Sahil Lavingia is building a startup on his own terms.
He has operated Gumroad profitably ever since buying out most of his VCs for $1.
He only wants to hire part-time engineers, so they can make time for side projects, travel, make music, or time with their families.
He no longer issues equity; instead he shares profits with employees and has no plans to sell the company.
Gumroad is an online platform that enables creators of music, books, films, and more to sell their products directly to their audience.
In our conversation, Sahil talks about:
Sahil Lavingia: I wanted to sell a product I made myself.
I designed a pencil icon (which is still available) and wanted to see if I could sell it on the internet for $1. I realized pretty quickly that selling stuff on the internet is pretty hard. Especially the way I wanted to do it. It was super easy to share stuff, but not super easy to sell stuff.
So I spent one weekend building Gumroad, kind of like Bitly + payments form. Over time, I kept coming back to this idea of selling stuff being atomic and simple — each product attached to a URL.
There are a lot of creators — musicians, writers, film makers, photographers, stand up comedians — who were making stuff. Building a service that would help them had a ton of appeal to me.
The combination of those things got me excited and I decided to raise money and do this for a bunch of years. Instead of it being one of my many side projects at the time.
Sahil: It was almost immediate. Like pretty close to the second I had the idea.
I realized at some point, selling content on the internet was not going to be as hard, complicated, or undemocratic as it is today. I still think it’s early days. I get excited about stuff in general. I always consider myself probably too optimistic. It’s kind of necessary if you do startups to have irrational optimism.
Sahil: We want employees not to treat Gumroad like it’s the most important thing.
Typically startup culture is like, you work 8-12 hours a day and it’s the most important thing you’re doing. For people to be that dedicated, they need to believe in the company, it’s impact, and, most importantly, that their stock will be worth something someday. And you need to believe it yourself.
When we made the decision not to become a billion dollar company, I realized we can’t hire people based on that. So how can we appeal to people? So the decision we made is to say: we’re not going to give people equity in the company because it’s literally not going to be worth anything — I have no intent to sell the business. But you can work on a great product, you can get paid for it really well, we have high code quality, and you’re learning from other engineers.
Remote work is great, but flexible work is more important. A solid engineer in SF can make $100-150 / hour. Obviously you have to be pretty good and have a few years of experience. Any semi-competent engineer should be able to make that.
I’m trying to make an explicit case to amazing engineers: You can work for Gumroad for 20 hours a week and make $100k a year. Or you can work at Facebook for 60 hours a week and make $250k a year.
Would you rather make $100k less a year but get 40 extra hours per week?
I’d rather have three times as many engineers but they’re all working a third of the time. You could travel, you could learn, go to school again, spend time with your kids.
I think there are a ton of people who are super competent but don’t have options. They’re working 60 hours a week. They’re on call. On Slack. Have kids. They can’t really travel the way they wish. They can’t do 6 weeks in Italy. And I wonder what is the value of that?
You can make way more money at Facebook or Google, but at Gumroad you can get an insane amount of flexibility. There are no meetings: you’re writing code, designing, and working on the thing you like working on, and then you leave.
“I think there are a ton of people who are super competent but don't have options. They're working 60 hours a week. They're on call. On Slack. ... And I wonder what is the value of that?”Click To Tweet
Sahil: There is nothing regularly scheduled, but we do have ad-hoc meetings, like phone calls.
There is no Gumroad company calendar, but I have a personal calendar.
There are no Gumroad emails, besides mine.
All of that just feels like posturing.
You work at a company, you get a company email, a laptop, etc. It all makes hiring people annoying and hiring is difficult. Every time you do that it’s super stressful. We talk about healthcare being bundled with where you work, but there’s really all these other things bundled where you work too. I’m basically unbundling what it means to work at a company.
I don’t think most people are passionate about what they are doing. I’d rather have 10 people who work at Gumroad that all have side projects that they love more. And they work on Gumroad so they can make six figures a year, and spend the rest of their time making music or working on their music startup.
For me, I had to work at Pinterest and then leave Pinterest to work on Gumroad. There is no way startup culture would ever allow me to both of those things at the same time. If we were on the VC path, we wouldn’t be considering this weird model. But the fact that we are has made me realize there are a lot of people who are super competent, would take a paycut (definitely an equity cut) to have the freedom.
There’s at least 1% of people that would prefer this model. That’s all we need to make this work.
