Sahil Lavingia on Building Gumroad, Unconventional Success, and Rethinking Startup Culture

Sahil Lavingia, founder of Gumroad, has taken an unconventional path to startup success that challenges many Silicon Valley norms. In this wide-ranging conversation, Sahil shares key insights from his entrepreneurial journey - from early success and near-failure to reinventing Gumroad as a sustainable, profitable company.

Early Days and Silicon Valley Success

Sahil's entrepreneurial journey began as a teenager in Singapore, where he started freelancing as a designer and developer. His first iPhone app, a taxi hailing service called Taxi Lah, gave him an early taste of building products that solve real problems.

After moving to the US for college, Sahil quickly found himself immersed in the Silicon Valley startup ecosystem. He dropped out after just a few months to join Pinterest as employee #2.

Sahil recalls: "I basically started freelancing for them. I think I charged them like $4,000... for Pinterest for iPhone. It took a bit more than that, but I just built it. I was basically a student at USC and I would maybe spend 20 hours a week building Pinterest for iPhone."

This early experience at a fast-growing startup gave Sahil valuable insights, but also made him realize he wanted to build his own products. After leaving Pinterest, Sahil found himself with strong connections in the Valley and investors eager to back his next venture.

The Birth of Gumroad

In 2011, at just 19 years old, Sahil founded Gumroad with the vision of making it easy for creators to sell digital products directly to their audience. He raised a $1.1M seed round from high-profile investors like Max Levchin and Naval Ravikant.

Gumroad saw early traction, and just 5 months later Sahil raised a $7M Series A led by Kleiner Perkins. At the time, it seemed Gumroad was on the typical "rocketship" trajectory of a hot Silicon Valley startup.

Sahil recalls the mindset: "Somehow part of this pool that I was in got me thinking not just about building products but about building massive things that could change the world... I had raised the money and then basically five months later I met a partner at Kleiner who was like 'hey what would you do with $7 million more?'"

The Near-Death Experience

For the next few years, Gumroad grew steadily, increasing revenue by 80% year-over-year. But in Silicon Valley terms, this wasn't the hypergrowth investors expected.

In 2015, when Sahil went out to raise a Series B, he got a rude awakening. As he puts it: "The first conversation I had with somebody, he was like 'you're not going to have an easy time raising money, this is gonna be tough'... That is like the worst thing you could ever hear from someone who writes checks."

Unable to raise more funding, Gumroad was forced to lay off most of its staff and drastically cut costs. Sahil found himself running the company solo, doing customer support and keeping the site running.

This near-death experience forced Sahil to completely rethink his approach: "I think at the end of the day I think there is this level of entitlement I think I had... As long as I like do the right motions and I get the office and hire the team and all of the things in my control I was doing I think the right way, but what I didn't realize is like even that may not be enough."

Reinventing Gumroad

Rather than give up, Sahil stripped Gumroad down to its core and focused on making it sustainable. He moved from San Francisco to Provo, Utah to cut costs and gain perspective.

"The biggest decision was leaving San Francisco," Sahil says. "San Francisco is expensive, I don't need to currently hire any engineers, I currently don't need to raise any money... Provo is cheaper so I'm gonna go move there for a bit."

This distance from Silicon Valley allowed Sahil to reimagine what Gumroad could be. He focused on profitability and building features that would stand the test of time, rather than chasing growth at all costs.

"Now it's like hey, what should we build so that our numbers go up over the next 30 years?" Sahil explains. "The decisions you make are very different when you have that Long View."

Gradually, Gumroad became profitable and started growing again - but this time in a sustainable way aligned with Sahil's values.

Rethinking Startup Culture

Sahil's experience with Gumroad led him to question many aspects of typical Silicon Valley startup culture:

Fundraising and Growth

Rather than chase venture capital, in 2021 Gumroad raised $5 million through equity crowdfunding. This allowed the company to bring on thousands of small investors aligned with its mission.

Sahil explains: "Can I just pay myself and the rest of the stakeholders - all the 7,000 crowdfunding people - a dividend? If we can do that then all of a sudden I can continue to do what I get to do."

Team Structure

Instead of full-time employees, Gumroad relies on a global network of part-time contractors. Sahil developed an innovative equity structure where team members can choose to take part of their compensation in company stock.

"You get $200 an hour, you can choose to get $200 an hour or you can choose to get $40 an hour and then $160 an hour in equity," Sahil explains. This allows team members to benefit from Gumroad's success while maintaining flexibility.

Work Culture

Sahil rejects the idea that startups require 80-hour weeks and constant stress. He believes in sustainable growth and giving team members autonomy.

"I want people who are like, work here for 30 years," he says. "I don't see why not. I think people somehow separated out like long-term employment and freelancing or startups or equity."

Lessons for Entrepreneurs

Sahil's journey offers valuable lessons for entrepreneurs looking to chart their own path:

Be Willing to Experiment

Sahil encourages founders to try new approaches rather than blindly following conventional wisdom. "Don't forget that being weird is how you got here," he says.

Focus on Sustainability

Rather than chasing growth at all costs, build a business that can survive long-term. "Staying alive is like the most important thing," Sahil emphasizes.

Embrace Constraints

Limited resources can breed creativity. Sahil found that stripping Gumroad down to essentials allowed its true value to emerge.

Think Long-Term

Instead of chasing short-term metrics, focus on building features and a business that can last for decades.

Be Honest About Challenges

Sahil's openness about Gumroad's struggles has resonated with many entrepreneurs. Acknowledging difficulties can lead to better solutions.

The Future of Startups

Sahil believes we're entering a new era of startups enabled by AI and remote work. He's excited about the potential for more diverse, sustainable companies to emerge.

"I think there's something here and if you can make it super easy and super cheap and help people understand this way of working and making money... maybe there'll be a large opportunity and many many people will benefit," he says.

While building a successful company is never easy, Sahil's journey shows there are many paths to creating value and impact. By questioning assumptions and staying true to one's values, it's possible to build a thriving business outside the typical Silicon Valley model.

As Sahil puts it: "There's many more trains. Where you're at, the trains just make sure you're at the train station. That's like the important thing."

For aspiring entrepreneurs, Gumroad's story offers both inspiration and practical lessons in building a company for the long haul. By focusing on sustainability, embracing constraints, and continuously experimenting, it's possible to create a business that not only survives but thrives on its own terms.

Article created from: https://www.youtube.com/watch?v=KaJd6QKCezw&list=PLYh4THTDg5FrRBHUNS6js3L2uwre36ChA&index=1