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 continue running the company.
The founder wrote a couple articles about the experience:
https://www.businessinsider.com/startup-failure-gumroad-why-...
https://sahillavingia.com/reflecting
What's not pictured in these articles is the employee perspective. The founder got to keep his company, got the company's IP handed to 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.
I remember reading a very angry Twitter rant from an ex employee who was burned. I wish I could find it now, but that was nearly a decade ago. It was one of my cautionary tales about taking equity in startups at the time. It hadn't ever crossed my mind that someone could take VC money, pay employees (partially with equity) to build a company, then everyone gets laid off, equity declared worthless, but the founder gets to continue operating the company at a profit.
It's also interesting to note that the Tweets embedded in both of those articles above come from Austen Allred, the now-infamous founder of Lambda School. Lambda School was rebranded to BloomTech after their first wave of scandals, which was rebranded again to Bloom Institute of Technology after their recent scandal (which resulted in Austen being banned from all student-lending related activities for 10 years). The two of them are prolific social media users and have an incredible ability to rewrite their own stories through sheer volume of social media postings and articles.
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
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!
Frankly, I'd rather have nothing.
For a dude who’s only alive because his investors decided to walk away from their 8MM investment, that’s kinda tight. But freelancers just want the cash, so if he’s paying cash, this is just some weirdo being weird in tolerable ways.
The whole performance here is off putting to me though. You got gifted a huge amount of money and kept almost all of it for yourself. Alright man. You got the right. Everybody is a big boy and agreed to the deal.
But let’s not play around about how you got rich, or how much of the pie goes in your own pocket versus everybody else’s.
What kind of ungodly sh*t is that...
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 to have the fee actually be a success. It's Netflix all over again, 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. Anyone worth listening to is not shitposting on Twitter and other social media.
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.
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 - partly because on the rare days I go to facebook, it rarely has anything on from humans, partly because it's not covered in news that "Blah Blah said Blah on Platform". That's a good thing.
I'm uncertain what drives Meta's continual growth
[0] https://www.cjr.org/the_media_today/journalists-on-twitter-s...
I think Patreon has better rates and now they have commerce.
Considering you'd only be paying Apple 15% (I doubt many people on Gumroad are making more than $1 million) it still seems like a relatively good deal in comparison.
Compliance with local laws is VERY difficult. I would not take this equity even for free. It triggers all sort of accounting laws, exceptions and so on. How should I estimate the price on my tax returns? What if I am on some sort of sanction list?
Cash is the king when it comes to freelancers.
Eg, you gave equity to early contributors, how much and what did that translate to? If those same people work as freelance now, are they paid the same relative equity? Same class?
How long would someone allocating to equity need to work before they see the equivalent in dividends? Calculator seems like 25 years. Or working as more or less full time for 12 years with a 50% split.
For me by the end I was left with more questions than answers, so I side with mom, but I like the general idea of https://flexile.com/
at least, this is my hope as a broke ass peasant who invested in gumroad's "funding" offering, and also as somebody who sees this tool as a simple way to facilitate alternative labor relationships.
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.
The Wikipedia isn't much help, but does do a decent definition.
"Gumroad enables creators to sell digital products, such as e-books, music, videos, software, and physical goods."
https://en.wikipedia.org/wiki/Gumroad
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Then MakeUseOf has an article, which makes it sound good. They compare it to Etsy as another site for selling things on.
see: https://www.makeuseof.com/what-is-gumroad-what-can-you-sell-...
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Checking on scamadvisor, the site rates it pretty highly, but user score is low. I'm guessing this has to do with creators getting burned by their history and/or price increases.
see: https://www.scamadviser.com/check-website/gumroad.com
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Some reddit posts have positive things to say. With a common theme of BYOA (Bring Your Own Audience), as gumroad seems to do a minimal job of pushing content; Which matches up with my experience of never having heard of it before.
see: https://www.reddit.com/r/selfpublishing/comments/h02pls/anyo... https://www.reddit.com/r/artbusiness/comments/17ij8nz/is_gum...
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Checking pitchbook and crunchbase shows it's a private company with pretty good financials. And so there's minimal risk of being "Actively Evil" that public companies can be; i.e., selling out the company for short term profits while grifting customers for all their worth.
see: https://pitchbook.com/profiles/company/53830-99 https://www.crunchbase.com/organization/gumroad/
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One caveat is that they don't seem support commissions; That is, paying a fee to an artist or creator for a customized piece.
see: https://www.reddit.com/r/selfpublishing/comments/h02pls/anyo...
