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Reflecting on my failure to build a billion-dollar company

The future came into focus: I could grow a small team, slowly buy back our investors, and build Gumroad into a meaningful business focused on our creators. We would never become a billion-dollar company, and that started to feel okay. Certainly, the thousands of creators selling on Gumroad wouldn’t mind.

The eight years I worked on Gumroad were full of personal ups and downs. There were months where I worked 16 hours a day. But there were also some months where I worked four hours a week. Here’s one way to picture that time:

Can you tell which is which? I can’t. We had a sales team for a few years, then we didn’t. Can you tell when we made the switch? I can’t.

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.

So 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.

Creating and capturing value

At a CEO Summit many years ago, my all-time hero, Bill Gates, was on stage. Someone asked him how he dealt with failing to capture so much value? Microsoft was huge, sure, but tiny compared to the total impact it has had on the world and on humanity.

Bill’s answer: Sure, but that’s true with all companies, right? They create some value and succeed in capturing a very small percentage of it.

Similarly, I am now more focused on creating value than capturing it. I still want to have as large an impact as possible, but I don’t need to create it directly, or capture it in the form of our revenue or our valuation.

For example, Austen Allred, who’s raised $48M for his startup Lambda School, got his start selling a book on Gumroad.

Startups have been founded by former Gumroad employees, and dozens more companies have been massively improved by recruiting our alumni.

On top of that, our product ideas, like our credit card form and inline-checkout experience, have proliferated the web, making it a better place for everyone–including those that have never used Gumroad.

While Gumroad, Inc may be small, our impact is large. There is, of course, the $178,000,000 we have sent to creators. But then there’s the impact of the impact, the opportunities that those creators have taken to create new opportunities for others.

Opening up

I’ve found other ways to create value, too. After the layoffs, I didn’t talk to anyone about Gumroad. Not even my mom. And after moving away from San Francisco, I felt pretty disconnected from the startup community.

So, as a way to re-engage with the community, I thought about sharing our financials publicly. Founders starting their own companies could learn from our mistakes, utilizing our data to make better decisions.

It was scary: What if we don’t grow every month? It could scare off prospective customers. It’s something I would never expect a startup seeking venture capital to do. It makes sense to hold those cards as close to your chest for as long as possible when you must raise money, hire people, and compete for customers with other venture-seeking startups.

But, since we were not any of those things anymore, it was easier to share that information. We were profitable, and a no-growth month won’t change that. So in April 2018, I started to release our monthly financials publicly.

Ironically, more investors have reached out (we’re just interested in raising money from our customers for the moment, thanks!), more folks want to contribute to Gumroad, and our shift in focus has brought us closer to our creators.

Instead of freaking out about how ‘small’ Gumroad actually is (like I thought they would), our creators have grown more loyal. It feels like we’re all in this together, trying to do earn a living doing what we love.

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.

In 2018 we donated over $23,775 (8% of our profits) to different causes. We raised money for the hurricane relief efforts in Puerto Rico and the floods in Kerala. We helped fund the Presence-of-Blackness project in speculative fiction, and a Mexicanx publication.

Seeking the nonbinary

For years, my only metric of success was building a billion dollar company. Now, I realize that was a terrible goal. It’s completely arbitrary, and doesn’t accurately reflect impact.

I’m not making an excuse or pretending that I didn’t fail. I’m not pretending that it feels good. Even though everyone knows that the failure rate in startups, especially venture-funded ones, is super high, it still sucks when you do.

I failed, but I also succeeded at many other things. We turned $10 million of investor capital into $178 million and counting for creators. And without a fundraising goal coming up, we are just focused on building the best product we can for them. On top of all that, I’m happy creating value beyond our revenue-generating product, like these words you’re reading!

I consider myself “successful” now. Not exactly in the way I intended, though I think it counts. Where did my binary focus on building a billion-dollar company come from in the first place?

I think I inherited it from a society that worships wealth. I don’t think it’s a coincidence that Bill Gates was my all-time hero and was also the world’s richest person.

Since I can remember, I equated “successful” solely with net worth. If I heard someone say “that person’s really successful,” I didn’t assume they were improving the well-being of the people around them, but that they had found a way to make a lot of money.

Wealth can be a measure of success, as seems to be in the case of someone like Bill Gates, who has invested heavily in philanthropy. But it’s not the only way to measure success, nor is it the best one.

There’s nothing wrong with trying to build the next Microsoft. I personally don’t think billionaires are evil. And there’s a part of me that wishes I was still on that path.

But for better or worse, I’m on this one now. This has been my path to notbuilding a billion-dollar company. There are many like it, but this one is mine.

Let me know if you have any questions. I’m happy to help, or at least to listen.

Gumroad is a product of many people’s hard work, including our alumni: Leigh McCulloch, Sidharth Shanker, Anish Bhayani, Kathleen Warner, Heather Whiles, Benjamin Nguyen, K. Tighe, Steve Kaye, Tuhin Srivastava, Avinash Ananth, Joel Packer, Katsuya Noguchi, Matan-Paul Shetrit, Amir Haghighat, Ian Atha, Emmiliese von Clemm, Kate Yu, Sri Raghavan, Ryan Delk, Al Hertz, Travis Nichols, Maxwell Elliott, Phil Howes, Ben Reynolds, Michael Klocker, Bryan English, Laura Biester, Jake Heimark, Aaron Relph, Ben Walsh, Greg Terrono, Donald Huang, Paul McKellar, Francisco Gutierrez, Kyle Doherty, and Jessica Jalsevac. Thank you.

Sahil Lavingia, the founder and CEO of Gumroad, originally posted this piece on Medium. It is reposted here with his permission. The e-commerce platform empowers small creators to sell directly to their audiences.
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