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Sahil Lavingia: Leaving as Pinterest Employee #2, Gumroad Creators Earning $500M, and Why Web2 Companies Can’t Compete with Web3

Dec 21, 2021 ·

By Tom Shaughnessy

The Delphi Podcast Host and GP of Delphi Ventures Tom Shaughnessy sits down with Sahil Lavingia, Founder of Gumroad, a powerful, but simple, e-commerce platform that helps creators monetize digital products and memberships. The two discuss Sahil’s decision to leave Pinterest, Web3’s edge over Web2, decentralizing Gumroad and shifting to a Web3 model, and much more!

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0:00 • Tom
Hey everyone. Welcome back to the podcast. I’m one of your hosts, Tom Shaugnessy. I’m one of the co-founders here at Delphi. Today, I’m thrilled to have Sahil who is the founder of Gumroad. Sahil, how’s it going?

0:11 • Sahil
It’s going great. How are you?

0:13 • Tom
Good, man. Are you getting ready for the holidays, the classic rush, and all the travel?

0:16 • Sahil
Oh yeah. I have three different projects up in the air with Gumroad, and my fund, and my book that just came out, so I’m trying to inbox zero all three of those projects before Monday.

0:29 • Tom
Nothing crazy. That’s nice. Let’s do a general guest intro. Give us a bit of your background. We’re going to spend a lot of time on the history of Gumroad, but would love to learn a little bit more about you before we get started.

0:43 • Sahil
Totally. I was born in New York to parents who immigrated from India. I grew up primarily in Singapore and moved to the U.S. to go to school at USC in Los Angeles which is where I got really serious about startups. I didn’t realize there was a word to call ‘building software,’ and I learned about startups and venture capital. I ended up dropping out of school as a freshman to join Pinterest full-time as employee #2 where I was a designer/engineer hybrid. My big shipment there was Pinterest for iPhone. Kind of stupidly, I left early before my stock vested. So that’s kind of my “not buying Bitcoin in 2011” mistake. 

1:30 • Sahil
I left Pinterest to start a company called Gumroad. I was very excited about two things. One was starting a company. I felt like there was no better learning than founding something and being forced to figure out everything for yourself or your business dies. And then, just this idea that we were going to head to a world (which is still playing out with crypto and Web3), but basically a world in which everyone was going to build an audience online, sort of permissionless, gatekeeper-less. The missing component, that I felt back in 2011 when I started Gumroad, was payments. It’s cool that you can build an audience – like Justin Bieber can now just tweet instead of doing a magazine with People Magazine or something. Well, that’s great. But what comes next? I assume Justin Bieber won’t need all the other intermediaries that exist on the payments, the commerce, the label, the marketplace…there are all these people that take fees out of this thing that should effectively be peer-to-peer (in my head). 

2:37 • Sahil
That’s why I left and started Gumroad. Gumroad was a super simple way for people to sell digital products directly to their audiences on social media and via their email, blog, wherever they may happen to build an audience online. We make it super easy to sell that content. We take a tiny cut, maybe 5% or so. I’ve been running Gumroad from 2011 to today, so about 10.5 years. It’s been quite a journey, and we’ve raised a bunch of money. We raised over $10M in VC, a $5M crowd-funding round, did a round of layoffs,…all of the things I feel like you can do in a startup, I got the chance to do in this single startup. I feel like Gumroad has lived multiple lives already at this point. Still going, still chugging along, still shipping features. That’s the brief background. 

3:36 • Sahil
I guess I also invest in startups. Last year I launched a rolling fund, one of the first rolling funds, with AngelList, and that’s been going pretty well. I’m looking to scale that up in 2022. It’s been fun to get back into the startup industry. I feel like I took a break in 2017, disconnected with it for a while, and reconnected with it in 2019 or so when I wrote this blog post reflecting on my failure to build a billion-dollar company (which went viral). It was ironically meant to be my ‘goodbye’ to the startup industry, “This was my set of learnings,” but it was actually my ‘hello again,’ my phoenix moment, which tends to happen. Life is quite entertaining. 

4:24 • Tom
That’s a hell of an overview. Starting at the beginning, what was your decision process like with leaving Pinterest? I read your post and it was phenomenal. To your point, what went through your head at that stage? Did you recognize how big Pinterest would be but you still wanted to do Gumroad anyway, or was it more so that you weren’t sure about Pinterest and you wanted to bet on yourself? You’re obviously a very early employee there, and I’m sure you have some horror stories, but you did make a move at a pretty pivotal point in their life cycle, too.

4:57 • Sahil
There was a lot that went into that decision. Probably the biggest one was this sort of sense of market timing that was early 2011. The iPhone / App Store stuff was getting crazy, and obviously, Pinterest and Instagram and Snapchat, Slack, Stripe, Square, etc. and I felt that this was the best time ever to start a company, and if I don’t do it then I don’t know when there will be another wave. 

5:27 • Sahil
Once I got thinking about, “Oh, I can start a company,” which I didn’t know I could, to be honest… What happened was I built Gumroad as a weekend project, and it was one of many weekend projects. I started getting emails from investors who found it, which happens all the time now – people sliding into your DMs, etc., and saying, “Hey I’m a VC, and if you start a company let me know. I’d love to invest,” which I now do too, so it’s fun. When I started thinking like, “Hey, I can start a company?” and I was 18 or 19 at the time, “I could raise from top-tier investors and effectively dramatically accelerate my pace of learning and career trajectory,” because I knew at some point I wanted to start a company. 

6:07 • Sahil
The prudent decision would have probably been to stay at Pinterest for a few years, at least financially. I was just so impatient. The other thing that corrupted my decision making was that I had only one experience in startup land which was picking a company like Pinterest, which when I joined had a $5M valuation, and by the time I left, I was quite confident it was going to be a multi-billion dollar company. When I did the Google sheets calculation on what I was doing, obviously I was owning 100% of a new thing vs. slightly less than 1% of Pinterest at the time…what do those dynamics look like? But, I just felt like building something from scratch and learning all of those things would just compound over the next few decades, and I think that played out. Certainly, my Pinterest stock … the math would be around $100M worth of stock that I gave up. But, the amount of learning and cool stuff that I’ve been able to do and people I’ve been able to meet far outweighs that.

7:07• Sahil
That kind of went into it. Once you get incepted about, “Wait – I can start a company? I can raise money? I can hire people?” All of the sudden, going into work becomes a little bit more…it’s a little bit like the crypto rabbit hole. You can’t stop thinking about it. Once that happens, it’s like the writing is on the wall. That’s why I ended up leaving. It was tough. Pinterest was a rocket ship. I think they were about to close the Series B from Andreessen, but I just felt, “If I struck gold once, why can’t I strike gold again?” and this would be my own thing, my own idea, so that’s kind of how I thought about it.

7:46 • Tom
That’s respectable. I spent time on finance on Wall Street, so I knew people who left $100k jobs for Wall Street, so that was a little bit easier, but to bet on yourself when you’re in such a good position – that’s admirable because you’re actually doing what you want to do instead of just getting comfortable.

8:02 • Sahil
Totally. I try to play the alternative universe in my head, and I like to think maybe the prudent thing to do was maybe stick around for a year and then leave. But, truthfully, I think you kind of become the story you tell yourself, so I think if I stuck around I would have made a very different set of decisions than I ended up making. But, the story of, “I’m going to quit my job at Pinterest and start a company,” – like I’m signing myself up psychologically for a very different journey that compounds in a very different way.

