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Reflecting on My Failure to Build a Billion-Dollar Company

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

#291

Post by zorga »

hnnh44 wrote: post #226
TAForObvReasons wrote: post #222

Earlier quoted context omitted.

Keep in mind that HN is a website operated by Y Combinator, a company in the business of developing and launching startups that will raise more money through the VC system. The core business model involves encouraging companies to take more money at better valuations. If you view the startup world from the HN lens, it's all about the VCs and how to maximize their returns at all costs. Those incentives run counter to…

Also, keep in mind that HN is mostly user curated, and represent the views of it's participants more than ycombinator itself.

And is moderated by an asshole who shadowbans anyone who dares disagree with another human being like actual humans disagree. Fuck you dang.

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

#292

Post by hilbertseries »

graeme wrote: post #249
ilamont wrote: post #196

I was basically alone. I didn’t have a team, nor an office. And San Francisco was full of startups raising gobs more money, building amazing teams, and shipping great products. Some of my friends became billionaires. Meanwhile, I had to run a “measly” lifestyle business. It wasn’t what I wanted to do, but I had to keep the ship from sinking. There's that term again, "lifestyle business." Uttered like a dirty word, wh…

He's talking about switching from vc rocketship to bootstrapped. In that context the pejorative makes sense: he's describing how he felt at the time. Furthes, he ran this "lifestyle" business with outside investors. He's written a nuanced, heartfelt essay, and this comment seems to have missed all of that to nitpick on a word.

>He's written a nuanced, heartfelt essay, and this comment seems to have missed all of that to nitpick on a word.

Hackers news comments in a sentence.

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

#293

Post by eanzenberg »

nostrademons wrote: post #290
eanzenberg wrote: post #276

Earlier quoted context omitted.

That's actually not a bad return on investment (7.5% yearly)

There's a time value on that money. If you'd put $10M into an S&P 500 index fund in 2011, it'd be worth about $22M now, which first of all is a fair bit more than 7.5% and secondly is the denominator you're looking for to figure out percentage returns on capital now. The company wasn't making $780K/year in profit in 2011, it took 7 years to get there.

That's timing though, historically I believe s&p yields 7% per year on average.

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

#294

Post by bluquark »

It seems to me the acquihire option was rather summarily dismissed in this post, and I’m not sure why. It would’ve been better for employees and investors, and the customers at worst would’ve gotten a clean, slow wind-down with time to find alternatives.

The idea that large companies are horrible places to work and where good products go to die is another stereotype spread by VCs to convince people to go hard into billion-dollar companies.

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

#295

Post by pandapower2 »

ian0 wrote: post #278
Justsignedup wrote: post #201

Earlier quoted context omitted.

"lifestyle business" is really just a small business that works, is self-sustaining, and not overly bloated to attempt to make obscene amounts of $$$. I feel like this is exactly what most companies should strive for. They'll make better decisions that way.

Isnt a "lifestyle" business a business to support the lifestyle of the founder? IE money is not typically a problem, either the company is profitable or the founder will support it loss making. The main function of the company is to keep the founder entertained more than anything else. There are a lot of companies like this (big & small), though sometimes its not recognisable from the outside. Note the goal is still…

>Isnt a "lifestyle" business a business to support the lifestyle of the founder? IE money is not typically a problem, either the company is profitable or the founder will support it loss making. The main function of the company is to keep the founder entertained more than anything else.

I don't think I've heard the phrase lifestyle business used that way. I'm not in the US let alone silicon valley so that might be relevant.

Rather I've heard lifestyle business used to describe a business, typically with zero to half a dozen employees, which the founder can run without putting in a whole bunch of time.

A real but deliberately vague example. A company that acts as an authorized dealer for a manufacturer. The sales company handles the sales process and takes orders through a website supplemented with phone calls. Actually shipping the merchandise and handling after sales customer support is done by the manufacturer. Why they don't want to do their own sales I don't know. Staffing requirements are one person to answer any phone calls and someone to do the books. Owner's required time is maybe a few hours a day.

Commissions on sales cover all the bills etc and let the owner pay themselves handsomely but it will never be a giant enterprise.

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

#296

Post by woogiewonka »

Thanks for sharing your story. There are many valuable lessons there and I certainly wish you all the best.

I am familiar with Gumroad as someone who has used it to buy things. From what I recall, the UX was smooth but left me wondering about the ease of cancellations / ways to handle refunds. I recall not feeling like the product lacked something critical - perhaps it was Paypal integration, but I don't remember. Something about it didn't sit right with me as a customer.

From a UX perspective, I feel that some of the commenters here are onto something. The website does not make it clear what the product does. Looking a bit into it, it feels like there are two products in one - payments and audience building - something that I would expect to be separate. It's like the product is trying to do 2 things well instead of 1 thing really well. Of course, this is my personal opinion which could be harsh and unfair seeing how I am not really qualified to give advice. In all, you know your customers and their needs best and it's great to hear you havent given up on gumroad. I hope things go your way and you accomplish everything you set out to do.

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

#297

Post by aiisahik »

For the employees of a VC backed company, the liquidation preference of its investors is cage - a cage that you can't break out of unless you become a billion dollar business.

This is a wonderful story and I have such enormous respect for Sahil for sticking it out. I wonder if the story would be different if the investors didn't give up the keys to cage.

Here's a challenge to VCs: do you really want to strangle us if we turn out not to be the billion dollar business you hoped for? And if you don't want to strangle us, put your money where your mouth is and do away with the preference. Better still, buy common stock :)

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

#298

Post by snake117 »

This was a really insightful read, so first of all thank you to Sahil for writing and sharing this.

I think this is a perfect read for anyone contemplating on starting their own business as this clearly illustrates that not every startup is destined to become a unicorn and/or should be heavily backed by VCs. Moreover, if that is the only reason why you are pursuing your venture, then you will most likely experience heavy turbulence, possibly face the brink of total failure, and possibly just have to accept failure.

All that being said, I really enjoyed the end of the post, where he was explaining his change in outlook and open-sourcing the service. This could lead to wider adoption and potentially open new sources of revenue, similar to Discourse and how they can create and manage your forum for a fee even though the product itself is open-sourced. The reality is, sometimes people need the middle-man and it is nice to have the option available if you are in that situation.

Thanks again for sharing your experiences. I wish Sahil and the Gumroad team all the best :)

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

#299

Post by dennisgorelik »

jim-greer wrote: post #116

My experience with Kongregate was different, but I did feel some of the same things. We became a vehicle for many indie game creators to make a living, which I'm very proud of. In our case we also had a sale that was very profitable for the founders and early employees, and also profitable for our investors. But the weird thing is that if our VC investors had known at the outset that they would have a 3x return on th…

> if our VC investors had known at the outset that they would have a 3x return on their money in three years, they probably wouldn't have made the investment.

Of course they would have made an investment.

Any guaranteed return above bank interest rate -- is appealing for investors.

Guaranteed return of 50%/year is an amazing investment opportunity.

What you probably meant is that if investors knew that the return cannot be more than 3x, but also has high probability of failure -- then the investors probably would not make the investment.

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

#300

Post by csa »

brandnewlow wrote: post #136
eanzenberg wrote: post #86

Earlier quoted context omitted.

How is that even remotely possible, unless he got no equity in pinterest? They are ~10b IPO'ing this year. Even 1 basis point of pinterest is worth more than what Gumroad brought in.

1 basis point of $10b is $1m. It's pretty easy to see someone paying him well over that to buy GumRoad at some point.

I will guess that as employee #2, he had more than 1 basis point.
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