Gumroad’s CEO on the company’s first 10 years, competitors like Patreon and Substack, the rise of the creator economy, and how app store “taxes” stifle growth

gumroad ceo patreon the business…

One of the first things you notice when you open Gumroad’s website is a straightforward promise.

“Escape from your 9 to 5 desk job with the help of Gumroad. Remove your tie and suit. The commute is over. Earn money from your craft.”

Maybe that promise doesn’t seem so extraordinary now. Many businesses, like Patreon, Substack, Ko-Fi, Teachable, Cameo, and others, have made spaces for themselves in the expanding creative economy and make similar promises to their customers. However, Gumroad’s narrative and the principles guiding its business model deviate from the usual.

After quitting his job at Pinterest in 2011, forfeiting his one-year cliff, and putting all of his money into what he saw to be a booming market for individuals to sell their art, Sahil Lavingia launched Gumroad. The following ten years were not without difficulty. Lavingia chronicled the startup’s rocky history of layoffs, growth spurts, and pressure to fold in a blog post titled “Reflecting on my Failure to Build a Billion-Dollar Company” despite the creator economy’s expanding presence in today’s society. He also discussed how those experiences influenced the way he runs the business today. Gumroad, as a result, is a business that rejects the usual venture-backed success measures and opts to run on a flexible timetable. Gumroad advertises to its creators that they may stop working, work whenever they want, and be paid for what they do; thus, why shouldn’t Gumroad hold itself to the same standard?

Gumroad isn’t the most well-known business in its industry despite that philosophical stance. Despite being founded years later, Patreon, Substack, and other services are all expanding quickly. But Lavingia is certain that the ever-expanding creator economy and Gumroad’s guiding principles will succeed in the long run.

The Business of Business spoke with Lavingia about his assessment of the condition of the creator economy, how Gumroad compares to its rivals, and what it will take to accelerate the market’s growth.

In 2011, you launched Gumroad. Back then, the internet culture and ecosystem already had “influencers,” “creators,” and “personalities,” albeit they were not at all discussed or used in the same manner as they are now. What did you notice at the time—before other significant businesses in the sector, like Patreon—that you sort of saw as an opportunity and prompted you to go all-in on Gumroad?

This is divided into two sections. One was that I wanted to solve my own issue; I didn’t even have a website, but I wanted to sell this pencil symbol I drew to my Twitter following. Just now, I had about 1,000 Twitter followers. This was kind of a novel issue because, in most cases, having an audience implies having a website. For me, the procedure was reversed. Realizing that a lot of people are probably going through this right now is the next step after that because the internet has made it much simpler to grow an audience without needing a website. I realised that individuals are interacting directly with their audience [on Instagram, YouTube, or Twitter], and for me, commerce was the next step in that process. You don’t need a record shop or radio to interact with your audience; you may do it directly. Step one is finished.

Step two was posing the question, “Well, why do you even need the record label or radio star?” I had the impression that the current arrangement would surely alter as creators grew in strength. However, the term “creator economy” did not even exist at that time. It took us three or four years to recognise that this was truly a different sort of use case from the word “influencer” that others were generally using to describe things back in the day. In fact, I believe we were the first firm to ever use the phrase “creative economy” in 2015.

You mentioned having an all-star ensemble of angel investors in your blog post regarding the origins of Gumroad. Was it challenging to persuade those investors to believe in your vision given that you identified the “creative economy” before others did?

In all honesty, it was really simple. A lot of folks were bought quite quickly. The straightforward answer to the question “why now?” was essentially because everyone will be able to grow an audience without the aid of gatekeepers. The next stage was to completely separate the marketplace from the storefront, allowing anyone to sell goods independently. Even in 2011, many people were discussing Bitcoin, decentralisation, and unbundling because this was the period when Bitcoin started to gain popularity and cost roughly $1 at the time. I believe that was also helpful.

So yes, I believe Chris Sacca, Naval, and a few others understood it at the time. Perhaps they consumed too much? We may have all been a few years too early, it turned out. The “Creator economy” is already becoming a word, thanks to COVID, although it’s still quite early in the process.