8:34 • Tom
I respect that. Diving into Gumroad a bit, why do creators choose to sell on Gumroad? What are the key features for them? What drives them to want to sign up? Is it just the no-fees? Because it is free to start? You guys have helped. I think over 100,000 creators make over $500,000,000 if my stats are not a little outdated. What are the key drivers to attract people to work on Gumroad?

9:01 • Sahil
I think the ultimate key driver of our growth is creators seeing other creators find success. I underestimated how important money was for people, and ultimately people want to make money. Money is great. Money is awesome. You can spend money on rent and food and all of these other amazing things. So, when people see someone find success in a very new kind of way without traditional education via a four-year university degree or traditional employment via just getting a job, that inspires a lot of people. Just like watching people start companies without having an MBA inspired me to realize, “Oh, I don’t actually need a lot of these sorts of things.”

9:52 • Sahil
I would say where Gumroad fits today, obviously, in the last 10 years the creator economy has become a buzzword and there is so much market saturation at this point, the way we’ve kind of started to position ourselves is as the best way to get started. Maybe it’s not the best way to scale or the best platform to run your newsletter (which I would say is Substack) or a membership (which might be Patreon), but if you’re just getting started and you don’t know if you should have a newsletter or membership or how do you think about this, I think Gumroad … we really want to be the place to try stuff which means it is free to start, no monthly subscription fee or anything like that. You should be able to get access to all the features without a premium offering or monthly anything. We got rid of that earlier this year. It means everything is super simple. It is very friendly.

10:47 • Sahil
One thing I learned building Gumroad is that creators are not the most forward-thinking people or the most tech-savvy. Sometimes they are some of the least tech-savvy people I’ve ever met. So, building a UI that is super simple, super clean, super approachable. Gumroad will never be like the insanely ‘Bloomberg Terminal looking thing’ that allows for power creators to make tens of millions of dollars per year and has all this extra cool functionality to it, but it is always going to be super simple, really quick and easy to get started. It starts out beautiful. It is much more constrained which is what I think people need when they get started. Hopefully, we can build out more stuff so that people stay and don’t churn over time, but we’re just comfortable with it.

11:36 • Sahil
There’s nothing wrong with saying, “Hey, we’re really good at being a high school, and there are places that you go to college.” Hopefully, we can retain those people over time, and I think we will. We have 100,000 people who still love Gumroad, but I think really focusing on what we call the 0 to 1 dollar (kind of a joke on the Peter Thiel book) – we want to help people go from 0 to 1 dollar, and just really focus on that because that is really the unlock for many people. Once you make a dollar from a stranger on the internet, it’s like, “Wait what? That’s possible? Can I do that? What else can I do?” The more we can focus on unlocking that for people, the better off the world is. It’s probably not the best strategy, to be honest, to maximize GMV or revenue, but I think we have just taken a different angle at how we think about Gumroad and our mission which is, “How do we unlock value and create value for people?” Sometimes that doesn’t necessarily inflate the value of the company or the equity of the shares themselves.

12:37 • Tom
That’s really cool. I could see why people want to build on Gumroad. It makes a lot of sense. Before we go into the future of Gumroad…I re-read your blog post last night. It’s a pretty incredible journey. I’m probably going to botch the timeline, but you raised a bunch of money, you built up a company, stuff started to go a little sideways, you had to fire everybody, then you re-hired everybody. I was trying to read through that post and figure out what was your key to success over such a long period of time, and I guess the thing to me was your consistency – your ability to build despite having money or a team or not. And then, two, it sounded like everything you did was for your creators, like shipping products, shipping features. I read that you woke up every morning and answered all of the support emails or messages. Just thinking back to your journey, I’m not sure what question I should ask here but…just trying to figure out how you stayed at it for so long despite all the adversity that you faced here.

13:39 • Sahil
I appreciate that. The consistency was key. I remembered talking to Ben at Pinterest a while ago and one of the questions I asked him was, “What commonalities do success stories have and failures have? How do you become more successful?” He said something really profound to me at the time, which was, “The only thing that all the people that failed have in common is that they basically gave up, because if they hadn’t given up yet, then inherently they’re still in the successful category.” That made sense to me. As long as you don’t give up, like I think Pinterest was his 3rd or 4th idea or even a company that he had started, and obviously Pinterest worked. That really stuck with me. I thought, “Okay, I need to pick an idea that I will work on for better or for worse.” The truth is, I didn’t know what else to do. It wasn’t like I could just go and start another company and solve this other problem. “I’m happy and I picked a problem that I liked.” If I started from scratch, it would be a similar thing, so why not just continue to do what I’m doing?” that consistency, that commitment, like that Finding Nemo quote, “Just keep swimming. Just keep swimming,” was my approach. I’m just going to keep swimming, I’m just going to keep shipping. I can do that. I don’t need a team, I don’t need VCs to do that. Anyone can ship. I’m just going to keep doing that, and I’m going to put the creators first. That was really important.

15:19 • Sahil
The minute you don’t do that, it is a lot easier to move on to the next thing. If you lose a mission, like, “Oh, I’m doing this for the money,” then obviously when it doesn’t look like the money is going to show up, you find something better to do. Like the people who left crypto in 2018, you don’t want to be one of those people. You want to find a larger mission like, “I’m going to be in this thing. I’m going to buy and hold. I’m going to do this for 10 years.” That’s the key. 

15:45 • Sahil
And then I’d say, the last thing that I think did pretty well, was that I was super communicative with everybody. It made it easier when I had to do layoffs, when I had to tell investors this thing isn’t working or when we failed to raise this Series B…it helped a lot that I was always super communicative with like, “Hey, we might have to do a round of layoffs. Our Series B is not going to come together as easily as our Series A did.” That gives you a level of trust and integrity that, when you have to make hard decisions like laying people off, that trust pays off. Because, if you were some crappy CEO, when the shit hits the fan, they all bounce, like they were in it also for the money or whatever other reason. But, when they’re willing to bet on you as a person, then that kind of reputational damage you would take otherwise, really helps people. At least for me, that was really important.

16:46 • Sahil
But yeah, just doing it. Just waking up and saying, “This is my job. This is what I signed up for. I’m going to be working on Gumroad for the next 10 years. I’m already 5 years in. I’m making good progress. Why stop now?” Maybe a little bit too much of the sunk cost fallacy, but yeah I don’t think there are any easy answers. It’s kind of like running a marathon. What do you do? You just run. You just run short distances and they get longer over time and your heart gets better and your legs better and eventually you can run a marathon. There’s no real secrets. There’s no special sauce. You just need to go for a run every day or two. Often, building a profitable business sounds really simple. You talk to some people, you figure that they have a problem that you also have and that there’s a market here. You build a solution, and your solution is probably off. You probably don’t have perfect product-market fits. You talk to customers. You try to sell your product. You update the product when you fail until you have product-market fit. You grow and you hire a team, and then you talk to more customers. You just keep doing that. That’s what you do when your startup is working, and that’s what you do when your startup is not working. 

18:06 • Sahil
Simple doesn’t mean easy. It’s not easy to go for a 30-mile run, even though it’s simple on the surface. It’s just saying, “Look. This Is what it takes,” and being honest about it, and saying, “This is a journey that I signed up for, and frankly I don’t have anything better to do, so I’m going to keep doing it.” I basically just did…I just never stopped doing it. That’s sometimes what it takes – just not stopping. At least, that’s what worked for me. Maybe the answer somebody else might say is, “Actually, I spent way too long on this that ended up not working anyway.”

