Sahil Lavingia, welcome to the Indie Hackers podcast.
Thanks for having me. I’m excited to be here.
You are the founder of Gumroad. You wrote a mega-viral blogpost earlier this year called “Reflecting on My Failure to Build a Billion-Dollar Company”. So once upon a time, you moved to San Francisco, you were employee number two at Pinterest. You started your own company, Gumroad, and you raised millions of dollars for investors, even tweeted about how this is going to be a billion-dollar company.
Fast forward a few years, you took a much more Indie Hacker approach. You moved to Provo, Utah. You bought out most of your investors and you just kind of focused on generating revenue, not trying to get to some billion-dollar valuation anymore.
What’s cool about this is you’re doing it all at the same company. You’re one of very few founders, I think, to take the high-growth start-up approach and the Indie Hacker approach with the same business.
So, let’s talk about that for a bit. What are some of the differences between these two lifestyles as a founder and what are some of the things that have stayed the same?
Yeah, it is sort of fascinating because most people – especially when you raise a venture – one of the things that happens is you’re stuck, right? You’re sort of with those people for the rest of the journey and the company people always joke that it’s harder to fire your co-founder, your investors than it is to get a divorce.
And so, yeah, it’s kind of this strange thing that happened, to no credit of my own, that I was able to buy back most of the investors and sort of like basically start from scratch.
I think in terms of the differences, I would say the number one difference is that I do not prioritize it above everything else. So, you know, when I raised money Gumroad when we started growing the team and all of that stuff, Gumroad was THE thing in my life, right? It was the most important thing. It was probably – sleep was probably number one. Gumroad was probably number two, exercise number three, etc.
My personal life and all of those things were sort of at the bottom and even my personal life, I sort of had to architect it in a way that it was further Gumroad. All of my friends, meetings, how I’d spend my time, even if I wasn’t at the office was all about sort of like how do I benefit Gumroad.
And I felt like I had a duty to that. I had raised a bunch of venture capital. You know I raised $8.1 million from sort of a list of Silicon Valley angels and BCs and things. I also had built a team and when you build a team you have this sort of duty but also this sort of financial incentive to work super, super, super hard and stay super, super, super focused because every hour that you put in, you have 20 people that are going to see that and mimic a little bit of that behavior.
So, I didn’t do – I mean in hindsight – sort of stupidly, I didn’t do almost anything else in terms of – like I didn’t angel invest in any friends’ start-ups. That would have been smart. John, from Stripe, was a good friend of mine back in the day. I’m not saying I would have been able to invest in it, but it just wasn’t on my mind. I was sort of so one-track and now it’s almost exactly the opposite where I am thinking about how can I build Gumroad in order to benefit my life?
It sort of very selfishly—and the weird thing with that is I didn’t really – I wasn’t really proud of doing that. When I moved to Provo, I told my investors I’m doing this thing, but I wasn’t sort of shouting it from the rooftops or anything, like I’m going to go to Provo and learn how to write and paint. That’s sort of a weird thing for someone who’s raised $10 million at this point to do.
And I sort of kept it under the radar for a while. And then I wrote this post at the beginning of this year called, “Reflecting on My Failure to Build a Billion-Dollar Company” because I just felt this dissonance where I was having these private conversations, but I wasn’t really reflecting that publicly.
And the reception to it was like yeah, you gave it a shot. It didn’t work out but you built this really great thing and you’re kind of like allowed to say that you did that, you know? And that really opened the door for me to be like hey, it’s totally fine to say look, I care about it my life. We call them lifestyles businesses, right? So, it’s okay to prioritize my lifestyle and I’ve been upfront with the investors that have remained on board through this whole, with new employees some of the people that actually used to work for us back in the day.
And it’s surprisingly fine to do that. To say actually Gumroad is my last priority of the day. I want to write, I want to paint, I want to go to the gym, I want to travel, I want to hang out with people and I want to read. If Gumroad doesn’t fit into that day, that’s totally fine.
It turns out one of the things that give me the freedom to do that was to look at this chart of the growth of Gumroad over the last eight years which is incredibly consistent, it’s one of the most boring graphs you’ll ever see. There’s very little drama in it. And to think about wow, there were weeks and months in that process that we had a 20-person team. We were working basically all the time – all the waking time that we had – and then there were times when we had no team. It was just me answering support emails once a week, working for hours a week and same sort of growth trajectory.
I think it gave me the freedom to say, look, I’m just not that important to the operations of this company and the success of this product and the success of our creators, and so let me give myself a little bit of permission to experiment and do what I want to do and it turns out that doing that actually, has driven almost more empathy and more loyalty to what we’re building and what we’re doing this year and beyond, than ever has been in the past which is kind of fascinating.
How much of that do you think is due to you living this more relaxed – I don’t want to say self-centered – but focused on you lifestyle? And how much of it do you think is attributable to you just putting in more effort to actually share your story, to write blogposts, to tweet more often?
Yeah, I think it’s a whole host of things that all just come back to being myself and being open and transparent about what I want to do with my life and how Gumroad is a component of that. And you know, inherently I was the founder of this company. You know, I was the sole founder. It was my thing for a little bit. There is this inherent alignment that happens and I think in many ways I was trying to force it. I was searching – to convince employees to join the company, you sort of have to drink your own Kool-Aid first before you can get anybody else to drink it. Otherwise, you’re just lying which is probably not wise.
So, I was just like drinking it so much that I was just convinced that everything in the world was going to get better because of Gumroad and to say, look, the world’s going to do what the world’s going to do, and I can have some amount of impact on it but I’m not going to necessary sort of slave over that. I’m just going to build what I think is the right thing to build for the group of creators that we already have which is far easier than going out and acquiring customers and far cheaper.
I think people see that and they’re like oh, yeah – I think people sort of respect the ability to say look, I am not a proud visionary. I’m not Steve Jobs. I’m not building cars. I’m just building a fast course and that’s fine. That’s what most people can do. Very few people can – you know, the car was invented by one person, one time and that’s about it.
I think the other thing that’s sort of unique about Gumroad is that we have so much in common with our creators and so the more that we share about what we are actually doing which is just building the great product as much as we can. We’re talking to customers. We’re not raising money for VCs, we’re not having fancy dinners with other founders anymore. That’s what our creators do every day, right?
So, I think when they see that they’re like, oh, cool, Gumroad’s actually just like me, we’re both trying to build businesses. We’re creating some form of software to do that. We’re selling it to our audience and so I think when we started becoming more open about the journey, we actually became much accessible and much more relatable instead of this Silicon Valley start-up that had raised $10 million bucks and is trying to become this billion-dollar company.
Most people are never trying to do that and that’s one of the things I sort of had to realize when I moved to Provo is I started talking about yeah, I’m writing this thing. It’s about my failure to build a billion-dollar company and people would look at me funny. They’re like wait, what?
First of all, you were trying to build a billion-dollar company. I thought you were just oil painting. Like who are you? And then, two, how is that a failure. You’re telling me you built this multi-million-dollar business that you own the vast majority of and you can kind of do whatever you want. You’re here oil painting with us Thursday at 2:00 p.m., how is that a failure. You know?
And that’s kind of what I wanted to talk about with that essay and I think why it resounded so much was because even though I think intellectually people understand the sort of absurdity of trying to go for building this massively successful company, in a way I felt like I could just do it. I tweeted like I’m going to build this thing. It’s going to be a billion bucks. It just sort of – it’s like denialism of like other people’s agency.
Other people have to decide that you’re worth a billion bucks. It doesn’t just happen otherwise there would be a lot more of them in the world. So that almost like peeling back some of the absurdity and sort of the surrealism of Silicon Valley sometimes. It was almost like stating the obvious and that’s sort of what I think a lot of people appreciated. It was I had a done this thing. I was in it. I was sort of most inside of the sort of insider’s circle you could get, and then being like yeah, it didn’t work out and that’s fine.
There are a lot of stories like this, I think. I’ve talked to a lot of founders that have raised bunches of money that have gone through a similar journey, but people just don’t talk about it. I think there’s sort of a component of shame. I think there’s a component of failure. I think there’s a component of my reputation is at stake here and because I think I moved to Provo and because I was just sort of was able to physically get that distance, it just meant less. I was going to suffer less and people were going to look at me and be like, wow, you made some really stupid decisions that prevented you from building a billion-dollar company. You idiot. I would be fine, right?
Whereas, if I was still in San Francisco, it would have been a very different story. I think it would have been a lot more difficult for me to really have that thing go live and feel comfortable and safe.
You’ve had a lot of conversations in San Francisco where people don’t feel safe talking about failure. They’ll tell you they’re killing it, even when they know they’re not. And at Provo, you tell people well I failed to build a billion-dollar company and they look at you funny and they say, you’re still killing it. I don’t know why you’re sad about that.
Yeah, it’s funny because even in Silicon Valley I mean everyone talks about the failure rate, right? I don’t think anyone is delusional about the percentage of start-ups that raise venture and fail. I mean that’s the majority of them, right? I think 70% or something. But for some reason when it starts to happen to you, you freak out and you’re like no, that’s not possible.
And I think part of it is just – it’s kind of like when you’re top – this didn’t really happen to me, but I’ve heard of it described as when you’re sort of top of the class in high school, right, you’re just like the valedictorian and then you go Stanford and everyone is you, and all of a sudden you’re like no longer interesting and you have this existential crisis. Like who am I?
I think it’s similar but maybe even more pronounced when you go to Silicon Valley and raising a million bucks is nothing. It’s meaningless there. So, you go from the top of your field or top of your class or you know, or all of these sorts of things and then you start from the bottom again.
I think because you’re seeing all of your friends and all the people that you hang out with raising bunches of money and hiring a lot of people at these crazy valuations and getting these crazy BD deals done and everyone is sort of inflating their chests a little bit because you feel like you have. Right? Like if everyone is playing that game, you frankly just look like a failure out of the gate. It’s sort of self-fulfilling in that way, right?
If you’re an engineer and you’re looking at all these hot, sexy companies and then this one random one that’s like hey guys, we’re failing all the time. It’s great. It’s just really going to work. I liken it a little bit to football helmets where I think everyone kind of acknowledges that these things are not good for you. It doesn’t really make you safer. It actually is more dangerous but you’re not going to be the one person on the football field saying okay, cool, I’m going to do it. I’m going to take this off and I’m going to play it like we actually should play it.
Like you kind of need somehow everybody to kind of agree on doing this at the same time. It’s like prisoner’s dilemma and it creates this sort of unsustainable very unhealthy environment, I think. And I think everyone know that it’s broken, but I think very few people want to say it.
I looked at some stats about Provo, Utah and it is definitely not San Francisco, definitely not Silicon Valley. The population size is just over 100,000. It’s 89% Mormon. The median household income is $32,000 a year which would probably not get you a one-bedroom apartment in San Francisco. So, I imagine you stand out like a sore thumb there. What do you say to people who ask you what you do and how do they react?
I normally say I’m learning how to paint is sort of my default. I’m learning how to paint and I write a little bit. Yeah, basically my girlfriend used to – she now is comfortable with it – but in the beginning she was like everyone just thinks you’re the bum dude.
Everyone thinks that I’m just dating this weird, washed-up, bearded brown dude. You know, I’m 26, so I’m a little bit older than the average college kid, right? So, it’s that kind of guy that never graduated in this kind of –you know what he wants to do and is learning how to oil paint, probably doing shrims [ph] on a weekend or something like that.
I think the vibe I was giving off from San Francisco, etc. – I mean Provo is the most conservative city in America. Over 100,000 people. No one here swears and it’s sort of very noticeable. But everyone’s super nice and I think it’s – one of the first things I noticed being here is how little people cared about what people did for a living. It was the questions were always oriented towards how are you? How’s your family? Are you Mormon?
Things that sort of reflected their priority stack which was sort of so fundamentally different from mine which was like – you know, I would ask what do you do for work? Where do you work? How – not how much money you make specifically but sort of raised to almost gauge someone’s value to the society in this sort of very transactional way which is kind of how everyone in San Francisco does it. You go to a house party and everyone’s like what do you do? Where do you work? Have you raised any money? From who?
Your work is your identity in a sense. It’s who you are.
