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Paying freelancers in equity and dividends

sahillavingia.com

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Re: Paying freelancers in equity and dividends

#11

Post by prewett »

azmodeus wrote: post #3

I love seeing into Gumroad so much. Very curious if it's worth 100 M at the moment based on dividends In 2023: 20.7 M Revenue - 8.9 M net income - 5.34 M dividend With no net income growth would take about 19 years for the dividends to pay out your original investment Will be interesting to see the 2024 numbers.

At a price of $100m and net income of $8.9m, that would be a P/E of 11 and a dividend yield of 5.34%. Assuming limited net income growth, such as a large corporation such as Coca-Cola (KO), this is a great stock! KO is kind of the poster-child for a stable, terminal business (how much more Coca-Cola / soft drinks can the world drink?), and it has a P/E of 25 and a dividend yield of 3.1 %. But, in fact, Gumroad is likely to grow earnings (and presumably the dividend), so this is an even better deal.

Re: Paying freelancers in equity and dividends

#12

Post by Aurornis »

satvikpendem wrote: post #2

I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway. Related, I thought it was hilarious how so many creators on Twitter publicly stated they were leaving Gumroad when the 10% fee change was enacted, only…

> I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway.

It's great that you wanted to fund the company with no expectation of return, but this is a perfect example of what contractors would need to consider when they choose to trade some of their compensation for equity.

Re: Paying freelancers in equity and dividends

#13

Post by jll29 »

I had a generalization of this idea once: not only giving freelancers equity, but giving EVERYONE equity who contributed to the success of the company. For a while, during my 2nd startup attempt, I carried a little paper notebook and documented anyone who helped me. (Alas, I did not raise funding the world was not ready for mobile search in 2004...)

Re: Paying freelancers in equity and dividends

#14

Post by AndrewKemendo »

Aurornis wrote: post #6

> It wasn’t always this way; from 2015-2019, everyone at Gumroad was paid cash, no equity. No one wanted any. Gumroad started in 2011 and raised $8 million. The reason "no one wanted" any equity in 2015 was because they laid most employees off, replaced them with contractors, and the investors wrote their equity down to $1 as a gift to the founder. The founder got to keep the IP, ditch the founding employees, and con…

Everything you wrote was par for the course for a private equity company (note that venture capital is a tiny subclass of private equity)

The founder kept everything because investors expect that their relationship with this person is going to continue and eventually this person is going to “make the fund” in a future venture

That’s the key thing here, as a CEO/founder if you have gotten the stamp of approval from venture/capital class (in the form of a series A conversion on a note, or some kind of liquidity event), as long as you’ve pledged allegiance to returning investors capital above all things, you can “fail” a lot actually, and it’s pretty much ok as a writedown.

Provided that you keep investors legally at the front of the line, they will be willing to continue to invest in you.

This is why you see all these people put “serial founder” in their bios, they want to signal that they are a reliable person for finance to come to

Re: Paying freelancers in equity and dividends

#15

Post by beejiu »

Aurornis wrote: post #6

> It wasn’t always this way; from 2015-2019, everyone at Gumroad was paid cash, no equity. No one wanted any. Gumroad started in 2011 and raised $8 million. The reason "no one wanted" any equity in 2015 was because they laid most employees off, replaced them with contractors, and the investors wrote their equity down to $1 as a gift to the founder. The founder got to keep the IP, ditch the founding employees, and con…

> him, and I don't know what became of the employees' equity. Probably nothing, given that the company had to be written down to nearly $0 for this transfer.

It is somewhat addressed (without specifics) in the article:

> We also gave a token amount of equity to alumni who worked on Gumroad from 2011-2015, without whom you wouldn’t be reading any of this. Thank you!

Re: Paying freelancers in equity and dividends

#16

Post by satvikpendem »

jjice wrote: post #9
satvikpendem wrote: post #2

I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway. Related, I thought it was hilarious how so many creators on Twitter publicly stated they were leaving Gumroad when the 10% fee change was enacted, only…

Sorry, but to confirm, they charge a 10% flat fee and that's it? That's insanely good compared to every other platform I've seen for any type of commerce. Sure, Amazon, Apple, and the like also help offer exposure and some other services, but 10% flat seems completely worth it until you hit a critical mass where it makes sense to handle things yourself. I imagine that number is very high though.

Well it was more so compared to LemonSqueezy which is 5% or Stripe Checkout which is 3%. But I believe both don't offer hosting of the actual products such as ebooks or videos while Gumroad does.

Re: Paying freelancers in equity and dividends

#17

Post by satvikpendem »

Aurornis wrote: post #12
satvikpendem wrote: post #2

I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway. Related, I thought it was hilarious how so many creators on Twitter publicly stated they were leaving Gumroad when the 10% fee change was enacted, only…

> I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway. It's great that you wanted to fund the company with no expectation of return, but this is a perfect example of what contractors would need to consider…

Indeed, I would've made more money if I put it into VTI. It's always tenuous to hold equity in such companies, especially at a 100 million dollar valuation which means my 1k would become 10k at most if Gumroad reaches a billion dollar valuation, which might be quite a while from now.

Re: Paying freelancers in equity and dividends

#18

Post by lotsofpulp »

ta1243 wrote: post #8
satvikpendem wrote: post #2

I invested $1,000 in Gumroad back when they did the public fundraise, and I got back ~$70 so far. At this rate it'll take multiple years to break even, much less earn a multiplier. But oh well, I liked the Gumroad team so I wasn't looking for much of a profit anyway. Related, I thought it was hilarious how so many creators on Twitter publicly stated they were leaving Gumroad when the 10% fee change was enacted, only…

> it just goes to show how the internet and the people on it create a vast but very vocal minority of opinions that are not worth listening to in the real world I saw this criticism of Twitter, way before Musk bought it, possibly even before Trump became president. This [0] story from 2018 was about journalists paying too much attention It does feel like Twitter and Facebook are shadows of their former selves though…

Instagram and WhatsApp are very popular. Also, Facebook marketplace.

Re: Paying freelancers in equity and dividends

#19

Post by earnesti »

AndrewKemendo wrote: post #14
Aurornis wrote: post #6

> It wasn’t always this way; from 2015-2019, everyone at Gumroad was paid cash, no equity. No one wanted any. Gumroad started in 2011 and raised $8 million. The reason "no one wanted" any equity in 2015 was because they laid most employees off, replaced them with contractors, and the investors wrote their equity down to $1 as a gift to the founder. The founder got to keep the IP, ditch the founding employees, and con…

Everything you wrote was par for the course for a private equity company (note that venture capital is a tiny subclass of private equity) The founder kept everything because investors expect that their relationship with this person is going to continue and eventually this person is going to “make the fund” in a future venture That’s the key thing here, as a CEO/founder if you have gotten the stamp of approval from ve…

I'm not sure that VC's will be investing in the company of a failed entrepreneur. At least something should have changed to make the company "better". In Gumroads case the truth was that the money would be pretty much gone, the company is not going to be valuable. He didn't raise this time from VC's, but from clueless retail investors, which is quite a different thing.
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