Sahil: It started out purely as a necessity.
We were spending $25k per month on our office in San Francisco and had to get rid of it. When we were VC backed, spending that much was normal. When we realized we weren’t going to be raising more money, we needed to get the company profitable as soon as possible.
The major cost in a technology startup is people. You can then divide that between people and the things people need. Things people need include food, catering, laptops, equipment, office space. It’s an 80/20 split. After we got rid of the office, it took us less than a year to get to profitability.
People get a little carried away about the perks of being remote, I wish people at the end of the day just said “Look, this just saves a lot of money.” And that alone is totally reasonable reason to do it.
While I think remote work is the future and we’re still early days about what remote work even looks like, I actually think it’s not that important of a trend. It’s pretty common and not that new.
Trump doesn’t even work from the White House.
Modern tools enable us to build a company like this.
Even five years ago, Gumroad couldn’t exist as it does today.
Maybe Facebook would look quite different if these services existed back in the day.
Sahil: Initially because I wanted to take a writing class with an author who teaches a class at BYU.
More than that, I wanted to get out of San Francisco. I felt burnt out. In SF, if you’re not there to build, hire, and raise money — it’s difficult to rationalize it.
You’re spending a ton of money. You’re being asked by everyone “How’s your startup going”? At the time in 2015, it wasn’t going that well, so what’s the point.
On top of that, Trump had just won the election and it was depressing being in SF. There was also no learning happening; it was just sadness and anger. It wasn’t a healthy place to be, so I bounced.
Provo checked all the boxes: super conservative, religious, cheap, I could take art classes, paint, writing, I could learn to drive a car for the first time, amazing nature. I wanted to live in a religious and conservative place, and get a sense of what it was like to be in a community like that.
I think I got that.
Sahil: I wake up around 7:30AM and start work around 9AM.
I like to start my day caught up at inbox zero.
9AM – 12PM: I do non-deep work. Like calls.
12PM – 1PM: Lunch. I always take an hour.
1PM – 7PM: I do deep work. Low collaboration.
Sahil: I always tell folks Gumroad is my last priority.
Because I know I’m going to work on it, I’d rather schedule as much other stuff as possible. Normally Fridays I try not to work.
So if you think about it it’s like 20 hours of deep work scheduled per week. But it works because it establishes the floor. I can always choose to work more. This Saturday and Sunday, I worked an extra 10 hours on it. But it was fun.
Sahil: I don’t travel that much.
From 2015-2017 when I was still in SF and not loving it, I was gone three out of four weeks. I got a lot of the traveling done then. There isn’t a city or place where I feel I need to go.
Routine is super important to me. I have a couple struggles with the hacker nomadic lifestyle:
When I travel, I don’t want to go to the gym and I don’t want to eat healthy. I eat the best things people tell me to try. So if I travel for three weeks, I’m eating like shit for three weeks.
Because vacation time is limited, I go all out every day.
Also, it’s hard for me to work when I travel. I’d rather just travel and not work at all.
There are some people who can go nomadic and work four hours a day. I can’t do that.
“When people buy something, they don't just pay you for the thing. They pay for pent up appreciation for the other stuff that you've done.”Click To Tweet
Sahil: I didn’t believe in Twitter until 6 months ago.
Mainly because I thought it was incestuous. And does the broader world care? I was sharing our financials on Twitter but it didn’t get any traction.
Then two things happened:
First, my friend Austen from Lambda School had a lot of success on Twitter.
He uses Twitter as his default marketing strategy. He tweets success stories all the time. People love seeing someone go from making minimum wage to making $95,000 a year in six months. He showed Twitter can be a good use of your time.
You kind of will yourself into being interesting. Then people believe it. It’s not too dissimilar from advertising. You put ads everywhere and people assume you’re a big startup because you have ads everywhere.
Here’s my strategy: Be really honest, a little cocky (because you need some credibility and authority), and share your story. Don’t just tweet more, but in an intentional way.
Second, I wrote an article on failure, which blew up.
Overnight, I went from minimal engagement, like 10 likes per tweet, to 100-1,000 likes per tweet. I went from 20,000 to 40,000 followers in a few months.
When people buy something, they don’t just pay you for the thing. They pay for pent up appreciation for the other stuff that you’ve done.
And it feels like people engage with me and talk with me because they appreciate the other stuff I’ve done.