It is. It is. Yeah and it makes sense, right? I mean you move – I did move to San Francisco to work at Pinterest, right? Literally to work and it’s a very transactional city for a lot of people and that’s fine. It just is what it is. I’m sure New York is similar in finance and LA might be similar in entertainment.
But in Provo, it’s just like we’re on this earth to be of service to other people and to raise a family and to be faithful and test our faith. That’s sort of the literal theology of it, right? And nowhere in there is how much money you make? No one in there is who do you work for and how many employees do you have.
Frankly, I mean a little bit of it is how educated you are but not really in any way that is used to make more money but just to be more educated so you can serve others. It really just got me thinking about how – you know, when you travel people always say it opens up your mind, right? And you sort of see how different cultures solve the same problem.
And one of the sort of fundamental problems, I think, is what is the meaning of life, right? In San Francisco, you’re so in it. You’re so in the meaning of life is to change the world. Have as much of an impact as possible, typically through scalable means like building software and building sort of high-growth companies. It just is what it is and you sort of forget that you’re breathing that air. It’s just everywhere. Then when you move to Provo – or when I moved to Provo – like over months it was like wow, there’s a totally – the way that they think, the way that they view the world and their place in it and their place in the universe is just so fundamentally different than I was looking at it.
It took a while, you know. Traveling definitely has some of that but it’s very surface level and when you live in a place – I’ve lived in Provo now for two and a half years – way long than I ever thought I would live in Provo, Utah. I thought I would last a year, but you realize just how – even though the houses look the same, the streets look the same and the traffic lights look the same. But the sort of fundamental – when people think about doing stuff, when people wake up in the morning and go to sleep at night and plan their days, etc., the very deep, deep reasoning beyond making some of those decisions is very fundamentally different than the ones that sort of feed into those decisions in San Francisco.
And it’s almost like meditating, right? When you meditate you sort of get in deeper and deeper into your own thoughts and really figuring out why you think the way you think. And living in a place like Provo is almost like an external version of meditating where you’re forced to reckon with all of the ways that you’ve lived and the decision that you’ve made and you’re just grappling with why you made them and relatively baseless those are and how momentic they are – how based on other people’s behavior they are, which in turn are based on other people’s behaviors, you know?
So, you kind of are like who am I? You used the word identity which is sort of the word on top of my mind right now which is yeah, what is my identity? How do I define that? It’s a weird thing to think about when you’ve spent eight years being so sure of what your identity was. I was going to spend the rest of my life building software products, tweeting pithy things and you know, just becoming a VC or whatever the track was that I saw in front of me. Doing what Bill Gates did just in my own way and now I’m like I have no idea. There’s not very many people that have done this sort of thing. I’m still trying to find those people and learn from them.
Let’s say somebody does a little bit of digging into your business. How do you explain to somebody from Provo what Gumroad is?
Yeah, I say, you know, I run a small software business called Gumroad. We help creators, like musicians, writers, artists, filmmakers, software engineers, stand-up comedians – anyone that makes stuff on their computer, we make it really easy for them to take that stuff, upload it to the cloud and sell it directly to their audiences that might exist on Twitter, on Facebook, on YouTube, on Instagram in order for them to own the relationship they have with their customer, sort of transact directly, make the vast majority of the revenue and earn a living to what they really love to do instead of maybe doing something else to pay the bills and then make music nights and weekends.
Let’s do a version two. Imagine you were talking to a founder or an investor or somebody in San Francisco, how would you explain Gumroad to them?
I’d basically say we’re a shopify for digital goods. We started out being a bit lead [ph] plus a credit card forum. We wanted to demaketize the ability to sell. Just like you can share basically anything and more and more people are sort of sharing directly with their audience instead of having to go through a middle man like Amazon or iTunes or their label or their publisher.
We want to sort of demarketize the ability to sell anything you can share and if we can do that, then all these artists, creators, influencers, celebrities, etc., should be able to make a living on their own terms instead of one dictated by all of these different middle men and when you get rid of middle men, in general, that means a more efficient, cheaper – just better – economy that sort of serving the consumer and the creator instead of all these other people that are sort of in the middle.
Which is kind of – actually I’ve never done that before – but it’s profound how different of a pitch that was. You know? That’s a cool thing. I mean it shows how much context is baked into Silicon Valley, right? Like middle man, demarketize, all of these terms. If you said that to one of the retired moms that I paint with, she would look at me funny. She’d think that I just had an acid flash back or something.
It’s also very mission-focused. When you’re describing Gumroad to a tech audience, you talked about how it was going to change the world, right? How it was going to affect the market, how it was going to make the experience of being a creator different.
Yeah, one of the things I have sort of mirrored a little bit is in San Francisco the way that people talk is similar – or in the way that they both want to serve people, right? I think that’s sort of – we agree on that. We both want to serve the world. We’re servants to humanity, etc.
But in San Francisco, it’s all about this crazy long-term, mega-large humanity – sort of, what does Steve Jobs say – denting the universe, right? And in Provo it’s like I just want to help people. I want to help my neighbor and my community, my government, my family and if I do that and everyone else does that, we’re going to be in a really good spot.
And so, yeah, it’s just the context and the scale is just so profoundly different in the way that these sort of groups that people think about their approach to actually being in the service of others.
Tell us about how you first moved to the Bay Area and got involved in tech.
So I moved to San Francisco to work at Pinterest. This was late 2010, early 2011. I was a college student at USC in LA and I got an email – I had hosted some stuff on Hacker News and I started commenting. That was my way of trying to get into the tech community and build up my audience at the time.
And Ben, the CEO of Pinterest, sent me an email out of the blue. He saw one of the apps I made on the Hacker News and it was basically like, hey, we have this thing that we’ve been building called Pinterest. We help people collect, organize and share the things that they love and we need an iPhone app and we don’t have one and it looks like you’re pretty competent developer and designer of apps. Do you want to help? And so, I quoted them $4,000 initially for Pinterest for iPhone. I ended up having to double that because it was way more work than I thought which is always the case and then I ended up being like hey guys, I started getting some full-time offers from other start-ups. Would you consider making me an offer. I’d love to work for you full-time and sort of take a leave of absence from USC and move up to the Bay Area.
And Ben was like yeah, we’d love to talk about that. Let us know when you’re in San Francisco. I was like I’m not going to be in San Francisco, you know, like I don’t have plans. Normally San Francisco start-ups fly you up for the day. But they were just – I mean it was just so indicative of how they thought about – just they were so frugal, you know, and they were just so like yeah, if you’re interested, drive up here yourself and come talk to us. So, I was like okay.
Eventually, I – a couple friends of mine were driving up to the Bay Area to watch a USC Cal game and I was like yeah, I’ll come up and then I’ll just bounce for a few hours on Sunday and hang out with this two Silicon Valley founders and talk to them about this app that we’re building together. So, I did. My friends thought I was really weird and then I told them I was going to drop out of school to join this start-up called Pinterest, be employee number two and everyone was like okay, I guess. You know everyone – you know, Mark Zuckerberg had done this thing and Steve Jobs and Bill Gates and you know the stories of these things, but to actually do it was weird and also surprisingly uncommon. I had sort of expected it to be like oh, yeah, this thing that happens in the news happens all the time to everybody, right? Everyone knows someone. And then I dropped out and I was the only person from my high school that did that. I was the only person basically in San Francisco.
Now, it’s a little bit different. Software has sort of developed and matured, for better or worse, and the social network came out. I also consider the social network one of the pivotal moments of Silicon Valley culture and history. But yeah, that’s sort of what got me up to the Bay Area. Initially, it was to work at Pinterest, employee number two, building and designing Pinterest for iPhone.
What did you hope was going to happen as a result of you making this decision? What was the best-case scenario in your mind?
So the way that I thought about it was I wanted to get a software engineering degree. It would take four years and t hen I’d work at Google and then I’d work at a small company and then I’d start my own thing. When I was 35 or something like that.
That was the track that I imagined for myself at the time and the way that I justified leaving school to join Pinterest was well if I want to do that, if I think start-ups are generally a thing that I want to do, I should probably figure out now if that’s a possibility for me. If I’m going to be good at it, if I’m even going to like it.
Otherwise, I’m going to spend 15 years and realize I’m not made for that. Which I don’t know if I was a way of just deluding myself to make the jump and I was already convinced or not. But that’s sort of how I justified both joining Pinterest, leaving USC, and then also leaving Pinterest to start a company which was – I want to maybe start a company. I don’t know if I’m going to be capable of doing this thing so, I might as well try now and then if it’s not the thing for me, I’ll go back to school and figure things out or what have you.
That was sort of it. It was like I was like there was this potential job and career path which is you basically get to make software which is something I was already doing and I could get paid for it and I could do it on my own terms. That sounded amazing. And then basically BCs would pay for me to do that. You know? And if those things are true, like how can I not try this thing. It just feels too perfect and too good. So that’s of, for better or worse, what I ended up doing and it led to starting Gumroad.
It’s kind of funny because you inadvertently and unbeknownst to you at the time, won the lottery by being employee number two at Pinterest. There’s a ton of Silicon Valley companies you could have gone to work for, the vast majority of them did not become billion-dollar companies that made all of their early employees rich. But Pinterest did.
Totally and it was incredibly stupid of me to leave with a few months left on my clip. It was a multi-million-dollar decision to do that. But I think if I – I think the truth is if I was smart enough to stick around at Pinterest, I would have been smart enough never to have joined. You know?
Like it required a certain amount of ambition and ego and ignorance, I think, to join Pinterest but then that was the same cocktail of things that was going to get me to leave Pinterest and leave all that money on the table. And I think, in hindsight, gave me this immense chip on my shoulder where when I left I kind of knew that they were on to something.
They were growing super-fast and we just raised a series A and it was like the largest series A of the year and it was like this has a good shot at being really big. Therefore, Gumroad has to be significant because otherwise I’m going to look like a fool, which I think anyways a little bit.
But I’m still on the journey so, you know, maybe one day. But I would be remiss, I think, to say that I don’t think about what could have been. Right? If I had stayed a Pinterest and who knows where I would be now.
Ironically, April Fool’s Day, 2011, you infamously tweeted just had an idea for my first billion-dollar company. Tomorrow I start building it. What was going on with you energetically when you sent that tweet. I imagine you must have felt amazing to be so confident about this idea.
Yeah, I think I was home on a Friday night and I was just learning a photorealistic icon design and I had made this pencil icon and I wanted to see if I could sell it to anybody that followed me on Twitter or on Gerpil [ph] or something like that.
I had a sort of modest audience at the time but I didn’t want to invest in building a storefront and a whole website or put it on some marketplace somewhere and then get a tiny percentage in 60 days or something like that. What I called it at the time was lemonade stand. I just want a lemonade stand. I don’t want to invest in a retail experience or anything like that.
And then it just wasn’t possible. It was surprisingly difficult, just kind of this weird sort of gap between selling something and sharing something and the minute you attach a price tag to something, it just became basically impossible for me to do it myself. And I just thought that was super weird and I remember going into this sort – the opposite of a death spiral, whatever you call that – in terms of just having all these revelations about oh, my gosh, if musicians could sell all their stuff, that doesn’t make the album and all these designers could sell all these wire frames with mocks and you could see all this behind the scenes footage.
Basically, what happens when you allow all this stuff to get monetized? When you drop the minimum requirement for what is a sellable thing. What can you charge money for? Could you unlock this entirely new economy that would power all of this creative output. I just couldn’t stop thinking about it and I was just so convinced in this that I thought I would tweet and about it and so I did. I said yeah, tomorrow I start building my first billion-dollar company which I think is hilarious because I said first. You know, it wasn’t like a billion-dollar company. It was like yeah, one of seven.
I don’t know what I was on at the time. I’m sure I was sort of euphoric probably, you know. Then I built – yeah, I built Gumroad that weekend and it launched Monday morning. It was on the top of Hacker News. Fifty thousand people saw it. It was just like the most – it was probably the worst thing that could have happened in that – I mean because it totally just fed into that.
It was like if this is going to be a billion-dollar company, this is how that starts. In hindsight, it wasn’t but it definitely sort of – that confirmation bias was very, very strong at the time.
We talked about that move The Social Network and how that was sort of a turning point in Silicon Valley where so many people who weren’t really aware of what was going on, got suddenly interested and wanted to come out here and sort of write the story of their life as this billionaire tech founder.
