Reflecting on My Failure to Build a Billion-Dollar Company • Hacker News Board

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#181

Post by Dumbdo » Thu, Feb 07, 2019, 7:53 PM UTC

neya wrote: post #178

sahillavingia wrote: post #13

Hey, #1 on Hacker News! I don't think that's happened since...I launched Gumroad back in 2011: https://news.ycombinator.com/item?id=2406614 Thanks HN for being a part of my journey!

Hi Sahil, Thanks for sharing the amazing story. I was wondering, since Gumroad's announcement about 2-3 years ago [1], is the plan to open source Gumroad still on track? Thank you. [1] https://twitter.com/gumroad/status/811650470758359040

From the the article in OP:

> Soon, we will also open-source the whole product, WordPress-style. Anyone will be able to deploy their own version of Gumroad, make the changes they want, and sell the content they want, without us being the middle-man.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#182

Post by randall » Thu, Feb 07, 2019, 7:58 PM UTC

theptip wrote: post #163

randall wrote: post #111

Earlier quoted context omitted.

Market determines your growth almost always. I have enough data points now to basically say this with enough certainty. Friendster is the countercase where the technology couldn't scale, and their execution was poor, and they focused on revenue at the expense of growth, but generally like... now-a-days with modern web stack market is basically all that matters.

Is your claim "for most companies the quality is already sufficient, and so it's not the limiting factor (even though it would be if the quality was insufficient)"? Or literally "the TAM matters, your app's quality doesn't"?

The prior. Now-a-days, the majority of developers can build a quality app since infrastructure and tooling (heroku etc) are widely available, that you can paper over most completely horrible / unacceptable experiences by limiting features early on. If you pick a huge market and have simply 1-2 compelling features, you can go from nothing to something within 90 days typically, and then use that to become unstoppable.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#183

Post by super-serial » Thu, Feb 07, 2019, 8:00 PM UTC

lquist wrote: post #128

On the one hand I applaud KPCB for giving up their interest in a founder friendly way, but this also leaves a bad taste in my mouth and seems a bit “Heads I win, Tails you lose” from Sahil’s pov. The VC investment let him build a fully fledged product capable of breaking out. But it didn’t and he still got to keep the company without much liquidation preference. This is an example of a true VC subsidy.

I wonder if an entrepreneur with less connections and not a part of YC would get that $1 buyout deal. I would think the default would be ousting the founder and selling the assets. Then the founder would be left with nothing. They'd have no lifestyle business, even though they could have had one if they never took VC.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#184

Post by numair » Thu, Feb 07, 2019, 8:02 PM UTC

frtcike89 wrote: post #166

austenallred wrote: post #132

Earlier quoted context omitted.

He owns the majority of Gumroad. Let’s say he had 100 basis points of Pinterest, call it 50% dilution, he’d walk away with $50m. That’s probably very generous, probably actually closer to $20m. Gumroad will be worth that in a few years at this rate, and he could cash million dollar paychecks along the way if he wanted.

So he'll be worth $50M in a few years with Gumroad. Meanwhile his original investors lost all the millions they invested. His employees lost all the time and vesting. Ouch. That's why it's way to dangerous to just follow any guy and do a startup and waste a few years of your life.

Actually, his employees got a ton of experience building systems and processes the “hard way,” from ground zero at a startup. This inevitably made them more attractive to whomever they decided to work with afterward — startup, large company, whatever — especially as they were let go into a frenzy of hiring by other firms.

And if, God forbid, they wanted to start their own company and waste a few more years of their life (your words, not mine!), well... Everything is easier when you’ve seen someone else do it.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#185

Post by rubyron » Thu, Feb 07, 2019, 8:03 PM UTC

sahillavingia wrote: post #13

Hey, #1 on Hacker News! I don't think that's happened since...I launched Gumroad back in 2011: https://news.ycombinator.com/item?id=2406614 Thanks HN for being a part of my journey!

Sahil, thanks for sharing your story to date. I remember meeting with you in 2011 in Palo Alto shortly after your launch, and I could tell then you had the “right stuff.” Proud of you man.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#186

Post by kokokokoko » Thu, Feb 07, 2019, 8:10 PM UTC

PhasmaFelis wrote: post #95

holman wrote: post #11

Really love this post. My favorite line is: > Every month of less than 20% growth should have been a red flag. I think that's pretty insightful. 20% growth is great for a normal business, of course; for a VC-backed startup it can show some warning signs about future hard decisions you might have to face. I think there's certainly lots of discussion that has been had — and should be had — about "should I or shouldn't…

It is still baffling to me that the tech world has glommed onto a business model where steady growth and a solid core of loyal, happy customers is considered a failure.

