Based on your article, you sound pretty bad ass by having gone through the journey. I&#x27;m doubtful you&#x27;d have that by staying. It&#x27;s a pretty remarkable path, and I respect you for that!

Many years ago, you once mentioned that anyone who wants to build a startup should read Hacker News. I&#x27;m still here because of you. You&#x27;ve made an impact!

I can&#x27;t begin to imagine what that must feel like, but I gotta say, your kind of company (i.e. non-VC-funded, don&#x27;t care about the unicorn status, just serve the customers well) is the kind I&#x27;d like to do one day.  The vision and values just align with me so much more than hypergrowth and whatever it takes to get there.  Many hats off to you for making all the decisions you did to keep your customers first.  It may not be worth much, but you have my respect forever.

Your story speaks to my soul. I&#x27;ve never been too attracted to the VC-funded startup life (although I wouldn&#x27;t pass it up if it was the correct move to grow my business), but reading about your commitment to your users through thick and thin gives me so much more respect for you, and that is a quality I hope to emulate someday.

Haha, sorry didn’t mean to rub it in brother.But you’re still in an incredibly fortunate situation, and it’s all about the journey anyway.

If there a year at least vested one year of equity...?

Hindsight is 20&#x2F;20. A million different factors outside of your control could have led to different outcomes for both Pinterest and Gumroad. Thank you for sharing your story!

for what it&#x27;s worth I think you&#x27;ve created more value at Gumroad then you would have at Pintrest :)

It&#x27;s crazy that you care about the money, being in your mid-20s with a company pulling in 60k USD net&#x2F;month puts you squarely in the pretty much unlimited money category of the world.

Look on the bright side - maybe Pinterest would have failed if you stayed there.

But would you trade the amount of time spent at Pinterest before IPO with the experience you gained at Gumroad? Tough call, given the professional and personal growth you gained from it.

What&#x27;s the big advantage of having 200m vs 15m or so?It&#x27;s fuck-you money either way.

People actually do use Pinterest to collect images, I think, but I agree with you on the other points

Uh - can you elaborate? I often search for images and sometimes from pinterest - but I don&#x27;t find pinterest interfering with my searches when not using it.

Pinterest is a malignant tumor on the face of the Web that exists to trick people who are trying to search for images.  Being rich off that would be worse that toiling in obscurity.

Reminds me of Noah Kagan. Employee #30, I think, at Facebook. That should be what - $200M+?

&gt; You are vastly overestimating what even an early employee (esp a jr one) gets at a unicorn. Not that it wouldn&#x27;t be substantial today, but nothing close to 1-2% of the entire value of the company.Mmm...based on the valuation even 0.1% would equate to $10 million...not bad ;-)

You are vastly overestimating what even an early employee (esp a jr one) gets at a unicorn. Not that it wouldn&#x27;t be substantial today, but nothing close to 1-2% of the entire value of the company.

If he stayed he might have ended up in an executive position, getting additional stock grants down the line.

crunchbase says pinterest has had 15 funding rounds. certainly they weren&#x27;t all complete rounds and it would&#x27;ve been nice equity but nowhere near the nominal 1-2% early employees get.

Probably a fraction of that. Dilution etc.My guess is he’ll make more from Gumroad over the long run.

Ouch, number 2 employee at Pinterest - a $10 billion company that’s about to go public this year.He probably would have been worth an easy 100-200 million.

Give us some examples of what you&#x27;re trying to do, maybe someone here will help you in the future.

I always think of the market as ... all those shitty services and websites I absolutely hate &#x2F; or just don&#x27;t like ... that i still use because I want the service.Arguably they failed to execute some of what they did (their actual app or site) very well, but it doesn&#x27;t matter, they picked the right market because I can&#x27;t stop using it even in the face of other things.

That&#x27;s really more for market leaders. If someone stops by your site and starts comparing it to other businesses and their features, you&#x27;re not likely to shift the market soon. Even if you do shift the market, you might not get the growth as your well-funded competitors copy your features. It&#x27;d have to be some ground-breaking technology that essentially propels you to market leader overnight.

The corollary is that you can shift the market you&#x27;re in and increase growth.Clickfunnels addresses a slightly different market and has 9 figures of recurring revenue. Partly because they charge a lot more and have a lot more bells and whistles, partly because they have way more intensive marketing, but partly because they&#x27;re targeting the demographic that wants those bells and whistles over the simplicity of gumroad.

This is weird because... I&#x27;ve noticed the opposite. Often markets are way bigger than you think; or rather, 1000 users for a product seems small but is actually quite a decent size depending on how much effort has been put in.What it comes down to is being content that you will not always make a billion dollar product. With that in mind, a big market has many definitions. Maybe you should have paid attention to the emotional aspect.

I agree. Some of the most successful companies became that way because they told us we &quot;needed&quot; their products, usually by clever marketing.

Patreon and Gumroad were different businesses for most of their histories. Gumroad was always a place to sell stuff and launch subscription services. Patreon is trying to pivot that way now with all their talk of membership businesses, but no one who uses it seems to see it that way.That&#x27;s why everyone was up in arms about the fee change in 2017. People tossing $1 here and there to people they liked were the foundation of everything. Membership businesses generally start at $5 a month.And Patreon isn&#x27;t going to have much luck with it. There are so many better options if someone just wants to set up a membership business. Memberful, which they bought, wasn&#x27;t even one of the better options. It doesn&#x27;t even handle anything other than plans, payments, and integrations with services that do the heavy lifting.

&gt;. Patreon started two years after Gumroad and now look where they are.Two years away from buying back shares for $1 from their VCs?There&#x27;s this whole swath of the internet that can support thousands of small businesses that&#x27;s being slashed and burned by VCs in search of a unicorn. Gumroad and Patreon are both perfect examples. They are both good ideas that are well executed. They are not, however, companies that can extract tens of millions to hundreds of millions in profit a year. They really should be 20-30 employee type companies making a steady couple of million in profit.

Scaling to a billion dollar company in that market was certainly attainable. Patreon started two years after Gumroad and now look where they are. Gumroad had a movers first advantage - so I really disagree with the quote. Had they continued to push feature development and tweak PMF they could have been a billion dollar company.Don&#x27;t take that as a slight to Gumroad either. Building a profitable business from almost going under and now generating close to $1m in annual profits is an incredible feat. But I do disagree with the point that the market wasn&#x27;t ready (as clearly demonstrated by the success of others).

I wasn&#x27;t interested in the emotional story behind this. But I did resonate with 1 line in particular here: &quot;It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth.&quot;This is so true, in my experience. You hit a roadblock in recurring revenue, not because your product doesn&#x27;t have enough features, or your team sucks, but simply: your market is smaller than you thought.

&gt; was braced for more failed-but-really-succeeded porn.Isn&#x27;t that what this is though? Sure he failed to build a billion dollar business, but his business is still way more successful than most. Lots of people would certainly kill to attain this level of failure.I certainly recognise failure is a very personal thing, but from the outside looking in this looks like a success overall, even though I&#x27;m sure it was completely gut wrenching along the way.

Yep, I was braced for more failed-but-really-succeeded porn.This is a great read, and clearly from the heart.

Refreshing. I&#x27;d like to see more &quot;anti-survivor&quot; articles so the survivor bias gets toned down.

Exactly - having enough capital to waste in this way IS a morality issue.

These “metrics” are exactly why you see these venture backed SV companies engage in the behavior we saw posted all over the front page of HN yesterday (I.e. silently apply workers tips to their “guaranteed” pay and pocket the difference). But hey it’s an HN&#x2F;SV unicorn, so there is too much investment that needs to be made back to fail now...and they have the perfect back story, rejected from YC until they personally delivered PG a 6 pack of beer and pretended they had a functional product.It allows them to continue to make the representations of growth to future investors, the more buy in have from investors, the more you can continue these market&#x2F;marketing manipulations (e.g. the fyer festival).Of course the entire SV ethos encourages this behavior: move fast and break things, growth hacking, and fake it till you make it. It’s also built into the system that 9 out of 10 of these scams will fail, but every 10th scam can be offloaded to the public through an IPO.