It seems to me kind of like the wave that you were writing to. How old were you when this happened, when you launched Gumroad and it blew up over the course of a weekend?
I think I was 18 at the time. I was super young and it was honestly – I think that was a big component because if you imagine a – this happens to prodigies in piano and different skills where they have this trajectory – because their professional development has taken place over a very, very few years, the rate of growth looks like a rocket ship but in a lot of these cases it’s sort of isotonic.
It goes from 0 to 90 in 30 years but then it goes from 90 to 91 in another three years and it slows down. Whereas most people have a more linear growth. It basically tricks people because what people do inherently is they extrapolate, right?
So, I was 18 at this time. I had just raised – no, I was 19 maybe at the time that I raised money. I had raised $8 million. I was 19. I was on the front page of all these different things and it was just like you can’t help, I think, project that line sort of breaking through the chart and going into the stars or whatever.
Then, yeah, totally at the same time, Silicon Valley was getting on the radar as a whole in pop culture because of movies like The Social Network. I think that was such a critically important movie and time and moment because it really sort of mainstream-ified Silicon Valley, right? This was 2010 when people talk about Instagram being this massive thing. But at that point Instagram, I think, had not even sold to Facebook for a billion bucks. Which is now if you think about it, it’s going to be more than a billion dollars. It would be laughed out of the room.
Back then, no one really used Instagram. It was still like a relatively niche thing then. For photographers now it’s just by influencers and everyone to just post their life. But I think it really – what it did was it matured the industry, I think, really fast where all of a sudden, it went from a bunch of people building stuff and their motivations definitely were money-related but, you know, were mostly there to build things and truly, I think, change the world.
It turned into something like Wall Street which is this is a great business opportunity. There is a massive amount of inefficiency in the world. Software is this new thing that’s going to fix a lot of that. We’re going to be able to capture a bunch of value by doing that. So, inherently, it tracks people that are there to make money and to have a career, which is totally fine and sort of necessary.
I think every industry sort of goes through that but I think it happened so fast that it felt overnight that like one day it was just a bunch of people building stuff and then all of a sudden it was these people wanting to sell stuff and wanting to grow stuff and wanting to growth hack and all of these sorts of things.
It just changed, I think, the vibe of the industry. And I think honestly for the better. I think it’s easy to sort of say oh, all these finance pros came in but at the end of the day, I think it just provides a mirror to what we were doing which is at the end of the day tech is a great job. You get to build a lot of really cool stuff and you make a lot of money. So, I think it’s sort of okay to say look, we are motivated by several things and not all of those things is just sort of like hippie building stuff, you know, on the peak of a mountain because we love the process of building software. At the end of the day that’s just not true. I think it’s healthy to be like, look, at the end of the day, Wall Street and the tech industry are not profoundly different. They are honestly almost identical and that’s fine, because most things are pretty similar and everyone sort of has similar incentives and things like that. There’s not something sort of profoundly unique about software. It’s just money with logic build into it or something like that.
What was this process like of you building this app over a weekend? Because I think most people if they’re under this road block, oh, I really want to sell this thing I made online. I can’t. The conclusion would be that it’s too difficult to do it and if no one else has done it certainly you can’t do it, so move on to something else. What gave you the confidence that you could make this website, this product, that would actually help people sell stuff online and how did you build it in just a weekend?
I think it was a combination of things. The first one was because I could design in code. So that was always a strength of mine. I think it’s what led me getting the job at Pinterest was they could basically give this kid a really loose spec and then I could come back with a flap. I didn’t have to necessarily work with anybody else too deeply to get to a sort of an MVP.
It was similar I think with Gumroad where it’s like okay, I’m not that competent of an engineer certainly, but I can make a crud app which is basically what most apps are. You create products, you upload files. You edit the name and the price. You can delete them and then you can tweet them out and then people can buy them.
I think the other thing that happened was I always try to ask myself why hasn’t this been built yet. Like what prevented the past from making this thing. And I think with Gumroad it was this idea that people were still building up these audiences on their own on social media, and it was a relatively new thing and so, you know, if you didn’t have an audience on social media, there was no point in selling directly, right? You were going to sell through all of these traditional means because that’s how people interacted with their audience and with their potential customers anyway, through iTunes and things like that.
So, that was part one was the sort of that component of the system was still owned, I think, primarily by these traditional middlemen and then the other one was Stripe. It was so difficult to accept payments and Stripe just totally changed the game on that.
Certainly, it went from a two- to three-week process to, you know, a weekend process or a 30-minutes process. I was sort of lucky, I think. I knew John. I’d met him a few months, I think, before that and I was like, hey, John, could I have a Stripe beta key and he was like yeah, sure. So, I don’t know what it – I wish I could find out. Maybe you can find out for me what user ID Gumroad has in Stripe but I think we’re pretty early. You know, this is April 2011, and so that I think made the whole thing super easy was really I think not only a proof of concept for Gumroad, I think, but a proof of concept for Stripe.
This is the sort of thing that’s now possible because of something like Stripe. I think if I had used PayPal which I think was the original idea I would have probably spent two to three weeks on it and then, no longer sexy, right. Like the whole – the huge amount of the appeal of something like Stripe is demarketizing the ability to accept credit card payments and what happens when you do that.
So, yeah, I was just so obsessed with the idea and I had this fixation already with building things on a weekend. That was always – when I had a full-time job and so I was burnt out at the end of the day. It was going to be hard for me to do that Monday through Friday but too, I just really felt like there were all these ideas.
Sometimes people get caught up in the name or the branding or the logo or the design and the FAQ pages and all that sort of stuff and making it perfect. I was always like no, I just need to build stuff. My goal is to learn, not necessarily to build successful products at that point because I’m going to do that in 10 years, right? That was still sort of my plan that in five to 10 years I was going to go try that. So, my goal was just to like be prolific and shift as many different ideas as possible because my goal – the product that I was really building was like in my brain.
It was my own ability to build products. That was more exciting to me than anything else. It was what I had to do. I was like I need to launch this Monday morning. I think maybe that was part of why I tweeted it. I think in hindsight I think there were a couple sort of deep reasons. One was that I – if I told the world then I’d have to do it, right? It would be really awkward if I tweeted this thing and then, you know, six months later, everyone’s like hey, what happened to that thing that you said you were going to build?
And then I think the other one is just I wanted to put a stake in the ground. I was so – I don’t know if I was confident that it was going to be a billion-dollar company, but there was a high enough chance that I wanted to – I sort of I think I imagined like the Times cover, you know? The TIME cover, you know. This tweet, this stupid kid in the middle of nowhere and his life tweeted this thing and then it actually became a billion-dollar company. Like what the hell? That’s crazy. So, I think part of it was that, too, just thinking about sort of the 10 years I can look back and it would serve almost like a time capsule of my thinking at the time.
This is why I brought up The Social Network again because it’s the story of Mark Zuckerberg striking it rich, but everybody in SF and Silicon Valley, really, has his own kind of story about themselves, picturing themselves on the front cover of a magazine, picturing the biography that will be written about them and I think that’s also why it’s so shocking to people when their company is one of the 70% that don’t make it because it’s contrary to the story that they’ve sort of written about themselves.
Yeah, and you need that story to a degree. At the end of the day, it’s not easy, it is relatively low probability and the truth, I think, is you need to have almost a –some amount of delusion because five years in, it’s – I mean it’s not nearly as fun or as sexy as The Social Network makes it out to be.
You’re sort of constantly in like a fight or flight response with something or the other. You’re building a team. It’s really high stakes. It’s a lot of stress and there are a lot of reasons to say okay, never mind. But I think when you – you know, if you’re a basketball player, having the poster of LeBron on your wall, that’s super motivating. You know? Even though you might not make it.
And I think you kind of just have to – you just have to believe that you’re going to be the exceptional case and I think what happens is you go so long believing that, and seeing all these signs that sort of are like oh, we can raise a series A in like six month. We raised $8 million buck. We hired this amazing person.
There are all these – you know, I’m meeting with the CEO of American Express or whatever is happening. There are all these signs that are like oh, that’s the story. Right? Like those are – if you watch a TV show like that’s the character art that happens.
These are the scenes in your movie.
Yeah, exactly. And then you feel like you’re getting closer and closer and closer and then all of a sudden you just hit a wall. And at that point you’ve sort of gone so deep into the movie, you’re sort of so unaware and so un-present in your experience that it’s a shock. It becomes a shock even though intellectually, I think, everyone’s like yeah, this is a thing. It’s a lottery, timing, market, lock, privilege, all these things really matter, but all of a sudden when you start to see these signs of success, you don’t really realize that a lot of other people are seeing these same signs of success and very few of you are going to make it.
There’s actually a story that a high school teacher told me one time about a scam that happened in America. And what they did was they would mail out, let’s say, 10,000 mails saying if you invest in this stock, you’re going to make money. Then every week they’d pick a different stock and they’d say if you invest in this stock, you’re going to make money.
And there were all these people that got to the end of, you know, let’s say, a 12-week process, and literally every single time this mail was telling them the stock that was going to make them a bunch of money. Then on the 13th week, it’s like hey, we told you all these things. It’s amazing. Invest in this new thing – $50,000, $10,000, whatever it is – however much money you have and all these people are like, yeah – I mean obviously this person literally predicted the future 12 times in a row. I’m going to give them a bunch of money.
But what happens is they actually mail thousands and thousands of people that and they pick all these different companies and then the second week they only mail the people that they were right on and the third week, fourth, week, etc. So, it’s a numbers game. So, you have all these people that they think they’re the chosen one in a sense. But actually, there were all these people that got really close to Mt. Doom and died along the way that you just never heard about.
It turns out there’s actually millions of hobbits or whatever. You know? You just – what happened is you figure out which one worked and then great, you have all the footage of all the footage of these other ones. You turn all that away and you just tell the story of this one. You just can’t help but think oh, I am on the track. I’ve been right all of these different times.
If you ever watched “How to Be a Millionaire” or whatever that game is called. It’s the same sort of idea. You’re like on the story and you just can’t imagine not being – winning the million dollars because you’re getting all of this confirmation by us all the time and then you lose it. And you can see their faces are just like in shock. They’re like – they couldn’t even – even though the chance – the true – sort of if you look at the statistics, probably like, I don’t know – half a percent or something – get from the penultimate question and then winning the money.
It’s sort of a fascinating – I’m sure they’re mindful of that, right? I mean they build the game and the story that they’re telling within the episode so that people believe they’re the chosen one and then they ultimately lose otherwise it would be very unprofitable for the producers of the show.
I’ve got a ton of stuff I want to say in response to that. First of all, to the audience, if you guys want to look at what Gumroad looked like back in 2011 when Sahil first launched it, just Google Way Back Machine and put in Gumroad.com. Click back to April 2011 and you can see the homepage as he originally launched it which was super simple. I think that’s why you were able to keep it to just like a weekend project. You weren’t trying to be super ambitious. You didn’t have a ton of different pages on it. I think people can learn a lot that you can get somewhere ambitious over time if you start small. You don’t need to start super huge.
But back to what you were talking about, this process where you sort of have, you know, when after when, success after success, in a lot of ways that’s completely indistinguishable from getting lucky over and over again. It’s pretty brutal. You actually tweeted that the best co-founder is luck. What do you think are some of the luckiest things that happened to you early on in Gumroad’s history and what do you think were some of the things that were very deliberate, considered decisions that led to success?
I mean, you know, some of the most profound moments in my career – and these are things that other cofounders and BCs have looked at and been jealous. I mean they told me after I wrote that article on failure they were like, wow, I kind of have to apologize because I thought you were a dick because you were having all this success for doing absolutely nothing.
But I was really thinking about when I got the job at Pinterest, that had nothing to do with me. What if Ben had emailed somebody else? Who knows? What if that post of my app on Hacker News didn’t make it to the top? What if he checked it 15 minutes later, right? There were all these sorts of things that went into that happening for me.
One of the things that got me really interested in Gumroad and really being like, wait, this can be a company? I can raise money for this was investors. This one investor, Craig from Collaborative Fund, he emailed me after he saw that on Hacker News. Hacker News has played a pretty phenomenal part in my life. He said, hey, I know you’re fully employed. I know you’re at Pinterest. If you ever decide to leave Pinterest and start this thing as a company, I’ll send you at least $10,000.