18:46 • Sahil
The important thing that always got me excited about Gumroad was we were literally giving money to creators every month, regardless of whether VCs wanted to give us money or not. I could look at the dashboard and say, “Today, this many creators made this much money,” and that’s real. That’s real money that’s going to go towards rent, groceries, college funds, alcohol, who knows. That’s real. Turning that off was so difficult for me. Like, “Why would I turn this off? Because I want to start a new company? So these creators no longer get to make $2.5M/month?” it didn’t make sense to me to do that. 

19:25 • Sahil
I would say the other thing is that I never felt super attached to the startup industry. I think the reason a lot of people shut down or sell or start again is that they’re playing a status game. There are a lot of people like, “you could sell this to Square, Stripe, Patreon, etc.” It doesn’t really matter how much you sell it for, but you can say “Acquired” on LinkedIn, and then you can start a new company. But that felt a little disingenuous. I could never get to a place (this goes back to putting creators first) where doing that would allow the product to continue to exist. I didn’t have a high degree of confidence that Square buying the company meant that Gumroad would continue to exist. Like the story, people say, “Collaborations…synergies…we’re going to grow faster together.” Maybe. Ultimately, what that means is that Jack is now the CEO of Gumroad and he gets to decide whether Gumroad lives or not versus me. That was a long answer, but that’s how I thought about it.

20:26 • Tom
I love how much you focus on consistency. We definitely went through that at Delphi in 2018 when it was a brutal bear market, so I have so much respect for you there, especially over your time period. And, being really open with people makes a lot of sense. They’re a part of the journey and they know you’re not screwing around with them. What advice can you offer to the crypto folks given your story? With your story, you had an insane amount of consistency, you showed up every day, you had this product-market fit from the get-go, like I think you had a post where you had something like 50,000 views overnight…but with crypto it’s kind of different. These founders have zillions of dollars overnight and they face certain issues like you do, but it’s a little bit of an accelerated timeline where they have to scale faster, they have to spend the money, they have to find product-market fit, so it’s a little bit different than a Web2 company. What advice would you offer crypto founders? Do you think they’re doing things wrong or right? Do you think the model is screwed up? We can get to the creator economy in a bit, but wondering what advice you’d offer the crypto founders going through this.

21:36 • Sahil
I think Chris Dixon had a great quote the day that I saw on Twitter, that was something about investors that join…the latest to join and the first to leave…you want investors who have been through a bear market. All the VCs that I know that are getting into Web3 in 2021 – awesome – no complaints about that, but also – if the market crashes, my guess is these people would be the first to leave. So, you want to pick partners all along the stack – from employees, users, customers, token holders, investors, whatever – everybody…I want to pick people who are also going to be consistent in that way. You want product-market fit quickly, you want to scale fast, you have all this money you want to deploy and allocate capital effectively…ultimately, you want to be doing this for 5, 10 years or maybe longer. If you’re enjoying yourself, why put an end date on it? Just do it as long as you want to.

22:33 • Sahil
You want to make sure you’re picking the right kind of people, and that you’re also really solving a problem. This gets complicated because of the regulatory nature of a lot of securities and all that kind of stuff, but ultimately you want to figure out, “What problem am I solving? Who am I solving it for? Am I excited about both of those things? Do I have a team around me that is also excited? Am I approaching it the right way?” I would say that is the most important thing – this is the mistake I made the most at Gumroad. Like, if I were to look back and think, “Man, I wish I did a better job at that,” it would just to be really honest about, “Are we really solving the problem?” I think the mistake I made at Gumroad is – I mentioned that the reason I started Gumroad is that we wanted to effectively disintermediate all these middlemen and create this more direct, more efficient creator/consumer relationship. 

23:28 • Sahil
More efficient also means we take a much smaller cut which is better for the creator, the consumer, they get to talk, all this kind of stuff. Like Apple doesn’t give you any of this data, Amazon doesn’t. But, I think we should have more critically analyzed, “What does this feature look like? Are we in line with our vision?” I think if we did that honestly, the answer was no. We thought every independent filmmaker was going to sell direct. Netflix 10x’d in stock price. Clearly, there was a disconnect between the hypotheses that we were making and what reality turned out to be. Effectively, every startup is like a scientific experiment to test out some set of hypotheses, or any fund or any real enterprise. So, the crypto founder should think, “What problem are we solving? What does the future look like if we do solve these problems?” Ask every month, every quarter, every year, “Are we getting closer to that vision?” If not, that’s fine, we still want to solve the problem. Maybe there’s a different angle here. As the Gumroad founder, for example, maybe we didn’t actually disintermediate anybody. Netflix is more powerful than ever. Disney is more powerful than ever. 

24:37 • Sahil
There’s more centralization, not less. And that’s not to say we lost, it’s just that we have not won yet. Seeing what’s happening with crypto and Web3 and this permissionless, trustless, secondary market, I’m very fascinated by that business model – maybe that’s where there’s a better answer. We didn’t solve it, and none of the Web2 companies have solved it. Just like the laws of Physics, Newton thought he solved it. It was a lot better than what we had before, but it turned out he was “wrong.” There was still more to go. So that’s important. Just be really honest about what you’re building and what problem you’re trying to solve, and be super consistent. People who are in it for the money, for one, it is a lot harder to make money when you’re in it for the money. It’s not hard to invest if you’re willing to hold for 10 years. I can predict pretty accurately on a 10-year horizon whether something is going to be worth more or less than it is today. Doing that for tomorrow is very difficult. Generally, if you’re willing to be patient and willing to take longer bets, you will have a much higher chance of being correct. It is much easier to say, ” I can predict the cost of a Tesla 5 years from now better than the price tomorrow with all these supply chain issues and this and that.” I like to think about the long-term, big-picture stuff.

25:53 • Sahil
Maybe one thing I’d also add is: I really think technology is really important. The reason all this stuff exists is because there’s research, there’s science. The science is technology and engineering to implement it. Ultimately, that’s why what we do gets to become so incredibly valuable so quickly, because we take something that has not been implemented in practical use and we solve a problem that creates a lot of value for the world.

26:16 • Sahil
I always like to go back to, “What is technology?” Read the whitepapers. Get excited about technology. Ultimately, that’s why we’re all doing this, because we want to take technology, give it to everybody, and see all the cool stuff that happens because of technology. Sometimes I see these projects and I have a hard time getting excited about them because they’re not wrong, but I get most excited about the technology, and you’re more excited about art or culture. I like that stuff too, but I really think the large unlock here is the technology. What does technology let us do today that we weren’t able to do yesterday? Like, proof-of-work, that’s clear technology that is fundamentally useful and created $1T worth of value off of something that you can summarize in a couple of pages..pretty crazy stuff. That’s the brilliance of technology and how impactful it can be. It doesn’t have to be, it just has to solve the problem. If it solves the problem in a single line of code, cool.

27:15 • Tom
That’s really cool. I like your answer on being honest with yourself that you’re solving something. I guess the smart founders spend a lot of time doing that before they launch a project, and the okay ones do that after they get started. It seems like if you spend more time not taking action and trying to figure out what you want to do, you’re more passionate once you’re plugged in. Do you have any advice for founders going through that? I feel like there are a lot of crypto projects that don’t make sense to us on the ventures team. Some of them just aren’t that well thought out, but on the flip side, you’re in a space where you have to move one million miles per hour, so if you have the glimpse of an idea, moving on it and building around is most of the battle. On the flip side, some of the founders are a little half-in/half-out because they don’t know if it really has potential.

