Sahil Lavingia wants creators to get interest on their interests

Welcome to Means of Creation!

Every Friday, Li and Nathan interview a guest in the passion economy — founders, creators and operators who are carving their own paths. This is a write-up of the most interesting parts of the conversation. If you want, you can listen to the full talk in your podcast app, or watch it on YouTube. There’s also a transcript at the end of this post.

Enjoy!


For the first episode of Means of Creation, Li and Nathan talked to Sahil Lavingia, the founder and CEO of Gumroad, about building a network for creators to turn their passions from side hustle to livelihood — and how he had to switch up his roadmap along the way.

Gumroad is a Swiss Army Knife for people who make things and the people who will buy them. The site hosts creators selling movies, music, online courses, and apps, among others. It also assists them through the entire process — from marketing to payment processing and delivery — helping them earn $300 million in revenue. Sahil Lavingia founded Gumroad almost a decade ago, at the age of 19. Today, more than 40,000 creators belong to the platform.

Creative people often think they can only work on their passions as a “side hustle”, something to do for little to no money in their free time while making a living from a day job. Creator-driven marketplaces are attempts to evolve that logic. People don’t have to go through middlemen to get returns on their work, and independence doesn’t have to come at the expense of income. Gumroad paves a more direct path that offers a bigger cut of the profits, allowing creators to “earn interest on their interests,” in Sahil’s words.

Sahil went for venture capital — but that didn’t work out as expected

Sahil envisioned Gumroad as a billion-dollar IPO one day, or an acquisition, like YouTube. Venture capital was the first source of funding he thought of. Over the first months of Gumroad’s life, Sahil raised $8 million from VC firms and angel investors. He grew what began as a three-person team, following a blueprint derived from other VC-backed startups.

Even though Gumroad had a strong product-to-market fit, its growth rate wasn’t rising as anticipated. He realized that true growth was a function of the following four questions:

  • Are there people who love the product/platform?

  • How many of those people are out there?

  • How fast is that group growing out in the world -- and how fast are you finding them?

  • For every individual you bring into your network, how much will they make? How much will you make?

Gumroad’s network of creators was not growing quickly enough, so Sahil downsized the company. After difficult conversations with friends, family, and coworkers, he emerged with a handful of concrete ideas on how to change the platform’s design to match its goals and best serve its users.

Although the site had been founded to give them control in building their audiences, Sahil realized that creators — especially newer, less visible ones — wanted more help in finding a consumer base. So he rebuilt the site with more functionality to direct audiences to new material. Creators took to this refurbished version of the platform — one that didn’t just house them, but helped them, too.

Gumroad’s growth today is better than ever. Here’s why Sahil still isn’t looking for VC funding

As the pandemic moves people from offices to homes, creator-driven businesses are growing with unprecedented speed. Halfway through this April, Gumroad creators earned more than they had over the entire month in 2019. Gumroad’s $12 million processed volume has increased 100% year over year, and its revenue is up 97%. 

But even as Gumroad looks like a better bet for a venture-scale success, Sahil isn’t particularly interested in returning to that sphere. Worldwide upheaval isn’t exactly predictable, and he wants the option to react to both extreme growth and plunging numbers amidst it. “I don’t think there’s anything wrong with raising venture,” he says, “but it locks you into a path before you even know what’s going to happen when you launch.”

Is Gumroad a platform or an aggregator?  

Sahil’s original vision for Gumroad was a white-label platform: it offered creators access to business without actually locating it for them, and remained invisible to consumers. Since Gumroad’s founding, platforms like YouTube have shifted to become aggregators — “destination” sites that control interactions between creators and audiences, and take a far bigger cut of the proceeds. 

Today, Gumroad sits somewhere between those two poles. It has swapped that initial hands-off approach for an active push toward connecting its creators with new consumers.“We’re slowly moving into an aggregator model,” Sahil explains. In five years, he thinks Gumroad is going to look “somewhere closer to where TikTok and YouTube are now,” a destination site dedicated to discovering new creators.

Vertical or Horizontal is the question. Is there a right answer?

Looking back, Sahil might have started Gumroad with a focus on a specific type of creator and their corresponding medium -- writers and eBooks, maybe, or filmmakers and their movies. This is closer to the vertical approaches of startups like Substack and Pietra, where creators appeal to specific, often pre-existing audiences. 

“Over time,” he said, “we would have gone more horizontal.” Successful sellers would have become case studies for the Gumroad team, as they diversified the sorts of creators they worked with. Sahil thinks this sort of rollout would have helped them isolate the most crucial assets of an online marketplace before going wide with the concept.

Still, he doesn’t think of the company’s initial wide scope as a mistake. “Whether you’re building a Gumroad for films or a Gumroad for books,” he says, “it’s the same software.” Even if a new creator might not receive a focused, dedicated audience off the bat, if and when their work catches on, it could likely happen with much more speed and growth. Sahil cites Patreon as one example of such a platform — “it serves a much more diverse set of people because its net is big,” he says. As artists and educators straddle forms and defy labels, the breadth of content and audience on a horizontal network invites more genres, forms, and types of creators.

If you’re building a company in the passion economy, the horizontal/vertical and platform/aggregator choices are two of many you have to make. Sahil has experience across both spectrums, but he wouldn’t claim any approach as the “right” one. You just have to be sure you can address and care for different types of creators and mediums.

This post was written by Babe Howard and Saanya Jain and edited by Nathan Baschez and Li Jin.


Transcript

Welcome to the first episode ever of our new popup talk show. In this show, we are going to be interviewing founders and operators who are building tech companies that help people to do what they love for a living. I'm your host Li Jin, along with Nathan Baschez. And we started this show because frankly, I have always wanted to become a YouTube influencer and live out my passion economy thesis. But putting that aside, oh yeah, we're going to take this Zoom recording, chop it up and just Quibi-like slices and put it onto YouTube and hopefully become YouTube influencers.

- We have a specific thesis around this six to seven minute format.

- But putting aside our own personal aspirations, we also want to encourage innovation in the passion economy and to help aid the world in becoming a place where people can unite their passions with their profession. And hopefully by shining a light on the innovators and thinkers in this space, we can help inspire more founders and creators who are forging their own paths. So our first guest ever for this inaugural episode is Sahil Lavingia, the founder and CEO of Gumroad, which is an online platform that enables creators to sell products directly to consumers. So Sahil started the business in 2011 when he was only 19 years old, which is insane. And today, it's used by over 40,000 creators, has paid out over $300 million to those creators, who are using it to sell things like films, courses, music, books, memberships and more. And it's mostly used to sell digital content. And the platform encompasses a bunch of functionalities, like payment processing, file hosting and delivery, marketing and communications, as well as the actual consumption experience, for a number of different verticals. And just a quick plug that this show is brought to you today by the Everything Bundle,

- Woo!