&gt;I always wonder if there is value lost in companies that are shuttered because something isn&#x27;t the next big hit, or some private equity decides they want to cash out &#x2F; break up a company that otherwise... would be just fine and would have continued contribute.Of course there is, but you have to compare it with the opportunity cost of working at something world-changing.

Yeah it appears this is a perfectly fine and successful business... it just went through an odd route for someone to figure that out.Those charts and numbers, all pretty good IMO. If someone came to me and said &quot;Hey I (or we) made this thing here is what it does and the numbers.&quot; I&#x27;d be all about high fives and such. And yet at times they didn&#x27;t think so based on the route they went, very interesting.I always wonder if there is value lost in companies that are shuttered because something isn&#x27;t the next big hit, or some private equity decides they want to cash out &#x2F; break up a company that otherwise... would be just fine and would have continued contribute.

It&#x27;s also an unsustainable growth rate. But of course, VCs know that. They just need something that can front load the growth like that and unload it on the public before that growth plateaus... or plummets.

Actually 20% per year would be great for most businesses, which just shows what an outlier VC backed businesses have become.

Startups. To choose a recent one that turned big, Facebook was approaching such numbers: <a href="https:&#x2F;&#x2F;i.guim.co.uk&#x2F;img&#x2F;static&#x2F;sys-images&#x2F;Guardian&#x2F;Pix&#x2F;pictures&#x2F;2014&#x2F;2&#x2F;4&#x2F;1391511321556&#x2F;Facebookusers.png?width=620&amp;quality=45&amp;auto=format&amp;fit=max&amp;dpr=2&amp;s=a60c3fd635a0b659affdf5cb7496caa5" rel="nofollow">https:&#x2F;&#x2F;i.guim.co.uk&#x2F;img&#x2F;static&#x2F;sys-images&#x2F;Guardian&#x2F;Pix&#x2F;pict...</a>

This would be 9x per year. What are examples of companies with such a growth rate?

According to the metric of Social Media.The Metric you have to meet now is Facebook&#x27;s growth rate in the first few years of launching with high gross. 500% first year, 250% next year etc...

&gt; The idea behind Gumroad was simple: Creators and others should be able to sell their products directly to their audiences with quick, simple links. No need for a storefront.Then:&gt; For the type of business we were trying to build, every month of less than 20% growth should have been a red flag.According to what metric? This isn&#x27;t meant to be snarky, but that type of growth rounds out to about 900% over the course of a year. Even if it meant that they&#x27;d grow 20% in the first month and had profits plateau immediately (i.e. 20% -&gt; 16% -&gt; 14% -&gt; 12.5%), that&#x27;s still 240% growth over the first year. What kind of business expects 900% to be the minimum growth over the first year?

It&#x27;s called being &quot;living dead&quot; or &quot;zombie&quot;, and it&#x27;s considered worse than failure. smh

It is because a startup is an investment vehicle, not a business.If someone had X amount of dollars they want to maximize the rate of return on that wealth. The point of growth in investing is that you can see the future before it happens and pocket the difference.For example if I invest in company Y and they are growing at a certain rate, I can sell my portion of the company based upon expected future potential. If the buyer of my shares believes the company will become 30% larger in 5 years, that is not much more than they would earn if they had some investment that return 5% a year. If the buyer of my shares believes my stock will be worth 100% more in 5 years that would now be equivalent to a return of 15% a year.So here comes the trick. Even 10% a year would be a great rate of return. So I can sell my shares at a premium. Pocketing the 5% today as opposed to waiting 5 years. If I can pocket 7% or even 10% of that would be even better. Now if this company will be worth 500% more in 5 years, you can see how I would stand to make a large amount of money today by selling my asset that will be worth much more later.With a company growing at a normal speed, there is not much of a premium I can extract for future growth to a potential buyer of my shares.

It is still baffling to me that the tech world has glommed onto a business model where steady growth and a solid core of loyal, happy customers is considered a failure.

Yup.  In reality, it tends to be something more like a 4&#x2F;3&#x2F;2&#x2F;1 split.  If you are a VC and invest in 10 companies, 4 will fail outright within 5 years, 3 will be somewhere between zombie companies and lifestyle businesses (both of which are effectively negative ROI for a VC), 2 will be modest successes, and 1 will be a massive success.

Yes, but hopefully your average founder will wise up to the following: The chances of you being super successful, happy and content are much higher with a &quot;lifestyle business&quot; than a VC funded one.Why?Well, the biggest issue is that VCs can diversify (as you point out, have a lot of bets counting on a few successes), while founders can&#x27;t.I think for the vast, vast majority of people, there are greatly diminishing returns after a certain amount of money. That is, if you have a 1&#x2F;10 chance of having a $10 million payout, vs a 1&#x2F;1000 chance of a $100 million payout, I think most people would take the former. Put another way, most people are willing to take a good deal of risk for &quot;fuck you&quot; money, but fuck you money for most people is MUCH lower than what VCs expect with a unicorn.Since VCs do always need to swing for the fences, they invariable will say no to ideas that don&#x27;t have a huge potential market. My belief is then that there are a number of &quot;mid market&quot; businesses, i.e. ones catering to smaller niches, that have a lot of potential but have lower competition than huge, winner-take-all type businesses.

But when VCs are criticized for obsessing over hyper-growth, we&#x27;re not really talking about $300K&#x2F;yr businesses. We&#x27;re talking about $5M&#x2F;yr businesses that are forced to try and become $500M&#x2F;yr businesses or go bust, rather than stabilizing at a lower level.

Let&#x27;s run some numbers. Say you are VC putting in $1M in 100 companies. To your great luck all companies become self-sustaining lifestyle business. By definition, lifestyle business is making just enough for comfortable lifestyle of founder, so may be $300K&#x2F;yr pre-tax. Let&#x27;s say founder decides to give back 10% of $300K as return on investment. At that rate, it would take 33 years for VC to just recoup his original investment.I wanted to illustrate this because it is necessary to understand why things are the way are. Lifestyle businesses is not viable for VC funding. You add on risk profile (i..e 80% of companies won&#x27;t even become profitable) you get the only outcome that one or two super-hits needs to occur to cover for rest of the failures. Also remember that even with this strategy most VC funds are not even as profitable as S&amp;P500 index.

20% growth per month in itself has such a non-meaning. It really depends on where you are coming from.If you start with 10 users in month 1 all you need is 90 users in month 12 to have 20% MoM growth. Well, that&#x27;s doable.If you start with a million though you need to have 9 million by the end of said year. Tougher to find 8 MM new users than 80, don&#x27;t you think?If you&#x27;re someone like Facebook with a billion users, good luck finding 9 Billion after 12 months of growth ;)

Really love this post. My favorite line is:&gt; Every month of less than 20% growth should have been a red flag.I think that&#x27;s pretty insightful. 20% growth is great for a normal business, of course; for a VC-backed startup it can show some warning signs about future hard decisions you might have to face.I think there&#x27;s certainly lots of discussion that has been had — and should be had — about &quot;should I or shouldn&#x27;t I raise money?&quot;, but there still are plenty of companies and founders who will raise VC, and paying attention to those early warning signs are important if that&#x27;s the choice you make. It&#x27;s important to worry about it each month and each week rather than the two months surrounding the raise of your next round.

I really tried to avoid being prescriptive about the solutions. It&#x27;s a lot easier to talk about the problems :)&gt; aren&#x27;t interested in these questions of what-could-have-been at this pointExactly. If we shipped this or that feature... If we raised more, or less.. If I stayed at Pinterest... If I invested in Bitcoin...I&#x27;m just not sure I gain a lot from thoughts like that!