28:07 • Sahil
There’s a painter that I love, and he had a great quote. He said, “You don’t have to be right, but you do have to be certain.” He was talking about impressionist painting, but I really like that. Ultimately, if you’re half-in/half-out, even if your idea is perfect, you’re not going to win, because someone else is going to be fully in and win because of that. Ultimately, there’s going to be a lot of uncertainty. It doesn’t matter how much you analyze the truth and try to be honest and do research and come up with a strategy and revisit your priorities, etc. This is high risk. Ultimately, there’s a lot of uncertainty baked into this. So, I do think you have to commit at some point and you should get to a place where you’re talking to customers and going back and forth and you have some feedback loop, kind of like the ODA loop. You want to consistently build something, get feedback on it from real people, from the market, and then rebuild. Change something, and do it again and again. 

29:09 • Sahil
The faster you can get to that feedback loop, the better. That feedback loop might be a whitepaper that you’re getting feedback on. It might be a product. It might be figma mocks, but I think getting a real feedback loop outside the company is really fundamentally important. I find that a lot of the people don’t want to commit to a concrete….that forces you to have higher fidelity. What does it actually look like? What actually happens when you click this button? It’s fun to riff and effectively just BS with your friends like, “Wow, the whole world is going to change and there are all these cool things you can do,” but I kind of think about it like bullshitting at the bar, to be honest, which is fun, but does this actually do anything for the world? No. Ultimately, what does stuff for the world is a bunch of people sitting in front of laptops, typing away, building stuff, fixing bugs, doing pretty trivial, boring kinds of stuff.

30:00 • Sahil
Just getting a ton of feedback is the most important. You’re not going to be right the first time. So, having this approach where you are acting certain but then say, “Look, if we don’t figure this out in a year or two, we’ll start a new project.” It feels like a gold rush in which you’re like, “Oh, no those boats are leaving and those boats are leaving, and there’s not going to be any boats left. What am I going to do?” My guess is that there are going to be more boats tomorrow. This is a rapidly growing industry, and if there was one boat ten years ago and 100 boats yesterday, I think saying there’s going to be one boat tomorrow and then zero…no. Just draw the curve. We’re probably just early. I do think it’s good to wait for the right idea, like if you don’t have an idea that you are super excited about. 

30:51 • Sahil
Also, I’d say: go work somewhere. I think this is super-underrated advice. Like, if you want to be a founder, what did I do? I joined Pinterest as employee #2. How much did I learn using their balance sheet? Probably quite a lot. I would like to get a job at Coinbase or Uniswap. I love learning by osmosis. I love just looking at what the engineers and designers at Gumroad are doing. I just got smarter. “That’s how you solve that problem? Cool. now I know.” So, I’d say, get in, hang out with builders, and then start building yourself.

31:23 • Sahil
The other thing is to spend time outside of the crypto echo chamber. For example, many people don’t know that most of the world doesn’t like Elon Musk, doesn’t really like NFTs, and think crypto is the largest cause of climate change in the world for some reason. If Gumroad tweets about crypto, we will get canceled. We have done it, and we got canceled. Not to say that that’s right or whatever, but just to say, ultimately, you’re selling a product to a market. If you want change, at some point we have to convince all these people that this is a good thing, or we have to get them to use it without them even knowing that they’re using it. Ultimately, we need every person to embrace this new technology, just like every person is going to embrace the internet – it’s inevitable. 

32:07 • Sahil
Spend time with people who are skeptical. Don’t just hang out with people who love what you’re doing and love NFTs and crypto and think it’s going to change the world and everything’s going to be tokenized. Hang out with people who are going to destroy your argument and rip it to shreds. That will make your argument much stronger. I bet you the Ethereum whitepaper, Uniswap V3 whitepaper, was not someone hanging out with people that agreed. No. You write a first draft, you send it to a bunch of people, and you rip it to shreds. I’m sure Delphi has this internally all the time. This is what you need. If you really want to make an investment, the best thing you can do is get a bunch of people telling you why you should not do it. If you still have conviction after that, then do it. But don’t be afraid.

32:56 • Tom
That’s my favorite quote. I totally agree with you . Finding your intellectual sparring partner and having them tear an idea to shreds is the best way.

33:04 • Sahil
The fear is, “What if they tell me my idea is bad?” Well then, you just saved yourself years of heartache. You want people to rip it to shreds and steelman the thing and eventually you have something great. This is the path of every great idea. The market refines these ideas. You just have billions of people who tell you what is right or wrong. They vote with their dollars. 

33:39 • Sahil
I think it is really important to get something out into the market for that and to make sure you’ve steelmanned it and get into that feedback loop of building and talking to people, building and talking to people. Ultimately, the same thing that works in Web2 and those principles will work in Web3. Those principles will stay the same. Because, ultimately, we’re all still human beings. 

34:01 • Tom
When you were starting Gumroad, did you have that sparring partner? Did a friend or colleague or VC go, “Hey Sahil, this is stupid,”? How hard was that road?

34:12 • Sahil
Honestly, I wish that I had more of it. The issue, which is still an issue today, is that people are so portfolio-ized at this point, where everyone is investing in a lot of different things, so sometimes it’s hard to get someone who really cares enough about you to say something. It’s like, if you’re dating someone and your friend says, “Hey, I really don’t think you should date that person.” It’s very hard to be in that position to do that, and most of the time it doesn’t work, because they like them more than they like you, and it doesn’t really work. You kind of have to wait for them to figure it out for themselves. I find that that often happens with startups.

34:44 • Tom
Parents everywhere agree with you right now.

34:45 • Sahil
Exactly. Naval was one of our first investors. Obviously, he’s very loud about crypto. He was loud then. I remember talking with him in 2011. He’s like, “Bitcoin makes total sense. The atomization of shopping carts, Gumroad, sell it directly on Twitter…,” having that conversation every year would have been really great. “Why didn’t this happen? Why isn’t everyone selling directly on Twitter like we thought? Why isn’t Bitcoin solving the microtransaction issue on the internet? Why aren’t people paying for articles instead of per month?” I think we would have made some different product decisions if we had that rigor early in the company versus late. Now, we definitely have that rigor. Also, frankly, it’s a lot easier to have that rigor once you’re profitable and ‘successful.’ because then you have confidence in yourself. Gumroad worked. It worked. So now I have confidence that my strategy, which looked stupid in 2015 when I had to let everyone go, was actually a winning strategy. It just took a long time. So, I also find it helpful to just re-frame a lot of these things.

35:51 • Tom
I like that a lot. It definitely works to have that sparring partner over time. One thing I wanted to talk to you about, just switching gears a bit – there are two sides to my next question. We’ll start with the first side. So, users love Gumroad. A lot of what keeps you going and why you started this was your ability to give creators money every month. Like you said, that kept you going. Each month, just being able to see that money flow to them and giving them a medium to do that. Now, having that relationship with your users is incredible. It’s something (not to bring it back to the Web3 community) that Web3 projects would kill to have. They would kill to have that lock in. Do you think that, with Gumroad, if you were to decentralize, where (thinking off-hand) your creators had some say in the direction or some ownership over the protocol overall, do you think that would work well with your vision or wrong? Because, I know in one of your posts, and you just mentioned it earlier, giving over the keys to the VC to let them have the direction would annoy the hell out of you. But, giving it to the community might be a different story. So, more so just wondering at a high level if you think Gumroad, in a true decentralized Web3 fashion would succeed or would it hurt the project?

37:03 • Sahil
I think there are pros and cons. Ultimately, ten years from now, looking back, when we do have the next generation Facebook, Google, etc., I think there is going to be a hybridization where you’re going to have certain components be super decentralized and you’re going to have other things that are pretty darn centralized. I certainly see a lot of value in progressive decentralization. There are many things that I have sole control over that, frankly, I don’t think I should have sole control over. For example, I get to choose who gets to make money on the platform. If I want to de-platform someone, I have the ability and right to do that. Should I? This goes into that you also want to prevent mob mentality. One thing I get to do as CEO, is say, “Hey, everyone wants me to the-platform this person, but I don’t want that, because I don’t think it’s the right answer.” So, there are pros and cons to that.