- Which you can find at everything.substack.com It contains so much amazing business analysis and strategy content that you guys should all subscribe to. And if you want to read more of my thoughts, I'm at li.substack.com And a quick note, before we dive in, that the structure will be for the first 30 minutes or so, Nate and I will have a discussion with Sahil. And then for the rest of the time, we'll switch over to audience questions. So if you guys think of any questions that you have, as we're talking, just put it in the chat and we'll pick and choose different questions to answer for the latter half of the show. So without further ado, let's dive in. So Sahil, thank you so much for being here today. I really appreciate your taking the time.

- You're welcome. That was the best. That was the best description, intro ever.

- Wow.

- [Nathan] Very professional.

- That was my first time ever giving an intro. So I'm really glad. It can only go downhill from here. So the first question that I have for you is, so you started Gumroad in 2011, almost 10 years ago, back when, even the word creator, or influencer, wasn't even really a word that people used. And so can you just help us understand and trace how the creator landscape has evolved and developed since then?

- Yeah, totally. So well yeah, when I started Gumroad, the thesis was, sort of really quickly, that people were building their audiences directly to their, you know, basically owning their audience, right? Like on Twitter, Facebook, YouTube, Pinterest, Instagram, email, blog, et cetera, instead of working. And this is before, as you mentioned, creator or influencer, so I was thinking about it like, musicians, filmmakers, you know, authors specifically, right? And teachers, potentially as well. So the label was gonna get disintermediated by Twitter, or the radio, or the record store, or whatever. Things didn't exactly go the way that I expected. But that was sort of the origin of the idea. Why I was excited about it was, first you sort of democratize this connection and then once you have the connection, you can sort of disintermediate these middlemen and start to sell directly, take a lot more of the proceeds home. Yeah, so the creator, specifically, the word was kind of interesting. There were two companies that we looked at for our, sort of, messaging. We really struggled in the early days. Like, what do we call these people? Are they creatives? Are they artists? Are they entrepreneurs? Do we just sort of reference, sort of say, musicians, designers, writers, every single time? Which is what we initially did. And then over time, YouTube kind of adopted the creator term and Kickstarter was the other one. I think Kickstarter was really the one that kind of pioneered that, like, these are creators. We were like, cool, awesome, creator. Like we can now obviously, everyone kind of knows, which is great, because it makes our lives easy. We just say this word and everyone kind of gets what that means. But yeah, I think the biggest shift has just been the growth of it, you know? We really anticipated this kind of hypergrowth, where like, this is gonna happen tomorrow. And it just took so long to really get to some sort of sense of maturity and scale. You know, Patreon launched in 2012 or, I think 2012. Teachable launched, I think in 2014 or 2015. It took a long time. And even those businesses, it a long time to get to that kind of scale. I think people kind of underestimate how long it can take to build an audience and how long it can take to monetize that audience. If you think about, even the life cycle of a startup, it takes five, six, seven, eight years, right? And so when you start with creators, who are now finally being on the internet and building their audiences on social media, it can take years and years and years to have 1000 followers, you know? And you wrote that great post, Li, about 100 true fans. And I think that's super, like really savvy, because I think people underestimate that. Like Kevin Kelly's 1000 true fans, like that many people paying you 10 bucks even, a month, to sort of be a six figure income, is a lot of people. Like that's, you know?

- Yeah. You read the S1's of Slack and it's just, 40% was from like 600 customers. You know, it's just, it's hard to really get to scale in terms of how many. And I think people look at Shopify and their million small-medium businesses, or Facebook, or Google, whatever. But just, the amount of time it takes Shopify, it's a 22 year old company, or something like that. You know, it takes a long time to reach all of these people. And so I think that's a big shift. And I think, just the educational piece. I think people understanding. I think the assumption we had was like, labels are gonna get disintermediated, because musicians can now sell directly to their audience, right? I think one thing we didn't realize, we kind of undervalued what a label does. And I think, Everything is actually a really good example of this, where they're super savvy about, you're not just a good, you can't just be a good writer. That's not enough, right? You have to find the audience, you have to do all the business stuff. You have to figure out pricing. You have to build a brand like this beautiful logo. I don't have it, but it would be here.

- You can get one, if you want it. We'll put that up.

- It's hard, it's true.

- It's interesting, Sahil, that you, you mentioned that even the term creator has become so ubiquitous over the past decade and broader awareness of the creator market has greatly expanded. And this market is much larger than it used to be. especially now that social platforms have reached such large scale. I think the word creator, a lot of people really struggle to pin down what that means. And so definitionally, I'd love to hear what creator means to you, or how you would define the term.

- Yeah, the way I think about a creator. And you mentioned in the beginning, like creators and founders, like, this is for creators and founders. And I think that's really interesting. Because I really believe a founder is actually kind of like a subset of a creator. And I think the way I define creator, is someone who makes stuff and makes money by sort of charging for that stuff, effectively. It's an incredibly broad term to me, but it's really anyone that makes money to make more of what they do. And they don't have to do something and get paid for it and then do something else that they love doing. It's the merging of those two things. So you can write content and get paid for that content, which is very different than a lot of the folks that, pre this sort of passion economy, would basically have a day job where they'd write about baseball. And then they'd have a little thing on the side where they write about video games. And it's like, no, now you can actually write about video games, get paid. And oh, you don't have to write about anything else.

- Your definition is very aligned with our logo. With like, you do things you love and you get money from it.

- This is very true.

- Or the original version, earn interest on your interests.

- [Nathan] Yes, I like that.

- I love that, I love that. Yeah, I posed this question to my Twitter audience, maybe last year, I was like, "What does everyone think creator actually means?" And people sort of gave their thoughts and their responses. And it was crazy how varied they were. Some people took a really broad view of what a creator was. They were like, "It's literally anyone that creates anything." Like, anyone who posts anything on Facebook, anyone who posts any picture on Instagram, anyone who maybe even takes a picture on their photo roll, would be considered a creator. And I think that definition, although true on some level, because they are creating something from nothing, I think it's too broad to be useful. I think, yeah, that might be true, but it makes everything sort of meaningless, if it encompasses everyone. So instead, when I use the term creator, I think there's an element of intentionality behind it. Like, is it someone who is creating something with the purpose of building up an audience, such that they can one day monetize that? So I think that's very much aligned with your definition too.