&quot;inability to get enough people to know about it, and to understand how it would fit their needs?&quot;Just from visiting the landing page for gumroad.com, I wasn&#x27;t clear about what the company did. Some questions that came to my mind:By e-commerce, is it like shopify or like stripe? By audience-building software, is that SEO, marketing, or analytics?Just writing the feedback I like to get from others. The features page answered most of my questions in general(I think its an online store platform for digital goods?).

I hadn&#x27;t heard of Gumroad before -- it actually looks like a really good product, and one that I would have occasion to recommend to people.To what do you attribute the challenges?Were you building a product there wasn&#x27;t a market for, what you were delivering wasn&#x27;t what people wanted?Or, a marketting failure, inability to get enough people to know about it, and to understand how it would fit their needs?Or, what I think I get from your post, is maybe you think neither of these -- rather you just tried to grow _too quickly_, quicker than the market&#x2F;product could bear, and then had to deal with that.Do you think if from the start you had _not_ tried to create a &quot;billion dollar company&quot;, stayed smaller, accepted less investment with clearer expectations, had fewer employees, etc. -- you would have still been able to get to where you are now, but quicker and with less pain? You still would have been able to get _enough_ investment, and with the investment you had still would have been able to build the product succesfully?I think maybe that&#x27;s what your essay is implying you are suggesting, but I&#x27;m not totally sure if that&#x27;s what you mean to be suggesting; or maybe you don&#x27;t mean to be &quot;diagnosing&quot; it at all and aren&#x27;t interested in these questions of what-could-have-been at this point. :)

<a href="http:&#x2F;&#x2F;omswami.com&#x2F;2011&#x2F;11&#x2F;the-successful-and-the-successfool.html" rel="nofollow">http:&#x2F;&#x2F;omswami.com&#x2F;2011&#x2F;11&#x2F;the-successful-and-the-successfoo...</a>

We do offer subscriptions! <a href="https:&#x2F;&#x2F;help.gumroad.com&#x2F;11163-products-and-customizations&#x2F;subscriptions" rel="nofollow">https:&#x2F;&#x2F;help.gumroad.com&#x2F;11163-products-and-customizations&#x2F;s...</a>

Hey Sahil,Big fan of Gumroad! As a customer, it&#x27;s one of the neatest checkout flows I&#x27;ve come across, among Stripe.Do you have any plans to expand into subscription offerings?

Thank you for sharing your story. It was inspiring to read.Couldn’t quite spot the failure though... maybe ESL thing.

Ha, didn&#x27;t expect to find my own comment there.I also mentioned selling jQuery plugins (remember jQuery?) and advertising my own game engine (now free) in the thread. Feels like such a long time ago.Gratz for pulling it off, Sahil!

Haha, it was crazy reading the discussion (in 2011) around whether Gumroad should take Bitcoin or not :-)<a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=2407053" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=2407053</a>

Thanks for sharing your story.I am a huge fan of gumroad, I remember your interviews on podcasts when you launched.I have a couple Gumroad T-Shirts that are still my favs.I have bought info products using Gumroad and it&#x27;s a great experience.Will definitely use you guys to sell my own in the future.Thanks again.

Any chance of finding these images again? They are 404&#x27;ing now but I&#x27;d love to see.<a href="https:&#x2F;&#x2F;letscrate.com&#x2F;gumroad&#x2F;gumroad-progress" rel="nofollow">https:&#x2F;&#x2F;letscrate.com&#x2F;gumroad&#x2F;gumroad-progress</a>

&gt; at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on to, which number is a better representative of &#x27;success&#x27;?Let&#x27;s not forget personal satisfaction. I&#x27;m a little leery of putting the entire assessment of my life onto other people (even though if I was going to, I could do a lot worse than number of people helped).Hopefully helping other people leads to some amount of personal satisfaction for most people, and they&#x27;ll have a fairly good life and good impact on others by the end. :)

Based on the revenue and growth rates of Gumroad my guess is Sahil will make more money from it than he would have at Pinterest. It will take longer but it will be on his terms.

at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on toI don&#x27;t disagree with your overall point, but I do wonder why those should be the only two metrics to consider. IMO, the range of metrics is nearly infinite and highly subjective.

&gt;at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on to, which number is a better representative of &#x27;success&#x27;?But of course those are highly correlated - it&#x27;s easier to help a lot of people if you have plenty of surplus wealth and time to share out. I&#x27;d imagine that Warren Buffet will end up helping more people that almost anyone else in the past 100 years despite never really having a goal other than &quot;make lots of money.&quot;

I love your story Sahil, it is so true that people equate &#x27;wealth&#x27; with &#x27;success&#x27; but that is short sighted. If you step back and look at the big picture, you&#x27;re on this planet for anywhere from 70 to 100 years, and at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on to, which number is a better representative of &#x27;success&#x27;?Working on things you enjoy, making a positive impact on people&#x27;s lives, and raising a new generation to carry on where you left off, that is success.Stay focused there and you might accidentally accumulate so much wealth you have to work at putting it to use helping people like Bill does!

I don&#x27;t think Gumroad could be the high-quality, full-featured product it is today without raising VC funding. Less, maybe, but bootstrapped, no.(Though, I was living in SF.)

Thanks for sharing your story, Sahil. Something I was wondering: do you think that Gumroad could have gotten to where it was without raising money to begin with? You mentioned sales not really changing with or whithout a sales team, but do you think you could have developed Gumroad in the beginning with a smaller group of developers, or even just by yourself?

Thanks so much for telling that story.In hindsight, what do you make of companies choosing or rejecting venture funding in the first place?

Good job man! Money isn&#x27;t everything.

$1.1M @ 1X$7M @ 1X$2.25M (the bridge I mention) @ 4X

Hello Sahil, thanks so much for sharing this. I know it helps a lot of founders out there.One question: You mentioned that you raised ~$8m from investors, but that your liq. preferences used to be $16.5m. Was there a 2x preference in the Series A term sheet?

Cool! Ive bought multiple video lessons from Gumroad before! Nice to hear from you :)

Came to ask similarly... it seems the functionality that Patreon offers would be a good start for parallel expansion&#x2F;features.

Any thoughts on the recent drama on the changes on Patreon and their funding round?

Thanks for writing this Sahil.&gt; But I was accountable to our creators, our employees, and our investors–in that order. We helped thousands of creators get paid, every month. About $2,500,000 was going to go into the pockets of creators — for rent checks and mortgages, for student loans and kids’ college funds. And it was only growing! Could I really just turn that faucet off?I really appreciate that you value being beholden to your customers more than your investors. It seems like as you&#x27;ve bought back your ownership you&#x27;ve had more opportunity to run your company the way you want to, and I admire that that way is doing right by your customers. If I ever start my own company, I would like to run it this way.

I remember this very well and telling my sibling to use your service

Hi Sahil, I don&#x27;t know why but I see you a lot in my LinkedIn feed. Hope you succeed even more in building Gumroad. Just visited Gumroad for the first time. Here is some of my feedback  based on initial impressions.
1) The homepage seems to be designed around creators and not customers. It&#x27;s trying too hard to onboard creators while ignoring the main source of revenue for the entire ecosystem, the customer.
2) The search bar for products is not very useful. It felt like I already need to know what I wanted to buy. There should be an alternative way for discovering, for example, top 10 selling items in each category. Like the first page a customer sees when visiting Amazon.
3) The review system although designed to help customers make more informed decisions, is not useful at this point in the product cycle. I could only find 5-10 ratings on every product. Compare this to the several 1000 reviews on Amazon products makes me scared to spend money on Gumroad.
I don&#x27;t want to be too critical of the product but I feel like your motivations are genuine and hate to see you struggle. So, wanted share some honest feedback.

From the the article in OP:&gt; Soon, we will also open-source the whole product, WordPress-style. Anyone will be able to deploy their own version of Gumroad, make the changes they want, and sell the content they want, without us being the middle-man.