Now Twitter is a legitimate marketing strategy. People know what Gumroad is more than ever before, for a reason that doesn’t have to do with the success of the company. It has to do with being open and sharing. That’s why I’ve been experimenting with different ways of adding value.
The good news is it’s authentic. It feels honest and pure. I’m not trying to tweet viral stuff.
Gumroad accidentally fell on this interesting path and there’s a lot more here than we might think. It’s worth someone thinking about those things. Sharing those insights and seeing if there’s more here.
Gumroad is more than a product. I want it to be a representation of a movement. Of a way of working. We’re trying to structure Gumroad as a way they already live their lives. For example, a creator is really excited about making music. They may work at a job — a bank or Trader Joe’s — and go home and make music. Their ideal is to get freedom to make music or spend more time with their family, travel, etc. The answer isn’t to work more hours at a company. Right now, a majority of companies look like a 9 to 5. In 30 years, I think the majority of companies might look like a 9 to 12.
With a typical VC backed company, you hire people to do things full time. It doesn’t make a ton of sense. You’re saying this job requires 40 hours a week. But a lot of time it does not. You either have a job here or you don’t.
There’s no in between. There needs to be an in between.
“Right now, a majority of companies look like a 9 to 5. In 30 years, I think the majority of companies might look like a 9 to 12.“Click To Tweet
Sahil: I haven’t wrapped my head around liquidity or exit.
It would be an asshole-ish move if I sold the company for $20m in three years, and I made a bunch of money and no one else did.
I think profit-sharing is more interesting to me. You can do it with contractors. It’s like accrued vacation days. You can calculate per hour or by billing amount, and then people get a bonus at the end of the year based on profits of the company.
I just don’t think I can sell the business.
Software is just so new.
We haven’t seen a 100 year old software old company because software hasn’t been around for 100 years.
And actually companies die too, right?
Jeff Bezos said something like “At some point Amazon will fail. It’s our job to extend it’s life.” Big companies last something like 30 years historically.
Part of where we’re at with Gumroad, we don’t need it to live on.
People will work on the right thing for the user, not the right thing for Gumroad’s growth since they don’t have equity. You’re getting paid for five hours worth of work regardless if it increases the bottom line.
Maybe Gumroad doesn’t need to exist in five years because it would be better for the world as an open source project.
For example, if someone offered me $10 million or I can open source the whole thing. I’d assess what’s the value of open sourcing the thing…is it more than $10 million? There’s enough stuff I want to build.
Currently, I can do whatever I want. The minute you sell, it’s no longer your thing. You are no longer the leader of the company, you don’t control how IP gets used.
I’ve told people who’ve reached out about acquisition that if I sold the company, I’d open source the product before I sold it.
“The amount of people paying attention to tech today is probably 10% of the people that will be paying attention in 10 years. I’m trying to grow my influence now because I know it will pay off in 10 years.“Click To Tweet
Sahil: It’s a bit altruistic, but in general there’s this idea in Silicon Valley that your value contribution is defined by your net worth. Most people are worth their most successful company. That’s how people measure who is cool, who is interesting, who is worth listening to.
I wonder if I can break that model.
Can I be worth listening to without a billion dollar company under my belt? I think the answer is yes.
Part of my realization is the article doing as well as it did. If I wrote it and 50,000 people read it, I’d keep doing my thing. But it exploded beyond what I was expecting and basically everyone in the Valley has read it.
I tried to build a billion dollar company so I could get to that point — where everyone knew who I was, respected me, and thought I was smart. Actually failing to do that and writing about it did a better job.
It gives me this freedom to think — Oh shit, what can I do now? This thing I wanted for so long I actually got, and I didn’t even have to sell a company or raise $30 million.
The way the Valley is now, you could raise $30 million or $100 million and no one knows who you are. There’s so much money it doesn’t even matter at this point. There are unicorns who you don’t know who the CEO is, because there are so many of them (on paper at least).
For me, I want to add value to the world, but selfishly I want to be interesting and have something to say. I’m not going be interesting by talking about raising money, because there’s a million people talking about raising money and they’ve raised a lot more money than I have. On that scale, they are more “successful”.
But I can talk about remote work, part-time work, creators, painting — at a level most people cannot.
The other interesting insight I had is there is now a lot of overlap in startups and the outside world. When I started Gumroad, no one cared about startups. You ask my mom, and she doesn’t know about it. Now you have The Social Network, Silicon Valley, and all these startups IPOing.
I still think it’s early days.
The amount of people paying attention to tech today is probably 10% of the people that will be paying attention in 10 years. I’m trying to grow my influence now because I know it will pay off in 10 years.
Just like working on Gumroad paid off.
I want to be more strategic to use Gumroad as a vessel to explore ideas and talk about them. Gumroad gives me a seat at the table for a lot of conversations. I can make it a remote company or part-time company.
If I sold Gumroad, I’d have nothing to talk about anymore.
Sahil: It gives me skin in the game and it gives me authority.
Everyone has an agenda. People who pretend they don’t, don’t play the game well.
The people who are liked are open with what they want.
If anyone saw me on Twitter and said I was just being truly altruistic without an agenda, they’d be wrong. And I don’t think they’d think that.
People like Kim Kardashian and Kanye West because they have clear agendas. People like Cardi B because she is open about the fact she wants a lot of money. That’s cool. I think that’s a good part of our society, being OK that people want stuff.
Silicon Valley has the opposite problem. If you buy an Aston Martin, everyone is going to think you’re a douchebag. Even though you are worth $40 million. Now it’s weird because you can be driving a Tesla and that’s OK. But you can’t drive a Corvette. The virtue signalling is very strong.
“I think there are conversations that happen that have grand importance that you never know about because you’re not invited. I want to be invited. That’s my ego.”Click To Tweet
Sahil: I don’t really know yet.
Even with painting, I ask myself why the fuck am I painting. This is such a time-intensive thing to get good at. There’s very low ROI on this, that I know of. I consider it therapy almost.
I learned iOS development in 2010 right after the app store became a thing. It served me well because it got me the job at Pinterest. People were like “what is this startup, I haven’t even heard of it”. And that worked out. Then I started Gumroad, which was early in the creator movement — we didn’t even call them creators because that wasn’t a word. And now it’s becoming a big thing with Skillshare, Patreon, Youtube, and Instagram.
If I follow my gut and do things I care about, it seems the world cares about those things eventually.
Even this bootstrapping thing — we fell into it (although we spent a bunch of VC money). Now it’s become cool not to raise a bunch of money as well.
As long as I’m exploring, learning, and sharing those learnings — it’s going to be a broad net. I’m going to learn about painting, writing, telling stories, running a company, part-time work, remote-work, creators — as long as I talk about those things I’ll be an interesting person to follow for those interested in those topics. Hopefully that will drive Gumroad as an interesting market leader.
The best thing for me is if I do all those things and Gumroad becomes a very meaningful company. The opportunities you get if you have a company that is important — I don’t know what that means, to meet Trump or hang out with Obama and talk about tech — so who knows.
I think there are conversations that happen that have grand importance that you never know about because you’re not invited. I want to be invited. That’s my ego.
I’ve always been an outsider type person, but have always wanted to be included. I want the invite. I don’t need to go necessarily.
I want to be respected and treated like a peer in these communities, where that’s tech or VC, and do it my way. I want to be friends with VCs because I say No to VC’s.
I really enjoy having one foot inside and one foot outside. It’s more interesting to me than gaining full acceptance in a community.
Sahil: Sex sells but true authenticity and integrity sells more.
People make jokes that VC twitter is a fortune cookie landscape of people saying nothing. When you break that illusion, people respect that. Like it can be super valuable when someone explains cases where raising money is stupid.
I talk to creators in a lot of verticals — illustration, painting, art, music, publishing, film, documentaries, animation — and it’s a small list of people who are openly talking about this stuff.
Tech is the most open of all the industries. The world is still pretty opaque. There’s a lot of zero sum thinking that if you disclose your thinking, someone is going to steal your spot.
With Gumroad, as long as I want to, I will be the CEO of Gumroad. Most of my employees are part time, my investors know where I stand — so I can say I’m working 15 hours this week and it’s cool. I don’t know anyone in tech who can say that.
“I have a graph that is up and to the right and can’t distinguish between days I worked four hours a day or 16 hours a day. It doesn’t matter.“Click To Tweet
Sahil: A little bit.
Some creators said I’m wasting time by answering questions on Twitter and not working on Gumroad more. But Gumroad’s bottleneck is not my time. If one human being is the bottleneck of a company, something is drastically wrong.
