Reflecting on My Failure to Build a Billion-Dollar Company

https://news.ycombinator.com/item?id=2406614

Thanks HN for being a part of my journey!

To what do you attribute the challenges?

Were you building a product there wasn't a market for, what you were delivering wasn'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/product could bear, and then had to deal with that.

Do you think if from the start you had _not_ tried to create a "billion dollar company", 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's what your essay is implying you are suggesting, but I'm not totally sure if that's what you mean to be suggesting; or maybe you don't mean to be "diagnosing" it at all and aren't interested in these questions of what-could-have-been at this point. :)

Big fan of Gumroad! As a customer, it's one of the neatest checkout flows I've come across, among Stripe.

Do you have any plans to expand into subscription offerings?

Couldn’t quite spot the failure though... maybe ESL thing.

> aren't interested in these questions of what-could-have-been at this point

Exactly. If we shipped this or that feature... If we raised more, or less.. If I stayed at Pinterest... If I invested in Bitcoin...

I'm just not sure I gain a lot from thoughts like that!

https://news.ycombinator.com/item?id=2407053

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's a great experience.

Will definitely use you guys to sell my own in the future.

Thanks again.

https://letscrate.com/gumroad/gumroad-progress

Working on things you enjoy, making a positive impact on people'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!

Just from visiting the landing page for gumroad.com, I wasn'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 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!

Let's not forget personal satisfaction. I'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'll have a fairly good life and good impact on others by the end. :)

It's a bit ironic that one of the main features of the product is "audience building for creators".

In hindsight, what do you make of companies choosing or rejecting venture funding in the first place?

I don'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.

Because that's a problem I face with Stripe as well.

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?

$7M @ 1X

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

(Though, I was living in SF.)

Gumroad will be worth that in a few years at this rate, and he could cash million dollar paychecks along the way if he wanted.

> 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've bought back your ownership you'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.

That's why it's way to dangerous to just follow any guy and do a startup and waste a few years of your life.

Yep. For me it's "number of Mötley Crüe concerts attended" and "number of Trans-Siberian Orchestra concerts attended".

(currently "4" and "4 or 5" respectively)

But of course those are highly correlated - it's easier to help a lot of people if you have plenty of surplus wealth and time to share out. I'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 "make lots of money."

That's my best guess, yes.

> Meanwhile his investors lost all the millions they invested.

Well, some sold his equity back to him for $1, so yes.

> His employees lost all the time and vesting.

Well the employees could have exercised their grants when they were laid off, but I doubt they were inclined to double down on what was then a failing company.

> That's why it's way to dangerous to just follow any guy and do a startup and waste a few years of your life.

I mean, the employees got paid all along the way, and probably not that much less (if any) than they would have working for another company, and they got to work on something they loved.

Sad that it didn't work out. These things are risky, but having worked at startups and not gained anything from the equity I would do it again in a heartbeat.

But in addition to that, there is absolutely nothing to suggest that the extremely wealthy are generally a positive force in society. Many give nothing or close to nothing back, and often work against the interests of others in so many ways (trying to decrease their own tax burden, hoarding wealth in assets, disproportionately damaging the environment, etc.)

Americans in particular worship the wealthy, but I really believe that it is utterly misguided.

Thank you.

[1] https://twitter.com/gumroad/status/811650470758359040

> 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.

And if, God forbid, they wanted to start their own company and waste a few more years of their life (your words, not mine!), well... Everything is easier when you’ve seen someone else do it.

With that said, optimizing for after you're dead might be selfish and reasonably desirable, but there's a lot to be said for optimizing for tomorrow instead. Life would be pretty pointless if none of us were supposed to optimize for some enjoyment while we're here.

But to address your question: people 'take the limit' and argue that life is just meaningless in every way all the time. If it were true, you shouldn't be bothered to make that effort in the first place. Obviously your actions matter to other people by the sheer virtue of the fact that you're optimizing for it. if you weren't, you wouldn't have bothered to ask the question.

Sometimes life is what you actually do, not merely what you think.

In both cases the founder made between 20-50 million.

By this logic, culture and society would die every generation, and have to be rebuilt from scratch each time.

We all leave behind a "small" but far-reaching legacy that ripples out from our short lifetime. Each of the thousands of interactions we have with with other people and our general environment have a tiny but real impact that doesn't necessarily diminish to zero after we die. The change that occurs then has a small domino effect on any other person or system that it touches. And so on and so forth :)

My life today is deeply affected by the concerted actions of billions of unknown individuals from centuries and millennia past in ways that I can't even begin to fathom. I'm grateful for some of those impacts. For other impacts less so, but I hope to contribute small changes for the benefit those who live in the untold distant future.

Founders own more of the company than employees, of course. The good news is anyone can start a company!

Nothing matters to you once your dead. Other peoples' assessment of your life is irrelevant to you.

I would rather live my life happy with my decisions (part of which is helping people because of my own morals) rather than helping a bunch of people in ways that make me miserable.

I'm also very happy that they've slowly been incorporating more old Savatage songs into their sets. :-)

You can be one of the people you help.

As far as Warren Buffet goes, I don't worship him - he got pretty lucky, was a little bit disciplined, and rode a wave of increasing value of American stocks for 40 years - but to say he has been a "premier monopolist" (hint: having high profit margins on the back of brand recognition like Coca-Cola and Apple have done is not what a monopoly is) or is a "parasite on economic growth," is only your own preconceived bias.

And as far as the behavior of the very wealthy in general, the things you describe are things that the middle class or the poor do as well. The vast majority of human beings are assholes, unfortunately. If you do happen to be a good person, though, I think the world is better off if you're wealthy than if you're poor. And if you set out to do the most good possible in the world, then choosing a career where you can make a lot of money, and then donating a large portion of it, is not a bad way to go. Doubly so if you can help people along the way, as many doctors or lawyers with pro bono hours do.

Even to pick a small part of it, 130,000 people worked on the Manhattan Project but a history of it that the average person would consume might name 10 key figures.

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->$10M is a big step which is hard to self-fund, there is some risk involved, and the owner's mindset needs to change.

I couldn'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'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't hear from VCs, but if you hit that milestone, who says you have to go higher?

Maybe it's OK for a founder to just stop at some point, especially if they don't enjoy what they're doing or they've been under-investing in other areas of their life.

If you have 'startup' with so many unhappy customer - its expected to fail. https://gumroad.pissedconsumer.com/review.html Focus more on being open, transparent and being kind. Good luck!

Annual sales of $1M does not mean "generating a million dollars a year". In some industries, those $1M in sales might be as low as $30k to $50k in earnings (though it would probably be more for a software company).

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'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't use my credit card online if I can help it

Thanks in advance)

To use your example of the Manhattan project: only 10 people may be remembered in books, but they certainly would have never completed the project by themselves. The contributions of those other thousands of individuals was vital to the project's success. If they didn't exist, it's not a guarantee that you could have replaced all of them -- the project may have simply failed.

What you do in life, echoes in eternity.

> getting someone to give you that much money for something you are selling is a lot harder than most people realize

Absolutely, I agree! But the value of a business – which you were talking about – isn't determined by its revenue alone. In fact, earnings and earnings growth determine the value of a business a lot more than revenue.

Even for a "mom and pop" business – especially for a mom and pop business – earnings are much more important than total revenue.

I'm curious now: is there a story behind this ambiguity?

Then I thought about it and said to thyself, "actually, a million is a lot either way." I've actually founded two companies that grossed over a million in a year (one at about 40% gross, 5% net and one closer to 75/65) and both times have required a whole lot of work.

So my fault for being vague, not intended.