The Road Out Of Startupland
Sahil Lavingia once believed his startup was headed for unicorn status, but his journey through Silicon Valley—the viral launch on Hacker News, $8 million in venture capital, the glowing press—led to a very different outcome. In this episode, Sahil reflects on life outside the literal and figurative confines of Silicon Valley, and the satisfaction he gets from building a sustainable business.
- "Is Venture Capital Worth the Risk?" (The New Yorker) - 00:51
- "The deal Jeff Bezos got on Basecamp" (Signal v. Noise) - 1:55
- Sahil Lavingia on Twitter | Gumroad - 2:05
- Vibram shoes - 6:00
- Jon Wheatley founded DailyBooth, a YCombinator company - 7:22
- "Pinterest Has Already Pinned Down $10M At A $40M Valuation" (TechCrunch) - 7:31
- Bebo is a now-defunct social networking company - 7:54
- "SoftBank's Vision Fund Is a Graveyard of Broken Tech Startups" (Vice) - 9:47
- "Gumroad Gets $7 Million Series A From Kleiner Perkins For Indie E-Payment Platform" (TechCrunch) - 11:43
- Basecamp Personal - 15:45
- Her (film) on Wikipedia - 21:01
- The 4-Hour Workweek - 29:10
- Sahil's big essay on his experience, "Reflecting on My Failure to Build a Billion-Dollar Company" (Medium) - 32:58
The Full Transcript:
[00:00:00] Anyone You Meet Normcore Remix by Clip Art plays.
Wailin: [00:00:03] Rework is brought to you by Basecamp. Basecamp puts everything you need to get work done in one place. It’s the calm, organized way to manage projects, work with clients and communicate company-wide. Learn more and sign up at basecamp.com.
Sahil: [00:00:23] My journey happened so fast where I went from being in high school to raising 8 million bucks from all these investors in two years or three years. You don’t really question things. You’re kind of like, life’s good. I don’t need to break the mirage. This thing is working. So like let’s not analyze it too much right now. You know?
[00:00:41] Broken By Design by Clip Art plays.
Shaun: [00:00:43] Welcome to Rework, a podcast about the better way to work and run your business. I’m Shaun Hildner.
Wailin: [00:00:46] And I’m Wailin Wong. In last week’s issue of The New Yorker. There was a great piece by Nathan Heller titled Is Venture Capital Worth the Risk? It goes into the history of venture capital and how the US government helped bring the industry into existence. And it takes a critical look at the economic system and kinds of companies that VC has created. Here’s an excerpt I really enjoyed.
[00:01:08] When venture capitalists take board seats, they are supposed to help guide a company in the best direction. By sheer necessity, though, their most immediate interest is seeing the company grow quickly enough that their equity can reach their own targets. For a young startup, getting bigger, faster is not always the best directive. You’re unlikely to be a great boss if the people who invested millions in your company are pressuring you to grow, grow, grow, or deliver even greater efficiencies or be fired yourself. It doesn’t even take a hard-nosed venture capitalist to whip a startup into such a state because pressure is built into the system itself.
Shaun: [00:01:46] Here at Basecamp, we’ve been really critical of venture capital, but we don’t have firsthand experience with it because we haven’t taken any outside investment, aside from a small unconventional deal with Jeff Bezos in 2006.
Wailin: [00:01:57] Today on the show, we have someone who’s been through the venture capital machine and witnessed the unglamorous underbelly of the system up close. Sahil Lavingia, the founder of a company called Gumroad was ones wined and dined and praised and told his startup could become a unicorn. Then when things fell apart he had to pick up the pieces by himself.
[00:02:17] Broken By Design by Clip Art plays.
Sahil: [00:02:23] My name is Sahil Lavingia, I’m the founder and CEO of Gumroad.
Wailin: [00:02:27] And what does Gumroad do?
Sahil: [00:02:28] Gumroad helps creators, artists, musicians, writers, filmmakers, anyone that makes stuff, we make it really easy for them to sell that stuff directly to their audience.
Wailin: [00:02:37] Sahil was born in New York where his parents had immigrated to earn advanced degrees. The family then moved to Singapore and that’s where he grew up.