It is because a startup is an investment vehicle, not a business.

If someone had X amount of dollars they want to maximize the rate of return on that wealth. The point of growth in investing is that you can see the future before it happens and pocket the difference.

For example if I invest in company Y and they are growing at a certain rate, I can sell my portion of the company based upon expected future potential. If the buyer of my shares believes the company will become 30% larger in 5 years, that is not much more than they would earn if they had some investment that return 5% a year. If the buyer of my shares believes my stock will be worth 100% more in 5 years that would now be equivalent to a return of 15% a year.

So here comes the trick. Even 10% a year would be a great rate of return. So I can sell my shares at a premium. Pocketing the 5% today as opposed to waiting 5 years. If I can pocket 7% or even 10% of that would be even better. Now if this company will be worth 500% more in 5 years, you can see how I would stand to make a large amount of money today by selling my asset that will be worth much more later.

With a company growing at a normal speed, there is not much of a premium I can extract for future growth to a potential buyer of my shares.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#187

Post by jimbokun » Thu, Feb 07, 2019, 8:16 PM UTC

crispyporkbites wrote: post #124

sahillavingia wrote: post #3

Earlier quoted context omitted.

I prefer not to do the math.

It's crazy that you care about the money, being in your mid-20s with a company pulling in 60k USD net/month puts you squarely in the pretty much unlimited money category of the world.

"It's crazy that you care about the money..."

Did you read the article?

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#188

Post by Kye » Thu, Feb 07, 2019, 8:16 PM UTC

ryanSrich wrote: post #122

AznHisoka wrote: post #4

I wasn't interested in the emotional story behind this. But I did resonate with 1 line in particular here: "It doesn’t matter how amazing your product is, or how fast you ship features. The market you’re in will determine most of your growth." This is so true, in my experience. You hit a roadblock in recurring revenue, not because your product doesn't have enough features, or your team sucks, but simply: your market…

Scaling to a billion dollar company in that market was certainly attainable. Patreon started two years after Gumroad and now look where they are. Gumroad had a movers first advantage - so I really disagree with the quote. Had they continued to push feature development and tweak PMF they could have been a billion dollar company. Don't take that as a slight to Gumroad either. Building a profitable business from almost…

Patreon and Gumroad were different businesses for most of their histories. Gumroad was always a place to sell stuff and launch subscription services. Patreon is trying to pivot that way now with all their talk of membership businesses, but no one who uses it seems to see it that way.

That's why everyone was up in arms about the fee change in 2017. People tossing $1 here and there to people they liked were the foundation of everything. Membership businesses generally start at $5 a month.

And Patreon isn't going to have much luck with it. There are so many better options if someone just wants to set up a membership business. Memberful, which they bought, wasn't even one of the better options. It doesn't even handle anything other than plans, payments, and integrations with services that do the heavy lifting.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#189

Post by Retra » Thu, Feb 07, 2019, 8:19 PM UTC

kbenson wrote: post #66

ChuckMcM wrote: post #57

Earlier quoted context omitted.

I love your story Sahil, it is so true that people equate 'wealth' with 'success' but that is short sighted. If you step back and look at the big picture, you're on this planet for anywhere from 70 to 100 years, and at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on to, which number is a better representative of 'success'? Working on things…

> at the end of that time there are two metrics, the number of people you helped and the amount of wealth you amassed and held on to, which number is a better representative of 'success'? Let's not forget personal satisfaction. I'm a little leery of putting the entire assessment of my life onto other people (even though if I was going to, I could do a lot worse than number of people helped). Hopefully helping other p…

Personal satisfaction doesn't matter once you're dead. Those other things do. And your entire assessment of your life at that point will be put onto other people.

With that said, optimizing for after you're dead might be selfish and reasonably desirable, but there's a lot to be said for optimizing for tomorrow instead. Life would be pretty pointless if none of us were supposed to optimize for some enjoyment while we're here.

Re: Reflecting on My Failure to Build a Billion-Dollar Company

#190

Post by coupdejarnac » Thu, Feb 07, 2019, 8:21 PM UTC

I use gumroad and like it.

This reminds me of the Patreon founder claiming a few days ago that he didn't have a sustainable business. Did Patreon or Gumroad need $10 million of VC money? Do they need to be located in the bay area? These seem like sustainable businesses that shoot themselves in the foot with unnecessarily high operating expenses and unreasonable expectations from VCs.