Sahil Lavingia wrote the first chapter of his planned book Building A Billion-Dollar Company in 2012. Lavingia, who was 19 at the time, had never built a billion-dollar company. Nor would he.
The title was aspirational, but at the time the goal didn’t seem out of reach. His e-commerce startup Gumroad created a$ 7 million of funding led by venture capital conglomerate Kleiner Perkins. “I think I had a bit of an narcissism trouble, ” Lavingia , now 27, acknowledges. “Hopefully I was realistic about my fortunes. My thinking was that if it labor, I wanted to have it documented.”
It didn &# x27; t work out the route Lavingia or the VCs hoped. The fellowship, a tool inventors can use to sell digital concoctions like ebooks and sketches, received one year of tenfold growth, but by 2014 had settled into a much slower rate. He says the company is now growing at a rate of around 40 percentage per year and moved$ 5 million incomes and a net profits of $195,554 last year. That &# x27; s not bad, but it &# x27; s not retaining Jeff Bezos up at night.
In Silicon Valley, purely being sustainable is considered failure. Paul Graham, the founder of the startup incubator Y Combinator, once wrote that the difference between a startup and a small business is that startups are firms designed to grow into big companies and to do it quickly.
Because most startups flunk, risk capital conglomerates are dependent upon financings that go public or sell for at least$ 1 billion. Karan Mehandru, development partners at the VC firm Trinity Ventures, says even smaller firms like his urge inventors to aim for billion-dollar payouts.
Lavingia’s story is just part cautionary anecdote for entrepreneurs deceived by the allure of venture capital and billion-dollar valuations, and one side an example of how a company can flourish outside those expectations.
Many startup benefactors, particularly those like Lavingia who specifically aspired to build a billion-dollar company, sell or shutter their startups and move on to their next big idea formerly they realize their company will never be what Silicon Valley VCs want them to be. But Lavingia is still at the helm of Gumroad, demonstrated that sometimes it’s better to see an idea through, even if it isn’t a billion-dollar idea.
Lavingia says a big part of his trouble is that as a teenager he didn’t see any course to step success other than net worth. As a kid, Lavingia, who was born in the US but grew up in Singapore, worshipped Bill Gates. “I don &# x27; t think it &# x27; s a co-occurrence that this guy who was the richest guy on the planet became my protagonist, ” he lends. “He was the epitome of the American dream and technology.”
Lavingia learned to program in high school and moved to the US in 2009 to study computer science at the University of Southern California. In his spare time, he built mobile apps for firms like Pinterest and the music streaming startup Turntable. That work landed him a task at Pinterest just as the company was attracting mainstream attention.
One Friday in the spring of 2011, Lavingia designed an icon for a mobile app that he never purposed up build. He decided to sell the design, but he wasn &# x27; t sure how best to sell the digital enter. There were a range of free, open generator shopping-cart plans he could set up, but that seemed like a lot of hardship to go through to sell a single item. Areas like eBay and Etsy were geared toward selling physical goods. What he certainly required was something like the Apple App Store, but for any type of content–a site where he could upload the file he wanted to sell, placed the cost, share a link to the product on social media, and make someone else handle credit card processing. He realized that there were other people who wanted the same thing. So he spent the rest of the weekend cobbling together the first version of Gumroad and announced a link to programmer hangout Hacker News.
Lavingia was right: Thousands of people wanted a service like Gumroad, and they flocked to the site to sell competitions, ebooks, typefaces, furnish artwork, podcasts, and other digital commodities. Some even sold physical produces like zines.
Investors came calling, including Craig Shapiro of the Collaborative Fund, and Turntable founder Seth Goldstein. Part of the plea was Lavingia himself; Goldstein had worked with him on the Turntable app and came apart amazed. “This kid had some strong technical skills, but seemed style, empathic, prudent, ” Goldstein says. “You know, both right-brained and left-brained.”
Goldstein also reflected Gumroad had real potential. There were few styles for pioneers to sell digital content online in 2011. Patreon wasn &# x27; t around more. Payment processing startup Stripe was still in beta, and it wasn’t easy to process pays. There were specialized websites, like Bandcamp for music, but Goldstein pictured an opening for a general intent marketplace. “It seems to be me that Sahil could build a really seamless big business, ” he says.
By the end of the year, Lavingia had quit his job without vesting his shares in Pinterest, necessitating he didn &# x27; t get a payout when the company exited public last year. He created $1.1 million in early funding for Gumroad from Goldstein, the Collaborative Fund, PayPal cofounder Max Levchin, and others. The next year the company shored a$ 7 million round of funding led by Kleiner Perkins.
Users determined Gumroad valuable. In addition to handling credit card payments, the company obtains sales tax and handles customer support. Gumroad freights 25 cents plus 10 percent of each product sale, and moves the marketer a check with the continues formerly a month.
Adam Wathan makes a living selling computer programming tracks. After trying to offer his makes with custom-made software on his own website, he turned to Gumroad. The site’s fee cut into his revenues, but he soon decided the service was worth the toll. “Gumroad acts as the broker of record, ” he shows. “When someone buys the produce, they &# x27; re buying from Gumroad , not me.”
The company thrived rapidly, chiefly by word of mouth( Wathan started applying Gumroad because he &# x27 ;d purchased produces through it himself ), and it stimulated certain niches. Max Ulichney is an artist who sells custom cleans on Gumroad for the digital illustration work Procreate. “Gumroad has always felt like a neighbourhood for touches, ” says Ulichney. “It felt like the natural locate to go when I was ready to sell my own.”
Things went well for the first couple of years. “We had one year of tenfold growth, ” Lavingia says. “We were germinating like crazy and thought it would be like that every year.”
But then the emergence stalled out in 2014. It turns out that the selling digital produces only wasn &# x27; t as big-hearted a market as Lavingia thought it might be. “I thought that was OK, it was just going to take longer to get to the size we wanted, ” he recalls.
Investors were less rosy. They wanted to see 20 percent growth per month, he says. Lavingia realized he was in trouble when he started discussing another round of financing. “I very quickly realized that VCs were not super bullish on the company. That was a surprise to me, but it shouldn &# x27; t ought to have. That &# x27; s when I realise I had to start thinking about layoffs.”
His investors told him he should simply shutter the company. “They said &# x27; Your time is worth more than this, shut it down, start again, we &# x27; ll give you more coin to do that ,&# x27; ” Lavingia tells WIRED.
But, Lavingia says, he felt a responsibility to the marketers on Gumroad. “We were managing $2.5 million every month. Creators relied on that for payment, student credits, mortgage. It seemed mistaken to tell thousands of people &# x27; Hey, because I want to try something else, you &# x27; re going to lose this monthly check that you &# x27; re employing to pay your hire .&# x27; “
Selling the company would have been almost as bad. In many cases, fellowships buy other companies for their engineering flair , not their products or clients, a practice known as an “acquihire.” Selling out might &# x27; ve helped Lavingia and his investors save face, but he felt like it would have been abandoning Gumroad &# x27; s customers.
Instead, Lavingia chose to try for sustainability , not VC-style growth. He laid off all but five works in 2015, and by mid-2 016, the company was a one-man operation. Gumroad was paying a meagre earning, and Lavingia was able to live off the business. But he felt like a lack. In Silicon Valley, a business that simply compensates the founder &# x27; s statutes is scoffed as a “lifestyle business.” For a while after the layoffs, he &# x27 ;d hoped to get the company back on the way to more VC funding and hypergrowth, but eventually he had to admit that Gumroad would never be a billion-dollar company.
In 2016, realizing he could run Gumroad from anywhere, Lavingia left the Bay Area for Provo, Utah, and now lives in Portland, Oregon. The length from Silicon Valley, he says, has given him a brand-new position on business.
Where before, his purpose was getting to$ 1 billion, he found other ways to measure success, like the millions of dollars he says the company has paid out to authors. He’s constructed the Gumroad team back up to 15 people, including part-time hires, but hopes to keep the company small-time and sustainable.
He never wrote more than a few sections of Building a Billion-Dollar Company . But he &# x27; s returned to the essential idea of documenting the nuts and bolts of building and operating a company. Last-place time, he live streamed a board meeting, committing budding inventors a chance to see how he races one. Around 100 people tuned in and another 4,000 watched it later. And he produced a 3, 000 -word piece on Medium detailing his Gumroad experience.
Lavingia realizes that other industrialists who took venture money can &# x27; t consequently follow the same path he did. Gumroad &# x27; s largest investors sold their shares back to Lavingia for$ 1 because they didn &# x27; t want to deal with appointing members of the security council any longer, and it used to work better for their taxes.
The best thing to do would probably have been never to have made venture capital to begin with. “Ninety-five percent of companionships don &# x27; t and shouldn &# x27; t make risk capital, given the outcomes of most small businesses, ” says Mehandru, of Trinity Ventures. “But formerly you get on that treadmill, it &# x27; s hard to get off if you want to build a large company.”