Hi Sahil,
Thanks for sharing the amazing story. I was wondering, since Gumroad&#x27;s announcement about 2-3 years ago [1], is the plan to open source Gumroad still on track?Thank you.[1] <a href="https:&#x2F;&#x2F;twitter.com&#x2F;gumroad&#x2F;status&#x2F;811650470758359040" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;gumroad&#x2F;status&#x2F;811650470758359040</a>

Sahil, thanks for sharing your story to date. I remember meeting with you in 2011 in Palo Alto shortly after your launch, and I could tell then you had the “right stuff.” Proud of you man.

Hi Sahil, who are your most prominent competitors? Do you consider Patreon a competitor? I&#x27;m asking since with so many platforms for selling items online I find it surprising there is still room for more companies in this space.

Gumroad is really cool, bought lots of tutorials on 3d modelling, photoshop, texturing etc..  Maybe 100 or so. The platform does not get in the way and has useful ui.

People addicted to Startup Porn GREATLY underestimate the value of a business that generates a million dollars a year.

I was reading an article recently about managing small business growth. Not tech or startup related, just a good old fashioned blog post from an accountant who said hey you&#x27;ve started a business and it&#x27;s growing, here are some things to consider. (I&#x27;ve lost the link unfortunately.)One point this guy made was that a lot of businesses develop additional overheads and need a lot of cash to grow after they reach around $1M in annual sales. Going from $1M-&gt;$10M is a big step which is hard to self-fund, there is some risk involved, and the owner&#x27;s mindset needs to change.I couldn&#x27;t help but think, hey a consistent annual $1M in sales is quite an achievement by itself. If you own most or all of the equity in that company, financially you&#x27;re doing far better than most people (OK, maybe less true if you run in certain Bay Area circles). This is a perspective you won&#x27;t hear from VCs, but if you hit that milestone, who says you have to go higher?Maybe it&#x27;s OK for a founder to just stop at some point, especially if they don&#x27;t enjoy what they&#x27;re doing or they&#x27;ve been under-investing in other areas of their life.

I had terrible experience with Gumroad (more info: <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=13139000" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=13139000</a>) and even pinged you on quora: <a href="https:&#x2F;&#x2F;qr.ae&#x2F;TUrSmp" rel="nofollow">https:&#x2F;&#x2F;qr.ae&#x2F;TUrSmp</a> No response what so ever. I still believe Gumroad provides one of arrogant customer support I ever received.If you have &#x27;startup&#x27; with so many unhappy customer - its expected to fail. <a href="https:&#x2F;&#x2F;gumroad.pissedconsumer.com&#x2F;review.html" rel="nofollow">https:&#x2F;&#x2F;gumroad.pissedconsumer.com&#x2F;review.html</a>
Focus more on being open, transparent and being kind. Good luck!

Just wondering how much of your decision for not starting new venture could be because of burn out. You can always hire your one person replacement to do customer service, fix occasional bugs etc so you  move on. Especially if you hunt for good freelancer offshore&#x2F;remote, you probably can do it with more devs and cheaply. This I wouldn’t recommend for spinning new products but for maintaining existing mature enough products it works out fairly well and lifestyle-level revenue is good enough to do this. Shouldn’t this allow you to move on to new ventures?

Sahil,thanks for writing this article. very useful to me (as someone working on iteration 2 of a company).(If you see this, could you please fix the paypal integration. In India, we don&#x27;t have any protection if credit card data gets leaked, (and could end up paying off whatever the hacker charges the card) and I don&#x27;t use my credit card online if I can help itThanks in advance)

Hey, #1 on Hacker News! I don&#x27;t think that&#x27;s happened since...I launched Gumroad back in 2011:<a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=2406614" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=2406614</a>Thanks HN for being a part of my journey!

Grateful to read such a personal and detailed post. I had a startup that failed myself, back in the long ago, and in retrospect I&#x27;m glad that if failed quickly and cleanly. I admire this alternate path though of working your way to a new equilibrium.The offer from KPCB to let you off the hook for the venture financing is amazing. Is that a common thing to happen? I get why they just wanted to write it off and be done with it, but it still seems like a generous outcome. An undo button!

I remember when Gumroad first launched. I was 24 at that time and just couldn&#x27;t believe that a kid that young could be so good at making such polished products.To that end, I considered Sahil - and people like him - to be my model of success: being able to bring your vision to life.

I&#x27;m sorry you had those interactions with me in the past!I think I&#x27;ve grown since, but it still sucks to hear that about past-me.

Why does his behavior on Twitter, good or bad, need mentioning here? What does it have to do with the article?It feels like the new normal is for absolutely everyone to be in everyone else&#x27;s good books. I&#x27;m sure a TON of people in the wild think they had bad interactions with you, online or offline. Does that really matter? Can one reduce you to any one of those singular opinions? Is one not allowed to make a mistake, because, the last I checked, humans were imperfect. Why make these trivialities a topic of conversation?

I&#x27;ve had some interactions with @shl on Twitter where he seemed a bit full of himself (a few years ago - I didn&#x27;t realize he was so young, so that probably had a lot to do with it). However, he could, and most would, have cut and run and found the next opportunity. Not doing so probably cost him millions of dollars; that&#x27;s pretty authentic in my book.

This is a marketing article, but at least it&#x27;s fun to read.

I am not sure whether he&#x27;s really serious or this is a long false modesty article about himself

Ehh. It doesn&#x27;t matter up until the point it does. I quit my last job partly because we moved from a nice area in a dumpy building to an awful space (no natural light) for ~10 months. My health suffered, I felt depleted, and the entire team was on edge. How easy to commute to ($$) and how nice it is are definitely things I consider. Free food gets an outsized return too, if we&#x27;re talking &gt;100k salaries--I&#x27;d bet $4000 in free food gets more goodwill than a 5% pay bump.Agree that remote should be more widely used, especially in software.

I thought the same thing. There are tons of people all over the world, or even spread out in America, that want to work on an interesting idea with interesting people. The office really does not matter.It feels like so much of the VC funding goes to creating buzz and cool-factor (cool office, free lunch, potential lucrative exit), which can obviously be great marketing, but it really limits your runway and obviously the control you have over your idea.Still insane to me that more companies do not embrace remote work.

They probably leased a space with growth in mind.  I&#x27;ve read about a lot of companies that continually move because they keep out growing their space and it&#x27;s incredible distributive.

&gt; The next year was not fun: I shrunk the company from twenty employees to five. We struggled to find a new tenant for our $25,000&#x2F;month office and focused all of our remaining resources on launching a premium service.Ouch. Even at 20 employees, $25k a month is insane when you have no profit. I&#x27;m sure it was a pretty office, the kind that attracts good developers in a competitive market.

Yes I&#x27;m confused why Gumroad didn&#x27;t become more like stripe or patreon. That would&#x27;ve been a natural development. It must be execution problems.

They&#x27;re not really congruent products… if anything Gumroad is more similar to Stripe. But to take your question seriously, I&#x27;d far rather hack together a shopping site and use Gumroad for payments than grapple with Shopify again, they give me a migraine.Gumroad is also going to have some new opportunities if Patreon continues to struggle with their similar deal-with-the-devil.+1 Gumroad, glad to see it&#x27;s found a way to thrive.

Amazing and poignant story; thank you for sharing.I do wonder if there was a path for Gumroad to become a Shopify killer, instead of focusing on sellers too small and unsophisticated for Shopify, which limited the addressable market.

This bit is interesting...&quot;I am following up our conversation a few months ago. KP would like to sell our ownership back to Gumroad for $1. Can we discuss this week?&quot;...do founders discuss a Plan-B exit strategy&#x2F;costs with the VCs ? Do VCs (or their lawyers) give this option or offer to discuss.For Gumroad, it sounds as if this was a lottery or a happy coincidence. But I am interested in finding out if VCs actually only are interested in outright discussion of the up side (similarly for the founders... but that&#x27;s kind of apparent from observation, and ... well also reading your article :-) )

This brings me back to a few lessons I’ve learned from other friends:+One of the CEOs main roles is to raise money+Rich or King? Know which one you wanna be.+How much is your friendship really worth? Think carefully about this before you get in business with them.

