Gumroad cut 75% of staff, then became a good business

On 2 April 2011, Sahil Lavingia posted: "Just had an idea for my first billion-dollar company. Tomorrow, I start building it."

He was 19 and the second employee at Pinterest, holding stock in a company that was starting to look enormous.

The idea was small. Upload a file, set a price, share a link, get paid. Selling something directly online otherwise meant building a store and wiring up payments.

He built it over a weekend and launched it on Hacker News on the Monday. More than 52,000 people visited on the first day.

That was enough for him to leave Pinterest before his stock had vested.

Investors agreed. Lavingia raised $1.1m from a list that included Max Levchin, Chris Sacca, Ron Conway, Naval Ravikant, Accel and First Round Capital. A further $7m followed in 2012.

A solo founder in his teens now had more than $8m in the bank. He hired, and the company grew to 23 full-time employees at its peak.

Then the growth rate stopped satisfying the people who had paid for it. Gumroad was not dying — creators used it, revenue was rising — but the next round did not come. On Lavingia's account, investors simply were not interested.

Without it, he could not sustain the team. He laid off 75% of Gumroad's employees, many of them friends.

He hoped to restructure quietly. TechCrunch published the story instead, customers started worrying the platform would disappear, and some of its biggest creators left. "For years, I considered myself a failure," he later wrote.

The company kept shrinking until it was one person again. Contractors kept the platform running. Lavingia answered support tickets, designed features and wrote. He left Silicon Valley for Utah and stopped trying to build a unicorn.

Gumroad became profitable, then kept growing. No office, no meetings, no conventional deadlines, and at one stage no full-time employees at all, including him. People worked asynchronously and were paid for the hours they put in.

By 2021, Lavingia said creators on Gumroad were earning more than $175m a year, while the company itself was on around $11m in annualised revenue. He has put the amount flowing through the platform to creators at roughly $2.5m a month at one point.

His own reading of it is blunt. Roughly $10m of investor money produced hundreds of millions of dollars of creator earnings. The unicorn valuation he chased for five years never existed.

The useful part for anyone else is the mechanism, not the sums. Lavingia did not fail at business; he failed at a target he set himself at 19, then spent years measuring against funding rounds, headcount and other founders' announcements.

If your company is profitable, wanted and survivable, the question worth asking before you go out for another round is whose scoreboard you are reading.

More: Gumroad · Sahil Lavingia's own writing