Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Gumroad raises $5M from Crowd SAFE in first 24 hours

republic.co

Post reply on HN
Print view View original

41–50 of 72 posts

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#41

Post by joshmanders »

duxup wrote: post #40
joshmanders wrote: post #38

Earlier quoted context omitted.

Good job downvoting instead of doing some self research. It's not hard to find stuff. The stuff Nathan talks about isn't even the worst. He never mentions Shl's attempt to monetize racial injustice and then telling a black woman she doesn't qualify for the promotion because her skin isn't dark enough, then blocking everyone who says what he did/said was not cool, and instead of acknowledging and fixing his fuckups, h…

>It's not hard to find stuff. What stuff? The rest of your post sounds like some personal conflict about some unrelated topic.... it's about racial injustice now? Are you saying the dude who posted that twitter thread is concerned about that?

I'm saying Shl is a shitty person and screwing the original creators of Gumroad out of their equity is just a drop in the bucket for the shitty things he's done, and Nathan creating ConvertKit Commerce in direct competition with Gumroad doesn't negate the things Nathan brings up, and other people have brought up in light of Shl taking peoples money for nothing in return.

People are too quick to just ignore things people point out because gasp he has a competing project!!!

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#42

Post by duxup »

luckylion wrote: post #21
andygcook wrote: post #15

The investment is being done on a SAFE with a $100M valuation cap, not a $100M valuation with equity grants. That means theoretically Gumroad could never have a qualifying event by selling, going public, or raising a properly priced round by accredited investors. And therefore, investors never get an ROI. Dividends also require actual equity, not promissory notes. I’d imagine even if all investors did convert, paying…

The $1000 maximum investment will probably mean that it won't be professional investors, but individuals who will likely not understand the risk and the potential for misuse. Nicely sized to fit into the stimulus check.

I'm concerned about the risk there as well, but I feel like you can spin that both ways. There's a weird intersection with opening investment to anyone and concerns about folks making ill informed choices.

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#43

Post by whack »

PragmaticPulp wrote: post #16

Gumroad is an interesting cautionary tale for employee equity compensation. The company was declared to have failed several years ago. Employees were laid off and the investors released the IP (built by the early employees) to the founder as a token of goodwill. Presumably, they thought he might use it to start a new company. Story here: https://www.businessinsider.com/startup-failure-gumroad-why-... However, he cont…

> However, he continued running the company with new part-time employees, minus original investors and minus the early employees who built the company. Apparently the company succeeded enough that it's now worth $100 million. Early employees who built the original site presumably don’t have equity because they were laid off and their options expired worthless as they were told the company had failed.

Let me start off by saying that I think most startup compensation is downright bad for employees, compared to FANG alternatives. I would like to be a startup founder one day, but I realistically can't see myself as a startup employee.

That said, I don't think Gumroad did anything morally wrong here. The layoffs were absolutely necessary, because the company would have gone bankrupt without them. But it's false to say that this caused employees to have no equity. Even if you get laid off as a startup employee, you can still choose to exercise your options and hold on to the company's equity, if you think that they will eventually be worth $100M. No one misled the employees about the company's future. They saw that the investors were pulling out. They saw that the engineering team was getting shredded. And they made the very reasonable assessment that the company's equity isn't worth the cost of exercising their options.

Blaming Gumroad for employees not having equity, is like blaming AMD for their previous employees selling off their stock during their near-bankruptcy days. Any company can and will go through dramatic reversals of fortune. And whenever there's such a turnaround, there is bound to be people who missed out on the upside, because they didn't continue holding through the dark times.

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#44

Post by vmception »

PragmaticPulp wrote: post #16

Gumroad is an interesting cautionary tale for employee equity compensation. The company was declared to have failed several years ago. Employees were laid off and the investors released the IP (built by the early employees) to the founder as a token of goodwill. Presumably, they thought he might use it to start a new company. Story here: https://www.businessinsider.com/startup-failure-gumroad-why-... However, he cont…

The employees didn't pay for their options because the options were "out of the money" and the employees had various confirmations that the shares would not be worth anything, but they still had the choice to.

Yeah I guess cautionary tale is the good word here.

> watching the early employees lose out on their equity because they were told the company was a failure is not cool

eh, they had the choice, this isn't a story of the share class changing or the entity being changed, and you had to write presumably because you don't know and are relying on the financial unsophistication of many tech employees

can be a tough choice to both earn below market salary and then be expected to use that income to buy your shares. sadly this is due to various tax law changes over the last few decades.

but yeah this isn't "egregious enough" for me to garner anything from it.

its a case study about how much you can do with contractors and that you don't need venture capital or the employee structure if you know what you actually want to build

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#45

Post by PragmaticPulp »

virgilp wrote: post #25
PragmaticPulp wrote: post #20

Earlier quoted context omitted.

> I like the idea that a startup that fails to be a unicorn can still be something. The problem isn’t that the company failed to be a unicorn. The problem is that the company was declared to be worthless and was given away to the founder (but not employees who built it), but it obviously wasn’t worthless as it’s currently valued at $100 million. Early employee equity was wiped out in the process. The point is that yo…

> but it obviously wasn’t worthless I disagree, there's nothing obvious about it. On the contrary, I argue that it WAS worthless (in the same vein that "ideas are worthless" - not that they lack anything of value, but that without sustained effort & dedication to extract said value, they're really not worth much). Also, it's entirely possible that the value of the company was actually _negative_ for the investors. Ha…

> On the contrary, I argue that it WAS worthless

The founder continued running the company with part time contractors and blogged about their profitability. It wasn’t worthless.

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#46

Post by p0ckets »

PragmaticPulp wrote: post #26
ROARosen wrote: post #22

Earlier quoted context omitted.

The alternative was to close down the company completely, I'm not sure how that would help the employees equity. Besides, options are by nature expiratory unless certain milestones are reached, which obviously wasn't the case. And if the employees did have real equity there is no way the founder could have gotten that without their consent.

> The alternative was to close down the company completely No, the alternative was to give the IP and equity ownership proportionally to the employees, not 100% to the founder. Instead, they gave it all to the founder and none to the employees who built the IP (as far as I can tell from public documents). Employees were told they received nothing because their work was useless. Apparently it wasn’t so useless.

Do we know for a fact that the investors sold the equity back to the founder and not the company (like a stock buyback)? The investors just wanted to get out, so tracking down former employees, deciding how much equity each one deserves, and selling them equity probably isn't what they want to spend time doing. So the only real options would be selling to the company, or to the founder.

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#47

Post by vmception »

joshmanders wrote: post #41
duxup wrote: post #40

Earlier quoted context omitted.

>It's not hard to find stuff. What stuff? The rest of your post sounds like some personal conflict about some unrelated topic.... it's about racial injustice now? Are you saying the dude who posted that twitter thread is concerned about that?

I'm saying Shl is a shitty person and screwing the original creators of Gumroad out of their equity is just a drop in the bucket for the shitty things he's done, and Nathan creating ConvertKit Commerce in direct competition with Gumroad doesn't negate the things Nathan brings up, and other people have brought up in light of Shl taking peoples money for nothing in return. People are too quick to just ignore things peo…

So neither you or Nathan have posted what you would like to happen and why.

What is that? Rebrand Gumroad instead? A lower valuation? Different kind of security issued with more rights? Shi should be shut out from the capital markets and corporate sphere forever? PSA to investors who have already 100% subscribed the max raise?

I'm just grasping, what do you guys want to happen?

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#48

Post by virgilp »

PragmaticPulp wrote: post #45
virgilp wrote: post #25

Earlier quoted context omitted.

> but it obviously wasn’t worthless I disagree, there's nothing obvious about it. On the contrary, I argue that it WAS worthless (in the same vein that "ideas are worthless" - not that they lack anything of value, but that without sustained effort & dedication to extract said value, they're really not worth much). Also, it's entirely possible that the value of the company was actually _negative_ for the investors. Ha…

> On the contrary, I argue that it WAS worthless The founder continued running the company with part time contractors and blogged about their profitability. It wasn’t worthless.

The founder might've earned more at a FAANG or different companies, just like the other early employees presumably did. He didn't contact the investors to buy them out for $1 - the investors did, because the tax cut was worth more to them by that point.

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#49

Post by vmception »

tinyhouse wrote: post #6

What do investors get? First time I hear about this site Republic.

they get something slightly above what all your local restuarants asked for on gofundme when they boosted your email from the square point of sale system:

something close to non-dilutive financing and still hilariously opportunistic

Re: Gumroad raises $5M from Crowd SAFE in first 24 hours

#50

Post by luckylion »

duxup wrote: post #42
luckylion wrote: post #21

Earlier quoted context omitted.

The $1000 maximum investment will probably mean that it won't be professional investors, but individuals who will likely not understand the risk and the potential for misuse. Nicely sized to fit into the stimulus check.

I'm concerned about the risk there as well, but I feel like you can spin that both ways. There's a weird intersection with opening investment to anyone and concerns about folks making ill informed choices.

That's true, but I think something like SAFE is very different from crowdfunding for equity (and much more risky and misnamed, it can be neither simple nor safe).

That intersection you mention will be an interesting place in the time to come. I don't think we've found the sweet spot between "only professionals can invest", "the retail investors take on huge risks and aren't aware because of wild models with strange names" and "the company can't raise medium amounts because the regulation surrounding the process would cost much more than they would get", but I'm sure somebody is working on it.

Post reply on HN