I have to say, this was a very pleasant read. I expected it to be a thinly vield ad for some new business, but it was actually very insightful.Seems to me like the author&#x27;s failure taught them a valuable lesson about what they actually valued vs. what they thought they valued.I would like to see more tech companies like Gumroad; that is companies whose focus is not on IPO and quick aquisition, but instead, on the quality of their product&#x2F;service and the prosperity of the customers&#x2F;users.

<a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19106780" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=19106780</a>

Uber and Lyft are middlemen, but because they interface directly with the consumer, they also create demand. I deleted my apps when I realized that I was spending a hundred bucks a month compared with twenty bucks a month if I had used cabs, and getting little real benefit out of it. It just feels so convenient, but the fares add up quickly. I bet if they sent weekly or monthly summaries people would use them less.

&gt;because what you actually do is easily replicated.Not really for Lyft&#x2F;Uber, at not now that it&#x27;s flat fee and ride pooling instead of a traditional per minute&#x2F;mile fee structure. To achieve those thing efficiently you need data and until you get that data you&#x27;re burning through a lot of money.

&gt; no real differentiating benefits other than size and brand recognition and maybe some vague “guarantee” to the customer.- scale- brand- customer loyaltythat&#x27;s a lot of differentiation. more then 99% of the businesses in the world and more than even many public companies.(especially once you add the power gained from aggregating demand and supply which most of these companies have)

You could say the same thing about Uber, Lyft, Airbnb, Etsy, TaskRabbit, etc..When you sit down and think about it you start to realize just how “temporary” all these so-called unicorns are, as they are just middleware services with no real differentiating benefits other than size and brand recognition and maybe some vague “guarantee” to the customer. You’ve got to get big fast, because what you actually do is easily replicated.

They should have said $178,000,000 in transactions.

&gt; There is, of course, the $178,000,000 we have {sent, channelled, moved-through-our-platform, assisted in transferring} to creatorsAll of the above seem synonymous and none seems particularly malicious, but &quot;sent&quot; is easiest way to express it. For a marketplace, I don&#x27;t think anyone&#x27;s naive to believe the host is directly advancing funds to the tune of millions. Is it really necessary to nitpick that?

Might be a language thing, but if someone sends me money through paypal, I definitely would say paypal receives the funds from that person and then sends them to me.Thus paypal can tally up how much money they have sent to their customers. I can&#x27;t see how you could misunderstand that or think there is malice in the formulation. I can&#x27;t possibly anyone would sit there thinking that gumroad ment he donated money to people or invested it.

I&#x27;ve always liked Gumroad as a product and service but this line kind of bothers me:&gt; There is, of course, the $178,000,000 we have sent to creatorsThis money wasn&#x27;t sent to creators. They sold products worth $178M + Gumroad fees through the service. The creators made the products, marketed the products, acquired the customers, etc. When I use Paypal to sell something they aren&#x27;t &quot;sending me money&quot;.

I wonder if this issue they had is why they went from charging 5% per sale to a monthly flat fee instead.

Unfortunately failing to build a billion dollar company often means ending up with a $0 company. Like the OP said, VC too often comes with the pressure to either succeed in a big way or pack everything up and go home. And when your liquidation preferences are greater than the current value of your company, as a founder it&#x27;s not very compelling to keep moving forward.

I&#x27;m sure it&#x27;s been a very tough experience and the author learned a lot during the time. But I would expect that if you fail to build a billion dollar company you end up at least with a $100 million company...

Indie.vc is built to make this not admirable, but the norm. I think KPCB is amazing and should be totally shouted out for this, but indie.vc is building an entire model so that founders don&#x27;t have to choose.

Not sure that entirely follows; Gumroad may have existed whether VCs pumped money in or not, but I hear what you&#x27;re saying.In a way every time you ride in an Uber or Lyft you&#x27;re capitalizing on investors pumping cash into companies.Luckily the winners make enough to pay for all the losses of the losers.

It&#x27;s interesting how Lambda School was able to capitalize on investors pumping cash into and hyping up Gumroad.It&#x27;s a smart move to capture some of that VC money without having to pitch anything to them.

I’m incredibly grateful for Gumroad - Lambda School (YC S17) wouldn’t exist without it.We threw up a my book on Gumroad because why not&#x2F;it was easy, and now I believe we’re sitting north of $100k in sales. I don’t think we would have put it anywhere else - wasn’t worth the effort. I often think about how important it is to remove even the slightest amount of friction as a result.I also find the move from KPCB admirable. They gave up their interest in the company (it was a loss for them anyway) and allowed the company to flourish. Hats off for that.

Reminds me a lot of Bandcamp, which serves a similar market and has a similar and very refreshing ethos: in it for the long haul, dedicated to serve their audience because (likely) nobody else will, because there&#x27;s not and never will be VC-sized 100x upside.

This story seemed inside-out to me. With the &quot;you just have to find the right pre-existing market&quot; logic, as well as the (much more significant to me) &quot;but we were venture-funded, which was like playing a game of double-or-nothing,&quot; buried as an aside.I think these are the real stories in this story: basically stable and relevant, coupled with irrational growth pressure. I get it, though: the personal journey through the wilds of Sand Hill Road, doing battle with market forces with an army of unknown strength, and so I would have liked to see some spotlight on the mistake of taking VC.In this way, we also see this conclusion about halfway through the essay, &quot;[s]o instead of pretending to be some sort of product visionary, trying to build a billion-dollar company, I’m just focused on making Gumroad better and better for our existing creators. Because they are the ones that have kept us alive.&quot;I remember hearing a lot about Gumroad! People in the UK(? Aus?) used it a lot! In that way, this incredible journey appears as another log on the fire when it could have been part of a nice house. Or something like that. Everything about this story signals a decent business that was killed by VC.

I think what he meant was, there is no product so amazing that it will give you growth enough to satisfy your VC investors, if the market you&#x27;re in is not big enough or growing fast enough.  Could have been worded more precisely, but in the context of the article it was pretty clear.

Nice story, but:&gt; It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth.This is just a cop-out. The market will limit, not determine, your growth. It&#x27;s up to you to hit that maximum, and use marketing&#x2F;sales to extend that maximum. That is called creating a market. And overall it&#x27;s called execution.OTOH, Sahil isn&#x27;t wrong. Some markets are either not that ripe (timing is important), don&#x27;t have enough support, are too niche, and a thousand other factors. But as a generalization, &quot;Product doesn&#x27;t matter&quot; is just wrong.

This is exactly why I won&#x27;t hire good friends. The personal relations would skew business sense then, on both sides in order to stay loyal to your friends. This skew can be dangerous for business, and thus for the well-being of those who are involved and bet on its success.

The author mentions hiring a lot of good friends, so I assume they did it because they believed in him and the mission.

This is the type of reasoning that startups use to justify making employees work 60+ hour weeks for a tiny amount of equity and below-market pay.  Most startups will not become billion dollar companies.

I bet there are far more people who didn&#x27;t leave similarly-positioned-but-unsuccessful startups and regret it... maybe spurred on by the survivorship bias (or non-survivorship bias, in this case) of those who left a successful startup.

If gumroad became a billion dollar company you&#x27;d be retiring on that 9 months of work with even a tiny bit of equity. I bet  there are plenty of people that bailed out of google, facebook or other similarly positioned startups at that stage and regret it.

Exactly what I was thinking when I read that part. I hope those people are still his best friends.
Working long hours for 9 months and getting laid off at the end doesn&#x27;t only affect you financially. It will will have a significant effect on your personal life and the people around you who may depend on you.