38:01 • Sahil
I joke that Gumroad is like a Web2.1 company in which we’re slowly inching into the future and hopefully we’ll meet somewhere in the middle. We did a crowdfunding round where we raised $5M from 7,331 non-accredited investors, primarily – from many of our own users. We could, in theory, give every one of those people an NFT. Now there are 7,000 NFTs, which maps to a PFP project, and then say, “Hey, if you have this, there’s a governance method, there’s a DAO, some sort of proposal mechanism and you get to vote. One vote per NFT….” Maybe I as CEO just get to react to it, just like a representative in Congress gets to react to what the constituents want, but they don’t actually have to do what the constituents say. So, I think there’s a lot of interest in ‘dipping our toes in the water’ of decentralization.

38:55 • Sahil
Ultimately, I’d love to not be CEO. I think the answer is not a new CEO but the answer is no CEO. I think that more and more of what I should either be automated or effectively, Gumroad should, at some point, be a protocol and not a company. It should just be rails that people can plug into. For a variety of reasons, that would be really awesome. There’s so much about DAOs and decentralization that I would love to embrace. I hate payments. I hate accepting payments. I hate banking. I hate everything to do with KYC, AML. I had a call with a Silicon Valley Bank about a new product that we’re thinking about building. They sent me an email with a long list of bullets and all of these documents saying, “Hey, this is what we need from you. Please send us your policy on AML, KYC, etc.” I was like, “This is for a speculative new product that doesn’t exist yet, and we will do the bare minimum. 

39:57 • Sahil
We don’t enjoy doing any of this, we are just doing all this stuff because you want us to, so just tell us what you want.” It’s like when the government says, “Tell us how much you owe in taxes.” They already know so you just tell me. Silicon Valley Bank is like, “We won’t give you a license unless you do what we say, but we’re not going to tell you, you’re going to have to guess, or you’re going to have to pay a bunch of consultants a bunch of money to give you the same docs that everybody else has.” So, I emailed back saying, “We’ll do what you want us to do. Can you give us templates, and then we can fork them?” And they said they wouldn’t do that. They’ve been in business for how long and literally every startup has to do the same thing? So I hate all this stuff. I can’t wait until there are no banks, only wallets. I also can’t wait until there are no companies, only organizations. 

40:47 • Sahil
I think VISA should just be a protocol. Why is it a company today? Why? What value do they have? And this is what companies do, right? They create a ton of value, a ton of innovation, and then they stagnate, they ossify. Things eventually come and replace them. This happens to countries, to companies, organizations, everything, certainly humans. Why can’t there be a, “Hey, you’re getting really old. Innovator’s dilemma is starting to kick in. Now it’s time to turn it into a protocol.” There’s a way to do that. Just like, “Oh, it’s time to IPO,” Well, “Now, it’s time to DAO.” Right? Why not? I’m always looking at crypto and Web3 and figuring out how we steal some of this stuff.

41:21 • Sahil
For example, one of the things I spent a lot of my time thinking about Gumroad is, I really do actually think the creator economy is fundamentally broken. The way people are talking about it is like it’s the next crazy big thing and that everyone’s going to become a creator…as someone who has been working in the industry for a long time, I think that is very optimistic. One reason I think it’s broken, an example is that effectively your biggest fans take the most risk. They basically get the least reward. Why? Because they’re effectively paying the most expensive price, because generally things get cheaper over time. Like, my book came out and now it’s $28, a year from now it will be like $18, etc. And, there’s no upside to them. There’s only risk. They have no idea how good the product is. They haven’t even listened to it or watched it or consumed it. So, it’s such a backwards sort of thing. You just get brownie points I guess if you found them early or something. So, I love that aspect of crypto, where you’re actually rewarded for being early, and you can actually make money versus spend money. I love that idea, because, as a creator, the worst thing in the world is asking your fans for money, saying, “Hey, give me money.” Why? “It’s an eBook.” 

42:28 • Sahil
How do you price a marginally free thing? It’s really hard. There’s a reason why all this stuff is so difficult. But I love the idea that, instead of selling a book, giving away the book for free, but then saying, “There’s only a certain number of them, and if you want to buy one, you have to buy it from an existing owner, and I get 10%.” All of the sudden, my marketing is not, “Hey, I have a new book out – buy my book.” It’s now, “Hey, I released some new content and it goes out for free to all the people that own this thing. If you want it, you have to buy it from someone who has already supported me in the past.” To me, that’s very different. I would be excited. For example, Gumroad – I just get to build stuff. I don’t have to really sell anything. I just get to build stuff, create value, and my shareholders are like, “Awesome. Cool.” This is what Tesla gets to do. This is what all public companies get to do. The more we can unlock that for the average creator, effectively every creator has equity in all these different kinds of ways….that will happen.

43:33 • Sahil
I’m 100% confident that these worlds will completely merge – startup equity, NFT, all of this stuff will blend together. It’s going to suck for many incumbents, which is why it’s taking so long, or maybe it’s happening a lot faster than people thought. I think there are many ways to look at this. The price of Bitcoin is surprising to many people who have been in the industry for a long period of time, but it does feel inevitable to me that at some point these things will merge, and this technology will solve all these problems. If the SEC is not cool with it, the SEC will lose. They’ll just lose a larger battle. I hope they don’t want to do that.

44:09 • Tom
Those are really good thoughts. Co-running our fund, I share the same concerns you do. Seeing on-chain funds that just automate all the backend housework and your comparison with your struggles with Gumroad are all interesting. I agree with you firing yourself as CEO. The more people that could take on that role and automate it away, I feel that way in Web3 too. One thing I wanted to ask you about is the merging of Web2 and Web3. I’m of the opinion that Web2 is frankly not able to compete with Web3. Culturally, the whole cap table, CEOs, the 9,000 Vice Presidents, I don’t feel like they’ll ever make the switch to giving up control and giving their creators and users a real stake or ownership. It feels like too big of a seismic shift in the way that they think and the way that they operate. Do you think that they will merge or that the Web2 businesses themselves will be negatively disrupted? I don’t mean Gumroad, but more like Facebook, Instagram, possibly Pinterest.

45:09 • Sahil
Honestly, even Gumroad. Speaking to sparring partners, Naval and I have talked about, “Does Gumroad play in this world? What does that look like?” We’re definitely still exploring a lot of it. Almost better to start a new company, frankly. The mental model I have is that we’ve kind of built on top of all of these layers. We started at ground level with basically banks and branches, ACH, onto debit cards and credit cards, all of this stuff has been layered on top of each other. Crypto just basically feels like starting from ground level, which means you lose all this stuff that’s been built over time – you have to build it all again – but the fundamental assumptions you’re making are totally different. For example, every decision that’s made in this old stack includes banks, right? Something as simple as banks which don’t really exist in crypto land – they’re just wallets – why do you need a bank? 

46:05 • Sahil
Why do I give money to the bank? I guess because I don’t want to hold a bunch of cash, but it’s all 0s and 1s anyway. A lot of these things break down and have broken down, but because a skyscraper is so freaking tall, it’s like Stripe can just build on top of this. Paypal tried to go a different route and create a lot of what is happening now. I think you’re right. You’re not going to see a bunch of Web2 really being able to embrace Web3, and I think that’s actually great. They’ll be new countries, new companies, new winners in this new ecosystem, and that’s going to be really positive.

