Top Insights

• Raising millions of venture capital dollars before you have product-market fit could be devastating for a startup
  • "Pointing the rocket in the wrong direction"
• Chip and a chair: even if your startup is in cockroach mode, as long as you're still alive you still have a chance
• Major advantages of new equity crowdfunding and raising a rolling fund: general solicitation on Twitter
• Rolling funds gives fund managers an advantage by allowing them to leverage their reputation into investment capital

Background / Intro

"I was watching you on Twitter, and I was like 'This guy is really noisy, and maybe on the margins annoying,' and then I thought 'Oh, wait a second, that's the definition of my career!'" - Jason on his similarities with Sahil

• Sahil Lavingia is a founder and fund manager who has been making noise with rolling funds and raising $5M on Republic at the new cap on equity crowdfunding.
• Sahil is a founder turned investor, and he believes that gives him an advantage over career investors who don't have founder scar tissue.

Gumroad's first go around

I didn't really understand how early it was and how small the market was. The LTV (life-time value) of a creator is very different from the LTV of a startup. - Sahil Lavingia

• Kleiner Perkins led Gumroad's $7M Series A at a $30M valuation in 2012

  • According to Sahil, his biggest mistake was raising that much money before Gumroad had achieved product-market fit

  • As a 19-year old, Sahil couldn't pass up the opportunity to raise millions from the top VCs in the world, despite the lack of product-market fit

    "You're committed for the next... at least five years of your life. People say raising venture is like putting gasoline on a fire or a rocket ship. You don't want to point that in the wrong direction." -Sahil

• After taking a bridge investment from Kleiner with aggressive liquidation preferences, Sahil failed to raise another round due to Gumroad's stagnating growth
  • He eventually had to lay off all of Gumroad's employees in starting in October 2015, going from 20 to 5 and then 5 to 1
    • Gumroad then entered "cockroach mode", focusing on profits and staying alive, while Sahil took some personal time learning oil painting in Provo, Utah

Chip and a chair - Gumroad rises from the ashes

You're never out of the game if you have one chip. And that is so important for people to realize because you are the manifestation of chip and a chair." - Jason Calacanis on Sahil's ability to stay in the game

• In November 2017, Sahil received this email from Kleiner Perkins:

  "I am following up our conversation a few months ago. KP would like to sell our ownership back to Gumroad for $1. Can we discuss this week?" - Kleiner Perkins email to Sahil in Nov. 2017