for more analytics. One of the big kind of constraints with Gumroad is because everything lives on a certain page for sort of security, we don't allow for people to say, hey, we want to track like what everyone's doing on this page because it means you might be able to like see what, you know, information they're typing in their email, right? Or credit card, uh, or things like that, right? And so having this kind of will be a Gumroad sort of page that we kind of control and won't have analytics, or at least it's sort of filtered through us. And then the product page will, it will, that will allow for, you know, once we do this, that flexibility that we, you know, we're currently working on with the content that you get after you purchase, I can imagine bringing that actually into the, into the front end. So you can imagine like kind of the Gumroad product experience ends up being almost like two WYSIWYG editors with like a checkout page in the middle, right? Where you have like a super customizable marketing page for your product. You could, you know, you should be able to attach a custom domain to it. Then when you hit checkout, you're taken to this page, which you'll be able to customize, but it'll be more kind of standardized. Kind of similar to Shopify or something like that. And then when you hit buy and you're done, you're kind of taken to whatever you paid for, right? And I think that's just gonna be a way better, more native kind of experience. So that's kind of like the core sort of shifts that we're making at Gumroad. Oh yeah, gifting. The other huge change is we've been doubling down on our marketplace, which we call Gumroad Discover, which has been going quite well. And this is a feature that people have been asking us forever. And I think it's a great way to kind of empower creators, empower affiliates, and hopefully make more revenue for Gumroad. The way it works, basically the way it currently works is every affiliate on Gumroad has to kind of have a direct relationship with every creator on Gumroad, right? So for example, let's say I know Daniel Vassallo, I'm like, "Hey, your thing is awesome. I have an email newsletter. Can I tell people about it?" And Dan could say, "Here's an affiliate code. You'll get, let's say 10% of every sale or something like that." And this is all super custom. It all happens like one-on-one. And I think that was a great way to get started, test the model, make sure there's no spam and scams and all that. That kind of stuff. We feel pretty good about it and it's been live for 3 or 4 years. I think the next step is to do something that affiliates really want, which is to say they want to be able to go to— and creators want this too, but they want to be able to go to creators and say, "Hey, can I be an affiliate for you?" Creators should be able to basically say, "Hey, anyone who wants to be an affiliate for me should be able to." Daniel should not have to approve every single person. So that's a really big shift that we're making is that people obviously, it's going to be opt-in,, but you'll be able to say, hey, anyone who wants to be an affiliate for me can, and they'll make 10% of every sale automatically. And so this should allow, in theory, thousands, tens of thousands of products that are already doing really well to become potentially a new revenue stream for people who have audiences, but maybe don't have products that they want to sell of their own, or they feel like, hey, this product already exists and it's amazing. I'd rather just tell people about that. I think this could be pretty cool. I could also imagine it, so maybe getting ahead of myself a little bit too much, but if you kind of combine this with like the new profile customization that's gonna be able to happen and the new add to cart experience, I could totally see something like if you go to, you know, on this page you might have like more like this, right? That's pretty common. You might surface your own products, you might be using it for upsells, but I totally think creators should be able to say, hey, well actually I want to, almost like a blog roll back in the day where you recommend other people's content. And then if people choose to add that to their cart and check out, then you can get a commission on that, right? So I think that, that can be pretty awesome, pretty awesome too. Okay, I think that was a lot of talking about what I want to do at Gumroad. I wanna make sure that before I talk about the new thing that we're working on, if anyone has any questions, please type 'em into the chat and I will answer them. But if not, I'm just gonna move on. No questions. Awesome. All right, let's talk about, uh, about what we're working on next. So you might be familiar, in 2019 I published a blog post called Reflecting on My Failure to Build a Billion Dollar Company, uh, and one line— this is actually the line that like has kind of been reshared the most, um, which is 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. I think people who saw a bunch of markups during 2020, 2021 and have been hit by the market, see this, where there's stuff that you can do. Obviously, you should build a product and get the product market fit and these things are all super important. But ultimately, COVID is going to generate a ton of growth for Gumroad. When people are going back, it's going to plateau. It's going to normalize at some rate. A lot of these things are outside of your control. And the best thing to do if you really want to grow is to actually pick a big market, right? Like you, you go find a market that's larger and go solve kind of a new, a new problem for them. And oh, Pratham has a question. So let me answer that and then I'll, I'll, I'll, I'll talk about the new thing. Pratham asks, why does it need to scale as a website builder? Does this mean losing the niche? Yeah, certainly we don't need to. And the way that I think about it is everything that we ship should be Pareto superior, right? So anything that you were able to do previously with Gumroad should not be any worse, but there should be new, better things you should be able to do. Right. Um, and so I just think it's better, frankly, I think it's better for everybody. Uh, I think, I think the way that, you know, for example, if you want to upload 5 MP3s like you did before to sell, let's say, uh, uh, you know, an, uh, an audiobook or an audio course, um, you can still do that, right? It's just now you can, you can add text before, after, in the middle, you can add video, you, you have a more