Sahil: [00:02:43] I first got my sort of hint of tech just like designing stuff in Photoshop, I think. I just got interested in these tutorials that you’d find on the internet, like how to do like these cool text effects and things like that. It was just a way for me to make some money online, doing freelance, designing logos for people and forum designs and things like that.
[00:03:04] And when you do that, I think two things happen. One, you realize the power of the internet and how like anyone can get paid, which is really cool, especially when you’re that young. Some of the biases that you might encounter in a professional setting and don’t come up when you’re interacting via email. Also you get paid, you know? And especially in Singapore where there’s not that many opportunities to do things like this. And then I went to USC mostly to be in California and I went for computer science and engineering degree. And at this point I had started building iPhone apps. The iPhone had come out, the app store had come out after that, and that was really cool because as a designer I felt like I kinda got it a lot sooner. I was kind of struggling a lot with learning how to code, just websites and things like that. The iPhone really for whatever reason, like that system just clicked a little bit more for me, Objective-C.
[00:03:54] So I went to school, was doing that, and then publishing my stuff on the internet. This was something I’d always sort of done. And when I went to USC, I pretty quickly realized that like even though I was way closer to Silicon Valley, like 90% of the journey at that point had been made in a mileage context. But very few people there were into startups. This is 2010. People didn’t know what VC was 10 years ago. And anyways, so I got to USC and I was just making stuff, blogging about it and Ben, who was the CEO of Pinterest, still is, sent me an email and said, Hey, you know, we’ve worked on this product, it’s a few of us in Palo Alto. We’d love your help making the iPhone app.
[00:04:33] And so I started contracting for them and you know, that happened with a few other companies. My plan at the time when I went to USC was to get a degree in four years. I would get a job, you know, ideally at Google or whatever, and then sort of like work my way down into a startup and then maybe one day start my own company, you know, in 10 years or something like that.
Wailin: [00:04:53] What actually ended up happening was Sahil left college after one semester to become the number two employee at Pinterest.
[00:05:01] I mean, did you feel prepared for the workforce at 19 when you went to work for Pinterest? Did you feel like you had a handle on what it’s like to work for a company full time?
Sahil: [00:05:12] I think I might have, but I really had no idea because all I had done before that, I guess, was doing freelance. So that was the first time I’d ever worked in an office. I remember the first time we went out to eat, I was like, what do I do? Do I pay? Do I offer to pay? Like do, how do I, how do we even split a bill in this context?
Wailin: [00:05:31] Right. I mean, did you even have like a credit history?
Sahil: [00:05:35] No. Yeah. I don’t even, I think I only had a debit card at that point. I didn’t even have a credit card. Maybe I whipped out some cash or something. And it’s funny because I felt like—it’s always hard looking back because I feel like all the learnings you have, you kind of like apply them to your past self in a way. It’s hard to really recall what you were like. I’m sure I could’ve done a better job. Or even I remember I went through a phase where I was wearing those Vibrams to work every day and I’m like, why did? What the hell was I going through? I must’ve, I was like super into paleo and all the, you know, I was like that guy that people probably… Like, the tech bro, I guess. Maybe.
[00:06:12] But I think grew out of that pretty fast. And I think the other thing is that Pinterest had no idea what they were doing either. And that helped. We were all trying to figure this thing out. I was the second employee there, so it was four of us in a house in Palo Alto. The company had a roommate. And so I think it helped that it wasn’t like they were like, Hey, this is how we run a company. They were like, we can build a product. This product is clearly working and hopefully that’s enough, right? Like that’s going to give us a lot of sort of flexibility and leeway with maybe our inability or inexperience in sort of the other stuff.
[00:06:42] And that’s the promise that VCs make, typically, right? Is they say, hey you’re good at this thing. Maybe you don’t know how to sort of scale a company or raise money or do these other things that if you want to be a unicorn, if you want to be the next Amazon or Netflix or whatever, like you’re going to need that from us and we can help you do that. That’s kind of the path that Pinterest, at least, took.
Wailin: [00:07:02] Were you there at Pinterest when they raised money? Is that how you learned about venture capital?