I was like hey, I don’t know if I’m ever going to do that but if you want to send me $10,000 here’s the bank account and let me know. And he did. He literally sent me – I mean we had some back and forth and agreed on some terms – but he sent me $10,000 and it just sat there in some Bank of America account or something I had made for a holding company.
It was just like this insane amount of validation that I had that had nothing to do with me. It was just other people constantly being like, hey, we think we have potential. Here’s some validation. Here’s a contract. Here’s some money, etc. And I think that played a really sort of profound role in my confidence levels at the time and really sort of like, wow, I can do this. This is something I can do.
I had always just read these stories and I imagined Bill Gates as some crazy, profound CEO founder, working on a super computer, parked up against the wall or something. Who knows? I never related to them. I’m not nerdy enough and that really was like no, you can do this. You are one of these people.
So, I think that was really important. But the thing I was good at and one of the things I will take credit for is I was always very open and very transparent and so, you know, I wasn’t just building stuff in my dorm room. I was posting on Hacker News. I wasn’t just posting on Hacker News. I’d write a blog post about building this thing and then I’d share that on Hacker News and I’d tweet about.
I think I was always really good at putting myself out there and putting my work out there and building up a reputation and a brand and even when I raised the seed round it wasn’t just this random person raising money. It was this person who had worked at Pinterest, who had this blog, then gone back for a few years. People can see that and be like okay, this is a reputable person. He really does care about building stuff. He didn’t just watch The Social Network and then move to San Francisco and is trying to raise money and build the next Facebook. Right? Which I think is a lot of stuff that they probably deal with, I think, on a day to day basis.
I’ve always been really open about meeting people. I was spending every weekend – you know, when I was in Palo Alto, meeting with different founders and different people from Hacker News. Some of those founders have gone on to create billion-dollar companies. John from Stripe is one of them. He reached out to me, I think, back in the day. We were both like 18 or19 year old kids at the time.
Brian Armstrong from Coin Base reached out to me and asked me if I would consider working with him on some Bitcoin related project. I said that’s weird. I don’t really think Bitcoin is going to work. Then he made Coin Base and then – oh, I didn’t even know that – I had totally forgot about this. But apparently the founders of Plaid which is also I think, a unicorn at this point – or close – I hung out with them recently.
We had a former employee go to them to lead their design. He’s like we actually met a long time ago and you were giving us some advice on some stuff. I was like wow, that is insane. But I think it’s important. I think – you know, the best co-founder is luck but I think you can definitely work on your luck. Right?
Luck, I think, broadly means all sorts of stuff but mostly what it means is the stuff out of your control but you can still kind of – you know, you can – like Ben sending me that email was out of my control. I couldn’t force him to do that. But what I could do is post my app on Hacker News, email a bunch of blogs that wrote about app design and try to get them to write about it. Email Tech Crunch every time I built something, tweet about all this stuff, have a Twitter account that people could follow. Put my email in my Hacker News profile so people could reach out and we could grab coffee.
Start building up these relationships and even – I wrote this post reflecting on my failure to build a billion-dollar company at the beginning of this year and it did really well. I think it probably would have done well anyways but I think a lot of it – I got probably over 100 people that were like, hey, I met you at [inaudible] Coffee in 2013 and I just wanted to say I had no idea you were going through this, etc., etc., etc.
But there were a lot of these responses, I think that probably led to a large amount of the success of the article because it wasn’t just like oh, this random founder went through this. It was this person that people had met potentially, and you go to that Twitter post and you’ll see the replies of it. There’s like 200 to 300 replies of all these people that are all Silicon Valley somebodies now that are like, hey, we met up or this or so cool to hear your journey. Glad you’re doing well. It gives a depth to the article that goes deeper than just like, oh, this story that you read on Medium and it’s really cool or whatever.
I think that’s really important because at the end of the day, if you want to raise money, often the first round of funding is called friends and family round, right? That sort of implies that it has nothing to do with what you built. It implies that you built a network of people that trust you, that believe in you and that want you to succeed and are sort of willing to help you do that. A lot of people don’t have friends and family with money and that’s super notable and important to talk about. But I think at the end of the day I spent a long period of time building that network and building that level of trust. So, when I decided, hey, I’m going to go start this company, I had that already going for me. Right?
Like when I tweeted that Medium article, I think I got something like 150 re-tweets in the first five minutes. There’s no way anyone read that article that fast. Right? But I think it was like, hey, this person that has helped me out somewhere the last eight years. I did the math and I think I probably had coffee meetings with probably around 7,000 people at that time.
… in that time. It’s like hey, he helped me out that one time. I’ll help him out this one time. And that boosts posts and Twitter looks at that and is like, hey, clearly this post is jiving with people. Let’s – the algorithm will go put that somewhere else, etc., etc.
And so, I think those things add up over time. You can’t control when they’re going to help. I think Neevalle has some saying about that where it’s basically like you know, you should help people and it will come back to it. But if you’re counting it, if you’re waiting for it, you’re going to get pissed off.
It’s going to take a lot longer than you think, but a lot of these things will come back and help you out. If I was bitter about Pinterest, that could have burned some bridges. That would have led to me not being able to raise money at all. Right? I think I’ve always tried to be really, really positive about my relationships and even today, I think it’s important to continue to build those relationships with people I’ve never met, and one of the things that I really believe now that’s a relatively new realization for me, is that friends take time to build.
You don’t become friends with someone overnight. I always used to be upset and I’ve talked about it before, that you know, San Francisco is a transactional place. When I went through the layoffs and everything, I felt like my network had sort of evaporated. But the truth, I think, in large part, is that these networks – they weren’t friends because we hadn’t known each other long enough, right, and I think friends become friends over time.
Adults complain about oh, it’s really hard to move to a city and make friends but I think part of it is well, it takes years. Imagine – think about who you’re friends with. Who would you crash on a couch with when you’re visiting a city, right? It’s probably the people that you’ve known the longest, that have seen you drunk and through some really some hard times. It’s not just the people that knew you when you were a found of a venture-back start-up.
I think that’s been important for me to realize, too, and something I’m actually trying to do now when I go to San Francisco is not to status seek and not to hang out with, oh, I have 50,000 followers on Twitter and they’re all these new, cool people that I get to hang out with or whatever. But really like, okay, who did I meet over the last eight years that I really just liked? That I really just want to be friends with these people. I don’t care how many Twitter followers they have or what they’re doing, but I just like them and I want them to succeed and I want to help them succeed and I just want to spend time with them and really sort of build out those relationships.
You talked about how so many people came up to you and said, hey, we had coffee but we had no idea what you were going through. You talk about hitting a wall. But you also talked about Gumroad having the most boring, upward trajectory graph with nothing really super exciting going on. So, what was this wall that you hit despite Gumroad growing pretty consistently over time?
I think the physical wall I hit was just the series B that we tried to raise. We went out – so we raised, $8 million in six months with basically no team. So, we had an insanely long burn. So, we went from –I think we closed the series A in May 2012. That was $7 million lead by a client at Perkins and everyone took the pro rata.
So, we had three years basically before we had to really be like, okay, we need to raise money again. So, I think part of it was we’d gone so long without any real external pressure. I think that was a mistake in hindsight but basically, I started talking to investors again and saying hey, you know, a year from now we’re probably going to be raising money. These are our numbers. They look awesome, up and to the right.
And the investors are like ehhh, no. This is not where you need to be if you’re going to go out to raise a series B, 15, 20, 30 million bucks. Sort of a $100 million plus dollar valuation. You need to be growing a lot faster. Your numbers need to be a lot bigger. Your trajectory – your potential, basically, is just – there’s none of that here. Right?
And I actually looked up – I was taking notes along this process and I was sharing it with the team which is something I’m very glad that I did, so it was never a surprise when things got really tricky for us. One investor from – actually one of the investors that gave a series A term sheet said, you’re growing seven percent a month. You need to be growing 10 to 20% a month. Those are the types of companies we’re looking at right now and you are sort of in your stage.
And I think that’s important to realize is when you’re fundraising you’re not fundraising in a vacuum. You’re not just building a good business. You’re building a business that is competing with 10, 15, 20, 50 – I don’t even know how many other businesses – for a series B term sheet from less than 10 top-tier firms that can invest in this sort of thing.
So, when everyone else is growing at a certain rate – you know, 10, 20% or even if just one of them is – there’s one spot and if you’re not that spot, you’re a no. You’re not – there’s no second place, basically. And that’s the wall that we ran up against was we just were not growing fast enough and I think a lot of people – including former team members I’ve had conversations with. They’re like man, we could have done something differently. We could have raised money if we told a different story.
But I think the truth is – and Josh Koppelman [ph], one of our investors says – there’s nothing like bad numbers to F-up a good story. At the end of the day, I think that’s relatively true because when you raise money, you have to do it on potential. You have to do it on trajectory because the numbers frankly, are so absurd that you can’t raise money based on your normal metrics. Right?
You can’t – otherwise they would go invest in a very boring, profitable company that had a guaranteed rate of return. What they want to do is invest in incredibly higher-risk things that have incredibly high rewards, if and when they work out. And when you have the time at this point five years of data revenue, transaction data, etc. and those things show the company growing at a rate of 25, 35, 50%, even 80% a year, when the other companies they’re looking at are growing faster, it’s very difficult to say, look, it is growing like this but we’re still going to be a billion-dollar company because you just extrapolate and it’s like, okay, this is going to take about 40 years to be a billion-dollar company at this rate.
I think it’s just important to really understand that, you know, while everyone’s in it to build cool stuff, and change the world, at least hypothetically, at the end of the day, investors are still money managers. Right? They have a job. It’s not their money. They raised a bunch of money and they need to provide a 3X return in 10 years and you just start doing the math on what that looks like for firms and they need an Uber and they need a LinkedIn, they Pinterest and they need a stock in order to make the fund work for them.
And if you’re not going to be that – and there’s a lot of data that shows you’re not going to be that – you’d have to come up with something incredibly compelling to change their mind. And I just don’t know if that’s possible.
It’s pretty brutal as a founder to be in that situation where you’re not what these investors need. You’ve got numbers and the numbers are basically telling investors, hey, you’re not going to hit it out of the park for us. But the numbers are also telling you that your company’s working and people like it. You know, 2X a year. What are some of the things that you did early on to get these numbers to consistently go up and to the right, even if they weren’t going up quite as fast as investors to.
Yeah, I think one of the things that we did well was we really built the correct product. I think we were really focused and one of the things that I always try to do is build things that have a built-in, sort of word of mouth, growth component to them because I’m just so scared of having to do that on purpose.
I think it’s incredibly difficult. I have mad respect for people that figure that part of the problem out. But for me, it’s like I want to build a phenomenal product. If it’s great, it’s going to grow by itself and then we can think about our sales funnels and our sales function as how do we just get this in front of the right people that are going to fall in love with this product and all we’re doing is raising awareness basically. We’re not sort of selling – we’re educating somebody on a problem that they know they have and we’re just telling them, hey, by the way, this solution exists now.
And I think we did – that was just a lot of direct sales basically, lot of cold emails, a lot of cold calls. We tried to think about, okay, these are the aggregation points of these sorts of communities. This is where all the musicians are, this is where all the filmmakers are, this is where they hang out – Sundance, different talent agencies, labels, etc.
And we just really had to make it happen. We had to sort of push the boulder up the hill. There are no real secrets, I think, to that. It was really just crafting personalized emails to people saying, hey, we built this thing called Gumroad. This is what it does. It helps anyone that has content. We sort of do an all-in-one commerce. We do the credit card forums, the payments, the marketing page, the receipt, the invoice saying the content delivery, the download, the streaming, rentals, subtitles, everything you need to sell your documentary. And you can take 95% of the revenues home if you sell with Gumroad. All you’ve got to do is have an audience.
And it works. I think it works if you do that. People are going to say cool, yeah, that’s a fit for me. Most people are not. At the end of the day, most people are pretty happy with their lives. There’s a profound amount of minutiae. Everyone is making things work. So, I think there is a lesson there which is focus on the people that already have the need. It’s incredibly difficult to convince somebody that they have a problem if their life is going fine, right?