freeform layout. Um, and it's just something that, you know, Creators ask us, right? Like the way that we generally ship stuff is we ask our creators, both new creators, zero to one creators, and also our top 200 creators who are responsible for a good chunk of the total GMV. And we just say, hey, you know, what, what, what should we build? Uh, I did this, uh, you know, to our top 200 creators. We got 100 people saying, these are the things that, you know, I'd love if you built. And then we just, you know, kind of prioritize by, by, by that. And, uh, people just really want this. Like they, they sort of use Gumroad for certain things, then they use other things for other things., and it would be cool if they could do more of this in one place, right? Um, and if you're running your business on Gumroad, it's just easier to kind of add more things to the place where you already deal with payments, right? So one, for example, uh, one cool thing is that the website builder will be completely free. Most of these other platforms, Squarespace, et cetera, et cetera, like they basically all charge, you know, some sort of monthly fee, right? Because we're, we did the commerce stuff first, we, we kind of have a model that works. Hosting is not that expensive. And so all of this stuff will effectively be free and subsidized by our sort of percentage rate. So yeah, and I think Gumroad has been amazing at this sort of zero-to-one stage. I think considering it the kind of the on-ramp to the creator economy, we do a really good job, I think, with getting people started. I actually think the dynamic content editor is actually going to make it even easier, hopefully, for people to get started. You no longer even have to upload anything, you can just type. So that should help a lot. But I think allowing people to customize more and more stuff is gonna retain people as they scale and get farther along. They should be able to stay on Gumroad versus say, hey, I can't customize the layout enough, so I have to leave. That's less than ideal. So I think that should help. Oh, Dimitri says, what is your take on the creator economy in a recessionary environment and in post-COVID world? I mean, pre-COVID, we were growing about 20, 30%, 40, I guess 40% was 2019. Which is still great. I mean, 40% year over year growth was considered phenomenal for a high-growth tech startup. COVID messed with the numbers for everybody for a couple years, and obviously the Fed lowering interest rates and stuff. It'll be interesting. I don't know. I personally think the creator economy is a 100-year trend. I think it's this idea that before Gumroad, there was WordPress, and before WordPress, there was Blogspot. There's a consistent trend of people should be able to reach and sell things to the people directly that they know and love and talk to them directly without intermediaries. I think long-term, this probably ends up in Web3 crypto land, 20 years from now or something like that. My suspicion is that even Gumroad and stuff have completely adopted to become almost protocols or something like this. But really hard to say what that looks like. I think that people will continue to to become more independent, more entrepreneurial, more people will start businesses, online businesses, software businesses as it gets easier and easier to do so. There's certainly a lot of supply chain issues that are making it harder to do so right now. So Shopify, for example, they do mostly physical products. My guess is they're really struggling because a lot of new small businesses, they really rely on that pipeline. Digital content, I would love to think that Gumroad is "recession-proof," because I would love to think, and actually the new product too, but Gumroad is all about flexibility. Ability. It's all about being able to make a supplemental income stream. So I would like to think that in places where people need to make more money, they prioritize that. Gumroad should do well. Actually, this was my thesis when Gumroad was not doing that well in 2015. We got some acquisition offers to sell, and the reason I said, "I'm just going to try to keep running this thing forever," is effectively because I was like, "Well, at some point there's going to be a recession." This is 10 years into a bull run or 8 years into a bull run that continued for another 5, 6 years. But at some point, there's going to be a recession. And at that point, people will really need stuff like this, and then Gumroad is going to do really better. And COVID showed that in a weird way, because it looked like a recession was going to happen and then didn't. And maybe that's what we're seeing now, is that just happening 2 years later or something. But that's been the thesis for me for the last 7, 8 years. And I think we'll perpetually be the case. I'm a big believer in the concept of antifragility, which basically means in good markets, in bad markets, in any market, you want to build something that does well. And I think Gumroad is a good example of that. For example, the fact that I was able to run it myself, it's super self-serve software, means that if we ever need to get into a position where we have to be super high— For example, if we want to be super free cash flow positive, Gumroad could get back to that tomorrow because we ran that exercise and we have a playbook on doing that. And we would very quickly get to basically turning almost all of our gross profit into net, which would be about, I think the math on that is about, again, it's unaudited, but I think the math on that was, according to our internal dashboard, internal finances would be about $3.6 million a year, overnight. So certainly possible to do. But again, that would be basically saying that it's better to do that than to invest in these things that I just talked about. And for me, it's like, no, we should invest in those things because I think that that will improve the product whenever it's needed. If we can make those bets, I think we should generally do that. And I think the other thing to mention is a lot of this depends on investors. I'm going to keep building, that doesn't really matter to me, but what ends up mattering is what does the— It depends on who gets the money. Facebook and other companies can only hire folks if they have that ability. And so really the market will say, hey, should you be doing R&D or should you be focusing on on free cash flow and generally companies will be forced to listen to the market. So I think it's hard to know, but I think of the creator economy