How a 19-year-old engineer's "selling should be as easy as tweeting" vision built a billion-dollar creator commerce empire

This story starts with a bold decision

In 2011, Sahil Lavingia left his job as the second employee at Pinterest — before he vested any of the stock — to work on something he thought would be my life’s work.

We all know how much that stock could worth. It’s really a bold decision.

But what happened after didn’t meet what he imagined, every founder might think themselves as the next Jobs, the next Mark Zuckerberg, but the reality is 99.9% of them failed, the others? They never end up as they planned.

He started gumroad as a weekend project, The idea was simple: Creators and others should be able to sell their products directly to their audiences with quick, simple links. No need for a storefront.

He launched that MVP Monday morning on Hacker News, and over 52000 users checked it out on the first day. It goes viral immediately. After he left his job, he raised $1.1M from an all-star cast of angel investors and venture capital firms. A few months later, raised another $7M. Everthing was going so well that Sahil felt like he was on top of the world. And he was 19-years-old solo founder when doing that. He has only 3 employees by that time.

Then here is what he chose to do, like many other startups.

He started hiring and focusing on the product, the numbers started climbing

Everything seems so good, Until…

At some point, the numbers stopped growing.

Then he had to lay off 75 percent employees, firing some best friends is really a frustrating experience, it makes you feel like you failed everyone. And to make it worse, when you feel so, other media might publish articles about that make sure everyone else know about your failure. It’s a lot of pressure.

How did it fail like this?

Everything seems pretty good, what went wrong?

There is a famous saying at Y Combinator:

For a startup like this, every month of less than 20 percent growth should have been a red flag. But they got money from fundraising, they didn’t realize that until they failed trying to raise another $15M.

Gumroad hit aa peak in November 2014 and stalled

Sahil Lavingia laid off 75%, by that time they only got 18 months of runway. They worked very hard and shipped tons of features for 9 months.

Unfortunately, they still didn’t hit the number they need to raise another round.

The hard decision

Then it came down to the big decision,

1. Shut down the business, return the money to investors, and restart

2. Continue on this path, but slim down for sustainability.

3. Looking for an acquihire

By that time, Gumroad was making $2,500,000 for creators. Even though selling the company was an option, a very tempting one, Sahil didn’t feel right about it. Despite the advice from investors telling him to shut down, he decided to be profitable at any cost.

It hurts like hell to forget what dream you believed in

It hurts more than it looks, not only giving up the one-billion dollar dream, but also because to achieve that he basically fired the whole team, moved to a cheaper place, he was all alone. WIth all the stories startups raising tons of money each day in San Francisco, some of his friends became billionaires in a short time, Sahil was hanging on to his business with no team, not even an office. He had to live with that.

It hits so hard!

Every day, he had to wake up and take care of all of Gumroad’s support queries, and try to fix all of the bugs.

He survived, as a failure, it was a painful experience.

Cut the cost

Then he found an Indian firm called BigBinary and hired a few engineers as contractors, had to do that to cut the cost.

Their cost were like this before the layout:

• Revenue: $89,000 for the month

• Gross profit: $17,000

• Operating expenses: $364,000

• Net profit: -$351,000

In June 2016, which was one year later, they totally changed the numbers:

• Revenue: $176,000 for the month

• Gross profit: $42,000

• Operating expenses: $32,000

• Net profit: +$10,000

The redemption of a solo founder

Sahil recalled one thing looking at the revenue curve of Gumroad.

Leaving all that one-billion dollar illusion behind, Sahil focused on one thing, making Gumroad better and better for existing creators.

And after moving away from San Francisco, Sahil felt pretty disconnected from the startup community. Since he was not chasing fund raising from VC, he chose to share sharing public about Gumroad’s finiancial stats

Just like what people do in #buildinpublic today. For this down side data, it would be a nightmare for a startup seeking venture capital. But ironically, investors started reaching out seeing this data, which Sahil doesn’t need any more.

Gumroad transformed $10 million of investor capital into $178 million (and counting) in creator earnings. With no upcoming fundraising goals, he can simply focused on building the best possible product for customers. I think that is also the dream of many founders. It did created value and 10x it.

COVID Knocks

Then in around 2019 and 2020, COVID happened, which really gave Gumroad a little push, it grews much faster than before, here is what the numbers look like.

When staying in the startup game, there is one thing for sure:

You never know when is the bottom of your business, and when or how will it take off.

Gumroad creators earned $142 million in 2020, up 94% from 2019.

Look further in the distribution:

How did the growing expense helped revenue growth?

ZERO.

Here is how the revenue and expenses of gumroad changes. The layoff might be the best thing that happened to it. If it had raised another round, it could have died by now. The money always burns faster than you expected.

Let's put the story of Gumroad and Sahil aside for a moment, how did gumroad do the growth during all these years?

Gumroad’s growth didn’t come from flashy ads or viral hacks — it changed depending on the stage the company was in.

At the start, growth was entirely organic. The product was so simple and shareable that early creators promoted it just by using it. Twitter posts with Gumroad links doubled as marketing, and word spread in creative communities.

After raising VC funding, Gumroad tried to scale quickly by building more features and targeting a wider market. But growth didn’t keep pace with investment expectations, and eventually the team was downsized.

From 2016 on, the company focused on profitability. Growth shifted to being brand-driven: Sahil shared revenue openly, wrote transparently, and leaned into the indie maker world. This authenticity attracted loyal users without any marketing spend.

Once the creator economy took off around 2020, Gumroad was perfectly positioned. By letting creators own their audience and avoiding a centralized marketplace, they scaled through creators’ own promotion.

Instead of chasing growth, Gumroad let creators bring it one sale at a time.

2024

By the time of 2024, gumroad were making over $23M ARR with $9M profits. It started charging 10% fee from 2023, which massively boost their profits.

Resources：

1. https://sahillavingia.com

2. https://www.indiehackers.com/post/i-started-gumroad-as-a-weekend-project-and-now-it-s-making-350k-mo-0KqIBn9MseHiyQiZJOiM

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