To say, yeah, you’re already selling this thing on – you have a deal with Netflix, for example. You’re making a few hundred thousand dollars a year as a filmmaker. You should actually stop doing that and totally change your business model because this new way is even better. It just doesn’t work.
I think humans are incredibly fearful of risk and loss aversion, etc. Yeah, that was honestly it and even one of the things we used to track was our organic resourced growth. And we had this organic curve that was almost nothing. I mean, so much of our volume in the first two, three years, I think over 80% of our volume when we started thinking about the series B – so, probably even 2013, 2014 to like two to three years in, with a full product team etc. – we were still mostly fueled by direct-sourced growth, people that we reached out to and had to teach about the product. Because you know, at the end of the day, we’re relatively young company, we’re unknown, we have a weird name, we don’t have enough SCO power, it’s so difficult to build a business that’s purely self-served.
I think the beauty of sass [ph] is now, for example, when we had to do the layoffs we continued to grow because we’d invested so much in the self-serve component but the truth of the matter is, three, four years in, the vast majority of the sales were coming through people that we had built relationships with.
And I think this is similar, even with our own creators, when we see successful creators – I know Adam did an interview with you recently. A lot of that is building relationships with people and when you’re – that 40,000 bucks, right, when you’re ready to go, you can see that pay off.
That’s the version of all those who tweets on my Medium post is really taking the time to build these relationships. Similar with when I fundraised, right? It was mostly people that I’d known before and if it wasn’t someone I’d known before, it was someone that intro’d me that I had known before, that was willing to vouch and put their reputation on the line for me as a person.
So, I think that’s like really, really, really important is to say okay, I’m building an app that in the podcasting vertical and we help people. We build these marketing pages for people with podcasts, that’s not going to happen organically. You can build the best product but at the end of the day, it’s unlikely to happen.
You’re going to have to figure out okay, who’s the perfect customer for this. Okay, well go email them, go talk to them, get an intro to them and get them to use your soft ware and if they don’t use your software, figure out why they’re not using your software and that’s just kind of what you have to do.
I mean Stripe is, I’m sure, the same story. Of course, they’re now they’re probably relatively self-served, but in the beginning it was like, okay, let’s ping every single YC company. I was one of the first users. I was a friend of John. These are relationships that existed off of just a purely like, you know – I Googled soft stripe credit card processing and said, oh, yeah, sure, I’ll sign up for this thing. I’ll just give them all my banking information and let them power 100% of my business’s revenue. That sounds like a great idea. It was a lot uglier at the time.
So, yeah, I think it’s just so important and I wish more people talked about it, too. You know, people write these articles about these crazy growth hacks and all that sort of stuff but those things only work once you have your initial audience. Right? Once you always have your initial set of users, then you can start messing around with stuff like that.
That stuff works well, you know, as a multiplier on your existing growth but at the end of the day, you still need your exiting growth to make that stuff happen and to make that stuff work out long-term.
And I think the other thing that I think sometimes people miss is they listen tpeople talk about these things. Even me, you’re talking to someone who did this seven, eight years ago which is very different than someone doing this today. Right? The markets are totally different. The way that you might get into contact with people is so profoundly different, and I think it’s really important to talk to people that are just a little bit ahead of you. They have more skin in the game to teach you and to help you out as well.
It’s funny because it’s so deceptive from the outside looking in. You look at Stripe, you don’t see sales people doing direct sales to people at Stripe. You just see this sort of self-serve forum. You look at Gumroad, you don’t see all of you guys working behind the scenes to get the word out to tons of people. You just kind of see oh, here’s where I sign up for Gumroad.
So, I think a lot of people who want to start a company really underestimate how much you really need to be putting in a lot of this work – this relationship-building, this one-on-one sales outreach to people to really get the ball rolling.
That’s totally spot on and even when you see stories like 50,000 people saw Gumroad in the first day or whatever. None of the people use Gumroad, right? Most of them didn’t. We basically had this crazy spike and then it went back to whatever our normal growth curve was which at the time was basically nothing.
So, I think that’s another important thing to understand is that having an amazing long-term product might look really sexy, but that’s sort of like winning an award for a restaurant, right? Like all that says is that your community or your peers think you’re great, but that has nothing to do with if anyone’s actually going to eat at your restaurant, long-term.
And so, I think that’s also important to understand is at the end of the day, make sure you’re measuring the right thing which is how many people are actually using this software, paying you money to use this software, not just oh, I got number one on Product Hunt. That’s not typically what builds great businesses.
So I’m still on the Way Back machine, scrolling through different versions of what looked like in the past and it’s funny in 2011 you had a quote on your homepage from Nathan Berry who I’ve also had on this podcast and who also had a big inflection point in his business where it wasn’t growing, it was super small and then he just said, screw it, I’m going to start doing direct sales. And that was his break through moment.
I think what’s remarkable about your story is you guys are doing this – you said like the first three or four years, this was like your primary engine of the growth, for most people that I talk to though they’re like yeah, I got my first 100 customers or my first 1,000 customers by just sending a ton of emails but after that it kind of took on a life of its own. When did things switch around for you guys, if ever?
Honestly, I think things switched around by necessity when we literally couldn’t afford a sales team anymore. So, I remember that actually because the way that I was thinking about it was we failed to raise a Series B, we had all these conversations with investors. It wasn’t happening. I was going to shrink the team from 20 to five. And we did and we got to profitable.
What I told myself was, I’m going to run this business for a couple years and see what happens. This is – we have no sales team. I’m doing all the support at this point. We basically can’t ship any new features, right? We don’t have enough resources to really do that. What happens to Gumroad if we literally do nothing besides the bare minimum?
And that’s what we did. You know, and you look at that graph from 2015 to 2018, it’s the best part of the graph. You know, it continued to grow and so it paid off. I think we sort of – the journey down that mountain, that boulder, was gaining momentum and we’re actually growing faster. The rate of change is actually increasing over the years as well as the rate of growth.
But it was almost undetectable because those numbers were so small in the early days. Right? And I think the reason for that is because when we do a direct sales with M&M, he does $2 million in two days. We’re processing $20 million in 2014, I think. So, you just do the math on that. It’s like a tenth of our volume from one user in two days.
Whereas, a self-serve person like me is like I’m going to sell my pencil icon on Gumroad and make $7. Like you just do the math on that and you just – what happens is it goes to that whole vanity thing. What you’re doing is you’re tracking all of these people that use your software, like the 50,000 people, the number one on Product Hunt, all the accounts that are being created but you’re not tracking your revenue.
How many people are actually making a living using your software which is going to be a lot smaller and you look at a company like – what I’d highly recommend a lot of start-up founders is go read the S1s of some of these companies that have recently gone public. Look at Slack, look at Zoom, look at Pager Duty. The number of companies that drive the majority of their revenue is often in the hundreds.
Think about that. Your Slack. This is a company that basically everybody uses at this point. You’d be probably surprised if you met a friend that didn’t know what Slack was or didn’t use it for something or the other. Right? And I think something like 850 companies drive 40% of their revenue or something like that. It just is insane, the long tail of these things.
And I think if you look at the people that advertise on Facebook or Google or Twitter, you’ll see a similar long tail where there are very few companies that spend an insane amount of money – I think Microsoft’s contract with Slack is like $4 million a year. Right? Think about how many Gumroads you’d need to get paid $4 million a year. You’d need thousands of them, right? Or at least hundreds.
So, I think often – and, by the way, Microsoft is never going to sign up for Slack self-service. That’s just not going to happen, right? I’m sure if you look up Stripe, you’ll see a similar story where like a huge amount of the revenue is coming from these massive marketplaces like Lyft or what have you, right?
So, I think part of it is just being open and honest about that internally. I think one of the really hard things about that is that people don’t want to talk about it because it creates this dissonance with why you started a company in the first place because imagine you’re Square, you’re Stripe, you’re Gumroad, you’re Shopify, and you’re like yeah, we’re going to help demarketize, right? That’s the word. We’re going to demarketize this ability, all these people that have never been able to monetize their content or launch a SAS product, are going to be able to do this.
Then you look at your numbers and you’re like, wait a second. All of our money is coming from Microsoft. I’m pretty sure they could have done this on their own. You know? But at the end of the day, it is what it is. A lot of your money is going to come from these very, very few companies. Even with us, we have been incredibly long tail but even with us, you know, the top user on Gumroad – we process $6 million a month. The top user on Gumroad does around – over $500,000 a month so 80% or so of our monthly volume is one person.
So, even when you look at the loss of a product that seems almost entirely directed at the long tail, you’re still having a power law within the long tail itself, right? We don’t have a Microsoft doing $4 million – paying us $4 million a year – but we do have a creator that Microsoft in our world doing really, really well.
And so, I think it’s juts important to understand that you will have – in gaming their called whales, right? These people that spend tens of thousands of dollars a month on [inaudible] and that’s the majority of the revenue. And that allows you to build software for all of these other people, but I think it’s important to understand that the reason your business works at the scale that it does is because you have these beasts, these behemoths, spending a lot of money for your software and at the end of the day, they’re not going to sign up for your software organically. Maybe one day for now, if Stripe wants Lyft, there’s – I guarantee at least one phone call that’s happened in that process.
So how does this affect your strategy running Gumroad today? Do you spend a lot of time looking for these whales to sign them up?
We’ve actually done the opposite and honestly, it’s a tough one because I think a lot of people, including former employees, were like, look we should just focus on M&M, right? If he makes $2 million bucks in two days, we get 50 of those and we’re good.
It just wasn’t really the type of business I wanted to build. I saw that power law and I said someone needs to support these critters at the end of the day. These independent critters – basically what happens is all of these companies go up market because they see what I see, right? These whales making the vast majority of their revenue for them and they stop supporting these folks and then there’s a new service that does the same thing and then they go up market and etc., etc., etc.
And so, my philosophy now is like we’re not going to try to build a massive company. We’re not going to seek the whales. They are going to become whales on our platform and some of them will leave, unfortunately, because they need certain functionality or a lower transaction fee or all of these sorts of things – a dedicated customer support person, an SLA, some security features, etc.
And we’re just going to focus on this – what we call this zero to one. The people just getting started. Because at the end of the day, someone needs to help them and the amount of value being created, I think, by Gumroad critters is massive even though we can’t capture all of the value.
An example of this is someone you mentioned, actually. Nathan Berry, right? Convert Kit founder. He was on Gumroad. He made a significant amount of money on Gumroad selling books and software and he used those proceeds to start Convert Kit and now Convert Kit is a much larger business than Gumroad is and doing an amazing amount of good for the world.
So, I think, for me, it’s tricky honestly. It’s not easy and I definitely am still figuring it out but for me, it’s like I really just want a bias towards the Convert Kit stories and bias less towards the enterprise sales model, even though it means we’re not going to build as profoundly significant of a business, we will be able to build a business that people hopefully credit with some important inflection point in their life.
And then the other thing I think is just we’re going to talk a lot about building the business and hopefully we’ll be able to get some of that satisfaction not in the form of revenue or valuation of a nice bank account balance, but people saying thank you and appreciating the work that we’ve done, similarly to a company that I like a lot is Word Press, the automatic team.
I think they – I don’t know some amount of the Internet – 20% of the Internet—or something is powered by Word Press and if that was the case and they had a very different model, they could be doing a lot better and they’d be a lot more famous, etc., back in the day I think the amount of value that Word Press has created for the world, the amount of value that the rails[ph] framework has created for the world, [inaudible], etc., is in my opinion billions and billions and billions and billions of dollars, maybe trillions of dollars cumulatively, and certainly over time, will be true, and none of those people are going to be worth billions of dollars or anything close to the amount of value that they’ve created.
And I think that’s fine. I think that’s great. I think as a society it would be cool if we recognized that a little bit more, and if sort of the status and the leader board that exists in everybody’s head is sort of the scoreboard on the side of the wall of the Silicon Valley basketball court is not revenue, is not valuation, is not number of employees, but the value creation and we figured out a way to measure that, I think society would just be a lot better for it.
All this money that – basically these people become billionaires because of the status and then that money just sits around frankly, right? I know some of these people. They don’t even have cars. I always joke, a bucket load of money and I would buy a Tesla. But I could do that now if I really wanted to. I just haven’t.
