The Indie Hackers Podcast on Smash Notes

#100 – From Aspiring Billionaire to Indie Hacker with Sahil Lavingia of Gumroad

The Indie Hackers Podcast

After leaving his post as employee #2 at Pinterest, a teenage Sahil Lavingia (@shl) raised millions in funding from high-profile Silicon Valley to build a unicorn startup that could change the world — Gumroad. Today he lives in tiny Provo, Utah, spends much of his time learning to write and oil paint, and runs Gumroad as an indie business with the goal of making himself happier. In this episode we talk about what happened in between, and the lessons Sahil learned that can help every indie hacker create better lives for themselves by building more "successful" businesses.Transcript, speaker information, and more: https://www.indiehackers.com/podcast/100-sahil-lavingia-of-gumroad

Episode notes last updated on July 11, 2019 16:40

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In this episode


Smash Notes summary for this episode

What are similarities and differences between the life of an indie hacker and an aspiring billionaire?

Sahil no longer prioritizes Gumroad as the most important thing in his life; everything he did before was architected to support the company. Now, Sahil does the opposite, where the company exists to benefit him. Surprisingly, it's just fine to live this way, and the company has been growing better than ever before.

How is Sahil Lavigia's company focused different now vs. during his venture-funded days?

Before almost going bust, in order to raise money and to hire employees, Sahil had to believe that he was going to in-fact build the next unicorn. Now Sahil understands that he is "building a faster horse", but that's okay too.

Admitting that he's just building a great business enabled Sahil to connect better with Gumroad creators, who are building businesses every day, using Gumroad to fund them.

How is failure treated in Silicon Valley?

In Silicon Valley everyone talks about the failure rate, but for some reason it's also rejected, as if it's for everyone else, but never you.

What was Sahil Lavingia doing in Provo, Utah?

Sahil was learning to write and to paint. No one in Provo cared what he did for money, or how educated he was, but instead just wanted to know if was living in a meaningful life.

How do you explain Gumroad to someone outside of Silicon Valley?

Gumroad is a small software business that helps creators and makers to sell it directly to their audience, in order to own the relationship with their customers.

How do you explain Gumroad to investors in Silicon Valley?

Gumroad is Shopify for digital goods. Started out as Bitly with a credit card form, with a goal to democratize anyone's ability to sell their product, without a middleman, leading to a more efficient, cheaper economy.

How did Sahil Lavingia end up working at Pinterest?

While a college student, Sahil was making some apps and posting them on Hacker News. Ben, the CEO of Pinterest, emailed Sahil asking if he'd be able to make one for them. Eventually, he dropped out of college and joined Pinterest full-time.

Why did Sahil Lavingia leave Pinterest before his stock vested?

The same cocktail of ambition, ego and ignorance that led Sahil to join Pinterest, was the reason he was able to leave to pursue his own company, leaving millions of dollars on the table. He'd gain that in experience and connections via Gumroad.

What gave Sahil the confidence to build Gumroad over the weekend?

With his previous experience building apps, Sahil realized he did not have to be an extremely competent engineer to test this concept, he just needed to to build an MVP and see if it would work.

Sometimes people get caught up in branding, design, and all sorts of other tangential things, never actually launching their business. Instead, Sahil just wanted to learn, so he didn't spend any time making it perfect, and launched Gumroad on Monday morning after a weekend of hacking.

Startups success stories are few, but every founder believes they are building the next Facebook. Why?

The probability of a company striking it rich is very low, so to some degree, a founder needs to believe their own fictitious story to make it come true.

In startups, the stakes are high and so is the stress level. When a founder is constantly working in the fight or flight response, they have to believe that they are exceptional, in order to overcome the struggle.

As success gets closer and closer, founder's own vision becomes reinforced with new evidence. It feels as if a billion dollar company is just around the corner. What founders don't realize though, is that thousands of other companies see the same signs, but die along the way. One day, it just might be your turn.