as a super, super long-term trend. Is Substack, Patreon, Gumroad going away? No, I very much doubt it. And David, I'll hold your question about the fundraise stuff until the end, if that's okay. So yeah, let me talk about what we're building next. As I mentioned, The market you're in is going to determine most of your growth. So if you want to grow faster, then pick a new market. And so in 2021, there was an article that I wrote that a bunch of people read called No Meetings, No Deadlines, No Full-Time Employees, which goes into how we work at Gumroad in this weird way, which maybe is not that weird anymore with COVID and everything, but we started working this way in 2015 and it basically means that we have a team full of contractors, everyone works hourly, it's flexible, asynchronous, fully remote, no office, all of these things. But it was weird. And so I kind of wrote an article about this that resonated with a lot of people who had a lot of questions about how we work. And so that was cool. I published a bunch of our internal documentation and a bunch more companies have started to work this way. But to work this way is not easy. And so I actually wrote this memo in like 2017. So pre-COVID, like pre-remote, Because I rewrote it, I evolved it, so it mentions COVID. But basically, I was like, when I look at Gumroad in the way that we work, it feels like there's an opportunity to build something here. Because basically, we pieced together Bill.com, which is a public company that does mostly B2B accounts payables stuff. We use HelloSign, we send people these manual PDFs that they sign, then I sign, We have this recruiting process. All of this stuff that we've done is pretty custom and manual. And there's just not— it makes sense that it's manual and custom because it's not a common thing using Build.com in this way. And it's just kind of weird. And then the other thing that I think is really key is that I do believe there's this kind of like, it seems like this dichotomy in the sense there's venture-backed startups And then there's bootstrap startups and the incentive model is almost completely different where you have venture is very much like go big or go home. The value in a success outcome is in the equity more so than in the salary, but that's super high risk. That's a very specific kind of bet. And then with bootstrapping, it's like you get paid mostly in cash, like salary, and then Certain companies have profit sharing, or they have, you get a pool. So if you do ever sell, you do get a cut, but that is also, I think is still weird. And most people, I think most, just basically say you get paid. And that's what we did at Gumroad, and I wanted to, but I was like, no, Gumroad is still valuable. Most of my incentives are wrapped in the equity of the company, Which I think is good because it should be how I get rewarded ultimately as a founder of the company. But I want these contractors even to get some of that too, and get incentivized in that way. And so we figured this thing out where we basically, what we do is we take how much everyone built, let's say in 2021, we started doing 2020, and then a percentage of that we basically give as a stock grant, basically stock options. We think this is kind of cool, but again, it's manual, all done just using lawyers that cost quite a bit of money. And so just all of these things, just like, was like, this is clearly a problem for us. And the big question mark is, is this a problem for many more companies? So what does the solution look like? So one Friday night, just like I designed Gumroad one Friday night, now Figma exists a lot better. I built like just like a really basic prototype. And so I built like a, basically a product. What would a productized version look like? Right. Basically something that codifies all of this stuff I just talked about and turns it into software so that it's all manual, it's all automated. It's pretty simple. And then ideally it's a product that we can actually give to other customers, other customers, other companies. Right. So if you're, if you wanna work this way, if you have a bunch of contractors, you wanna manage in the same way that we do. You want to use our contracts, you know, that, that are globally compliant. You know, we have people in 17 different countries, so, you know, we had to get contracts in every single one. I think that could be pretty, pretty compelling. This is my design aesthetic, not good enough. And so, you know, I sort of spent time talking to people feeling like, okay, there's something here. I feel like there, you know, there, there's, this might be worth exploring. And so we ended up building this thing called Flexile. So that's the name, flexile.com, which is an English word, basically means flexible without the B. Maybe we can bring it back into the English lexicon or something. But really simple, it basically automates onboarding, invoicing, payments, tax compliance, all the things when you onboard a new contractor and you have to pay them, you have to get them to sign the agreements. And at the end of the year, you have tax forms, 1099s, W-8s, ENs, all sorts of stuff. We want to automate that. And so that's what we do. And this is what it looks like. So you get an invite. Let's say I invite you. This is what it looks like to a contractor. You get an email from me. Your details are on— you're going to work on average about 20 hours a week. This is your comp. This is roughly how much you're going to earn annually. You get onboarded. You go through our onboarding flow. You fill out your personal details, invoicing details, bank account details. You know, and then you sign the contracts. Uh, uh, and then once you do that, you invoice, uh, via Flexile itself. So if you're familiar with like a FreshBooks and, uh, or a Harvest, uh, you can kind of think about it like that. Um, where instead of, you know, currently the flow that almost everyone who's freelance is used to, I assume, is you basically time track in your own platform. It might be, you know, Apple Notes, it might be, you know, FreshBooks. You get a PDF, right? That's kind of like the unit of communication back and forth. That's the API, right? That people are familiar with. So you email the PDF and then you get paid, right? Or you use FreshBooks or Harvest to effectively do that, right? To spit out an email with that PDF and a way to pay, right? And so one of the novel things we're trying to do is actually verticalize and bring it all into a single place because Gumroad, because the company