So, yeah, I think if as a society, we could reward putting some of that money back into the system or building our companies in a way that means we never got that money in our bank account in the first place, right? But we did get some of the status, some of the credit, some of the fame. I think society would be better off. I think humanity would be better off and I think there would just be a little bit less animosity in the world towards other people if we were just a little bit “less selfish about some of this stuff”.
Obviously, it’s a little hypocritical of me to say, I think, because I certainly tried to do that and I failed and I wrote this post about it and that gave me all of this status and boosted my ego and all of those sorts of things. But I see the value of that now. I’m like oh cool, if I can get that without building a billion-dollar company, that’s not bad. That’s a pretty place to be and I’m sort of trying to convince other people like hey, is this an accident or is this actually a thing that more people would want to do on purpose if they need this was a possibility. Maybe you’d be able to do this without having to lay off 75% of your company, that would be kind of nice.
Is appreciating the intangible effects of the work that you do is tricky. You’re talking about people in Provo and the way that they live kind of in service to each other and for the here and now and the people in their community. I wonder if I tell you something like Gumroad has paid over $200 to creators and artists over the years, what’s the emotional impact of that on you versus the emotional impact of you being able to help someone in your oil painting class reach some goal that they haven’t reached before.
Yeah, I do wonder about that and honestly, I think it’s all the same at the end of the day. We sent $400 to some creator. We have this thing that we launched called the Gumroad Creators Fund because we started making profits and I just didn’t really didn’t know what to do with it. So, I saw these Mormons around me tithing 10% to their church and I was like, oh, we can tithe to our creators.
We can redirect 10% of our profits and give back, and so we started doing that this year and we gave $400 to this woman who’s going to a First Nations Conference and wants to bring a couple of her students, her female students with her. Four hundred bucks is not a lot of a money to a venture-backed company, that’s nothing nor would they ever make this investment because it’s never going to be the thing that makes them – that really inflects their growth curve which is typically what you’re looking for because you need to raise more money, etc., etc.
But it changed her life. She sent us a video and it was super emotional for me. It just was like wow, this goes so far, you know. And I think, at the end of the day, there’s this story about the little girl with the starfish, right, where someone says, what are you doing? She’s throwing starfish back into the water, right? Someone says, what are you doing? This is stupid. This doesn’t matter. Look how many millions of starfish you think you’re really making a difference and she says it matters, it matters for this one, it matters for this one.
And I think at thee end of the day that’s all there is, you know. The ocean is just made of drops of water and at the end of the day that’s –you can look at the ocean and you can say okay, we’re going to – it’s only worth solving this problem if we can move the whole ocean. But the truth is, if everyone thought smaller, I think it would be good.
But I think to sort of answer your question more directly, yeah, when I help someone oil paint or even if I’m just oil painting myself, the emotional impact of that, the serotonin, the dopamine, or whatever that fires off in my brain is larger probably than even hearing $200 million.
At the end of the day, we’re massively driven by helping other people and by sharing these stories and these stories are not data. They’re not numbers. They’re individual people whose lives changed because of something that you did, and that is the way that we’re built, I think, is to help those people to help other people and at the end of the day, numbers are just numbers.
I think one of the reasons that founders that get more successful get less happy over time is because what happens is you see the number go up like crazy. You see the 10 go to 100 go to 1,000, to a million but then all the stories that you hear, which are, in general, negative ones, because otherwise they’re just going on with their life, that goes from one to four to 10 to 20, so it actually as a percentage of the good stories is diminishing but as an absolute number it’s going up over time and that’s all your brain can process.
You’re just seeing all the people that are hurting because of what you built, their lives are more soft for what you built and I think that’s a huge reason that some of these people go into these depressive states because the stories are the things that matter to our brains.
Like you watch a Pixar movie and you start crying because a toy can’t be with the other toys. That’s insane but your brain – like you just can’t not cry because your brain perceives that story as valid and as true as anything else. But imagine if at the end of Toy Story it said four million toys were not reunited with their owners. Right? You’d be like that’s weird.
But that’s just the way that we’re built and I think understand and really grocking [ph] the way that we are built in ways that we cannot manipulate, cannot control – we can just sort of live within, those things are really important to understand because if you want to be happy – which I think a lot of people do want that – and also be in service of others – to work for yourself and work for other people I think you’re going to – a lot more people realize these things.
You know, it’s funny, because I wrote this post and I came to some of these realizations and I know that anyone that has kids goes through this too, right? I’ve heard it so many times but you just need to go through it yourself. I tell people you’re going to read this Medium post and then you’re going to make all of these mistakes as well because some of these things you just kind of need to go through the motions and your whole body needs to realize what it’s doing before you’re like, oh, oh, oh, oh, that’s what he meant.
You could read meditations by Marcus Aurelius or whatever but at the end of the day, it’s not enough. You’re not going to truly understand what someone’s been through until you’ve been through it yourself.
Yeah, and speaking of that – speaking of not really understanding what someone’s been through and tough experiences – you laid off 75% of Gumroad’s workforce. You went from 20 people down to a company of five and then down to a company of one. So, at some point I think it was just you back to being by yourself.
Yeah, just me.
What was that whole process like and how did it feel going through those layoffs?
Oh, man, it was tough. I mean we knew it was coming, right, and so it was like always there, sort of in the distance. As it got closer and closer it was just – I describe it like treading water – where we were alive but certainly, we were like running out of options. And at some point, if a BC didn’t come along in their boat and save us, we were going to drown.
One of the decisions we made was to say, okay, we can either cut the team in half now and then have two years of runway, or we can say, look, we’re going to go for it. We’re going to keep the team the same and we’re going to work really hard and hopefully we can sort of inflect the numbers and we’ll raise money and all will be good. And it didn’t happen.
But I think the thing that I did really well was to communicate with the whole team the whole time that we were talking to investors. It was going to be brutally difficult and the default state was we were going to have to do a round of layoffs. So, when it happened it was less like hey, I’m doing this and it was more like, hey, this thing that we already agreed upon is not happening because, you know, I’m not doing anything else. It was sort of the default.
But it was so hard and I think honestly, one of the hardest things about it was it was the first time in a long time, for me – maybe in my whole life – that I had so visibly contradicted that story that I had been telling myself and telling other people frankly, and the world had been telling me about being one of these people that was going to build this billion-dollar company and do the thing.
Honestly, sometimes, I felt like I was on a TV show or something, right? The Truman Show. It felt so perfect and when that wasn’t going to happen and it was like well it’s going to happen anyways. We’re going to raise money. There’s obviously these ups and downs are also built into the TV shows. But then when we did the layoffs, it was like, oh, okay, I guess this is it. It was just a very – it was like imagine if you’re watching some movie and at sort of the final battle [ ] just gets killed by [ ] and walks away with the ring.
I love these hobbit analogies.
But that’s really how it felt. It just felt wrong frankly, you know. It just didn’t make sense to me and then the thing that made it even harder was at least I felt that I could pretend. I could sort of project a different image to the world. I didn’t have to tweet that this was happening but then the Tech Crunch [ph] wrote about it and there was this – I was on the front page of Tech Crunch again for the first time in a little while and it was for the exact – it was for a reason that I did not want.
That was really hard because all of a sudden it was like – it was a story that other people knew but I didn’t know how many people knew it, so I was kind of in this weird mode where people would come by the office for a meeting that I scheduled and the office would be basically empty and maybe they’d read the Tech Crunch article; maybe they hadn’t.
And I sort of had to play this face and basically lie, you know. Be sort of dishonest and I’m sure I was not present at those meetings to a large degree and actually since the article came out, people have told me that. They’re like yeah, I came to the office and it was a very weird meeting and I’m glad you’re doing good now.
So, I wish – I think, in hindsight – that I had been more honest from the get-go. Look this happens; we’re going to get through it. But I think partly it was like I didn’t want to tell creators. I didn’t want creators to find out if they didn’t need to find out, because they’d leave and who knows what would happen with Gumroad and maybe it would be a self-fulfilling prophecy and we’d go into a debt spiral and they we’d die and then I would be a real failure.
So, I pretended that everything was fine and it was just the worst thing ever. Because I was still living in San Francisco. I was still paying a lot of money in rent. I was still hanging out with all of these people that were there for start-ups and I suddenly didn’t have anything to say at these parties, at these dinners, at these hang-outs.
And I think everyone knew what was up but it was like – did you ever have a friend go through something really difficult and you just don’t even know what to say to them? And so, you say nothing. You kind of pretend like everything’s fine and then they are like no one cares. No one cares about this.
I had a friend whose husband passed away and she said no one reached out to her about it and she felt terrible but she was like look, I also didn’t reach out to anybody and it was just like this thing like no humans really know what to do in these situations. I just remember feeling incredibly lonely. I had a support network but I wasn’t engaging with it at all. I hung out with my mom this most recent holiday season and I asked her – I was writing this article – and I was like, hey, like when – or I was thinking about writing this article and I asked her when I told her about all this stuff that went down – the layoffs and everything – and she said just now. You never told me and I never wanted to ask or bug you or stress you out. So, I waited basically until today. So, I was like okay, I need to write this article then.
Because if my own mom – how many people have thought about this and not been able to confront me or talk to me about it? How many people could learn or just feel validated or feel like they’re not alone because everyone is too scared to talk about this stuff and that’s really one of the key moments that got me to okay, I’m going to write about this. I’m going to publicly declare myself a failure and luckily, I’m in Provo, so if everyone things I’m a moron, it’s fine. Whatever. I’m a painter now. I’ll just fully embrace the painter lifestyle. I’ll be like – what’ s another metaphor – the guy from Luke Skywalker, right, just go to the mountains and just be alone.
Just hang out by yourself.
Hang out by myself. That will be good. Me and my paints. Then it turns out – sort of the exact opposite thing happened. It turns out everyone wanted to hear this story or wanted to hear A story like this because people have them and they don’t want to talk about them or whatever the reasons are but I think people are like – I think it was like it almost felt like a collective breath of fresh air in the industry where it’s like oh, cool, yes. We’re not perfect. Thanks for writing about it so I don’t have, too, sort of thing, which is kind of funny.
It’s not easy to pull off a good failure story.
Yeah, it’s funny because we almost joke about them. They were kind of a meme – sort of the failure Medium posts. I think part of it is because even in those failures, people are trying to position themselves as successes and make a point or sell a new product or something like that
I think with me it was just like I have no skin in the game at this point, I thought, at least. I’m just going to write this thing. I’m not going to make a point. I’m not going to sell a product. I’m not going to hype up anything else. I’m just going to say look, this is what happened. At the end of the story, I say, I had a punchline, I think at the end. But I removed it. It was just like this is my story for better or worse. Take from it what it will.
A bunch of people that were giving me feedback were like you need to punch your ending. If you want this to go viral, if you want people to share this thing, you need to say something controversial, opinionated or whatever. I was like, I tried. I had a few drafts with something like that in there and I was just like, I can’t. I’m exhausted. I feel like I just need to hit publish and tell the story. It’s a reflection, it’s not – I was inspired by Susan Fowler who wrote “Reflecting on My Very Weird Year at Uber” is what she called the post about all the sexual harassment and all that stuff that happened at Uber.
It was just like – I just needed to get this off my chest. I’m reflecting on this thing. I’m not like Uber should die or whatever. It was just “Reflecting on My Very Weird Year at Uber.” Like no mention of anything crazy. And I was inspired by that. I was like that’s what I want to do. I just want to tell my story, get this off my chest, 90% of the value was me just writing it and if it goes well, people like it, that’s great, they’ll share.
And if not, they won’t, and that’s fine, too, because I don’t know how many people I want reading about my failure anyway. It worked. I think people liked it and I think people almost like – it was kind of the anti-article, anti-failure article, too.
Because actually it was an article about success. It was like I actually built this great thing. I just didn’t really know it at the time. And now I do and that’s cool and it’s okay to say, hey, look, I built something cool as well. I think that’s the other thing that I think a lot of people appreciated. I think Silicon Valley almost has this kind of weird, self-deprecating nature. It’s like we can’t – when we do succeed, it’s like what’s the point? Because no one buys a nice car anyway. I feel like it’s this weird thing that happens where all these people fail but then even the people that succeed, I feel like our culture is so like we didn’t do this for ourselves. We can’t even buy a nice car.