46:39 • Sahil
I’m not concerned that Gumroad is going to go away. These things will continue to grow and develop and maybe even get acquired by Web3 properties over time or something like that. They’re great for getting communities. We’ve spent ten years building distribution and brand and traction and all these sorts of things. I still think there will be tremendous value to a lot of these things, but I do think ultimately what you’ll see is someone start a new company or protocol and that will be the next Facebook. It will not have a board of directors or a cap table. It will not have traditional investors. It’s like bringing a knife to a gunfight – why bother? Maybe it was the only option, but anyone can get into crypto. And, you have to build a lot less because it’s so composable. So, why would we use Gumroad if we could just totally start a new company within three months, and we didn’t have to do files, we didn’t have to do payments, we didn’t have to do the secondary markets or exchanges? We have, effectively, a more featureful Gumroad within three months. So, why would I try to convince everybody to use Gumroad instead of just starting a totally new thing and going to market with that?

47:50 • Sahil
I also think pseudonymity is also going to be really important in the crypto economy. If I were to start a new company, I don’t know if I would be using my identity. I would probably come up with a new one and start totally from scratch. That would actually allow me to do crazier things. The thing I have to run Gumroad through every time we do a crypto-thought-storm is like, “How do we not make the company that we’ve already built liable to this new tiny experiment?” What’s the point in a tiny experiment if it’s just going to make the whole thing risky, and myself personally? Starting totally from scratch, totally new identity…I was talking to Timshel from the Loot project, and that really convinced me that if I want to get into this stuff, start from scratch. Learn it from ground zero. I think it would also be a good test for me. I now have an audience. There’s more risk to saying certain things. Maybe it would be good for me to experience what it’s like to be crypto-native and to start from zero, to have no audience and to have to build that from scratch. Frankly, even without the Web2/Web3 stuff, it’s been a long time since I’ve done that, so I’m trying to teach people how to do what I did, but I haven’t done what I did in a long time. It’s been a while. It would be good to start from scratch. In 2022, that’s one of my goals, to come up with an identity and try to build it up from scratch.

49:09 • Tom
That’s really cool. I applaud you wanting to do it yourself. I think it would be really cool to get engaged and have a new personality. From the investing standpoint, we’ve invested in known founders and anonymous founders in crypto. I’m going to be honest, I love that the anonymous ones push the bounds, but it is so hard to replace that social credibility. Like, going to get a drink with somebody or…most of the founders that are anonymous – eventually you find out who they are or you meet them in person, but it’s really hard to replace that. That buy-in is hard to replace when you don’t know who somebody is.

49:40 • Sahil
You’re right. Zero-knowledge proofs may fit into this at some level. For example, I’d love to say, “Hey, I have a lot of Twitter followers, I just don’t have them on this account. I want to transfer some of my reputation without my whole identity.” This is a problem that I think technology will solve in pieces over time. I do think in-person is amazing. All this talk of remote and async and all this stuff – I love hanging out with people and going to a bar and riffing with people for a bunch of hours, feeling like I’m not being recorded, I don’t have to censor myself, and I can say stupid things. That’s really helpful. I’m not a pseudonymous-economy maximalist in the sense that 100 years from now I think everyone will be pseudonymous – no. I think our meat-bodies will be quite helpful and useful and we will travel and do a lot of the things we do today. I think a lot of the work stuff will move online. I struggle with it too. 

50:46 • Sahil
Even as an investor, it’s nice to have a reputation. Why do people take your money? It’s because you have a track record. You have a story. Obviously, you’re helpful and you have advice. A lot of being an investor is like this grand moat, this virtuous cycle where you do well, and then people want your money because you did well, so a vote from you is worth something. Kind of like the university model, the YC model – you basically become a picker over time – that’s how you get the best deals. It’s very difficult to unseat that kind of moat, like the Sequoia moat, or the YCombinator moat. I often think about that. As an investor, it would be a terrible thing to start a pseudonymous venture firm for myself. As a founder, building something from zero to start is a really good idea, kind of like what Dee-So did, where he eventually came out and said, “Hey, this is who I am, and I think it’s important to disclose my identity.” Maybe that’s some of what we see – just like this progressive decentralization of companies, we might see this progressive (I don’t know what the opposite of anonymity is) but… progressive “nimity” or whatever from people who are like, “Finally, I can afford a security guard, so I will now tell people who I am.” That sort of thing may happen.

52:05 • Tom
It is interesting. I have a couple more quick questions for you. I saw a couple of your tweets and some of them resonated with me. Like the SEC moving slow, and the US might lose their complete edge by not being too progressive with crypto, (and I’m very much paraphrasing and I might be totally off in what I’m remembering here), but I think people in the government are great people just doing their job, but hopefully, we can help them and inform them on the space and get them more up to speed. You’re a titan in the Web2 space. In the crypto space, we’ve seen banks and regulators push back on crypto, but I don’t know if we’ve seen the power of Web2 try to shut down Web3 yet. Like, Mark Zuckerberg is embracing it, Nike is buying companies with NFTs, but I don’t think we’ve seen the full force of Web2 CEOs and their power saying, “Screw Web3. We’re going to crush you guys.” Do you think the Web2 culture clash is a thing? Or, am I overthinking it and they will just embrace it and buy their way in? What should we think about it? Because you’re a Web2 founder and you’re completely inviting decentralization and creator economy and all this stuff…

53:19 • Sahil
It’s tough to say. Some of these people don’t even know why or what their motives may be. I personally think that Zuck is a good dude who really has the best intentions out there. I think most people have pretty decent intentions, and he’s probably like, “Damn, I have way too much power. I hate testifying in front of Congress. Can I please decentralize myself? I just want to surf. Let me just be weird. You don’t need to put a camera in my face all the time.” I personally believe a lot of these Web2 founders – the sort of deep thinkers like the Patrick Halston’s of the world and Tobi Lutke’s of the world – are really going to embrace it over time. Especially the technology pieces, right? That’s why I think technology is so important, because it’s a universal language. Math is a universal language. So, if you have a new math solution, a new proof, that’s really compelling broadly. I do think one of the tensions of “Web2/Web3” is just that it makes it feel mutually exclusive.

54:29 • Sahil
The way that I like to think about it is not that Web1 turned into Web2 turned into Web3. What actually happened is that Web1 brought certain things online, then Web2 brought certain things online that Web1 didn’t bring online. Like yearbooks, right? Brochures went online with Web1, then yearbooks and photo galleries and collages and pinboards and all these sorts of skeuomorphic kinds of ideas we put online. I don’t think anyone in Web1 was like, “Oh shit! Web 2…” Like the New York Times and all these brochure websites still exist. I think Web3 will bring online all these other things like gold. Web2 didn’t bring gold online, but Bitcoin did. Web2 didn’t bring the scarcity component of fine art online, NFTs did. It didn’t bring [inaudible], DAOs are doing that. I like to think about it as this very non-competitive thing. 

55:24 • Sahil
We’re all part of actually the same movement, which is offline to online. Software is eating the world, as Marc Andreessen said 15 years ago. It’s all the same movement. We’re just trying to move stuff online. Why? Because it’s cheaper to turn a 0 into a 1 then to turn something else into something else. Bits are just cheaper to move and change than atoms, right? So, it’s better. It’s like Pareto superior, right? We’re all aligned in this. The more we can say, “Hey, look. We’re all literally trying to do the same thing, which is we’re all trying to make things cheaper, faster, more efficient, and more accessible.” Until we live in a future where there is no fraud and we can trust everybody and we don’t even need passwords in that future – just full trust – we’re going to have to have a bunch of trade-offs, and these politicians are going to have to manage these trade-offs. That’s how I think about it. Politicians manage trade-offs. Technology just removes them. It eliminates them. Like, “Oh, we actually don’t need politicians to manage these trade-offs, because actually we built some technology that means that these are no longer conflicting.”