- Yeah, it's interesting, before we move on from this question really quick, to me how, as sort of like formats have become more fluid and everything has just sort of collapsed into digital distribution, that these generic words, like creator and content, have become necessary and useful. Whereas before, yeah, you were just a writer, because you publish books, by a publishing company that showed up in a bookstore, or you were just a journalist, who wrote articles that showed up in newspapers that showed up on your doorstep every morning. And like, now it's all just kinda like one thing and they're all mixed together and fluid. And so it's just kind of like, content and creators, you know? And I wonder like, if a lot of people are averse to the word content, 'cause they're like, "Oh, it devalues it, it makes it a commodity." And to me it's kind of useful, especially for people that are doing format sort of genre-bending stuff. It's kind of like, "Well, what is it?" It's not a clear thing. Well, on some level, it's content and I'm a creator, as an example.

- [Sahil] Totally.

- Yeah, I also wanted to ask you about, so you wrote this blog post about a year ago, which made huge waves and it was about your failure to build a billion dollar business. And it was really honest and vulnerable about how Gumroad didn't become a wildly successful business, per VC standards. It didn't grow 20% month on month. And for context, for folks in the audience, Gumroad had raised about like $8 million in VC funding and then within three years, had to lay off a lot of its staff. And this blog post sort of chronicles that journey of building the company and how you made peace with the ultimate outcome of what Gumroad is today. Which, I mean, I thought the piece was so refreshing and honest, and people don't often talk about failures, especially in the tech world. And I'm curious, like, why did you write it? What was your goal in putting that out there into the world?

- Yeah, I really wrote it as a reflection. I honestly wrote it as a closing chapter of the Gumroad journey. I felt like I had built Gumroad into a business. It sort of matured to what it became, which was like a nice, people would call it a lifestyle business, or just a small business, a software business, that, you know, makes a few million bucks a year, pays a team salaries. And that's great. But it took me a long time to get to that point. And I was so tied up in this sort of startup, VC, billion dollar outcome identity, the unicorn chasing sort of identity, that I just didn't tell anyone. I was like, by the time I'd become comfortable with it, it was like probably three years, three or four years. And so, I was just having conversations with people and people were like, "What happened?" Like, you know? I never figured out what happened. And I'm like, "Oh, I can tell you. I'm happy to tell you what happened. I'm actually in a good place now, I can talk about it." It took me a while. And then I just kept having some of those conversations. I had with my mom, who I'd never really kind of talked through this thing with. With friends from high school and former coworkers and all sorts of people. Some people thought Gumroad was dead, you know? Some people thought I had sold the business. And so it was really just like, I need to write what had happened, sort of just chronicle it. And then, it wasn't like, these are the 15 things you can learn, or whatever. It was just like, this is what happened. This is my path. And it is what it is and now I can move on. And then, sort of ironically, actually, maybe, made Gumroad a lot more interesting for folks.

- Yeah, the opposite happened. You didn't move on.

- I know, like crap!

- It kind of blew up, in some ways, right? And that wasn't the only reason. Gumroad obviously has a really high degree of product market fit. It's just, I think something that's so interesting about the VC model, is like, there's a lot of businesses that have really good product market fit, but not really good timeline of the growth. It's like, how much people love it, how many of those people exist, and how long it takes for the business to grow to reach a lot of them, are like independent variables, totally. And you need all three of them to be like an amazing VC hit. And Gumroad had like, two, probably .

- I would say the third one, is how much you can sort of make per person that you acquire, right?

- Right.

- Like a Shopify business, versus a Gumroad creator are sort of very different, potentially. And that can sort of dramatically change the scale of the business. Even though you might have a similar amount of customers, or something like that, yeah.

- Yeah, and I also recall, earlier this year, after COVID hit, that you tweeted out some growth charts about Gumroad, like COVID really accelerating the growth trajectory of Gumroad. And so do you think this is something where maybe the business, I mean, the business got the idea right, but the timing wrong? And like now is actually the moment for a business like Gumroad, where you see, a VC-like growth trajectory ahead of you?

- Honestly, I don't know . I think one of the things I've learned is it's so hard to predict. I think it's sort of obvious in hindsight, that Uber was gonna be a $60 billion company and Stripe was gonna be a big company and then these other... but I saw a screenshot of Stripe in the early days when they first launched their marketplace business, after the Postmates, sort of exit. And there's like five out of, half the companies, I don't even know what they were, but they were notable enough. It was like Postmates, Lyft, and then like three or four companies that I don't even know. And so I think people just don't know what's gonna work, what's not gonna work. I think that's a big part of it. Just like, COVID, right? It kind of came out of nowhere. I'm hopeful, I'm really hopeful that this is sort of a maturing industry it might, in five, 10 years from now, we might look back and be like, "Oh, it was too early." Or, "It was early," you know? And it's like, there's so much more here. Like Jessica mentioned in the chat, that Gumroad was sort of like, maybe, I wouldn't say started the way, but sort of like, came before some of these other companies, but even before Gumroad, there were sort of other things, right? There was Bandcamp and CD Baby. And like E-junkie, if folks even remember that. There's always like, and probably before then, like there was other things, that were wasted, you know? So it's just, I think it's all relative. I'm really hopeful. I'm really excited about where it's going. This is the first year we'll probably double year over year, since 2014, when we were sort of 10 times smaller. So we'll see, I think, you know, there's some really good growth coming and I'm hopeful that there's sort of all these people getting online and getting, in this new remote work era, working from home, making money online, like all these things are sort of accelerating that. So I'm really hopeful, but honestly, I just don't know. I'm always sort of trying to preserve my optionality, right? Where, if it does do, I can do that. If it doesn't, I should sort of be able to react to all of those sorts of situations. I think the danger that Gumroad fell into, and I don't think there's anything wrong with raising venture. I think some people took that message away from the article, which wasn't the intent. I think that venture is a tool that people can and should use and it can be a great tool. And I got a lot of value out of it. But we raised like eight million bucks, as you mentioned, sort of like pre-revenue, effectively, right? Super early. And so you're kind of locked into a path, before you even know, what's gonna happen when you launch. Are you gonna, you know? And a lot of investors thought it was gonna go to the moon. I thought it was gonna go to the moon. It didn't. But you just don't know, right? And so you have to just, that's sort of a dynamic there. Gumroad now, actually, we could sell for like 20, 50 million bucks. That's probably, roughly what it's worth right now, if I sold it, though, I have no plan to. And that's actually not a terrible outcome for the seed investors. Yes, it took 10 years. So it's all, yeah. It's just sort of understanding the dynamics of the business that you're in and preserving, knowing what the options are, right, going forward. I think that's really important.