Sahil: [00:07:07] So I had known just through reading TechCrunch, I think I was familiar with the concept of venture capital. And from my freelancing days, there were a couple folks, Jon Wheatley was one, who moved to San Francisco, did YC, I think, and raised I think a million bucks from a couple of sort of Silicon Valley hot shots.
[00:07:29] But yeah, I was, I was there when Pinterest raised the Series A and I think they were in talks to raise the Series B and even I think, maybe closing some of the C round, too.
[00:07:36] So yeah, I was, I saw some of that happen. And one of the things I really give credit to Pinterest a lot is they let me sit in, in the room often. I remember meetings with like Matt Cohler from Benchmark and Kevin Rose and Michael Birch who did Bebo and you know, it was like Paul and Ben who were the two founders, and then me.
[00:07:57] I think more than anything like gave me the confidence that this was something I could do if I wanted to. There were no secrets here and I think a lot of what I try to do now on the internet is just say, look, it’s like there’s no real, like you know these for example, these VCs promise you that like they’re going to teach you how to build this massive business. But you don’t need VCs to do that necessarily and nor will they give you this secret Bible of tips and tricks. They’re just going to roughly do things that you would have to figure out on your own, perhaps. But you’d be probably be able to do it.
[00:08:30] You know, like the first time I sat in a room with a VC, you open up a pitch deck, you kind of walk through the business, you kind of explain what you’ve built and like you show some of the numbers and then they kind of ask you questions and then they give you a term sheet. That’s it. It’s not magic. And I think sometimes that’s frustrating for some people to hear because maybe it seems like people then feel like they should have been able to get in. Maybe they weren’t able to get in and so there must be something else there. But often it’s just like there’s no real secrets. And that’s a lot of what I tried to say is like, you can do this.
Wailin: [00:09:04] When you were at Pinterest and they raised their Series A, how did the money, the presence of that money change your work life at Pinterest in either positive or negative ways, what was the impact of that money and how did you feel it when you were working there?
Sahil: [00:09:19] Yeah, I mean the impact of that money was not super apparent to me. I think Ben, especially, I assume even today remains incredibly frugal. I remember when we launched the iPhone app, we went to the neighborhood grocery store and bought apples. That was it. We were like green apples. And this was, I think a little bit before, you know, this is like 2011. This is really before I think sort of SoftBank entered the world and there definitely was a change culturally, I think that happened in Silicon Valley like 2012-13. The word frothy started being used a lot and people were raising way more money than they were able to really even spend like in any reasonable timeframe.
[00:10:03] And your incentives change when you raise that much money, it becomes a little bit more of a rat race. It’s not just about are you growing, it really is about like how fast are you growing. And then I think the other thing is it just changes the type of folks that you work with and the people that want to work with you. It just honestly made it a lot less fun for me.
[00:10:21] One of the weird things I learned, and I really struggled with this idea is that when you are as successful as Pinterest, it honestly becomes like a pretty quote unquote “boring” place to work. Like we’re on a rocket ship, as long as this thing doesn’t blow up, we’re going to be fine. And you have so many people joining the company, all of a sudden. It’s just really hard to make significant changes and do unique things because if you do a unique thing and then you blow up, it’s going to be really easy to be like, oh crap. If didn’t do that one unique thing, we would’ve lived.
[00:10:51] You become really cautious. And so it became kind of this place pretty quickly where I was like, okay, I’m not really being entrepreneurial or inventive. I’m just making the app faster. Or designing the iPhone app—the iPad app, which is roughly the iPhone app, but you know, with a few different interactions. But it wasn’t like, let’s build private pin boards and charge five bucks a month and see if we can get to profitable with this thing. Or you know, like those ideas, like when you, when you raise VC, those things quickly become uninteresting.
Wailin: [00:11:20] Sahil experienced some of this himself when he launched his own company, Gumroad, an eCommerce platform for creators and artists.
[00:11:27] And so you left Pinterest to start Gumroad and you raised $8 million, by your own account, almost immediately. And you had mentioned that the process of raising money was almost like bizarrely easy.
Sahil: [00:11:42] Yeah.
Wailin: [00:11:42] How were growth expectations conveyed to you when you raised all that money? I mean you raised money from some very blue chip type investors. Were the conversations that you had with your investors early in Gumroad similar to the ones that you heard when you were sitting around the table at Pinterest?