56:27 • Sahil
Like taxis – why do they regulate them so strongly? There are probably risks taking a cab, and obviously lobbying and other things come in after that. In the beginning, there’s probably some scam or rape or some bad things that happens that they have to prevent. And then Uber is like, “Technology can solve this problem with ratings and data and GPS and your phone and all these things,” and now – boom – you don’t actually need the regulations at all. That would be my case. Obviously people can disagree with that. The more we can just say, “Look. We’re all trying to get to the same place, which is one market which is fully liquid, super transparent, and anyone can participate in it.” Everyone knows that’s where we’re going. I should be able to invest in a grocery store in Africa, and that person should be able to invest in Gumroad. It’s just efficient. 24/7, no fees. I love the Jeff Bezos quote. “Stop trying to predict what’s going to change. That’s hard. It’s really easy to just bet on what people will want and continue to want,” which is like cheaper and faster goods. The same stuff but cheaper and faster. If we can make it cheaper, we can make it faster…we think people are going to want that in 30 years, in 100 years, in a million years. 

57:39 • Sahil
Centering everyone around the same goal and thinking we’re all aligned, and that we all want the same thing. The SEC wants the same thing. Web3 founders want the same thing. Web1 founders want the same thing. We all want the same thing. We all want technology to improve our lives and make things better, faster, cheaper, and closer. That’s why I love Gumroad and why it’s fun to work on. It is Web2. It is a creator economy. It’s kind of like Web1. We did the crowdfunding thing. We’re playing in Web3 slowly over time. I do think this is all one big melting pot of stuff, right? There is no metaverse. The metaverse is just some delineation we came up with. I don’t know why. We just needed it to define a certain set of things, but what is that? No one knows. It’s not like you turn it on. It’s just a thing. It’s like Shaan Puri says, “It’s a time, not a place.” That sort of thing. It’s just everything.

58:29 • Sahil
I see this a lot with the creators who I talk to who are very left-leaning, progressive, who often don’t like the NFT discourse and think it’s full of scams and issues with climate change…the answer is making them part of the camp. Over time, they will fall in love with these things. The answer is just having conversations, just like we talked before about having conversations with people who are going to rip you to shreds. Have conversations with these people and they will rip you to shreds, and you’ll keep doing it. Over time you’ll convince somebody. Over time, you’ll eventually win. We will win. The beauty of technology is that it’s kind of like Pandora’s box. Once it’s out there, it’s out there. You can’t put Bitcoin back into the box. Just like you can’t put nuclear weapons or guns back in the box – you have to work with them. That’s what makes me optimistic. We will win. The technologists will win because we always win because we are on the side of the future, which is – guess what? We’re headed in only one direction which is the future, we cannot go backwards. I really believe that this is all one thing and everyone is really aligned.

59:28 • Sahil
Personally, I’m not that scared of Facebook or Google or someone really trying to clamp down or shut down on Web3 stuff. Obviously, you do have some of that. I think it’s really going to come from the middle managers, frankly. The people at the center of these organizations are fearful of decentralization because in that future, they don’t have jobs, or at least not the jobs they currently have. I’m concerned about the VP, as you mentioned, and the 1000s of VPs at Microsoft. I’m not concerned about Satya Nadella. I think he’s super smart. He wants the future. He wants technology. He gets it. Certainly, a founder of a company would be better than a CEO, but I think generally the CEOs also get it. I would be most fearful of the employees, frankly. It’s kind of like the woke…I think that’s why it’s so important to do what Coinbase did, was to say, “Hey look – we’re going in this direction. If you don’t like it, leave.” like Balaji says, “Entry or exit?” You either work at the company, try to have the change you care about happening, or you start your own company and compete. What I always tell my friends who are anti-crypto is, “If you don’t like it, and this is just technology, then make better technology. You could win. By the way, this market is so efficient that you will become a billionaire overnight.” That’s the beauty of liquid, transparent markets. The winners become winners much faster than in the old world. It’s eerily efficient. 

1:01:00 • Sahil
I don’t really know what point I’m making, but I find that generally people are optimistic, and as long as you can center on the technology…like, when I get people excited about crypto, it’s generally because of zero-knowledge proof, and the technological explanation behind NFTs, just because that is what is currently exciting. It is still a very speculative casino of assets. There’s obviously value here. The funniest thing to me is that the SEC is basically making it a casino in a way. Their critique is, “There’s no real value here. It’s too speculative,” But they’re the ones doing that. In a second, they could make it very valuable. It would be 10x. 

1:01:46 • Sahil
I personally have this belief, it’s almost religious, to be honest…I just believe the future is going to be awesome. So, I just believe that, whether it’s the SEC or the future that replaces it or we just say “F it” and we don’t care what the SEC says anymore and there’s too many of us and not enough of them, and we have all the best engineers (which is a dynamic that’s certainly happening – the best engineers are not going to work at the SEC, they’re going to work at Coinbase), and we will win, and we will get our way, and that way is a beautiful sort of free market that will lead to all this other awesome and amazing stuff. So, let’s be nice to everybody because we’re all going to be there together. Politics and all these sorts of things…I’m a fan of the Big Tent philosophy that I know many people are not.

1:02:29 • Tom
I always try to think about how Web2 will react and how they’ll shift. The thing I usually come back to is that it’s hard as hell for them to do what Web3 is doing. If you want to give some ownership in Facebook, what are you going to do? Give them stock? You can’t just give them stock. You physically can’t do the things that Web3 is doing. You just hit a wall.

1:02:52 • Sahil
You cannot. Even when we did the regulation crowdfunding round, we raised five million, which is not a lot. It probably cost us $250,000, so 5% of that, to just raise the money. Actually, more. It was subsidized. It’s expensive. This stuff is not cheap. We had to write an 80 page and submit it to the SEC and get it approved, hire an external law firm to audit us, an accounting firm to audit us, we had to provide three years of financial statements (which in crypto, you get that for free). It was so painful. Or, functionally, technologically, it would have taken me a day in crypto land and it would have been close to free. And, it would have been more accessible, cheaper, more liquid, and more transparent. It would have been better, but I wanted to do it the Web2, old-school, SEC way. I can see that clearly there is a 10x better way of doing this, and the technology clearly exists. One of the things I always tell my Web2 friends is about the example of Uniswap. That clicked for me. 

1:04:14 • Sahil
When I played with Uniswap for the first time, I was like “Holy F, this is incredible.” A totally new paradigm, it doesn’t exist in any other part of the world at all. So, I see that, and I see that it’s literally 10,000x better than what we did, and the only reason we did this instead of obviously the better way, is because we wanted to do it by the SEC book. I literally talk to people in Congress and people at the SEC, I try to. And, every time, I tell them that this is all the same. We’re solving the same problem with totally different things. Please just understand that this is the same thing. Clearly, crypto is solving a real problem, because we had the problem and we tried to solve. And, it was so worth it to us to do it this way that we spent $250,000, which no one in their right mind thinks…even the SEC thinks it should not be this slow and arduous, but it is this way because we want to make sure there are no scams, so the way we do that is just make it stupidly expensive. Over time, we’ll make it easier. So, they definitely will make it easier, cheaper, and faster. Their time scale is decades, literally. It’s not like, “Oh, did any scams happen in the first 5 years? No. Okay, no change. Let’s wait 5 years. NO scams? Cool.”