- Yeah. It's amazing that you mentioned that Gumroad is growing faster than it ever has since 2014. I've actually heard similar stats from other creator businesses that have been around for a long time, as well. Like COVID basically accelerated the business so much that they saw growth rates that they hadn't seen, since year one or two of the business.

- Yeah.

- Which is why I think now is such a amazing time for founders that are building businesses in the passion economy, because you have this convergence of once in a lifetime events, where so many people unfortunately are out of a job and looking for new ways of making a living through online-based means. I mean, that's all there is to make a living today. There is no more offline jobs, unless you're an essential worker. And I think the second factor expediting the development of this whole ecosystem, is the fact that I think people have realized that that social contract that they used to have with a single employer, has been broken. You can no longer just trust that employer to provide for you forever, for your entire life, as long as you're loyal and stay there for 30 years. I think people have now realized that even if they are loyal and do great work for their employer, you never know what kind of crazy event could happen that could lead to being out of a job. And so that model of just tying your whole life to one single job, is actually really risky. And I think people are going to be shifting their mindset, to a place where it's actually desirable to have diversified income. It's a good thing to have side hustles, rather than that sort of pejorative and that's less preferable, to having just one job.

- Yeah, I think that's totally correct. And I think when you, we got rid of our office in 2015, cause we needed to, cause we would die otherwise. And it really isn't, it's probably a shift, a lot of people, this is sort of obvious now, but like when you're not in an office, it's like, well, why do you have to work nine to five? Why do you have to have lunch at this time? Some people were great in the morning. Some people work great at night. And you might work four hours, then work on your own thing in the middle and then work on your day job again. And I think you could, I mean I'm sure there are people that will work two day jobs, right? Or three, or four, when you don't have that sort of like, you can only, your physical body, can only be in one office at a time, right? But when you get rid of that, I think the expectations around work, scheduling, allowing folks to sort of pursue side hustles and all of these things, should be more socially, culturally acceptable and common. Because yeah, you kind of want... It's almost a hedge on your own traditional career, right? It's like, "Oh, if I get laid off, or if this happens or whatever, I have this other thing that I'm doing." And that's great. We encourage everyone at Gumroad to sort of have these things. I mean, it's great for us, 'cause we get the empathy for our customers that way, right? And so, I sort of, I have my own side hustles too and that's fine. And I'm not, that's the thing... That's the nice thing about not trying to build a unicorn sort of business anymore, 'cause I can sort of be up front with people and be like, "Yeah, I'm doing this for fun and I'm doing this other thing and I'm writing a book." And like, it's okay, because I'm not trying to sort of make your equity worth millions and millions and millions and millions of dollars. You know, it is what it is again, right? Like join, as long as the expectations are communicated, like you can make that decision of, is that what you want or not? And not everyone wants the same things.

- Yep, absolutely. I want to switch gears and ask you a few questions about the creators that you're serving. So I think of Gumroad as being somewhere in between being a platform and an aggregator, per Ben Thompson's definition, where a platform is something that enables someone to build a business, but it's really invisible by itself. And an aggregator being really a destination that is trying to intermediate the relationship between a company and like, all the third parties that are in the ecosystem. So Gumroad is sort of in between, because it's not entirely white label, people's storefronts on Gumroad all start with gumroad.com/something, but it's also not really a marketplace, where people are discovering new creators. So can you talk a little bit about strategically, why did you make that decision? And who do you think of as being the end customer of Gumroad?

- Yeah, I mean, it really started because I wanted to build, sort of the minimal viable product. And for me it was like, I want to sell this thing on social media and so I just, all I need is a single page, like a Bitly link that I can give people, they visit it, they see some information, they already know who I am. Like most of the marketing is actually in the tweet, not at the page. So they just need kind of, mostly a credit card form and a price, you know, buy it and a receipt that goes, "ding ding" and it looks nice and it's cool. And then you hit download and you leave. That was kind of the MVP. It's actually not very different to what happens today. And so we're slowly kind of... so we really started with that, sort of closer to the platform side. And we're slowly now moving more into the aggregation, sort of aggregator, kind of model. I think mostly because creators seem to want it, a lot of folks, especially who are getting started, they need help, they need discovery. They want more of that. You're starting to see Shopify start getting into that, which is kind of shop pay. And it's interesting, we have something called Gumroad discover. Teachable just launched something, as well, in that vein. And so I think there's a lot of... The truth is, this is all so new, that people don't really know, is that even valuable? Because when I talked earlier, when I started talking to creators, the big creators don't want any of that stuff. They're like, "No, I just want a low fee. And I want white label, because I already have my audience. I already have this."

- Yeah.

- Right.

- I already know to do that. And then the sort of newer, fresh, people are like, "I know I need all that stuff. Like, I'd much rather pay 30% and give it to Apple and Apple will connect me with people, right?" And so you're trying to really figure out, like who you're for, and also who you're competitive with, because I think one of the wrenches that were sort of thrown into the wheel of Gumroad, was sort of, how easy it was to kind of build your own stuff. Stripe came out in 2011 and then, you know, now there are all these website builders and webflow and WordPress has all these crazy things that you can do and WooCommerce. And so, it's hard to build a pure platform, because you basically can sort of be out-competed with someone just saying, "Hey, there's some open source stuff. You can plug these three things together. You can use MailChimp, plus car.co, plus Stripe Connect, and you have your own little thing and you don't actually need those people." And so the creator, I got a lot of the creator economy companies, the passion economy companies, sorry, are really trying to figure out how to sort of stay valuable and what the actual correct take rate is. Because, the other thing is, aggregators take a sort of a very different, have a very different business model, right? Where they typically take up to 30% or sometimes up to 75%, if you're like Amazon, Kindle and stuff like that, KDP, and then the payments sort of platforms, sort of take very low, right? Very, sort of, like, two, three, four. And they're closer to kind of like, payments companies, in that sense, but they have a lot more scale. And so I think people are still trying to figure out, like Patreon went through some pricing shifts and was trying to figure that out. And they haven't really invested in discovery, but I just saw that they added a search bar to their front page. So I think no one knows, honestly, like we're... It's not as easy to be like, "Oh, Shopify did this. Let's just copy paste and it'll work for us too." Or, "Uber did this, let's copy paste. It's going to work for us too." It's such a new market that we don't really know what the right business model is and how to solve the graduation problem. And all of these things. We're all trying to figure it out as we go.