is actually facilitating all of this stuff, we can kind of centralize this. And then instead of having 50 PDFs that all look completely different and you have to kind of go in and look at them and everyone has a different way that they set it up, you can have some nice standards going into this. And all of this data should be sort of rich, right? Instead of a PDF, which is effectively an image, right? You should be able to say, oh, This person worked this many hours on these days on these tasks. And you can imagine over time we want to keep it super simple. Our goal is to solve our problem first before we give it to anyone else, though you will be able to sign up for a waitlist and get access next quarter. But in theory, you should be able to do stuff like, hey, for example, we have Gumroad and we have Flexile, like who's working on what, how many hours, how much did that cost? All these sorts of things that right now you, you, you, you know, you have a CFO or you have people that kind of, you just kind of do this manual exercise every once in a while. Like Marcus, down, we need to lay people off. What, what, what are we spending money on? Right? All this stuff should effectively be all real time. And I think, you know, Flexile will, will make that happen. And so I'm, I'm super, super, super excited about it. And it's live, it's real, it's a real product. This is Flexile. This is what it looks like right now. I, I personally believe, you know, this is kind of Figma. So we're building time tracking right now. We currently already support You know, and we're kind of migrating from what we do currently, which is all manual, to kind of like half manual to completely automated. And honestly, it's been amazing. It's been so fun. And the reason is— I'm— one of the reasons I'm so psyched about it is because I get to use this product all the time. And so I'm very confident that it's going to be awesome because I have a high bar for the products I use and I'm kind of annoying. And, you know, imagine me being, you know, the most active user of the product and having access to all the people working on the product, including myself. I'm just so excited to have something that we can just make awesome. And so this is what it looks like to me if I went to the website. These are outstanding invoices that I have to look at and approve, and all the payments and all that stuff works, and we'll build time tracking and we have to do company onboarding and some other things, but there are a bunch of unknowns. Getting into this. And, and I feel pretty good that, that we've figured out most of those, um, as we've, we've built this, uh, internally. So yeah, if you're interested, uh, if you wanna be kind of an early, uh, user customer, you can check it out, flexile.com. Uh, we kind of call this the, the operating system for flexible companies. Gumroad being a flexible company, any company that is like primarily, you know, remote first, async contractor, you, you know, you, if you, you, if you empathize with any of the things that I've said, I think it could be an interesting fit for you. So yeah, that is Flexile. Before I talk about the fundraise, let me answer some questions and then I'll talk about the fundraise and answer David's question. I love how your last name is Rhode, by the way. Very cool. Gumroad's last name is also Rhode. Presem— Premislaw, maybe, um, asks, is Flexile part of Gumroad or a separate entity? Good question. So Gumroad, you can think about this like you invested in an NFT project and you just got airdropped a new project for free or something, right? Like, this is, uh, 100% owned, you know, by Gumroad, uh, and so effectively, you know, 100% just Gumroad. So effectively, you can think of it like at some point legally, it will be a wholly owned subsidiary of Gumroad, but it is kind of the same designers. You can probably kind of tell there's similarities. We haven't worked on the brand to the same degree that we kind of just went through with Gumroad. So it'll probably look a little bit different when we eventually kind of go live to the public public. But yeah, it's kind of cool because It's not the same, right? Obviously, like the user base for Gumroad, the user base for Flex House are very different. But the theme that I see is basically flexibility and freedom, right? Like sort of, there's a way, there's sort of a traditional career path, right? Which is like, used to be like you get a job and then you stay there forever. And it's kind of becoming more and more sort of flexible and staggered and freeform. You now have this kind of maybe a portfolio career is how some people call it, but effectively you work at many companies, you go from here to here, you're building up a portfolio of different things. And ideally, hopefully with Flexile, you'll be able to earn equity in all these places instead of just the places that you have to work full-time. And so I think basically employment and making money just feels so binary. You're either Either have a job and you have all the things, or you don't. And Gumroad and Flexile, I think, are both kind of looks into maybe a future in which that's less binary, and you can kind of explore more freeform. And I'm just a huge believer in kind of bringing more flexibility and freedom into people's lives. I just think it's really, really important. And especially if we head into a recession, Demetri mentioned, a recessionary environment, I personally think, obviously I'm biased here, but I personally think flexible work, part-time work, I think being able to pay people via equity, et cetera, that level of alignment, I hope I should say that that becomes much more popular in a recessionary environment where you have to get more lean, more efficient, make your runway last longer, Gumroad's runway, by the way, I didn't say this, is about— we're getting a third-party audit, but it's like 57 months. So we're good. But there are many other companies who might have to say, oh, we have to change the way that we're working more aggressively. And maybe flexible work is one way to do that. Again, when you have binary, you go from 1 to 0, which sucks. Maybe there's a better way to do that. And yeah, so if you invest in Gumroad in this fundraise, you're effectively investing in Gumroad, you're investing in Flexile, and I would say you're investing in me, because if tomorrow I have another idea, I won't— that's not true. I have lots of ideas. I won't work on anything until Flexile has product-market fit and is clearly successful. So I don't