I think people will argue and say “What about Steve Jobs”. I think Jobs could have worked five hours a week and been 95% as valuable as he was. Show up to meetings and say Yes, Yes, No, Yes, No, inspire the team, work on the key notes — that’s the stuff he did, not being in the office 9 to 5 answering emails.
I think a lot of people wish they could say they are not the bottleneck of a company but they can’t. If you’re a CEO of a company that has raised $50 million and is trying to grow three times every year, you have to work 80 hours a week. Because if it doesn’t work, people are going to look at that say you should have worked harder.
For me, I have a graph that is up and to the right and can’t distinguish between days I worked four hours a day or 16 hours a day. It doesn’t matter. It’s OK to surrender control to the market forces a bit more, give it a fair shot, don’t sacrifice your lifestyle too much. I think most of it will net out.
There are companies where people worked their assess off and failed, and companies where they coasted and succeeded.
“Humans have this model of you work to make a bunch of money, then you retire to do whatever the fuck you want. Which to me is broken”Click To Tweet
Sahil: This is the first time in my life I don’t have a one year plan.
I used to have crazy roadmaps and OKRs. Even in my personal life, I fucking love OKRs. I kind of have rough plans per quarter but I don’t have like “2020, I want to do this”. As a kid, I would do stuff like that. They are useful to ensure you’re setting yourself up, but they shouldn’t control what you do.
They can motivate you, but they can’t be your reasoning. You should do things based on rational thinking and reacting to your life.
A billion dollar company is a terrible reason to do something, but can be a great motivation. We need to seperate those things.
For example, I want to do an hour long stand-up special someday. So, if there are opportunities that come up, I’ll go after it. But I’m not trying to force myself to write a joke every week for a year.
I’m OK doing things like this whenever they happen. Before, I was more like “I need Gumroad to be here at this point”. In VC, you need that because you need to raise money and it creates time based thinking.
I have a friend who is a VC who left venture because every decision you make, you can’t help but think about the IRR and financial upside. That’s how your trained to think. I could do what I love, or make 30% IRR. It’s difficult to do both.
Humans have this model of you work to make a bunch of money, then you retire to do whatever the fuck you want. Which to me is broken. I think you should do both of those things intermittently. You should work your ass off, then do whatever you want, then work hard again.
There’s a balance there.
You should think a few steps ahead, but at the end of the day, no plan survives contact with the enemy.
Do the exercise of making your goals, and decide to throw them away if you want. But not having any goals is also dangerous. That’s a recipe for getting depressed in your late 20’s or early 30’s when you’re not on the path of running a billion dollar company.
At the end of the day, you are where you are.
The more you think about deserving being at a better or worse place is not helpful. Being present and acknowledging where you are and moving forward.
If you think too many steps in advance, you will be upset about not having the opportunity to get to a step.
What I love about OKR’s is they are measurable and under your control.
It wouldn’t be “get a million people to read my article”, it would be “write the article.”
Sahil: Inputs, not outputs.
For Gumroad, I have a goal to get a $10 million month. That’s a really dumb goal. The input should be about growing the company a certain way or having a certain number of people.
I’m trying not to categorize and just make a list of stuff.
The other thing about goals: where you are at the end of this quarter affects your future quarterly goals. So when you set yearly goals, that’s going to change every quarter.
Sahil: The most useful thing about these goals is to make sure I set aside time early so I make sure I don’t have to think about I have to do all the time.
Every time I feel like I’m running out of tasks, I make sure I’m making progress on one of these things. If I’m not, I either say that was a stupid goal, or good reminder. It’s a soft set of goals.
I struggled at Gumroad because people’s goals rely on other people’s goals. And there wasn’t real accountability. Which leads to stress and time wasted. I don’t have a solution
It’s cool to look back how they were structured and got looser over time.
A lot of it is confidence.
At the start, you want structure because you don’t know what you’re doing. When you start figuring stuff you, you realize you don’t need a lot of extra stuff. It can be loosely defined.
The painting journey was like that. Initially, I needed to draw so many pages every day. As I got better, I knew what I needed to do.
Sahil: It’s like a cheat code. I can’t be unproductive.
I could learn piano, and it turns out that’s useful in the Gumroad context.
I’ve learned how creators think, market, and how Gumroad fits into that. For most people, Gumroad is not their end all be all. It’s one of the things they do every day.
Realizing that and being in that mindset is really helpful.
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