We can’t – I remember meeting up with a friend who sold a company and he had an Astin Martin and another friend who had an Audi R8. They’re the only two nice cars I’ve ever seen in San Francisco. She apologized to me because – I was like hey, can you – he’s like how are you going to get home? I was like, oh, I’ll just call an Uber. He’s like I’ll drop you off, but please don’t’ tell anyone I own this car. And I saw it and I’m like, dude, this car is sick. What are you talking about? He’s like I know. It’s an Audi R8, it’s stupid but I’ve always wanted one. I’m like you don’t have to apologize.
Well that’s the culture in SF. It’s just a different culture.
It is, though.
You’re not doing it for yourself.
But yeah, and it’s like so wrong to admit that you are. To some degree, you are doing this for yourself. You are doing this because you want fame, you want status, you want to build something cool. You want people to say, wow, you’re actually pretty good at what you do. And I just think it would be healthier if everyone was kind of like yes, it’s okay.
It’s okay to sort of be who you are and it’s almost the opposite effect where people can detect that, too. You know? It’s like I think people obviously don’t like when people are pretending to be better than they are, but the same goes the other way around and it’s okay to be like yeah, we worked really hard and we won.
Obviously, there are a lot of signals and a lot of factors and we’re grateful for all of them, but a component of that was being smart, working hard and doing the thing and giving it a shot. And I think it’s okay or it should be okay, I think, to say that.
But you’re right. It is sort of the culture of Silicon Valley to sort of like accept no reward. The valuation speaks for itself and that’s all. But I don’t think that’s true.
You tweeted about a week ago that life is a series of distractions from existential dread. Is that what Gumroad is for you?
Yeah, well it was a little bit of a – hopefully a little bit of a sarcastic sort of tweet but I think it is true in a large sense that at the end of the day, the problems that plague us have plagued humanity since before technology and before software and probably before money and writing and those problems will stay the same and be the same even when we have a dyson sphere around some star and we haven’t invented teleportation and stuff, we’re still going to be like oh, crap, what are we doing? What’s the point of all this crap?
But I think that’s – yeah, I think it’s just sort of this acknowledgement that we all suffer from the same demons, that we all deal with the same rough problems and we can distract ourselves and it’s okay to call them distractions because I think like Gumroad and Apple and Microsoft and Facebook are all just tiny, tiny, tiny things in the span of the universe or the multi-verse or whatever scientists have discovered so far.
To me, it’s a sense of freedom to be like – it lowers the stakes in some sense and it lets me kind of do what I feel like doing instead of trying to solve the world’s problems. I’m sure some people disagree with that but I think for me, at least, it’s like look, we can really get riled up about all of the things that plague our society and spend every waking second trying to fix that and getting everybody to vote and doing all these sorts of things.
But I think at the end of the day, it’s important to recognize that the world looks the way it looks and it will roughly look the way it looks 50 years from now. These things will change certainly, but I don’t know, I feel like we have a lot less impact on them than we think. If Steve Jobs didn’t invent the iPhone, someone else would have.
We can care about these problems but we should care about them and work towards them in a way that helps ourselves and like makes sure that we are feeling fulfilled and happy and doing things for our own sake as well, because everything is a distraction, I think, from the core lived experience which is happening on our deep sub-conscious and I think we’re not that different from ants in that sense.
We look at ants and sure they’re doing stuff, but they’re sort of playing a role in their larger thing and I think at the end of the day humans believe that, too, and I think actually one of the – it’s one of the things I really picked up, I think, living in Provo, which is, as you mentioned 89% Mormon and even they believe that sure, you know – they believe and actually much more significance of a mortal realm because they believe it has a very important purpose in the grand scheme of things, but also they believe in the insignificance of it, because if you think of internal life like this 70, 80, 90 years you have on this planet, it’s going to be nothing compared to any of that stuff.
And so, I think I copied a little bit of their perspective too, which is do the best you can and hopefully, there’s something on the other side and that side is going to be way better than anything we have here. It doesn’t mean you should just sit around and wait to die or something like that but you know, it’s just like do what you can and do what you feel is right and what your conscience approves of and if we all sort of do that, I think the world’s going to be as good as it can be.
But killing yourself over something is going to do not much more so if you want to kill yourself over something because you want to learn a lot or because you want to really help somebody, that’s great. But for me, it was about perspective. It was about, yeah, I can totally kill myself, but it’s really important to just keep everything in perspective as well and be present in the moment and take a break and not over-optimize every single thing that I do with my life.
It’s okay to just watch Netflix for an hour or two. It’s another distraction, you know. Everything is distraction. I think it sort of levels the playing field. It’s not like going to the gym versus Netflix versus doing a start-up and I have to priority stack everything. These are all just the same sort of thing. They’re a lot closer to the other than we think. We just are so – that’s all we see and so they look really different but if you sort of expand your mind a little bit, I think they’re all basically the same.
It’s funny because business, in a lot of ways, is one of the ultimate distractions. As a founder, you have a million different things you can do at any point in time and it can take up pretty much your entire life. But you said when you were in SF, work was your number one priority besides sleep which is really not even optional.
But you also – like you tweeted something recently – I’m just reading all your tweets at this point – you said start-ups shouldn’t be scary – or they should be scary. They shouldn’t be dangerous. Scary is all the sort of things you have to do as a founder that are inherently hair-raising. Pivoting when things aren’t working, getting feedback, managing people who are smarter than you.
But the dangerous stuff – that’s where you sort of take this start-up as a distraction too far, where you’re racking up credit card debt, as you said, or you’re sacrificing your health and your well-being, and I think if you get to that point where you’re literally killing yourself for this business, then I think you’ve gotten to the point where you’re missing the point.
Yeah, no, I think that’s spot on – I guess, because I said it. I agree with myself. But no, yeah, I think that’s exactly right. It is scary. Just like rollercoasters are scary. They’re triggering a very primal sort of fight or flight response within them when we do them. We do it for the thrill but we acknowledge kind of what we’re doing. We have good bounds and if they actually led to a lot of deaths, we’d probably stop doing them.
I think the same goes with anything else. You can do them. You can do them for the thrill. You can do them for the personal growth or just because it’s fun or just because it makes you not think about something else which is a lot scarier.
But yeah, I think at the end of the day, it is important to consider if you are taking it too far and if you are sacrificing your life for this thing that is relatively insignificant, you know. Yeah, I think that’s exactly what start-ups are. I think sometimes conflict scary and dangerous. People say oh, is it dangerous? It’s not dangerous. It shouldn’t be dangerous. It’s just a start-up. It’s just a tech business. You’re sitting on a laptop in an air-conditioned room. It can’t be that bad.
But some do take it really, really, really far. I met a founder just this week that said he sleeps on average four hours a day. I said you’re basically killing yourself slowly. You might not think that, but there’s a good chance that’s what you are doing. You should go read this book and maybe you’ll change your habits. But yeah, you can totally do it.
But yeah, at the end of the day, you know, you have one life. You can decide to go crazy with it and do all sorts of stuff but at the end of the day, everyone has roughly the same amount of time. Roughly the same amount of happiness, I think, generated, regardless of your position in society and you should work to improve your life in a way that also improves other people’s lives.
And I really do believe that – and the same thing—it’s similar to Provo learning, I think, is that if everyone did that, if everyone was focused on just being better people, it’s a very sort of conservative approach. But if everyone was just better on a local level and being a better version of themselves and helping other people, truly helping other people, and sort of treating others like they want to be treated, etc. – there was a great line I heard the other day which is like treat your children how you wish your parents treated you.
You know, it’s sort of passing of the torch. Passing of humanity to the next version of humanity to the next version of humanity like if we pass on really good, positive energy, we’re certainly not going to fix every problem in a single generation. I think things that a lot longer to fix than they do to break. But that is, ultimately, the way that we will move forward as a society and we need to do that. And then also just treat ourselves pretty well, too.
Because, I don’t know, what’s the point? What’s – if you work your ass off, you aren’t even going to see – for you, the universe stops existing the second you die, right? So, what’s the point? I think there should be some selfishness. I think for me it’s aligning selfishness with selflessness. It’s figuring out what I can do that makes the world better but also makes me happier? That’s where Gumroad is now and things like even this podcast – it’s like look, it’s selfish for me. I get to basically rant on all these things. I love doing that. I get to talk to you. That’s awesome. I get to basically produce content that a lot of people are going to listen to but it’s also good. And I think it’s also valuable for the world. I think if people can align themselves with each other in a way that does that, that fulfills themselves and helps their own communities and broader society, I think if we can do that better as a system, I think – and we made it really easy for someone who isn’t aligned with their surroundings to move, then we would be in a pretty solid place. The free market, I think, would do some really cool stuff.
We started this interview by talking about the differences in your life as a founder of a high-growth start-up and as a founder of Gumroad as a more anti-hacker type business.
So, why don’t we end the same way? What is on the top of your mind today? What are you thinking about in regards to growing and improving Gumroad and how, if at all, is that affected that you are a more independent business than you ever were in the past?
Honestly, it’s similar in many, many ways. Someone asked me are you happier now? You seem happier. You’re not working 60 hours a week anymore. But, I think, as I said, I’ve replaced a set of distractions with another set of distractions and I feel like in general, my happiness is level is pretty close long-term. I think the rolling average is probably pretty similar, it’s probably less spiky.
But I think in general, the way I think about Gumroad is how can we create the maximum amount of value in the world and how little do I have to do to make that happen? Can I find someone who’s incredibly self-motivated and knows what they want Gumroad to do? Maybe they’re a user of the product themselves and pay them money to go do that thing.
I sort of want to almost detach myself and my identity from Gumroad as much as I can, because I think ultimately that will lead to better decisions for the company because I’m making them – or the company will be sort of allowing itself – I’m allowing the company to make its own decisions. So, a big part of that is hiring a different type of person, giving them no equity – so, I’m like hey look, we’re not selling this thing.
We’re not selling the vision of this thing to you. You want to work on this thing? You get paid pretty well for it. You get to have sort of an incredible amount of impact and self-direction. If that’s interesting to you, Gumroad might be a great fit; otherwise it’s probably not and that’s okay. I’ll tell the team hey, I’ve got to run. I got to do this speaking thing in Denver or whatever and I’ll be gone for two days. That’s fine. I don’t have to be on all the time because everyone – no one has equity in the company. It’s not like oh, Sahil’s gone, therefore my equity is going to be worth less, you know?
There’s this almost like freeing sense of it where people – someone asked me do you think people have less ownership? How do you solve that problem now that you don’t have equity? I actually have more ownership over the product. They have less ownership over the company but now they’re focused on – if they get paid $100 an hour or $200 an hour to do whatever they want, in general, if we hire the right type of people, they’re going to do what’s actually most beneficial to creators because that’s why they’re working on Gumroad, and actually not what’s most beneficial for their stock price because they don’t have any of it.
So, actually we’ve seen almost more – a more selfless direction to the product. And I think strategically – and this I think, is almost a necessity just because of the way that we’re building the product right now – is we’re just helping our current creators. We’re not – I do no sales. I don’t talk to perspective customers anymore. I just say hey, look, my focus is on people that already use the platform. All you’ve got to do is make one sale and now you’re a current customer and I’m having to talk to you.
But, you know, when we went through the down and out phase of Gumroad, like these people stuck with us and we’re just going to build stuff for them. We’re going to fix basically every bug that they report. We’re going to make the site as performant, as speedy as possible. We’re going to shift features that they’ve asked for for a long period of time and that’s it.
And we’re profitable, so even if none of that leads to growth, we’re still going to be profitable and the long-term hope is that actually really just focusing on our existing creator base and being really public and open and transparent about that is going to lead to more growth, more sustainable, long-term, organic word of mouth growth than ever before. That’s the dream.
And then the other thing, I guess, the last point, is I’m constantly trying to think of how Gumroad can create value that has nothing to do with revenue. So, we’re going to do a series of animated shorts like YouTube for kids. We’re going to release a comic strip that is all about the problems and suffering that creators face. I wrote this post on Medium that did really well. We opened up our financials. I’m probably going to start doing open board meetings so people can start seeing what that looks like for a start-up.