expect the portfolio to go from 1 product to 10 or something like that, Um, but I will say, you know, that I would love to build, uh, more stuff. I like building stuff. Uh, you could probably tell I like designing stuff. Uh, I have lots of ideas. And so I think I could totally see a future in which I think there might be 3 products, 4 products, um, over the coming years. Um, and I'd rather if the model works, you know, just allow people to kind of invest in the single entity versus like spin up new entities for each thing, which may or may not work. But we'll see. There may be a case in which it makes more sense, let's say, to spin Flexile out as its own thing. And Gumroad would obviously own the vast majority of that. The way it's set up, it owns 100%. But let's say maybe 20% goes to a pool for folks who want to lead that project. And so we'll see what happens. But yeah, currently it basically means that you get Gumroad owns every single thing that fits into this umbrella. And David says, you mentioned something about the next fundraiser. So yeah, let me talk about that a little bit, which I'll do that by sharing just this doc that I put together. Awesome. So yeah, so let me just go through this and hopefully answer David's question along the way. Which is, what happens to those of us who invested in Gumroad via Republic? Yeah, so you're entitled to that forever. So you own a chunk of Gumroad, and when Gumroad— basically, the major event will be an IPO at some point in the future is the goal. So whenever that happens, that'll convert just like this new stuff that I'm about to talk about. The timeline on that is TBD. The markets are certainly down, but, but I would love like if Flexile hits product market fit. Actually, let me go through this doc. I'm getting ahead of myself. It's awesome. Yeah. So as I mentioned, like due to the markets like being down quite a bit, we did have enough interest. Like I sent out that Google form. There's, there's a bunch of interest in it and I still have that list. I'll email everyone. So if you're on it, you'll get an email from me about all this stuff. But I just think like the markets are just down that it just doesn't make sense to proceed with Republic. Republic is like very expensive. Regulation crowdfunding is a phenomenal tool, and I hope that the federal government makes it easier. I've been talking to people in Congress suggesting stuff, but it's just way too expensive. In the perfect case, it makes sense because, for example, we raised about $5 million and we spent basically $200,000 to do it, $250,000 to do it. That's just the cost of capital of all of the things required to do a crowdfunding round. So when things are looking good and it makes sense to do that, you can think of it almost like a marketing expense, totally worth it, but it's tough to justify, I think, right now. However, I did commit to it, so I wanted to kind of honor those terms. And so there are a couple options for folks that I wanted to go through. So the first one is a SAFE. Oh, and let me share this in the chat, but if you go to raise.gumroad.com, you'll be able to get to it. But there's a couple options. So the first option is a SAFE. So as I mentioned, we did the crowdfunding round. It was at $100 million valuation in March, and then in August 2021, we did an insider round. And so basically emailed everyone and said, "Hey, if you want to double down, here's a way to do that." And that was at a $250 million pre-money valuation with a 20% discount. So just to be a little nuanced on that, if we raise at a $250 million valuation, which would be roughly the price that we would raise again, though again, we don't have to raise. So We're not in a rush, we'll do it when it makes sense and we have the demand and all those sorts of things and Flex hours, product-market fit, all that stuff has to be true. But if we raised at a $250 million valuation, it would've been as if you invested at a 20% discount, so at a $200 million valuation, which is the same, the terms that I mentioned prior. So if you're interested in that, fill out this form and I'll send you a link. Unfortunately, it does mean that you have to be an accredited investor. That's the way you get around all of the crazy regulation crowdfunding rules. So you do have to be an accredited investor, but fill out this form. There is an exception where technically, if you have a preexisting relationship with me, technically it's a business relationship. So if you're a Gumroad creator or somebody like that, you should qualify. So just send me an email, fill out this form, and then send me an email to confirm, and I'll try to make sure it works. And everyone who's an investor in Gumroad should also be fine because that's also a business relationship. And then the other option is a friend of mine offered to buy a bunch of my secondaries, which are basically, I own a good chunk of the company, about 50% of the company. I've never sold any of it, so it's still basically most of my net worth, but 11 years in, I feel like it probably makes sense to do that. And so basically at a $100 million valuation, so the same price as the 2021 March $5 million fundraise that 7,000 people participated in, You'll be able to buy common stock. So that's secondary, which means it's not exactly the same as preferred, which is what the SAFE would convert into. The key thing to keep in mind is that effectively, it just means that you'll be the last to pay it out. So just like me, let's say Gumroad— let's say in a good case, it doesn't matter because effectively preferred and common merge into the same thing. But let's say Gumroad gets to a place where we sell for, let's say, $10 million. Let's say we've raised $10 million and that $10 million has to go back to the preferred people, it protects them. Otherwise, in theory, you could raise money and then sell the company immediately and then make 50% or whatever. That doesn't make sense. So that's the difference. And it's also why you're allowed to— the fair market value of this is just different. So I think this is personally a great deal, not financial advice or anything, but it's a significant discount. And I think a fair— just like when I priced $100 million which is less than what I think the market would've paid at that time. I wanted to come up with a fair price because the goal is still the vast majority of my net worth will be when Gumroad goes liquid, hopefully in a few years with a portfolio of products that include Gumroad Flexile and maybe something else. And so that's really the event that I'm optimizing for. But I think in the short term, having a little bit of liquidity would be good for me. I've been doing this for a long time. I'd like to buy a house. Um, and hopefully it might sort of allow me to like take more risks, I guess, with Gumroad, right? Because if everything is in this thing, then I'm going to play it a little bit safer. And then one cool thing that I want to do is I want to— because these will be actual shares, I'm going to see if I can generate— I should be able to do this, I'm 99.9% confident. Um, but basically you'll get— you'll be able to kind of get, you know, a representation, the original kind of NFT, right? Like back in the day you would get paper certificate pre-software that said, "Hey, I invest in this company." And then when they did this transition to software, you go to your bank and say, "Hey, I have 10,000 shares of Apple. Here's some proof." And they register it and then they just wrap up your thing. And so I thought it'd be cool to allow people to get one of these and then hopefully that should get you access to how I run the company. Gumroad is obviously a very public company, But there's all sorts of stuff that I share, like these monthly memos that I write to the team and a bunch of internal documentation. So I thought it'd be fun if you have access to that, you get access to kind of my, you know, you're kind of in the driver's seat or in the passenger seat alongside me. And you know, you can kind of give me feedback as we try to figure this thing out and build this company together. Risk factor is always important to talk about. So the first one would be that Gumroad cannot rebrand away from, you know, as we talked about in the beginning, a place to upload and sell digital products into a place that people can actually have these dynamic products that they build and websites. I think we should be able to do this, but we'll see. And the other one is Flexile doesn't work because let's say COVID is ending, everyone goes back to the way that we work. For some reason, remote work doesn't work. So that's possibility. And then I do want to— the next project, if Flexile works, will be a hardware project that I've been wanting to do for a little while. And so that would be the third sort of project. And potentially that's just way harder than I thought and not possible. Actually, I wanted to go to school for electrical engineering. I ended up dropping out to join startup land, but I would love to— a little bit jealous of what Elon gets to do. So I would love to kind of start doing some hardware, but it might just be super difficult. Metrics real quick. We are getting the third-party audit that we already started for the, for the crowdfunder. We're gonna, we're almost done with that, so I'll share more of an audited P&L. But basically, the high-level, high-level overview is we're doing $180 million in yearly GMV. This, these are based on April numbers, which is the last month that we have done. $10.4 million in annualized revenue., and we're burning about $151,000 a month, and that gives us about 57 months of runway, so about 5 years, assuming like no change. Um, obviously we can make changes if we need to, but no, no need to, uh, right now. Um, and especially if Flexile works, um, you know, doubling down I think will make sense. Uh, and then Flexile, uh, or, and then success, right? Best case scenario, what, what happens? Um, or, you know, great, great scenario. Well, one, Flexile works, we, we get product market fit with Gumroad, with other companies. So far the feedback has been pretty good, but you never know. We get to $1 million ARR in a year, that's my goal or reach goal. If we do that, then it gives me confidence to ship more products. And I would love to basically turn Gumroad Inc. Gumroad will now be one of many products. And my goal would be to turn Gumroad into something I like to call the software and hardware lab, a place to incubate more and more things. Spin them out, hold them depending on where that goes. Shorthand for that would be SHL. And if we decide that we need more capital, and this could be potentially the next fundraising milestone for us, is we would use Reg A+ where we could raise up to $75 million and really finance and double down on those projects ourselves. There may be a case in which we decide, oh, it's better to spin each one out and do a crowdfunding round dedicated to that project. So there's other options, but I think this is a pretty good sort of case study of what success looks like for Gumroad. So cool. Let me go through and answer other questions that people may have. Dmitry says, could you elaborate on common stock has no liquidity preferences upon a sale? Yeah. So basically what happens is when you get preferred stock, which is what, let's say, a venture investor gets, the core protection is called a liquidity preference, which basically says you have to get paid 1x, or it could be more, but standard would be 1x. So if you invest $10 million, you have to get paid $10 million first before the other folks who invested before you get paid. And so this protects the last investor. So if you imagine you raise $10 million, let's say you raise $10 million at $100 million valuation, and then you raise $10 million at a $200 million valuation, and you sell for $100 million, what ends up happening is the $100 million, $10 million of that goes to the $200, then $10 million goes to the $100, and then the rest gets divvied up. So in that case, the person who was last gets a little bit of protection, but it's really protection in the case of the company selling for, let's say, $20 million. You raise it $100 and then you raise that $200 and then you sell for $20, so that's not a great case scenario. But in that case, all 100%, so $10 million will go to the $200 million investor, $10 million will go to the $100 million investor, and then zero will go to the founders and anyone who will hold common stock. So that's the way to think about it. Dmitry wants more numbers. So yeah, let me share with you some more numbers. So I'll send you all this. This is what I use internally. It's a little uglier, but basically you should be able to see this. So I've been tracking, I'll give you more than the last 5 years. This is every month up until, I believe I've done it up until May, until April. So that's the most recent, but you can see all the GMV revenue, all these sorts of things that we've done. You can see our greater earnings. Per month and compare them to whatever else. So you can see this is the beginning of COVID March 2020 was when we started to see that terrible, you were already starting to see this growth. And then the end of COVID around here, you could start to see that COVID summer where a lot of companies started to see this tapering off. And my hope and expectation is that Imagine COVID never happened, right? You just saw a bunch of growth pulled forward because of COVID My goal is that this thing will— my hope is that this thing will just continue the way it would've over here. And we're starting to see that actually, May is about 8 or 9% ahead of May last year. So we're starting to see— whereas April was roughly, first quarter of this year was about zero. So we're starting to see that hopefully start to happen. And I think it'll match. You'll probably see this with Shopify and all these other companies that are public, you'll start to see if that ends up being true or not, or better or worse or whatnot. Sahil Lavingia asks, will last round investors not have access to internal memos? Yeah, I mean, the internal memos, they're not that interesting. I'll maybe share a sample of one or two of them, but they're just They're just written for the team to say, hey, these are all the things that we're working on and why we're working on them. And I didn't wanna share them because we've been working on Flexile, which is, you know, we, I wanted to kind of keep a secret until we had good confidence that we were able to, to, to, to, to build it. And we did. And, and so now I feel more comfortable. So I'll share a bunch of them, but I do want to kind of hold stuff back so that I don't give everything away to everybody. I also find that when I, when I give everything away, It's sometimes hard to give feedback or get feedback, I should say, versus if I'm like, hey, I'm sending it to you, give feedback. So I want this to be more of a conversation instead of— I could imagine doing, let's say in the Discord, a monthly Discord where I go through the update and talk about what we're working on and what we've learned and how I'm thinking about things, et cetera. So we do the quarterly maybe public board meetings, which are or every 6 months, every quarter that are more public-facing, more marketing, more about features and stuff. And then the internal stuff would be more like, why did this work break? Why did this not work? Why do we have to change directions? And more like postmortem and stuff like that. So we'll see. We'll see. I'm super open to feedback on this stuff. And Christopher says, is there a minimum purchase amount? Fill out the form. But we'll see what, based on demand, I have to check. But my guess is either probably $1,000 or $10,000, depending on what it looks like. The only issue I would have with the smaller amount is it just ends up being a pain to do it for, depending on how much, if there's hundreds of people, thousands of people, there were 7,300 investors in the last round at a $100 million valuation. So that would be difficult to do again, but the markets are down, so we'll see. This is a doubling down opportunity for people., um, who are really like, you know, bullish on me and Gumroad and want to be involved for a long time. So, um, we'll see what that— what the interest level looks like. Um, oh man, Premeslogan, uh, sorry, I'll, I'll ask you how to pronounce your name, uh, in the Discord. Um, are you not worried about last 12 months performance? Uh, no, I mean, I, you know, one of the great things is that I've been super public and transparent about the numbers since the beginning. And actually, when I started sharing— actually, I'll show you. I get to this article. When I started doing open financials, doo doo doo, I talk about opening up about our financials right here and why I did it. And you can say here, we were not any of these things anymore. It was easier to share that information. We were profitable. And a no growth month won't change that. But technically we're not profitable, I guess we have 57 months of runway. But yeah, I just, I just love the idea of being super transparent with people. And as long as we're, you know, what Paul Graham calls default alive and like we're fine, like, and we get to hire awesome people and build an amazing product for our creators, I don't, I don't see a problem. Maybe there's a case in which, I don't know, people turn from Gumroad, that would be more concerning, but that's not what we've seen. For example, if you look at our cohort analysis, this is a little bit out of date, but if you look at our cohort analysis, there's generally every cohort is stronger than the last cohort. 2020 was obviously kind of crazy, so we saw this huge spike. And probably generally what we see is it settles, it'll probably settle around here. So internally, the creators who sign up, kind of will retain on Gumroad. So I think as long as that happens, I'm not super worried about the feasibility of the company or anything like that. And 99% of my net worth is in this thing. So if I'm not worried, hopefully that's a good thing, or maybe I'm delusional. Who knows? Manish asks, will Flexile work for internationally distributed workforce as well? Yes. So it's going to be for US-based companies only for now, for the beginning. Gumroad is a US-based Delaware C corp. That's what most startups are and what I would recommend for everybody starting a company that plans to issue shares. But contractors should be able to be anywhere. So for example, Gumroad, we have contractors in Austria, all over the EU, India, Dubai, United Arab Emirates, New Zealand, Taiwan, Brazil. We have 2 people. Brazil, by the way, is a pain in the butt. New Zealand also has some weird stuff. There's a lot of— I've learned a lot. But the cool thing is we'll do it. We're trying to be as international as possible. So hopefully, let's say a new customer says, hey, we have a contractor who's in Sweden, you don't have a contract for that, you know, we can get that spun up for them in, you know, a couple days, um, hopefully. Um, but yeah, the goal, the goal is that this would work for an internationally distributed workforce as well. Um, and we have the major regions covered just by the fact that we hire, uh, you know, ourselves. And I'm pretty excited about that. Daniel says, is there any plan to implement NFTs in Gumroad? Uh, no, no, no plans. Um, David says the company Sells is closing. Sells with a Z. Yeah, they're a competitor of ours from a while back that I did see that they're closing. I got an email from them as I have demo accounts on all the, every product, right? But haven't seen a huge, like I haven't seen any significant uptick from that, but we'll see. Narindran says, super impressed with how you operate, how open you operate. Thanks for this webinar. You're welcome. You know, it's, uh, it's fun for me too. It's a little lonely given, uh, you know, this is one of the things I think we have to figure out as a culture is, is people are moving all over the place. Your friends are now often online. You're working from home in a bedroom, in a guest bedroom. Uh, and, uh, Yeah, I'm, I'm sort of excited to figure this thing out and do it in public. And I'm super freaking excited about Flexile because if we can say, hey, if you want to, you know, this thing, this is the way that we work is working. And, you know, instead of just reading this blog post and like my Notion stuff and like piecing together your own process, you know, it'd be really cool to, to be able to just, you know, use your product and have you do it for us, right? That sort of thing. So I'm excited about that. Equity by the hour, I think is awesome. If we can sort of bundle that into Flexcel, we could say, hey, anyone who contracts with us, I want to give them a 10% at the last, this, we'll help you do that with, we use an integration with Carta. So I'm pretty psyched about it, but I always am. I'm always a very optimistic about, about the future, uh, because I think the future is gonna be awesome. That, you know, definitely some bumps along the road, but generally I think, uh, things get better and faster and cheaper. Um, more questions coming in. Sorry, I was gonna end with that one because it was so nice. Uh, the Discord link will be shared to anyone who, who kind of buys, uh, uh, who owns common shares, because that's, that's the met— the sort of what I'll set up is anyone who owns, uh, who has that digital stock certificate will be able to get access to the Discord. Um, Pratham asks, what do you think would be the probability that Gumroad would be displaced by a more feature-rich Facebook Marketplace or Shopify? Uh, that's a good question. I mean, honestly, I would be most concerned about Stripe getting into going more upstream and more into like website building stuff territory than I would be about these other folks getting downstream, because I think that model is really about I mean, Facebook Marketplace, I think is kind of different. They're kind of more peer-to-peer. I'm not super concerned about them, but Shopify, maybe. They do some digital stuff. I've talked to their PM. They thought about buying Gumroad one time, but frankly, I just think they have their own problems. They have their own space. Generally, competition is— I haven't found that to be the killer of companies. Generally, what I find, not always true, I'm sure there are counterexamples, but generally, it's kind of like you cap out on your own market and you run out of your own energy and you don't know what to do next. I think there's so many markets, smart, awesome engineers and designers building new products. You would think there's more room to grow for everybody if you want it badly enough. Daniel asks, and this will be the last question, in your opinion, do you see early-stage VCs rethink the way they invest or change their thesis, assuming that hidden part is because of the market downturn? I would think that it just goes back to what it was in 2019, which is basically not too different to what it was since 2011, which is you invest in early stage and it takes several years for these things to turn into mature businesses. COVID, I think, created this fake expectation that you could invest in a startup and get 4, 5, 10x in a year. You can certainly get that on paper, but very few people I know are actually able to pull that money out, which is what matters at the end of the day, distributions. And so I run a fund. My strategy is to basically keep doing what I'm doing, which is to invest in primarily super early-stage startups. I've always been able to get great valuations. I think the people who are probably in trouble the most in terms of portfolio are people who really double down on really expensive companies, later-stage stuff, I think that can be trouble because they really were working on the arbitrage of private-public valuations, and that has shifted. But I think if you're investing at, for example, the average company I invest in might be at a $5 million valuation. That's basically the same as it was in 2011 when I raised money for Gumroad. It hasn't changed that much. So I think what is hard and has always been hard is that finding early great founders is really difficult. I think COVID basically created a huge amount of founders who actually didn't fit that criteria, who are able to raise money. I think those people are probably not going to do very well. But I think as long as you're really diligent, you're saying no to almost everything that you invest, everyone that you meet, you should be saying no to most things. And you're just doubling down on the few people that you really resonate with and feel like they're doing stuff that's really interesting over the coming decade. This is not a short-term thing. You cannot be thinking in a 1 or 2-year cycle. If you're investing in early-stage startups. Illiquidity is a feature, not a bug. You should really hold this stuff for 10— I'm 11 years into Gumroad. That time horizon I think is healthy. Otherwise, you just go insane. I don't know what the price of Bitcoin or Ethereum or stuff is. It doesn't matter. I own it. I'm happy to buy it and I dollar cost average into it and all that stuff, but It doesn't matter to me. It only matters if and when you sell, which means— and I'm almost 30, so I shouldn't be pulling— Generally, I spend a portion of my income. I should not be pulling money out of what I consider investments at any point in the next 30 years. That's roughly my time horizon, is about 30 years is when I start to— I'll hit 60 and maybe have to change things or science gets a lot better and I can keep going for another 10, 20, 30 years. We're still very early into this. I think people who are thinking about the market being down, unless you're 65, 70, it shouldn't matter to you. And honestly, you should just stop listening to people who tell you that it matters, including myself. So maybe this is a good time to end the thing. I'll send a recap to everybody and upload this video to YouTube. And all that stuff. Thanks everybody for tuning in. It was great to hang out. Bye.