- Yeah, I think there's a lot of companies that have had a very similar origin story, of solving a problem for creators and then some more and some less successfully backing into aggregation. So like, YouTube, it used to just be hard to send someone a video. You'd send them a file and you're like, "I gotta download real player." Originally it was very similar to the original motivation for Gumroad, where it's like, it's just hard to sell someone a thing over the internet. Sub stack, it's hard to set up a newsletter that also has a good website and to make money from that thing. Medium, right? Back in the day, it was just like, where are you going to publish? Set up a whole blog? What if I just want to write a post? All these companies have very similar origins and I mean, Patreon, same thing, right? But of all the ones I just listed, I think YouTube has probably been the only one that's really, truly made the shift to aggregation and controlling the content, I think is really key to that. I'm curious what y'all think about how companies that start out as like, come for the tool, stay for the network, actually shift to stayed for the network.

- Yeah, I think the hardest thing, and I would love to do that. Like that's a shift I would love to make, if I'm confident that we can make it. I think the biggest question I have, is when you become an aggregate, when you become a destination site, you're now competing for, "I'm bored, where do I go?" And so you're effectively, Gumroad is now not only competing with all the sort of competitors that are top of mind for folks, but now we're competing with YouTube, right? We're now like the place where like, "I'm bored, I could go to Netflix, I could go to YouTube, or I could go to Gumroad and visit my content library and discover new creators." And it just will... And I think, honestly, I think if I were to guess, five years from now, Gumroad's gonna look a lot more like YouTube or TikTok, even.

- [Nathan] Yeah.

- Than sort of a SAS kind of tool, over time, because I think that's super, super important. And the other thing I wanted to add that I forgot about, is one thing that's been interesting about the landscape changing, is that actually, creators want more of that over time. As your brand develops, like now people, we don't wanna put a search bar on the top of every product page, cause that's yours, right? We don't want that. But now creators are like, "Actually I want that. I would turn it on, if that had the option, because I actually want to be part of this thing, this movement." And so that's kind of this interesting dynamic. Where in the beginning, if you're on Medium, if you're on Sub Stack, you're on YouTube. It's like, "I just want people to come to my video. I don't want related videos. I don't want any of that. They're all competitive with me, right? It's like my attention, I want this as their attention." And it's now actually like, it's much more sort of wanted and acceptable to sort of be like, "No, I understand. I want to bring people here, but then people are gonna bring their audience to me. And it's gonna to be a win, win, win for everybody, the platform and other people in the audience, me, and everything else like that." But yeah, it's sort of a fascinating transition. So we'll try that. We'll probably say, "Hey, on the free plan, like this is now there, if you're on the paid one, you can get rid of it." And just see many people value that and how many people on the pro plan, turn it on, you know? And kind of get a sense of like... 'Cause there's so many people, especially with the Gumroad sort of brand, they're like, "No, I want people to know that I'm on Gumroad." And that's sort of a value add, for them. And so, yeah, it's kinda kinda interesting. I think the other sort of thing that I'll throw in there is when you are focused on commerce, one of the sort of like, the gorillas in the room, is this app store, 30% for digital content, right? And so it becomes really difficult to compete with Netflix, YouTube, all these native experiences, when you're a sort of premium content only service, right? And Gumroad specifically, isn't a subscription billing thing. So it's, you know, it's mostly sort of one-off product. So effectively, Apple's like, "You can consume the content, you can't buy any of the content. Everyone has to have an account." It's just... And so you lose a lot of that. No one's gonna open up the Gumroad app and be able to discover content, which is such a huge thing, right? More people spend time on their phones than their desktop. Gumroad is still effectively, kind of like a desktop experience, right? And so that's kind of like another thing that I'm sort of really interested in following, especially with the sort of recent fallout around Hey and all that kind of stuff. I'm hopeful, like that could be another kind of COVID, in terms of just radically changing what it means.

- Huge.

- [Sahil] You know, overnight, effectively.

- Yeah, I think this whole line of thinking is really interesting, because I feel like when I was at U16 Seed, there were so many companies that came and pitched the whole, come for the tool, stay for the network vision, of, you know, day one, they were pitching a tool, but ultimately they had aspirations to become a network. And I feel like instances that I can think of, where companies actually successfully made that transition are so few. It's actually tremendously difficult to make that transition. I think it requires actually very distinct DNA and expertise in building product. And I think, especially in the creator realm, like a lot of creators are very sensitive, because over the years, they've seen the bad behavior on the part of different aggregator platforms, taking their audiences, feeling like they've taken their audiences and directed them to other people, or, you know, disintermediate them away from the end audience that has expressly desired to follow them. And people feel like they aren't reaching the same size audience that they used to be, on the algorithmic feeds, et cetera. So I think there is increased sensitivity around making that tool to network transition, more so than ever before.

- Yeah. And that's why I think it's so important to do it incrementally, because, yeah, there's so much fear around it and I totally understand that. Yeah, totally.

- Yeah. Maybe the last question before I turn it over to the audience questions, is, I think, there's a really interesting discussion that I'd love to have and get your thoughts on, around the horizontal versus vertical approach to serving creators and what you think is more interesting or where the bigger opportunities lie. So to elaborate on this, I think of a horizontal platform for serving creators as being something like Gumroad, which serves many different types of creators, or Patreon, that serves any type of creator that wants to turn on monetization, versus a vertical specific platform, being something like Sub Stack, the paid newsletter platform, or something like Pietra, which is, you know, helping influencers sell physical products and design jewelry, or home goods, or accessories and sell that to their audience. So do you have any thoughts on horizontal versus vertical approaches?