How can you maximize luck?

Lack that happens to you is out of your control, but each person can work on maximizing their personal luck.

Sahil didn't just watch "The Social Network" and move to Silicon Valley to start a company. Instead, he spent time to build apps, to write about them, to share them. He took time to advice strangers, without looking for anything in return. That led to him getting a job at Pinterest, brought him closer to the valley, connected him with founders and investors, and eventually opened all the right doors.

Friends become friends over time.
Same way, luck converts over time.

Why did Gumroad struggle to raise Series B?

Investors are money-managers, and they have a job to create returns for their portfolio. Those returns are tied to massive wins on companies like Uber, and Slack, and Pinterest.

A good business, growing 7% a year and trying to raise a Series B, like it was in the case of Gumroad, is not interesting to them. Investors want outliers.

A company that has great predictable numbers, but isn't growing fast enough, is less appealing than a company that is growing astronomically fast, but might crash and burn on ascend.

How did Sahil get Gumroad to grow?

Sahil built a product that solved a problem and had a word of mouth component, enabling it to grow on its own. He says the key was to figure out the audience, and then to talk to them, to figure out how they were using the software, and if they were not, then why.

Growth-hacking only works when you've got your product and funnel figured out. Many successful startups start using "Collison Installation", doing things that don't scale, one customer at a time.

What makes a great business?

Focus on users, and how many of them are actually using your product.

50,000 people saw Gumroad on the first day, but that did not mean anything. Almost none of those people used Gumroad.

When did Gumroad hit a turning point?

It's important to understand that most software-companies follow a power-law distribution, where a small number of users does so much volume, revenue coming from their accounts ends up paying for everyone else. Getting this customers requires the company to spend insignificant time on each, but when successful, it pays pack many-fold.

When Gumroad failed to raise Series B, they could not afford to have sales team anymore, and they could not build all of the features anymore, but that actually helped them grow. Instead of focusing on whales, Sahil was now able to focus on customers who legitimately loved and used his software to start their businesses.

Being a self-service platform, they could no longer support all the big accounts, but they could spend time helping millions of people who were just getting started.

What notable creators started on Gumroad?

Nathan Barry, Convert Kit founder, made a significant amount of money on Gumroad selling books and software. Now Convert Kit is a huge business, doing a massive amount of good for the world.

Should we aim for billion dollars companies after all?

According to Sahil, we would be a lot better off as a world if we focused more on creators and companies that are delivering value for the sake of creating valuable products, instead of explicitly chasing billions of dollars.

What is the value in helping small creators succeed?

Successful founders get less happy over time because while the numbers go up and up, their satisfaction goes down. They get disconnected from the positive impact of their companies, and the negative stories start to outshine.

The emotional impact of creating good in the world, by helping other people, is incredibly powerful.

What was it like to lay off the entire Gumroad team?

Sahil knew Gumroad was running out of oxygen and the layoff were coming. When the day came though, it felt wrong. It felt like watching The Lord of The Ring, hoping for the happy ending, except that Frodo got killed and Sauron go the ring. It did not make sense.

Even though he had a support network, and people knew what was going on, failure was an awkward topic and Sahil was pretty alone. Unable to share in person, Sahil wrote a larticle about his story, called Reflecting on My Failure to Build a Billion-Dollar Company.

Sahil was fully expecting to live alone in the mountains after that, but quite the opposite happened. People wanted to hear his story exactly because failures happens all the time in Silicon Valley, but no one talks about it. The post went viral!

Are startups scary?

Sure, they are scary, but we do them for the thrill! At the end of the day, you have one life, and it is important to consider whether it is worth to be sacrificing your life for something that is relatively insignificant.

Is Sahil happier now that Gumroad runs on his terms?

Sahil says his happiness is about the same now as before, but he is able to make company decisions that are better aligned with their customers. He is happy that he can make great product for people who want it, delivering value and making creators' lives better.