Jesus this part sucks:&quot;In those nine months, when the whole team knew that we were fighting for our company’s life, not a single person left Gumroad. From “this is gonna be hard,” to “yep, turns out it was,” every single person worked harder than ever.&quot;Did everyone one of these people have significant equity in the company?I&#x27;d expect people who love their jobs and who work on something crucial, such as researching new medicines or making more efficient batteries to want and be able to do this. No offense, but if this ultimatum was handed out and I wasn&#x27;t vested like the top guys I&#x27;d bail.

I think that&#x27;s the point the author is making. The benchmarks for &quot;success&quot; are different if you&#x27;re in the SV VC-funded startup world. What may be a sustainable 10-person staff e-commerce business would be seen as a failure in some circles because it didn&#x27;t grow fast enough to IPO, which is all VCs care about.

Honestly doesn&#x27;t seem like he failed at all. Sounded like just bad times for the business. I mean 2 years of difficulty seems like a minor thing in the grand scheme of the business lifetime. Not only that, the business literally keeps growing if the graphs are to be believed.Failing is when you can&#x27;t come back and you close the business.

I&#x27;m pretty sure this is the best post I&#x27;ve ever read on Hacker News, because of its potential positive impact on others. It&#x27;s one thing to give advice, it&#x27;s another to back it up with detailed life experience. The lessons shared here are invaluable ones, and if writing this story helps others learn them without having to go through as many trials to get there, you have done a great service. Bravo.

Off topic, but Sahil, love your drawings and paintings on your IG.I&#x27;ve thought about the idea of moving to a place like Provo from NYC, but I work in cybersecurity, and I don&#x27;t think there&#x27;s a client base anywhere but DC, NYC or maybe SF.

This is totally awesome, @sahillavingia. For a young guy, you have learned some incredible lessons about business in a VERY short time. You are positioned well to build that billion dollar venture that you originally dreamed of. It might not be called Gumroad, but who cares?&quot;It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth.&quot;This is so utterly, absolutely, painfully true. We hear stories of hypergrowth as if you can just choose that path and it magically happens. Reality is: most companies never get to hypergrowth. Your only real option is to pick a large potential market with a reasonable hypothesis for getting there. And then see what happens.

Is your claim &quot;for most companies the quality is already sufficient, and so it&#x27;s not the limiting factor (even though it would be if the quality was insufficient)&quot;? Or literally &quot;the TAM matters, your app&#x27;s quality doesn&#x27;t&quot;?

Market determines your growth almost always. I have enough data points now to basically say this with enough certainty. Friendster is the countercase where the technology couldn&#x27;t scale, and their execution was poor, and they focused on revenue at the expense of growth, but generally like... now-a-days with modern web stack market is basically all that matters.

Precisely this. Seems like a small change, but I think it&#x27;s a significant one.

so s&#x2F;determine most&#x2F;constrain&#x2F;

&gt; It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth. For better or worse, Gumroad grew at roughly the same rate almost every month because that’s how quickly the market determined we would grow.This seems like a simplification, and perhaps overly fatalistic. A company&#x27;s growth rate is a function with many parameters, and at most points, one parameter will be the limiting factor. An amazing product is (usually) a necessary, but not sufficient condition for rapid growth.It sounds like Gumroad built a product that delighted their users, but there just wasn&#x27;t a level of market demand to hit the growth numbers that they were hoping for. (Though I consider their end state a big success; being a unicorn isn&#x27;t the only way to add value to your users&#x27; lives.)In a different market, with enough pent up demand for the product, the story could have gone another way; &quot;We kept on getting new users, but ultimately couldn&#x27;t keep users because our product wasn&#x27;t awesome enough.&quot;

I’m curious: why open source at all in this particular business model at this particular stage?

Not that you asked, but as a word of advice from a random person on the internet: if you do go the open-source it like Wordpress route, it would be good if you made an easy path back in to your product.  Some people who start off self-hosting WP, Prestashop, or whatever, then decide after a few years they would rather have somebody else do it.  Oddly, it is often not a marketing focus for the company that makes the software.  If I had a self-hosted, open-source Gumroad setup, and a couple years later wanted to pay someone else to host&#x2F;manage it, I would want a clear and easy article on your website about how I could turn it over to you and pay you to do that.

From their calls for part-time&#x2F;contract devs, I think it&#x27;s largely a Rails stack.

&gt; On top of that, our product ideas, like our credit card form and inline-checkout experience, have proliferated the web, ...I&#x27;ve used Gumroad several years ago (as a customer), and the simplicity of the transaction and this interface was something refreshing.You also say that you&#x27;d make Gumroad open source soon. May we know what the tech stack behind it is?

Look at it this way. A VC fund has a finite number of investments to make. Typically a partner gets to say yes once or twice a year. They usually take a board seat and spend lots of time helping the company.Knowing that many of those investments will be worthless, they want to maximize the number of shots they get towards a billion dollar company.If 1&#x2F;3 of their companies are a 3x return, and the rest become worthless, the fund has failed. They’re all aiming for the one company that will deliver the big returns that offset all the failures (and the high fees they charge LPs.)Seed stage investors are different. YC, for instance, spends much less time with each company, and therefore can take lots of shots.Growth stage venture is different too. They aim to invest a few years before a company goes public, and are fine with a 3x-5x return. They are taking much less risk.The VC model also creates a fundamental tension with the founder. Founders get one shot at a time. $50M exits represent life-changing money for them (as long as they didn’t raise too much money.) VCs pressure them to take greater risks than are rational for the founder. This is why you want to look for VCs that will truly put the founder first. Or keep control of your board.Joel Spolsky explained this well 15 years ago, so we knew about it going in and chose a founder-first VC firm.Here’s that post: <a href="https:&#x2F;&#x2F;www.joelonsoftware.com&#x2F;2003&#x2F;06&#x2F;03&#x2F;fixing-venture-capital&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.joelonsoftware.com&#x2F;2003&#x2F;06&#x2F;03&#x2F;fixing-venture-cap...</a>Thoughtful VCs will do what’s right for the founder. It’s rational because their reputation matters so much when competing for investments. This has changed for the better since Joel’s post.

&gt; if our VC investors had known at the outset that they would have a 3x return on their money in three years, they probably wouldn&#x27;t have made the investment.Of course they would have made an investment.Any guaranteed return above bank interest rate -- is appealing for investors.Guaranteed return of 50%&#x2F;year is an amazing investment opportunity.What you probably meant is that if investors knew that the return cannot be more than 3x, but also has high probability of failure -- then the investors probably would not make the investment.

I think it’s common usage that investor is implied? I invest in tech companies at the seed stage.

&gt; I’m an angel nowYou actually label yourself that vs. an investor?

I&#x27;m probably at the tail end of the generation that grew up with Flash games and I have to say Kongregate was great! I loved playing Warlords: Call to Arms. Thanks for your work.

Thank you for making Kongregate, it was a huge part of my childhood!

My experience with Kongregate was different, but I did feel some of the same things. We became a vehicle for many indie game creators to make a living, which I&#x27;m very proud of. In our case we also had a sale that was very profitable for the founders and early employees, and also profitable for our investors.But the weird thing is that if our VC investors had known at the outset that they would have a 3x return on their money in three years, they probably wouldn&#x27;t have made the investment. A 50% annual rate of return is not worth their time. That&#x27;s not what their LPs are looking for.The angels made more like 6.5x and put in less time - most of them would take that deal all day long. I&#x27;m an angel now, and I definitely would. So perhaps startups that need capital but aren&#x27;t looking to be billion dollar companies should consider just raising a seed round from angels... The difficulty there is that angels do want an exit, not dividends from a profitable company that stays private forever.

I&#x27;m really surprised that Gumroad has such low gross margins. For April 2018 $65k gp on $273k revenue is 24% gm. It looks better in December $135k gp on $341k revenue is 40%, but still lower that what I would have thought. Is it credit card processing fees? Server costs? What am I missing?