Sahil: [00:11:59] Yeah. Yeah, totally. I mean, now I can look back and kind of evaluate it a little bit more objectively, kind of like an omniscient narrator or something like that. But at the time it was… I wanted to build something massive and change the world and that Steve Jobs quote, “Dent the universe.” It was so universal, I guess, that expectation of the reason you’re here is to raise money. Like, really take a shot at solving like the largest possible problem and that’s the only reasonable way if you believe that you’re intelligent. That’s like the moral thing to do.
[00:12:38] There is a sort of ethos in Startupland, I like to call it. That’s basically like you have a moral sort of prerogative to change the world. It’s a burden that you’re taking on. You’re going to work insane hours, you’re going to sort of be singularly focused on this idea. You’re not going to have a family or any of these other sort of commitments because if you do successfully build this insane thing, you’re going to create more value for the world than any of these other things, right? Even added up.
[00:13:10] There was really, I think at that point, like no other way to think about it. And because I had received so many yeses so quickly in this sort of bizarre way. I was like, you’re not going to question that sometimes, when that happens to you, right? When you might hate on the cool kids table and then you get invited and you’re like, see ya.
Wailin: [00:13:32] Yeah. I mean they also… like the cool kids drove a dump truck of money to your house.
Sahil: [00:13:37] Totally. Totally. Yeah. There are incentives to take the money.
Wailin: [00:13:41] What did you spend the money on?
Sahil: [00:13:43] I mean really just people, people are expensive. Especially in San Francisco. We got an office in Selma and we’re hiring kind of like exclusively from that locale and we raised 8 million bucks and even the math on that is like, we spent it pretty slowly. We made that money last three years, four years, which is long in Silicon Valley terms, I guess. It’s funny, it depends on who you talk to. If you talk to Silicon Valley founder, they were like, Oh wow, you were only burning $350,000 a month at peak. Whereas I talk to people outside Silicon Valley and they were like, you were burning what, $350,000 a month? It was just insane.
Wailin: [00:14:21] But in the early days, Sahil was focused on the kind of hyper-growth he’d been conditioned to expect.
Sahil: [00:14:26] And in my head it was like, we need to grow around 10X a year. A $1 million in revenue, then $10 million in revenue, then $100 million in revenue. It was really this idea that we were building this thing. It was software and so there was no cap on how fast this thing could grow. We’re basically empowering creators to sell digital content directly to their audience. And so it’s all sort of like a hundred percent margin, sort of infinitely scalable. So we just felt like we were going to hit the total addressable market of this problem really, really fast.
[00:14:57] I think the first year we did actually grow something like 10 to 20 times, but you know, relatively easy to do at tiny numbers. But then very quickly we realized that wasn’t going to happen. A lot of that was the engineering person in me where I was like, oh, it’s just software, right? This is infinitely scalable. High viral coefficient, et cetera, et cetera.
[00:15:16] And what I missed was people are people. It’s not just like bits moving around. Humans take time to make decisions and learn about things and feel comfortable and change their preferences. And so I really underestimated that.
[00:15:29] Anyone You Meet Normcore Remix by Clip Art plays.
Shaun: [00:15:33] After the break, Gumroad runs into trouble and Sahil deals with the fallout. But first, here’s Basecamp CEO Jason Fried on the new and absolutely free Basecamp Personal.
Jason: [00:15:42] So Basecamp was originally built for businesses obviously to manage projects and for us it was originally built to manage our client projects. But over the years people have been using Basecamp for all sorts of different things. And one of the things is personal projects, home improvement projects, managing a sports team, managing a family vacation, that sort of thing. And the problem is, is that Basecamp’s, pricing is built for business. It’s $99 a month. So we decided that it was time to offer a really nice personal version of Basecamp, which is essentially the exact same version as businesses use, except that it’s free.
[00:16:14] You can manage up to three projects, which is enough room and 20 people can be part, which is enough room to do most personal things that you need to do. And there’s no limit in terms of time so you can use it for 15 years if you wanted.
[00:16:25] So we just introduced that and it’s been a huge hit. We’ve had over 70,000 new personal signups in just a few weeks here and it’s been a big deal. So we’re excited to finally provide a Basecamp for free for people.
Shaun: [00:16:35] Basecamp Personal is free project management software that’s perfect for freelancers, students, families, and personal projects. Give it a try on your own projects at basecamp.com/personal.
Wailin: [00:16:50] the exponential growth that Sahil needed to hit with Gumroad didn’t happen. It’s not that the company wasn’t growing, it’s that the volume of transactions it was processing for customers, one of its key metrics, wasn’t increasing quickly enough and this doomed his chances of raising a Series B round of venture capital. Gumroad went from 20 employees to five and then down to one. Sahil found himself more or less alone without the council of venture capital investors.
Sahil: [00:17:16] I think one thing that sometimes people get wrong about VCs, honestly, is that they think VCs are breathing down your neck and saying, hey, this is not good enough. If you don’t change, we’re gonna fire you, or something like that. And honestly, I wish they did that a little bit more. The reality of it for me was they’re so busy chasing the next deal that they’re not even concerned about you. And because the VC model is so based on outliers, it’s that idea that one investment is going to return the whole fund. They actually don’t really pay that much attention to any of those other companies. They will literally just wait for you to work or not work. And then if they see like, Oh, you’re going to be that one company, then they’ll be really annoying. Then they’ll refer all these people to you and sort of intro you to everybody they know, et cetera, et cetera, et cetera.
[00:18:02] Like Pinterest, for example, was that for many investors, right, that participated in those rounds. But when Gumroad wasn’t going that way, it wasn’t like, hey, let’s help you out and let’s turn this from a double to a triple, or let’s save you or let’s like figure this thing out. Most investors, they’re like this is the game. My own investors said Gumroad is not worth your time. You could have built Pinterest and you still can, you have a few more decades. Shut this thing down, raise some money and do it again. And by the way your odds are going to be a lot higher because you know a lot more, you have a network, et cetera, et cetera.
[00:18:38] And to me it was just like, I can’t do that. That felt really wrong to me. That’s one of the really surprising things about Silicon Valley and you kind of maybe expect that there’s all these rules and all these obvious things that you shouldn’t be doing and keys and locks and all this sort of stuff.
[00:18:54] But actually there’s enough implicit signaling happening, it’s like no one even has to say anything. If there was a hint that you weren’t fully bought into it, you just wouldn’t get the next invite to the next conference or the next dinner or the next party at a VC’s house or whatever. Or burning man camp. Those things have happened to me since, right? And I don’t even fault it. Now I realize this bubble exists for a specific reason. It sort of is really good at producing, arguably really good at producing a specific type of outcome. Is at least really bad at producing anything else. If you’re trying to produce anything else like yeah, why would you wanna come to these parties? Why would you want to hang out with us? That sort of thing it starts to just happen.
Wailin: [00:19:38] It makes all of this mythmaking and self aggrandizing that happens in the industry seem even worse. Because it’s like. then all this stuff that they fed you about, you’re making a dent in the universe and we believe in you and we’re giving you this money so you can go out and change the world. It’s like if they really believed that all of these ideas they funded were truly universe-changing ideas, then like wouldn’t they do everything to help you make it work instead of just like dis-inviting you to dinner until you just shut it down. Do you know what I mean?
Sahil: [00:20:16] I mean, I agree with you. I think it is frustrating. I think there is one of the sort of fundamental misalignments I think founders have with investors and employees have with investors is investors invest in many things at a time, right? And founders and and employees typically can only invest in one thing at a time.
[00:20:39] I think a lot of it is not even sort of evil. It’s just like, of course if you’re an Uber and like 15 other startups that are kind of zombie mode, why would you spend your time on these other companies when you know a single hire at Uber would add $1 billion to their market cap or something like that.
[00:20:59] Have you ever seen the movie Her?
Wailin: [00:21:01] Yeah, yeah.
Sahil: [00:21:01] With Joaquin Phoenix?
Wailin: [00:21:02] I’m going to cry just thinking about it.
Sahil: [00:21:02] Oh, it’s a great movie. And at the end of the movie when he realizes and the audience realizes sort of the surprising but sort of inevitable conclusion of this is that this girlfriend or whatever that he had is actually having the same relationship with millions of other people at the same time.