- Yeah, I think this is honestly, potentially a mistake that Gumroad made in the early days, because we were sort of trying to enter this new thing. And then we were also not really capable of defining it, specifically, which as you mentioned, like when it's so broad, it sort of loses meaning. And so I think it would have been good. I think probably in hindsight, we would have picked a more specific sort of use case and built specifically for that, got really, really good at that. Probably like technical eBooks, or something like that. One of the early sort of a use case, or success stories and case studies and then sort of gone, horizontal, slowly over time. But the reason that we didn't, was we were so, we were like, there's no reason not to. Like, it's the same software. Like, you're building, you build Gumroad for eBooks and you build Gumroad for films, you're changing a few things here and there, you're changing some words, right? Maybe changing the layout, or something like that. But it's effectively the same kind of thing. And the network effect of having credit cards saved and all these insights that we could pull from each other. I think it was just, it was like, we're going to fight that, we're going to.. even though it might seem dumb, a lot of people are like, "Pick one, do the Amazon thing." Right? It was just sort of a cultural value. Why would we not allow this thing to be used for the other people who need it and want to use it? But I do think it is a kind of like, a short term, longterm thing. I think if you look at like Patreon, is quite big and that's because they're able to serve a much more diverse set of people. And I think to Nathan's point, I think a lot of people don't really identify strongly with a single vertical, right? They're like, "I'm not really a journalist. I'm kind of a journalist, but I write some entertainment, I write some opinion stuff and I'm not, like, I do some deep investigative stuff, every once in a while." Or like, you know, "I'm a musician, but I also sell sound packs." That's a common one, is this sort of hybrid entertainer, educator model. We've seen a lot of that. Often the education stuff is the stuff that makes all the money. And then the entertainment stuff, is kind of like the stuff that brings you the audience. And so, I don't, yeah, it's just a really interesting thing that I think people should really kinda think about as they get into this. It's like, what kind of platform do you want to build? And most importantly, I think it doesn't have a high moat. You can get into this space really easily. And so it's like, how do you sort of become top of mind? How do you become the thing? Like we have all the functionality, not all the functionality, we have a significant amount of newsletter functionality, as a Sub Stack, right? But if you're a writer, I mean, I would tell people, "You should go and use Sub Stack, if that's your goal, because they're better at it." And so, it's sort of important to, I think, if you're second place in everything , that might not be good as just picking one and being number one, right? Especially if you have that power line, of all of these different-- So Gumroad, you know, five years from now, it's like, "Oh crap." Or maybe even Patreon, right? It's like, "Oh, it turns out there was only fans for this type of content. And then this new thing for this type of content. And this thing for, you know, personal trainers have this and musicians have this." And then there's also, a lot of the technology shifts that have happened. I think like, the sort of, even just like the front end tech stack has allowed for much more dynamic experiences, so that you can sort of like, if you upload a video, it looks like this, if you upload a song, it might look like this. And so I think it's actually more possible to build horizontal experiences, whereas before it was like, you know, you have to kind of have, each sort of like, you'd have a template and you'd be like, "What template do you want to use?" Whereas, I think it's a lot easier for different parts of the website to kind of reach into over here and be like, "Oh, this person said that they're in the animation industry." And so we can kind of auto-theme it in this way. Or like, I've noticed small things, like the way people communicate a file size. For example, if you're watching a video, you don't really care if it's 600 megabytes, but if you're downloading a zip file, like some software, or something like that, or a photo pack, you really care. And so it really, over time, I think you, you really want, you want to make sure that you have that really high quality product experience. And when you generalize too much, you kind of end up like, people are like, "Oh, this isn't for me. This is for people selling this other kind of thing." So, yeah.

- Yeah, my observation has been that in the creator ecosystem, I think a lot of initial attempts to build products and companies, have been aligned to a specific content type. Like, it's either, make a paid video course, or a paid podcast, or an email newsletter, like they're aligned to a specific format of content, rather than aligned to a specific persona of individual, or a type of knowledge or skill that they have.

- Like business strategy and productivity advice, together as newsletters .

- Right.

- I think what Ben Thompson has shown is that, if you have a certain type of knowledge, or skill, that can actually be translated into a wide variety of different content formats. Like, he has his blog, his newsletter, his podcasts now. There's no one size fits all content type, for a particular individual. And there's many different ways to productize that kind of knowledge. And so where I'd like to see this whole ecosystem going is, awareness of who the customer is, who the creator is, and all the different ways that they can best translate, their intangible skillset and knowledge into various products that would best suit their audience.

- Yeah, like an overall jobs to be done kind of approach, where it's like, "I'm interested in this goal in my life." And then I'll download a file and I'll go to a live thing and I'll read some stuff and whatever, all the things are, it's like, there's a goal that's motivating all of it.

- Yeah, I think there's sort of this interesting, sort of three step process, of when things go from sort of offline and like atoms, to online bits. There's the offline version. And then there's sort of like the online version of the offline, which is like, oh, you can, it's a PDF, right? Effectively, it's a page-based document. And then you have, or whatever it stands for, paged document format, or something like that, I assume. And then you have the online version. And once everyone's made that transition, you can now say, "Oh, we actually don't need pages. Like, we can have refillable documents. We don't actually, you know, like we don't need, we can have words and then there's like an inline video that you can click and play." And so I think, the next few years will be really interesting. You're starting to see this with some of the new startups coming out, like with Mmm and like, all these weird like social, sort of new social AR audio apps. That I think, that it's not going to be like, just subscribe to my newsletter. It's gonna be like, "Pay for this membership, or this subscription, or enter this room." And that sort of has all of these different things in it that we can't even imagine, what those content types might look like. And I think you're totally correct that the lines will be totally, totally blurred. There'll be, some of them will be single experiences. Some of them will be, you know, massive sort of social experiences. Some of them will be text, video, audio, a sort of combination of those things. Some of them will be sort of like, I think what's really interesting, is the sort of synchronicity of livestream classes, versus like async kind of classes, homework instruction, the sort of two-way hasn't really been explored yet. There's like comments and things, a little bit of that, I think there's gonna be a lot more innovation there too. Even this webinar, right? It's gonna be consumed in a bunch of different formats. You might listen to.. There might be a transcription you could read, there's the live sort of version of it, there's the recorded on YouTube version of it. There might be like the Quibi version of it,

- Yeah, we're talking with them.

- There's like the summary, or the tweet storm summary of this, right? There's so many different ways to kind of consume each kind of thing. And I totally think the jobs to be done is a really great way to think about it.

- Yeah, we hadn't thought of transcription, but that's a great idea. Thanks for that . Awesome. So let's switch gears and shift to audience questions. All right, Nate, where should we start? There's a lot.

- Yeah, we've got 18 of them. And I would like to like balance answering them well and answering everyone's questions.

- I don't think we can answer everyone's questions.

- Yeah, yeah, yeah, yeah. So I've been looking through. One that we haven't touched on, but I think a lot of people are probably interested in, is what are some of the best practices from the most successful creators on Gumroad?

- Yeah. The most important thing, that I think people probably understand, so it might be a frustrating answer, is to just build an audience, of like captive people, who really value your thinking. And not only value your thinking, but are like, they've actually gotten value out of your thinking, which I think is a little bit different. You can point to things like, "Oh, I did this differently in my life, because I wrote this article, or I read this article, or I watched this video." I think there's an interesting sort of behavior that happens, where people are often looking for an excuse to support someone. So they're not actually potentially paying, like 30 bucks for an ebook. Obviously, they don't know what's in the ebook, so it's hard to make that decision completely. They might have followed you on Twitter for three years and they're like, "Oh yeah, this person has like clearly given me 30 bucks worth of value, I'll support them by buying this ebook." And so I think there's a lot of data that shows, like the Obama campaign, would do sort of experiments around donations and things like that. And they would see a lot more conversion where they'd say, "If you donate this amount, you get a free t-shirt," didn't work at all. If you said, you know, "You're paying 30 bucks for a tee shirt." They were like through the roof. And so like, the social, financial contract, sort of from predictably rational, like those sort of Dan Riley ideas, are also really compelling. I think Kickstarter did this really well, where they took this kind of, they kind of created a financial contract around this sort of social contract and it worked really well. I think Patreon did similar things. Instead of saying, "Hey, give me money, I want to go do this. It's like kind of weird, you're my friend." It's like, "Hey, check out my Kickstarter project." It's like, "Oh yeah, here's 50 bucks." You know, et cetera, GoFundMe and all these.

- Yeah. Cool.

- I really like this particular question about, do you see Gumroad going down the path of helping creators dealing with the admin sides of their business? Like accounting, or, you know, I'm now going beyond the initial question that was asked. Thank you, Russell, for that question. But like, yeah, I think this is a huge need in the space, where there's a lot of back office functionalities that people lose when they go independent.

- [Nathan] Health insurance.

- And decide to become a creator. Health insurance, taxes, et cetera, et cetera. So do you see Gumroad going into this? Or do you think that's a big opportunity?

- Yeah, I think it's a huge opportunity. I think it's an incremental one, right? So you want to make sure that you have scale, on the sort of GMB side, before you can start doing some of these things. But I totally think that, in every, you know, you're seeing it with, with Square Capital, Stripe Capital, you know? Like XYZ Capital, effectively. I think there is going to be definitely room to start sort of providing accounting, sort of loans, effectively. Yeah, back office, tax accounting. As you know, as we mentioned the beginning, you're not just a writer, you have to do kind of all of these things. And I imagine that over time, we'll either partner with, or build in house, like our version of your back office, your tax, like taxes is a thing every year. What if we, you know, if there was sort of, 500 bucks and we would do it for you. Or 400 bucks, we would we do it for you. I think there is a lot... I think savings is also a really interesting kind of thing. Like, what if you can say, "Actually just keep 10% of it and invest it for me, or keep it here and it increases at this rate."

- Yeah.

- Yeah.

- I think there's going to be a lot more collaboration between companies as well, because I think, we just can't do it all, right? And that effort is getting duplicated.

- [Li] Yeah.

- It's getting duplicated at this company and this company and this company, and like maybe those three people should, those three teams, should actually be able to work together and provide that service to Square, to Stripe, to Gumroad, to Patreon, to Teachable, et cetera. And I think that will probably start to happen. And we already get queries about that. I just think it's, again, it's early, right? The GMBs are small enough, that I'm like, you know, we do 150 million a year in GMB. Our revenues around 10 million. Incremental, you know, what percentage of those creators are making above this amount, to the point where it would be worth it? It's a few hundred people, probably, you know? But like, when that's a few thousand people, all of a sudden, a thousand bucks a year for this kind of premium service, is now sort of incredibly, incredibly meaningful.

- True.

- Yeah. And I think a lot of those services, probably benefit from scale and economies of scale and being, not just siloed in one particular creator company, but being able to serve creators across all of them. So I can see a lot of new companies being started in this space.

- Yeah, I love, can we, should we do the next question? 'Cause we want to end promptly. So we have 10 more minutes. Philip Thomas asks, "What have you learned about price sensitivity among passion economy consumers? Consumer budgets are zero sum. What's the future here?" Shout out to bundling, shout out to you, Phillip.

- Honestly, I that's funny. I've found, honestly, that there's, it's not really zero sum. It's really, it technically is, right? Technically there's like a finite amount of energy in the universe, right? So everything is technically zero-sum, to some level, at some point. But there is, I would say there is an unmet demand currently for education, for self-improvement, self-help. Anything that you can effectively monetize at a later date. There's an unmet demand for currently. So there is so much more opportunity, in my opinion, for supply. There's gonna be 10 X the number of personal trainers. There's gonna be 10 X the number of vocal teachers. There's gonna be 10 X, really anything. If you think about how many people want to learn something, or learn about something, which is effectively what all content is doing. Or be educated, or be entertained, which is probably an even larger number. I think it's effectively an infinite amount, right? Like Netflix could do 10 times the amount of standup specials and it would still all get a lot of consumption. People have a lot of time. I think this is the other thing that is sort of post COVID, I mean, already happening, but you know, currently people's kids running around and stuff like that. I don't think people realize, like how much time people really do have. If you just look at TV, right? There's this sort of famous stat, of like, the average American watches, three to six hours of TV a day, or something like mind-boggling. And that includes, just like having it on in the background, or whatever, I assume. But that's like, think about how much of that has really gone to your phone, or the things that are sort of equivalent on your phone. It's probably a couple, maybe one or two hours. There's huge, there's so much more right? And the whole point of innovation is to sort of free you from things, right? Automation, all these things are meaning that I can do my job in two hours, instead of eight hours. I can choose to work an additional two hours, to make more money, or I could consume some cool content, read some stuff. Like, I just, I really think like people... There's a danger in thinking that like, "Oh, there's too many of this kind of product." The other thing that people don't really realize, is like, someone could launch, almost identical sort of demographic to the Everything bundle, bit it's like three or four different people and it would be fine, it would be really fine.