Cool story! Makes me think I should write my own up someday.However, one thing I find odd. The story talks about the creators and how important they are. But when I go to gumroad.com looking to see all these creators, I see how to sign up as a creator, but don&#x27;t actually find the pages of other creators. Where are they all? After reading the article, I don&#x27;t get how the business works, I guess. The article led me to believe it was similar to Etsy where creators sell their wares. Is that not the case here?

The bigger, separate issue, is that billion dollar companies fit a certain mold, not one you should ever strive for to be honest. Just do a quick manual analysis of the top companies of the world and you will pick up patterns in them that Gumroad would never have had.

Reading about a 19 year old kid, grinding through that incredible ordeal is just awe inspiring. I think his constant re-focusing on creating value for creators and employees first has been his guardrail against total failure in toughest of times - I&#x27;m glad to see he powered through.

If he only did a series A, I doubt he gave up enough control to get ousted.

I wonder if an entrepreneur with less connections and not a part of YC would get that $1 buyout deal.  I would think the default would be ousting the founder and selling the assets.  Then the founder would be left with nothing.  They&#x27;d have no lifestyle business, even though they could have had one if they never took VC.

On the one hand I applaud KPCB for giving up their interest in a founder friendly way, but this also leaves a bad taste in my mouth and seems a bit “Heads I win, Tails you lose” from Sahil’s pov. The VC investment let him build a fully fledged product capable of breaking out. But it didn’t and he still got to keep the company without much liquidation preference. This is an example of a true VC subsidy.

After having founded a non-VC backed company (browserless.io), my anecdotal experience is that most potential creators out there need more encouragement to stand out on their own two feet. The maker market has huge potential, but there are so many barriers to entry that it does stifle growth.It takes almost a perfect storm of potential, communication, determination and timing to birth a successful company&#x2F;product. I think it&#x27;s just what our &quot;startup&quot; environment tends to favor, and how the ecosystem just works, for better or worse. If we had more companies like Gumroad, Atlas, and IndieHackers I think that there&#x27;d be a proliferation of growth in the creator space. Even just getting decent health insurance as a single-person LLC&#x2F;company is a frightening thing, and that&#x27;s just _one_ obstacle!I also think that, once more and more folks awake to the idea that you don&#x27;t need VC funding to get something off the ground (and that it&#x27;s really an achilles heel in many regards), that more products will start getting out there. It&#x27;s also a conflict of interest many times: they want a return on their capital, whereas you want that _and_ to make something of value. Sure, VC is necessary in many regards, but it also isn&#x27;t in a lot of cases.I&#x27;m really happy that Gumroad stuck it out and is fighting for creators. Just the notion of them _not_ closing for financial reasons is comforting to me. Means that they cared that much about their users and the bigger picture, rather than just money.

Venture capital is broken. Plenty of other good businesses to create out there that don&#x27;t have to do 20% month over month.

&quot;Every month of less than 20% growth should have been a red flag.&quot; It&#x27;s concerning that this is the state of affairs for expected business growth

&quot;Every month of less than 20% growth should have been a red flag&quot;It&#x27;s mildly concerning that this is expected business growth. Endstate is what&#x27;s happening now- how to get the public IPO to value my $1bil co at $1bil

I had not known about gumroad and took a look. Would you ever introduce more of a product browsing store front experience?I see all these great categories in the search drop-down, but no way to just take a peak into what was available.Great read and glad you are enjoying your journey.

I&#x27;m pretty sure I saw that graph of the CEO not working much correlating with low growth like a year ago

The lesson.Don&#x27;t take VC money before you&#x27;ve built something (anything) and tested it out. You don&#x27;t want to give away equity to invent your product.I am aware it was way harder to build something in the payment space back then but still.Great story and while I definitely am happy Gumroad is doing well it&#x27;s also great to know that good things can end well with a fizzle rather than a big bang.

Sounds like the story of a young person who drank the VC cool-aid. The company should have been bootstrapped from the get-go... $25k&#x2F;mo office, …doh.Yep, easy to say as a greybeard and hindsight. But I remember Joel on Software articles on this subject circa 2000, so some information was out there.Between the lines I feel a lot of self-punishment going on. Well, I&#x27;d love to have $10k+ of &quot;failure&quot; coming in every month, with the satisfaction of helping the little guy&#x2F;gal no less.Perhaps you&#x27;d consider selling to someone who believes in the mission and hates dark patterns? I don&#x27;t have a lot of capital laying around, but some, and perhaps something else could be arranged?

The most interesting thing about the setup premise, is that it should have a &quot;yet&quot; attached to it somewhere.Unless something terrible has happened in the last few months, their recent November 2018 numbers indicate that at a continued reasonable rate of growth over another decade, they&#x27;ll have a sizable business and a large number of creators utilizing it (which is one of his goals). It would be worth at least a hundred million dollars. If the growth spikes upward even a bit on average (maybe they garner more interest with scale or the market expands faster), it could get them to between a $500m and $1b valuation a decade out. Modest compounded growth with even a small kicker, from where they&#x27;re already at, will produce a big outcome over time. So he&#x27;d be a sub 40 year old with an extremely valuable company and a lot of people that use what he created (and which I assume he owns a large part of at this juncture).Given time and their history of slow but steady growth, Gum is more likely than not to produce a homerun. The continued growth over many years is a stellar signal that they&#x27;re already winning as a business. You can get there slow or fast. The VCs want it fast, Sahil can afford to take his time, he&#x27;s still quite young and Gum is his.

He &quot;failed&quot; to build a billion dollar company.

I think it&#x27;s simply a byproduct of silicon valley&#x27;s fetishization of the word &quot;failure&quot;. Anything that isn&#x27;t a runaway success is re-contextualized as a &quot;failure&quot; so that it can function as blog title short hand for &quot;here&#x27;s what I learned from my experience that didn&#x27;t go 100% as expected&quot;.

I struggle to see how this story is one of failure. A kid launched a business that is still going 8 years later. He learned that VC funding is a double edged sword and was able to shed some of that burden - buying them out for $1. In the beginning he speaks of building this thing and having it be his lifes work - which it may well be if he keeps going. And yet there was all this talk of being a billion dollar company and an IPO - which is actually as exit strategy. I was floored by the notion that only 20 percent monthly growth was a red flag. &#x27;du fuk you people think you&#x27;re doing? Launching a rocket? Oh right... SV, VC, etc...In the end this guy learned a bunch of hard lessons about business, finance, and life. I hope he continues at least until he finds a new adventure, and stops calling it a failure. It may turn out to be exactly what he said he wanted in the beginning: &quot;what I thought would be my life’s work.&quot;

I use gumroad and like it.This reminds me of the Patreon founder claiming a few days ago that he didn&#x27;t have a sustainable business. Did Patreon or Gumroad need $10 million of VC money? Do they need to be located in the bay area? These seem like sustainable businesses that shoot themselves in the foot with unnecessarily high operating expenses and unreasonable expectations from VCs.

Thank you for writing that up. Is there a healthier, less painful path you&#x27;ve identified for a company such as Gumroad to come into existence and get to the point it&#x27;s at today?Perhaps a traditional business loan from a bank and a smaller team from the start? Would it be possible to aquire new users at a similar rate without the VC headlines?

The great Scott McNealy quote about Sun really resonated with me:&gt; We kicked butt, had fun, didn&#x27;t cheat, loved our customers and changed computing forever... and in many ways, it seems like only a &quot;lifestyle business&quot; can really prioritize those over core revenue and growth metrics.Bryan Cantrill&#x27;s discussion is also great: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=-zRN7XLCRhc&amp;t=2000" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=-zRN7XLCRhc&amp;t=2000</a>

Reminds me of this talk from Vincent Woo (creator of Coderpad)<a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=J8UwcyYT3z0" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=J8UwcyYT3z0</a>Really made me rethink my priorities and has had me change the kinds of things I do.