[00:21:22] And I think that’s kind of how it felt like to me. We thought that we were unique, that we were like getting pitched so hard and like taking all these cool dinners and invited to all these cool things and we’re meeting all of these people that we’d read about for years and they were telling us how awesome we were and we’re like, oh, we’re like their favorite investment. And then the money gets wired and every VC moves on to… Guess what their job is. Their job is actually doing what they just did, but for the next company. And, by the way, they’re in your company now they’re on your cap table and you can’t get them out. There’s this incentive structure to really sell hard and then really kind of just wait and see after that and see if it’s worth sort of investing more hours, many years down the line.
[00:22:05] And yeah, we thought we were like the favorite child, but it turns out every child thinks that they’re the favorite child. I think the worst part about it is like from my perspective, I can’t really say anything bad about it because it’s like I was participating in perpetuating that myth, you know?
Wailin: [00:22:20] You mean by virtue of just taking the money and like having lived that life for a little bit.
Sahil: [00:22:25] Yeah. And letting the narrative continue. And now I think I’m sort of repenting in a way, but if a VC says like, you know, super excited to announce that we’re now investors in Gumroad or whatever, you know, I retweet that and I’m like, thanks for… I reply and… There’s this game that you feel like you have to play, almost. But inevitably what you’re doing is you’re perpetuating a system. A great example of this in a different industry I’ve noticed is playing out right now with the Golden Globes and the Academy Awards, the Oscars, et cetera.
[00:22:54] Because you see all these people that are complaining right about this system that’s broken, that is maybe not super-representative, not super-inclusive. And I think a lot of those critiques are super, super, super valid. But then when your buddy or your friend or someone you know or someone you want to work with that you might not even like, but you really, you would want to work with them, gets nominated or whatever, wins, or something like that. Then you’re like, this is amazing and you’re going to share that out and you’re going to tell everybody, and this is the problem I think with sort of these like structures of power. Is because they’re actually quite good at preserving themselves and it’s like everybody in that system might want that thing to go away, but too many people are benefiting from it too much for that to like sort of reasonably happen.
[00:23:40] I just want to acknowledge the hypocrisy. I don’t even know if I need, I can fix it, but it just like stating that I feel weird about this is I think a big, a good step.
Wailin: [00:23:49] In November of 2017, Sahil got an unexpected email from one of his investors and board members. The investor was leaving his VC firm to start his own and the firm was offering to sell its ownership stake in Gumroad back to Sahil for $1. Eventually Sahil was also able to buy back ownership from a few of the other investors and he left San Francisco for good and moved to Utah.
[00:24:11] You know, it’s like you’ve done some concrete things to extricate yourself from that system even if it’s difficult to be free of it entirely, right?
Sahil: [00:24:21] Correct. Yes. Yeah. I think I have. And I really try to communicate some of these things. I’m not saying like VCs are evil or don’t take any money, never raise… any of that stuff, but go into it a little bit more open minded and with open eyes.
Wailin: [00:24:37] Yeah. I mean what do you think is a healthy and/or appropriate role for venture capital? Do you think it should involve smaller bets? Do you think it should involve, I don’t know, like more thoughtful communication? Like when founders now ask you about raising money and saying if they say like, well I want to avoid some of the heartache that you went through but I think I still need this money because I can’t grow my business without it. You know? Do you have advice about how to approach venture capital in a way that’s going to be kind of healthy for the founder?
Sahil: [00:25:10] I mean, I think the first thing is kinda like what you said. If you believe that money prevents you from, from growing your business, that might be a great reason to raise money. I think there is this narrative presented that venture capital is much more than the capital. It’s smart money. It’s all these amazing people that have built these amazing businesses or participated in building these amazing businesses that will help you do that.
[00:25:36] And I think if that’s what you’re really looking for, I would be cautious, honestly. What I say to people is, look, ultimately you don’t actually want VCs to be able to make that large of an impact on your business because they’re spending, I dunno, a few hours a month thinking about you. Whereas you have a team of people that are sort of committed to you and focused on you and your business and you’re thinking about it all the time. And the most valuable help you’re going to get are from founders and from your own team. And you’re going to know your business and what you’re trying to do better than anybody else as you should, hopefully.