1:05:35 • Tom
I’m with you. It has to get cheaper and easier, and I think it will get there. It’s funny you bring up the reggae stuff. I remember years ago, when I was first getting into crypto, and there was Blockstack who did their reggae plus, I think. They didn’t have much money at the time. They didn’t raise that much. IT cost them one or two million and they did it legit. The funny part was that you had EOS around the same time raise four billion dollars, and they got like a twenty-five million dollar fine or something. It made no sense at the time, the dichotomy between doing it right and doing it wrong.

1:06:10 • Sahil
I’ll tell you something crazy that we’re probably both familiar with because we both run investment firms. The SEC has these laws around how many people can invest in your fund, how many partners you can have, there’s all these QPs…that is incredibly sort of not-anti-democratic. Because effectively you’re saying that you can only have rich people invest in funds, because if you only have 99 funds and you want to invest in a lot of stuff, you need those checks to be big. It’s insane.

1:06:39 • Tom
It’s not even the LP side. The thing I struggle with is, if you want to be the founder of a fund, it’s insanely expensive. The requisites for doing so are insurmountable. If you want to raise a $10M fund, you can’t do it. ITs not economical unless you’re in crypto-type-upside. It’s not approachable to the traditional world the way it is.

1:07:00 • Sahil
Totally. There’s so much that we could do to make it more accessible. I always try to remind myself that the reason we even get to have these kinds of conversations and be so early is because of this stuff. If the SEC was like, “Oh, cool, Bitcoin. This is awesome. Let’s just get rid of securities laws and you can just do whatever you want. We trust people, whatever. You can gamble it all the way. It doesn’t matter.” I personally would love that. I think I would do a lot better in that world, I would like to think. But, that’s not how they think about it. If they did, then it would have been too late for us. We wouldn’t have been able to get into it. The ship would have sailed decades ago. It would be a totally different timeline. So, I like to remind myself that the reason Gumroad was the first Reg CF company ever to raise $5M was because of how slow this old system is to change. It is weird to me that the future is so clearly on the wall and yet it’s not happening fast. 

1:08:00 • Tom
That’s a really good way to put it. When you go to somebody and you say, “Hey, man. If we were a little bit more progressive every Uber driver would own part of Uber and part of the token and earn fees, but instead they own nothing and can only buy it on the secondary market after the IPO,” what’s the pushback?

1:08:16 • Sahil
One thing that makes me optimistic is…I really think Elon is very underrated in this way: the idea that a single human being can effectively become…he’s like an influencer on a scale that I think no one has really seen before. And, he has something very few influencers have which is, effectively, unlimited amounts of capital. My crystal ball would say that there’s going to be a moment, just like the Gamestop stuff happened in January, that is going to create an opportunity for someone at that scale to point every single person at this single problem and say, “Hey, look. If we just change this one number, or just change this one thing over here, the world is just going to get so much more equal. If you care about diversity/equity/inclusion, this thing is going to improve it 10x.” This is the hard thing about traditional politics. You have to get everyone to care about the same issue at the same time. What’s the George Floyd moment? It’s not going to resonate nearly as much. But, at some point that’s going to happen, and someone like an Elon is going to be like, “Hey, by the way, did you know you literally can invest in startups like I can. Isn’t that insane?”

1:09:30 • Sahil
And then you create this Occupy Wall Street-esque movement toward this very specific thing around democratizing financial inclusion, and there’s a lot there, but starting off with the sophisticated investor accreditation rules, maybe with what it takes to spin up a bank or hold a balance with somebody else’s money…at some point that’s going to happen. And, that’s really how change happens. It’s ultimately just like the SEC is on their back foot so strongly, because the macro environment and the market just gets what it wants eventually. Once you have 100,000,000 people beating down your door, it’s going to happen. And, it’s not even that controversial. It’s like, “Oh, cool. You can now invest in startups if you’re with $10,000 instead of $1,000,000,” or whatever the rules may end up looking like. IT could happen. It’s actually a very simple change. IT will be a page. But, you need the House, the Senate, the SEC commissioner, and the administration of the United States to all agree at the same time. The events of 2020 and 2021 give me optimism that that can happen.

1:10:27 • Sahil
The power of the internet and the power of crypto is collective action – you can get everyone aligned on a certain issue. Currently, it’s used to do things like to try and buy a copy of the Constitution and things like that which is also awesome because it spreads the word about these amazing concepts and technologies. Ultimately, imagine if you could get 10x that and point it at, “We’re going to try and make this change happen.” We’re so early in that story and that narrative. I was talking to my wife yesterday like, “Wow, people think Elon has peaked.” Barely. That guy has been famous for like two years or a year, ever since he was on Joe Rogan or whatever. He is going to have unlimited amounts of capital and unlimited amounts of fame for the next 20-30 years. SO, we’ve barely seen what’s in his head and has yet to manifest. It makes me very optimistic for 2022 and the years beyond. I personally think there’s room for everybody. It’s not a zero-sum game. The present is – there’s a fixed present, but the future is that we can grow whatever the future ends up looking like. I believe it will happen. I believe strongly that all these things will play out. Everyone alive today who participates will look back in 2050 and be like, “Holy crap! The power of compounding is bonkers.” I don’t know what 2050 looks like, but it will be crazy.

1:11:44 • Tom
You’re right. It’s kind of funny. You have young people – 18, 19 – you’re probably not Hayden from Uniswap who built that I think in his mom’s basement. These people are clearly not accredited investors but are literally building the future of inclusion for everyone to invest in around the world and be included. It’s so backwards that you have these people that are literally changing the dynamic but don’t fit into the old world by definition. I’m with you. I think it will change.

1:12:13 • Sahil
Ultimately, the last people to be convinced are the people who get all the benefits from the existing system. The last people to reinvent the government will be the people in the government. One of my superpowers is that I do have this portfolio: I have Gumroad, I have my fund now, and that helps me be more honest about Gumroad now. If Gumroad was my only thing, it would be much harder for me to admit the truth about it, for better or for worse, because it’s kind of like, would you bite the hand that feeds you, even if you see the hand falling off? No.

1:12:44 • Tom
I think you would be an insane Web3 founder, not to try and poach you or anything. The way you approach wanting to reward your community, wanting to fire yourself as CEO, wanting to make this all free, having all the inclusion, trying to get away from the traditional world. This is the Web3 founder playbook. You’re saying it, some Web3 founders say it but don’t do it, so it’s nice to see that you’re embracing it.

1:13:16 • Sahil
I’m excited. I’m hopeful that in 2022 I’ll have more to say than just words. Just like I used Gumroad to do the crowdfunding thing, which is much more impactful about a tweet about how cool crowdfunding is, if we can figure out a really interesting use case in the Gumroad context in 2022, we will do it. We will do it very unapologetically. We’ve seen what happened to Patreon and Discord. We know what the narrative will be, and we’ll just lean into it super hard, because that’s the only way this stuff will change. It’s not saying, “Oh, we apologize, you’re right,” No. The answer is that you’re wrong. Let’s have a conversation. Ultimately, if you care about the planet, there are better ways to solve that problem. So, I’m excited. 

1:14:05 • Sahil
I think that Gumroad’s superpower as a company is that we almost died. I think about it like the war movies where someone almost dies and then they become a badass because they’re just playing with house money at that point. Like, what can we do? Like, if I can literally kamikaze Gumroad into the SEC and that’s what creates the change for the rest of everybody, then I win anyway. