Number
Gumroad: $143M GMV but only $1M net income in 2020
The Gumroad crowdfunding numbers: GMV grew from $73M to $143M, the company's take was $9M in revenue, gross profit $2.6M, and net income just $1M in 2020 — yet it raised at roughly a $100M valuation.
$143M
Gumroad annual GMV (2020) · USD/year
“So last year, $73 million. This year, $143 million. And then their revenue off that was $9 million. Their gross profit, they say, is $2.6 million. And the net income at the end of the day for them was $1 million in 2020.”
Framework
The 10x math that kills the Gumroad bet
Shaan's investing rule applied to Gumroad: an illiquid early-stage startup needs to return 10x, so a company valued at $100M must become worth $1B+. With sub-$10M revenue and ~$1M profit after 10 years, he calls it a bad bet where you aren't paid for the risk.
“So that million dollars of profit you're valuing at $100 million today, which means for me to get 10x on my money, which is what I need for an illiquid early stage startup, this has to become worth $1 billion or more. And so you're telling me that this company that's doing, you know, sub $10 million in revenue, sub, you know, like about $1 million in profit, is going to be worth $1 billion, I find it like— I think it's a bad bet.”
Steal thisBefore investing early-stage, ask if a 10x return implies a believable end-state valuation.
Billy
Jacob Greenfeld's Bootstrap MBA: build in public, learn by shipping
Shaan celebrates indie builder Jacob Greenfeld, who ships small tools like GumSpy (a leaderboard of top-selling Gumroad products) and runs a self-styled 'Bootstrap MBA', publicly building a bunch of businesses over a year to learn by doing.
“He's doing what he's calling a Bootstrap MBA, which is like, how do I learn business through trying to bootstrap a bunch of projects over this year? And it's gonna cost me money. Maybe I'll make some money, maybe I'll lose some money, but I'm definitely gonna learn about business by building a bunch of businesses this year. And I'm gonna publish as I go.”
Fact
Open startups: companies that publish their revenue in real time
Shaan describes 'open startups'—companies like Buffer, Ghost, ConvertKit and Gumroad that publicly reveal metrics (revenue, growth, sometimes salaries) in real time. An aggregator site, openstartuplist.com, compiles them.
“there's this whole group of people, they call them open startups. If you Google like open startups, I think there's a website that compiles all of them and they're startups or companies that reveal their revenue in real time. You could see their burn or not.”
Story
Gumroad's founder fired everyone and rebooted the company mid-flight
After Gumroad couldn't hit the growth needed to raise more venture money, Sahil Lavingia laid off the whole team, went back to his investors, got the business to profitability, and rebuilt it as a small operation while it was still running.
“And I was like, okay, this company is either going to die because we have all these people and we're not growing fast enough to raise more money. Or I get rid of all these people and I don't raise money, but I get it to like profitability and I kind of run this like a business instead of like a venture cap— a venture-backed company.”
Framework
Take something free, create a new category, charge for it
Greg's idea generator: take something people get for free (water, air) and build a charged-for category around it — the way Evian turned tap water into luxury. He cites the Gumroad founder's ladder: to make $10K/hour, create and lead a new category.
“you know what are cool? Ideas that take something free and then you charge for them. Like, and then I put IG water. Like water bottles. If you think of water bottles, like no one was charging for water until some— someone was like, hey, wouldn't it be cool if like you can transport this water and like we would sell it and then we can have like a luxury brand and like you can have Evian and it's gonna be from France. And then there's this whole new category, like new categories.”
Steal thisList things people take for granted as free, then design a premium category and brand around charging for one of them.
Number
Visualize Value hit ~$1M/yr revenue in 18 months
Jack Butcher built Visualize Value (a design course plus a productization course) to close to $1 million a year in revenue in only 18 months, from scratch.
$1M
Annual revenue · USD/year
“But he built this business to close to $1 million a year in revenue in only 18 months.”
Framework
Convert social capital into financial capital
The rich-creator path: spend years building an audience and trust like a full-time job, then convert that social capital into financial capital via early-access deal flow and investment vehicles. Sahil from Gumroad is the example, running a rolling fund that grew to ~$13M from his audience.
“So overall, you're converting social capital into financial capital. The social capital is all the trust that you're building with your audience day after day. It's kind of showing up and proving to people that you actually are who you say you are and you know what you're talking about. And then people come to you with deals and you can invest much earlier than the average person gets a look.”
Steal thisTreat audience-building as a full-time job, then monetize the trust by converting deal-flow access into early investments.