Most businesses should strive to be self-sustaining. And if they make obscene amounts of money, all the power to them.What I dislike is A) the view from startup land that there are only two types of new businesses, &quot;startups&quot; and everything else (&quot;lifestyle&quot;) B) and the &quot;everything else&quot; category is somehow inferior or even some sort of hobby or vanity project. Sahil used the term to describe his own company, and at one point felt shame about it, even though he had a real business with real customers and real revenue.That&#x27;s how twisted the mindset in startup land has become, where real business owners are supposed to feel shame, and &quot;success&quot; is based on as-yet unfulfilled promises and raising a round?

&gt;&quot;lifestyle business&quot; is really just a small business that works, is self-sustaining, and not overly bloated to attempt to make obscene amounts of $$$.I guess it sounds too bourgeois for the young (and not so) SV rebels who are in to change the world and make some billions along the way.

Isnt a &quot;lifestyle&quot; business a business to support the lifestyle of the founder? IE money is not typically a problem, either the company is profitable or the founder will support it loss making. The main function of the company is to keep the founder entertained more than anything else.There are a lot of companies like this (big &amp; small), though sometimes its not recognisable from the outside. Note the goal is still ostensibly to make money. You don&#x27;t run a business when you could have retired if you don&#x27;t love growing businesses. I cant imagine a founder turning down an offer to expand rapidly, if it made sense. They just tend to avoiding going all in on a particular bet and for obvious reasons don&#x27;t like ceeding control to outside investors.

&quot;lifestyle business&quot; is really just a small business that works, is self-sustaining, and not overly bloated to attempt to make obscene amounts of $$$.I feel like this is exactly what most companies should strive for. They&#x27;ll make better decisions that way.

I agree and use it sometimes too but hearing &quot;bootstrapped&quot; applied to companies outside of tech doesn&#x27;t feel right. Example: my dad owns a 20 person small business selling commercial doors and hardware - we are in the construction industry. Saying he has &quot;bootstrapped the business&quot; still feels weird.That&#x27;s when good old &quot;small business&quot; should be sufficient enough IMO. It has a stigma but it shouldn&#x27;t.

I like and use the term &quot;Bootstrapped Business&quot; -&gt; smaller, tight focus on profitability, trying to meet real needs.

Isn&#x27;t it just a VC term that has snuck into the vernacular?  As builders and creators of value, we do ourselves a disservice by using the same language as that used by those who only deploy value - or more accurately who rent it out opportunistically - and have different values and priorities.

I also use Gumroad and also used to think lifestyle business is bad.But really it just means “business that supports a lifestyle”. Which a “startup” does not.In that light, startup is the bad word when you think about it. What, you run a business that can’t even support your lifestyle? LooooooLAnd yes if I’ve learned anything about silicon valkey in the past 4 years of living here is that people are elitist as fuck, hate their lives, and grab onto any little thing to make themselves feel better than others. It’s what they need to endure the grind and that’s okay. I get it.

I agree 100%. I&#x27;m a big fan of just calling them businesses.

Agree the essay was a great read. I didn&#x27;t see anything to suggest the OP missed that fact so much as had a reaction to a specific part of the essay and wished to discuss it.Being a part of the SV startup ecosystem myself, I also see the term &quot;lifestyle business&quot; used as a soft-perjorative for &quot;not ambitious enough&quot;.

&gt;He&#x27;s written a nuanced, heartfelt essay, and this comment seems to have missed all of that to nitpick on a word.Hackers news comments in a sentence.

He&#x27;s talking about switching from vc rocketship to bootstrapped. In that context the pejorative makes sense: he&#x27;s describing how he felt at the time.Furthes, he ran this &quot;lifestyle&quot; business with outside investors.He&#x27;s written a nuanced, heartfelt essay, and this comment seems to have missed all of that to nitpick on a word.

I also found it illuminating how quickly the investors wanted to just dump the entire thing, which would have almost certainly left all the businesses in the lurch, like we see with so many companies these days, especially in the valley.People seem to forget that the VCs are hidden from the blowback of those cut-and-run decisions, so it&#x27;s easy for them to make those flippant recommendations. It is the executives who will be publicly shamed for cutting and running and that reputation will follow them and likely catch up to them.Good on Sahil for sticking it through and getting out of the bubble and realizing that chasing money is not the path to happiness.

Couldn&#x27;t agree more.The lack of business sense in the startup scene is absolutely astounding.Too many opt for playing game of thrones instead of creating value and capturing some of that value as a profit.

Most people use the term to describe businesses that require little ongoing effort (hello, “4 hour work week”), but yeah, the implication that people who take vc money aren’t interested in a particular lifestyle is kinda hilarious.

I think this comment is an unfair treatment of Sahil&#x27;s opinion. He disclaimers all this at the start with the following:&gt; Now, it may look like I am in an enviable position, running a profitable, growing, and low-maintenance software business with customers who adore us. But for years, I considered myself a failure. At my lowest point, I had to lay off 75% of my company, including many of my best friends. I had failed.&gt; I no longer feel shame in the path I took to get to where I am today. It took me years to realize that I was misguided from the outset. This is that journey, from the beginning.He acknowledges that he is grateful and proud of his lifestyle business. There&#x27;s nothing wrong with the phrase itself. I run a lifestyle tech business as well. I&#x27;m proud of it. I switch between &quot;small business&quot;, &quot;sustainable long-term business&quot; and &quot;lifestyle business&quot; depending on my audience. &quot;lifestyle business&quot; doesn&#x27;t have to be a dirty word if you don&#x27;t use it as one.

Worse than the use of the term lifestyle business is his definition of success. Success is his placement relative to other people who become billionaires. He describes this several times. That is vanity rather than any sort of imperative or objective goal describing a business position.To me vanity is a major red flag. That sort of self serving quality needs to describe the founder as somebody willing to ask for cash and drive necessary growth, but must not be a goal driving the business. The difference is that the qualities (appearance) of vanity are attainable early.

I was basically alone. I didn’t have a team, nor an office. And San Francisco was full of startups raising gobs more money, building amazing teams, and shipping great products. Some of my friends became billionaires. Meanwhile, I had to run a “measly” lifestyle business. It wasn’t what I wanted to do, but I had to keep the ship from sinking.There&#x27;s that term again, &quot;lifestyle business.&quot; Uttered like a dirty word, when in fact Sahil has an actual product that many thousands of people use and pay for. I&#x27;m one of them.Meanwhile, many startups aren’t true businesses – they book no revenue, and they may not even have a sellable product. That’s fine, because almost all businesses start with an idea or a dream or a need or pure desperation, and it’s up to the founders to make it work. They may even need investment, too – sometimes a lot of it. And that’s fine, too.But when people from the startup world use the term “lifestyle business” to describe real businesses that aren’t pure tech, have solo founders, don’t take VC money, don’t intend to scale to a billion users, or whatever other qualities are not worthy of investor consideration, I find it condescending and misguided. Some startups could actually learn a thing or two from the vendor who sells hot dogs in the park, the person who starts up a specialist marketing agency, the partnership that builds a ceramics factory, or the solo founder running a media distribution and sales platform. They have products or services to sell. They have customers. They book revenue, pay their employees and suppliers, and if they do things right, may even become really successful.In short, people who run small businesses are not hobbyists or dilettantes. They’re entrepreneurs doing real business selling something, often with limited capital and without the glamor or hype.Kudos to Sahil for what he&#x27;s accomplished. But for the love of Pete, please stop using the term &quot;lifestyle business.&quot;

If you&#x27;re given $8M, how hard are you really struggling? I think many people here on HN believe they could build a tremendously successful company with $8M.It&#x27;s frustrating that I cannot get money for my ideas, which I believe are more impactful.

He links another post he made a year ago about moving from SF to one of the most conservative&#x2F;religious cities in America[0]. Both were great reads.[0] <a href="https:&#x2F;&#x2F;medium.com&#x2F;@shl&#x2F;from-bubble-to-bubble-21d86195e178" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;@shl&#x2F;from-bubble-to-bubble-21d86195e178</a>

Reflecting on My Failure to Build a Billion-Dollar Company