[00:26:14] And then I think the other thing is like to your question about like the role of venture longterm, I believe venture capital can be great. I think there are businesses that are really capital intensive and high risk, so those sorts of endeavors, right? Like if there are opportunities that are like Tesla or something, SpaceX where yeah, you need to raise millions and millions and millions of dollars, there is a pretty low chance of this thing working, but 10 people need to try and one of them is going to work. I think that can be really, really, really great. But there are not that many of those opportunities and I think that idea is sold to many more companies than actually fit that mold.
[00:26:56] That’s one of the hard things I’ve had to wrestle with recently is just this idea that I sort of sold this idea that Gumroad was super-scalable and it’s software and it’s low margin, all these amazing things. And realized, looking at those numbers and looking at how big the team was at one point and how small it was at one point and realizing there was actually… it seemed like there was no relation between these two things. How much money we were spending on people and how fast the business was growing. When I realized that, it was like I can’t raise money, I can’t advocate for raising money for this type of business because it just seems negligent, right? Because what I’m saying is on one hand raising more money is not going to grow the business any faster, but on the other hand, I need to raise money to grow the business.
Wailin: [00:27:42] Yeah.
Sahil: [00:27:41] That that dissonance, I think became so large that I was kind of just like, at least for Gumroad, I can’t do it. And I wonder, right, like what if that didn’t happen? Gumroad would still have $16.5 million in liquidation preferences, which basically means investors get paid out $16.5 million before anybody else sees a dollar. And where would that put Gumroad today? I don’t know. Gumroad is probably not worth $16.5 million. It would be hard for me to get motivated to work on a business if I have effectively 0% ownership in the outcome.
[00:28:13] And when they did write off the investment, when we bought it back from them and a couple of other investors as well, it changed the game completely and it made me sort of re-excited and re-energized. And I’m super happy, now, to be working on the business. That’s like the thing that I try to communicate. It’s like we got lucky in a sense. We’re in a great place now and this is the place, actually, that every business starts. Every business starts out where we are today, which is not beholden to investors. The optionality is highest at the beginning and just before you maybe make a decision on what kind of company you are, it might be good to really figure that out.
Wailin: [00:28:51] When did you start feeling happy about your work again? Did it take a long time to get back to a place where you felt good about your work?
Sahil: [00:29:00] It did take a while. So the layoffs happened in 2015 and then in 2016 I basically went full four-hour work week, like travel the world and you know, I had all this time at least, right. That was like my new asset that I had. And so I had just started traveling and trying to really get away from San Francisco, I think.
[00:29:21] And it was the worst, honestly. Like it was not super enjoyable. I think I was like hedonistic almost, right? Like I was trying to find like pay for or like find sort of external excitement and I just wasn’t really finding it and it took me leaving San Francisco completely, giving away all my furniture and packing my bags and moving to Provo, Utah. And living in a culture of people where I would sort of tell somebody about my story and they would just, they would be so confused.
[00:29:51] So you’re telling me you try to build $1 billion business? What is it? What do you, what? How do you try to do something like that? The priority stack of that community was, you know, having a family, raising kids, going to church. Like these were the things that were the barometer for success. And in San Francisco it was like, what do you do? How do you spend your time? Who do you work for? How many employees do you have? How much money have you raised? It really took that, I think, a year or so of that as I started answering the questions they had for me to really rewrite the questions I had for myself and be like, oh yeah, like I do plan on like having a family one day and painting and writing and having a nice life, but also doing something that I believed in.
[00:30:32] That’s the thing that I found that was kind of in the middle of both of those things, which is kind of when I tell people about it, they’re like, yeah dude. That’s like what everybody does. They have a job, they like doing it and then they have other things that they care about. That’s also great. I enjoy working. I enjoy building software. I also enjoy getting paid for it so that I can have a relatively nice life, but I need both of those elements. I need those things to help each other out. I can work until I don’t feel like working and then I can play until I don’t feel like playing and then I can work. And I think that’s what most people want.