- And totally different. It's crazy, like you can't make the same thing if you tried.

- Yeah, if you answer the question and I answered the same exact question, in the scale of the 7 billion people, or 8 billion people on planet Earth, like we're probably pretty similar, right? And we would have a totally different answer. Like humans are just so insanely different. And so there's, I really think that, it's not really zero sum. It really is like, you can... And there's certain people who absolutely love what I say. And there are some people who absolutely don't. And everyone has those people. And the beauty of the internet is that you can just find those people. And as long as there's like, 1000 of them, you're good to go, right? You're probably fine.

- Yeah.

- Love it.

- The other lens that I like to bring on to this, is I think a lot of creator-led products represent low end disruption. So rather than being zero sum, where, like instead of consuming X, you now consume Y from a creator. It's like, instead of consuming this thing that had been available before, like say traditional higher ed, you can now consume so many more courses that are creator-led and developed by creators, because they all are low end disruptions. Meaning they address a segment of the market that hadn't been able to access what had been available before, because it was too expensive, or inaccessible to them. So I think in that sense, there's also a lack of zero-sum ness.

- Yeah, I would add just really quickly, Harvard is going online. That's a $50,000 a year thing. Try to spend $50,000 a year on every single creative platform. I think you would run out of creators before you run out of that $50,000. You'd have to subscribe to all of Patreon and Gumroad to get even close. Obviously you could do it. But just, you would have, you would never run out of content to consume at that point, right?

- You would have to write a script.

- Yeah, exactly.

- It would take too much time to find the individuals.

- I think that low end thing is like super, super spot on. You're not really going after like that. You're really being like, "Look, I don't need to go to Harvard for this one class. And like, what's the $100 version of this class? Oh, it's like this class on Teachable, or this newsletter that I'm subscribed to, right?" Yeah, there's so much opportunity.

- Yeah. Okay, last question. And apologies to everyone whose questions we aren't getting to. I think all of our DMs are open, probably.

- Yeah.

- So you can DM any of us on Twitter and ask us your questions later. So the last question that I think is really fascinating, is, "Given that you have so many creators on the platform right now, how do you think about enabling collaboration between all of the creators? Just so that there's not only like two-sided network effects, where fans are discovering new creators, but creators can actually, you know, create a situation where there's like, one plus one equals five or more."

- Yeah. I mean, I think Everything is an example of this happening. I think one of the best ways to sort of learn how to do it is to just see what people do. And then you're like, "Okay, I guess we should probably support that natively, right? That's sort of, a really good sort of filter for what you should build. I think going back to the sort of, building an audience being the hardest and most important part, I think there's a huge, sort of like, that I think we'll see a lot of interesting stuff. I think affiliates is kind of an interesting way to tackle that problem, where like, if you bring me a customer, you get some percentage. If I bring you a customer, I, you know... There's I think going to be more opportunities for like, this product is actually created by two people. And this is the split that they get. That's a feature that we get requested pretty often, that technically, wasn't even possible to build a few years ago, but now is, because Stripe has launched and stuff. And it's more easier to do that. So I think there's gonna be a lot of those sorts of opportunities. I think building more of this sort of aggregation on the creator side, where creators that make a certain amount, can go into this forum and meet people and learn from each other. That's a whole opportunity. And there's a whole sort of brand of creators that are now, sort of like, educating those folks. I think there's a really fascinating potential for event organizers and people who are really good at sort of producing, putting things together. They might not actually be like, we talked about this in that thread that you mentioned on Twitter a while ago. There are certain people who are just like phenomenal at just like, putting things together, curating a panel. Like, you might organize an event, in sort of pre COVID era, like 300 people come and you can make a bunch of money by bringing, by doing all the work of getting all the people together. And so I think that's going to be a thing that we haven't really seen yet, which is, there might be someone who doesn't write anything, but is just phenomenal at sort of like putting some pieces together and they get sort of a percentage of that. This sort of curation idea, I think has a lot of interesting sort of potential, that hasn't really been explored yet. Effectively, the only thing I've seen is, you can create a wishlist on Amazon and you get a tiny affiliate fee if someone buys through that, right? But it's not really built for that.

- [Nathan] Yeah.

- I think that's really sort of, like a really interesting angle potentially as well around that.

- [Li] Yeah.

- Quickly, a cool example of that is The Browser, by Robert Cottrell, one of the best sub stacks, in my estimation. And he just reads a ton of stuff and has really specific taste and really great taste. And he's like, "Here's what I'm reading. And like, trust me, these are good." And they are, always. People pay, literally just for that. Like, you don't get access to the articles themselves.

- Yeah. If you go, if you sort of sail around the planet Earth and you find some cool thing and you bring it back, like that's sort of like, location utility. That's worth a lot. And so effectively, that's what they're doing in sort of a digital world, right? It's just like, saving people the time and money, which effectively is what teachers do, right? Like they go to school and they learn all these things and then they can teach you in an hour. You know, a set of those things, that will get you 80-90% of the way there. That's sort of what you're effectively paying for.

- Yeah, I think TikTok houses are also an amazing example of this type of collaboration between creators and helping everyone to level up the quality of content that they're producing. Nate and I are actually--

- Lots of very deep and intimate collaborations.

- Yes.

- In TikTok Houses.

- Nate and I are in a virtual Sub Stack house together, called Type House, rather than Hype House.

- I've heard about this!

- Where we, you know, I think it helps a lot, with elevating the quality of our writing and just like, sharing a lot of knowledge about business practices, like how we do referrals, et cetera, et cetera. So I definitely see a lot of new platforms emerging in future years, to help creators actually better engage with each other and to all elevate the quality of the content that they're producing. So with one minute left, I will start wrapping up. Thank you guys so much for attending today and tuning in live to our popup talk show. Next week, we are going to be joined by Greg Eisenberg, the founder of Islands, which was a consumer social network. And now he's at WeWork, or maybe just left. Anyways, so he'll be joining the show next week to talk about consumer social and opportunities for vertical social networks. But thank you guys so much. And thank you so much to Sahil for joining us today. It was such an interesting discussion and I hope everyone enjoyed it.

- Thank you for having me, that was awesome.

- Thank you so much, cool.

- [Li] Have an awesome weekend everyone.

- Okay

- Bye.

- Yeah.

- [Li] Bye.