Gumroad

Reflecting on My Failure to Build a Billion-Dollar Company

In 2011, I left my job as the second employee at Pinterest — before I vested any of my stock — to work on what I thought would be my life's work. I thought Gumroad would become a billion-dollar company with hundreds of employees. It would IPO, and I would work on it until I died—something like that. Posting on Hacker News, the reaction exceeded my grandest aspirations. Over 52,000 people checked it out on the first day. Almost immediately, I raised USD 1.1M from an all-star cast of angel investors and venture capital firms, including Max Levchin, Chris Sacca, Ron Conway, Naval Ravikant, Collaborative Fund, Accel Partners, and First Round Capital. A few months later, in May 2012, we raised USD 7M more. Mike Abbott from Kleiner Perkins Caufield & Byers (KPCB), a top-tier VC firm, led the round.

We grew the team. We stayed focused on our product. The monthly numbers started to climb. And then, at some point, they didn't. But we were venture-funded, like playing a double-or-nothing game. It's euphoric when things are going your way — and suffocating when they're not. And we weren't doubling fast enough to raise the USD 15M+ Series B (the second major round of funding) we were looking for to grow the team. For the type of business we were trying to build, every month of less than 20 percent growth should have been a red flag.

The online creator movement was still nascent; the slow growth wasn't our fault. It always looked like change was right around the corner. Product-market fit is excellent, but we needed to find a new, more oversized fit to justify raising more money (and then do it again and again until acquisition or IPO).

With that off the table, our options were:

1. Shut down the business, return the remaining money to investors, and try something new.
2. Continue with a slimmed-down version of the company to aim for sustainability.
3. Position the company for an acquihire.

Selling (Option 3) was undoubtedly tempting. We decided to become profitable at any cost (Option 2). The following year was not fun: I shrunk the company from twenty employees to five. It hurt, but it meant creators would keep getting paid. It also meant that we were in control of our destiny

After repurchasing all of the stocks, there was a path to an independent business, not beholden to the go-big-or-go-home mentality I signed up for when I raised money. It doesn't matter how unique your product is or how fast you ship features. The market you're in will determine most of your growth. For better or worse, Gumroad grew at roughly the same rate almost every month because that's how quickly the market decided we would succeed. Soon, we're also planning to open-source the whole product, WordPress-style. Anyone can deploy their version of Gumroad, make the changes they want, and sell the content they want without us being the middleman.