What are all the ways that we can create value for creators and everybody else, too? Because we can. Because we’re profitable and we don’t need to grow and we don’t need to raise more money and if we stay the same size, we double the amount of value that we’re creating in the world, that’s better, in my opinion, than growing the company’s revenue by 10% and growing the value by 10%, you know.
It’s pretty cool to hear. Everybody has their own sort of anti-hacker dream. If they run a profitable business and they could do anything what do you do? I tweeted about this yesterday. Do you retire? Start another company? Do you keep working on your same company?
And it’s cool hearing how you’re making these decisions about Gumroad that, quite frankly, I never hear the typical venture-funded companies making these decisions. Everybody’s sort of building for the hypothetical, marginal, next customer. Everybody’s trying to figure out what’s going to inflect their growth curve and get them to the next level and if that means neglecting the current people, so be it. Despite the similarities, it sounds like there’s a lot of differences as well.
Yeah, I mean there’s – I mean there’s not a problem necessarily with that approach and certainly many people do that and I’m jealous sometimes of their success. But it never ends. I think for me the important part about where I’m at is – actually a Gumroad creator told me this. She said enough is a decision, not an amount.
And I really thought that was pretty profound. Because that’s – you know, I am at enough. I’m good. I’m happy with the creators that we have and I’m just going to make their lives – basically the way that I pitch it to the team and to friends and to other people I talk to is I want to do things that are so good that it makes no sense. Literally, makes no money, no cents.
But also, it makes no common – like why would we do this? Why would we open first Gumroad that has – literally it’s because it makes no sense which is why I want to do it. I want to do things that are so outside the realm of what normal businesses do and that’s sort of what makes it interesting. And that’s what makes it make sense because that’s the stuff – people don’t get it so they share it and they appreciate it and that’s why I’m going to do, I think. We’ll see. We’ll see how it goes. But I think yeah, to that point also, if enough is a decision, not an amount, when you are seeking that, when does it end? And I think there is this loop that happens and you just can’t escape it. I’m surprised, frankly, sometimes when I see what some of these large tech companies are doing like Google and Facebook now is in the news a lot. Google is in the news a lot as well for doing kind of these shady things. And I don’t know necessarily – I think part of it is that their valuations are so high and they sort of have no sort of grounding in their revenues and their actual trajectory – Amazon is another one.
It’s like 70X, you know, whatever, earnings per share or something. They have to just keep growing because they know that’s why their revenues are so high. So, you just get trapped in this loop where you’re just like we need to just keep – it’s the football helmet. If everyone was like hey, we’re not going to play this game anymore. We’re going to just go back to doing awesome stuff within reason. Great.
But the problem is everyone’s playing this game and frankly, at the end of the day, if you’re a public company, you’re competing with every other public company, and actually every other possible type of investment, and so you just kind of get on the hamster wheel. And to me it’s like if I did build the billion-dollar company and then IPO’d, I would still be on that game today. I’d still be doing that thing. I’d just be trying to run as fast as possible, grow the company, hire as many awesome people as possible, ship as many things, go global, go international, build a massive sales team because – I mean I generally know where this goes because we’ve never been here before as a society, as humanity and it’s like – it seems clearly unsustainable to me but it’s been like this for five plus years, and I think no one I’ve talked to really knows what’s going on.
Some people are like okay, whatever, it’s fine. Let’s just keep going. I don’t want to be the one that swaps out and then gets destroyed by this. I think there’s a big reason that Bitcoin is doing as well as it is right now which is people are scared of the traditional system. No one really knows that the heck is going on and so everyone’s like well, we might as well hedge our bet on this whole system and get some of this crypto money but yeah, it’s a weird thing.
That’s the other that makes me really content with where I am is because I know if I go back on that path – people have asked me would you raise money again? I just know where that goes. I’ve done that before and I know how much of a drug it is to get into that mode. There’s no escape from that mode. Show me the escape? I haven’t seen it yet.
I mean the one example I have seen of it actually is Bill Gates, who I mentioned in my post. He figured it out. He got out of the system and now he does this amazing stuff. I’m sure his wife played a huge role in that. I’m sure he’s more fulfilled and happier than he’s ever been and his bank account is just dropping like nobody’s business, right? He’s just giving it all away and just the serotonin, dopamine firing off in his head is just awesome. And I think he got it.
Then you have Warren Buffet who, I generally don’t know what the hell that guys’ doing. I have a massive amount of respect for him. I know it’s blasphemy to say anything negative about him but what’s the point? I don’t – I generally would love to be like dude – like maybe he’s just so fulfilled by that and that’s great. I think there’s nothing wrong with that but it’s just kind of crazy to me.
He’s like late 80s. His partner Charlie Munger is like 95, still going to the shareholders meetings and still running their business the same way. It’s pretty …
Still drinking Diet Coke …
Yeah, eating at McDonald’s.
Oh, my gosh. It’s – I mean the best system – I think there’s one example of this that also I think I just figured out which was George Washington, right? He got to the peak, and then he’s like I’m good. I’m just going to retire. I’m going to smoke on my cherry farm or whatever he does or did and the next dude can deal with this. Unfortunately, the next dude has you know – since now – hopefully the next one but soon.
But yeah, it’s crazy. It’s just – and I think that opting out – I mean, think about how rare that is. That’s the most significant thing he did was not do anything anymore. Yeah, I think people – I think if there were more people doing it, it would be pretty awesome. You’d make space for more people to do their thing. Unemployment rates are at like a record low and yet everyone is unhappy and making no money somehow. So, maybe the answer is like all the people that are making money just buy a nice house and ….
And chill out for a bit and make space for the other people that can make more money.
Well, this show happens to be listened to by a lot of people who are ambitious who haven’t started yet, and they want to get started doing something. They’re not quite ready to call it off because they haven’t gotten started yet.
I’ve surveyed the Indie Hackers audience quite a lot in recent months. They are mostly developers. They really struggle with coming up with ideas or once they do, how to get traction and how to grow and most of them have no interest whatever in raising any sort of money. They’re very dialed into I want to start a business to improve my life and the lives of people around me, perhaps my employees and customers. What’s your advice for somebody just getting started on this path today?
I think the most important thing is to build stuff, to start small and figure out what you want to build and honestly, a lot of people aren’t going to know what they want to build so just like build something, as small as it is. Or maybe not even build something, just ask the people that you love in the communities that you care about how you could make their life better.
If you know how to code, that’s a super power. You can build stuff. You can automate stuff that people are doing manually so just ask them. What are you doing manually? Are you spending 30 minutes a day dealing with an Excel spreadsheet to calculate blank? Are you going on Yelp trying to find a restaurant to eat and you kind of go through the same process every single time?
Automate the boring stuff is a term I’ve heard and I like it. Figure out what you can start building and I think once you start building stuff, it’s similar to painting. Some days you’re like I don’t know – or writing – like I have no idea what I want to paint of write. I’m like driving down the highway, looking at spots, wondering what do I want to paint. Fine, I’ll just paint that stupid barn. Whatever. And then I’m driving home and every single thing looks like a painting – like the same stuff I was looking at before.
So, I think a lot of it is you prime your brain for that process, that creative process which is what building products is and then all of a sudden, you’re going to have more and more ideas. But if you just sit around and you’re like I’m just going to sit down and stare at this piece of paper and come up with ideas, I guarantee you that’s the absolute worst way to do it. Go for a run, go for a walk, hang out with some friends and just live your life and you’re going to have those ideas eventually. Then you’re going to build one of them and then you’re going to figure out – your brain’s going to click and your observation skills – when you get better at painting, what you’re really doing is training your observation skills. You’re not really training your hand. You’re not really learning anything about how paint is mixed. The vast majority of the learning is happening in your ability to observe a disconnect between your painting and what you’re seeing and fixing that. You just fix it over and over again until you have a really great painting basically.
And so, it’s kind of the same goes. I think you just train your brain. Your brain is sort of a muscle in that way. You just have to train it and make it stronger and it will get better at those things. So, that’s like the big thing, I think, is like build stuff. Build a lot of it. I really like the weekend project thing because it keeps the stakes super low and also it is a really great constraint. When you’re like I need to build something – I mean anything looks like, you know, like that thing. But if you constrain yourself and you’re like I’m only going to build things that use the zoom API because that’s a new thing. I feel like it’s under served. Maybe there’s something there.
Focus on that, really thing about that, look through the API endpoints and just prime your brain for that thing. And then as you live your life, you’ll be like oh crap, wouldn’t it be cool if I had a little bot that I could invite to every single call that I’m on and it would just transcribe the notes. Of it would tell me how many times I said the F word, or whatever, you know. Something like that.
And then you can figure out what you want to build. But unless you start, it’s so difficult to really start moving. Actually, the Mormon faith says, I think, something like faith is like walking in the dark. You have to take one step at a time and over time you’ll build your faith and the room will light up and things like that. I kind of like that metaphor because it’s true in products, right?
It’s like you have no idea – you can’t build anything – I mean you look at the homepage of Gumroad, the homepage of Netflix, the homepage of Yahoo, the homepage of – maybe Google is the same but Amazon, etc., when the first launched. Like it’s totally different. You just have to start and then you’ll learn and you’ll iterate and you’ll build and 99.9% of a product is built post-launch. So, get to the launch as soon as you can. Again, that’s why I like the weekend thing.
Yeah, just think as small as you can and also the other thing that I did a lot was I didn’t have ideas in the early days so I was just like for hire. You know? I just built apps and designed and developed for other people, and eventually you will have your own ideas because they’re going to be like hey, you should build this. And you’re like cool, yeah, what about – but actually this is a really weird way to think about it but have you thought about this. And they’re like oh yeah, that’s better. Do that instead.
And you’ll start basically be getting paid to learn on the job and then you can always branch out, and I guarantee you’re going to start having your own ideas. I mean experienced founders and product folks that I’ve talked to, they have too many ideas at this point. They have – they have more ideas than they can even write down because they’ve trained their brains so much that everything in their life is a problem.
I remember I had dinner with Johnny Ive from Apple – or he used to be from Apple – and one of the things he said – someone asked him, it was a group dinner – and someone asked him about yeah, just like does he obsess over things. Right? Is it a problem basically? He’s like this is not design, this is not design, this needs more algominium [ph] and he was basically like yeah.
You train your brain to such a level to sort of like point out any consistency, anything that could be improved and everything starts to look like a problem waiting to be solved. You know, the hand soap dispenser, the soy sauce container, paper plates, blenders, everything.
You can’t help it because you’ve trained your brain and your brain is like okay, cool. I have this skill now and therefore it requires energy to maintain the skill and clearly, like I learned this skill for a reason related to my survival and so I need to use it as much as possible otherwise it’s going to go away. I think that’s kind of what happens. I don’t know, some evolutionary scientist is going to get upset at me.
But I think that’s how I think about it. So, if you want to get good at something you just have to figure out a way to do it and you will get good at that thing. That is just how our bodies work.
Love that advice. Make a lot of stuff. Build a lot of stuff. Start small and just try to get the momentum going and you can sort of trust that your brain will follow. It’s what it’s best it. It just adapts to whatever the needs are that you place on it, and it’s like you’re saying the goal really is to basically become the sort of person who has ideas rather than just sitting down and staring at a blank sheet of paper and just hoping that you have ideas today.
Yeah, you’ve got to train your brain and if you do get into that habit – if you code every day from four to seven, you’re going to start – it’s going to be like 3:40 and you’re going to have all of – your brain’s just going to get into it. It just knows. It’s much smarter than you are and much more powerful if you train it, I think, in the right way.
Oh, that seems like a great place to end the episode. It’s been two hours. Sahil, thanks for coming on and giving us a ton of your time, sharing the story of Gumroad and all the things that you learned about how to build a company that makes you happier and more fulfilled as a founder.
Can you tell listeners where they can go to learn a little bit more about you and what’s up with Gumroad nowadays as well?
Definitely check out Gumroad – Gumroad.com – and then the best place to see what we’re up to all the time is to follow us on Twitter @Gumroad and then to follow me on Twitter if you want which is @SHL which is where I tweet basically everything that I think of at some point and all the weird ideas I’m up to and yeah, that’s where to go.
Thanks again, Sahil, for coming on the show.
You’re very welcome. Thanks for having me, Courtland.
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