Wailin: [00:31:04] I mean, does it provide a large measure of comfort for you that after all of this, after having built up the company and then slimmed it all the way down and leaving San Francisco and traveling and working less and then coming back to it, that you still really like working on Gumroad? That this core idea you started out with, helping people who make art and creative things sell it, that that still holds so much value for you?
Sahil: [00:31:32] It’s surprising for sure. That was a really scary thing to kind of face. I definitely thought maybe that wouldn’t be the case. I had this idea, it was a weekend project. I raised money for it because VCs said that I could and luckily I do actually really enjoy working on it and I genuinely like… When I was doing all that traveling and stuff, I was trying to find something that I believed was going to be more important to me.
[00:32:01] I think it took that, it took like a year of me realizing Gumroad is actually a pretty good idea. I really do enjoy it and I think the realization I had with Gumroad was like this is what got me into my whole life. It really helps people do what I did when I was a kid, which was like make things and get paid for it.
[00:32:16] I just thought there was one way to do it. There was one way I was going to live my life and it was to build or try to build a really impactful company. Now I’m kind of the opposite. I don’t want to live a life and then live another life after I’m done building the company. I think you can do both of those things at the same time and hopefully do both better.
[00:32:33] Broken By Design by Clip Art plays.
Shaun: [00:32:41] Rework is produced by a Wailin Wong and me, Shaun Hildner. Music for the show is by Clip Art. You can find Sahil on twitter @shl and Gumroad is at gumroad.com. Sahil has written extensively about his experience in Silicon Valley including this big retrospective he published a year ago on Medium. We’ll link to that essay in the show notes for this episode, which you can find at rework.fm.
Wailin: [00:33:03] We’re on Twitter at @reworkpodcast and if you’re new to the show or haven’t yet taken the plunge and subscribed, please subscribe to Rework on Apple Podcasts. Pocket Casts, Overcast, or wherever you get your favorite shows.
Shaun: [00:33:16] Rework is brought to you by Basecamp. When you’re working with a group on a project, everything can get scattered across email chats and whatever you use to track your tasks. Things slip through the cracks. Basecamp centralizes it all and it’s easy to use so everybody sees everything about the project in one place, learn more and try for free at Basecamp.com.
Wailin: [00:33:45] Did I tell you that I’m worried about my worms?
Shaun: [00:33:48] Oh no.
Wailin: [00:33:49] Well after like whatever smugly proclaiming on this very show a couple of weeks ago that my worms are indestructible and they’re so easy to use. I am describing my worms like they’re software. But anyway, you know that like the vermicomposting has been like going so well. I feel like they haven’t been eating lately and I’m like, I don’t know what to do. Like I had admittedly kind of like not fed them in a while, but usually they do okay. And then I put a bunch of, what did I put in there? Some woody broccoli stems, you know. And I try cutting them up small and I think I put some eggshells in there and then usually things are gone like within the week, you know, even like a large amount of stuff. And then I went back with I think some like rotting raspberries and some wilted kale leaves and I opened up the bin and it looked like they hadn’t touched it yet.
[00:34:42] And I got really stressed out because I put the new stuff in there and then I put down some extra newspaper and made sure that the newspaper was really soaked through. Because I thought maybe my moisture levels are off or something. And I checked back again a few days later. And it didn’t seem like they eaten too much of that stuff either.
Shaun: [00:34:59] Had they eaten any of it?
Wailin: [00:35:00] I think so because then I went and dug a little bit and underneath the surface level I could tell they had started to break it down, but maybe they didn’t really like the broccoli stems. Maybe that was too hard.
Shaun: [00:35:12] Are your worms getting picky?
Wailin: [00:35:13] Maybe it was too hard for them to break down because my worms have never been picky. I remember a long time ago I was telling Jason Fried about my vermicomposting and he said, do you ever just put like a fresh organic strawberry in the bin? And I was like, no, I feed them my garbage. I was like, that’s what they’re supposed to be doing. Something is rotten in Denmark. I think when the—
Shaun: [00:35:33] Something is rotten in Wailin’s basement.
Wailin: [00:35:34] In my basement, I think when the weather gets a little bit warmer, I’m going to have my husband drag up this whole bin because it’s very heavy from the basement, maybe into the backyard or onto the front porch or something. And I’m just going to have to take apart the whole thing and dig around and see what’s what.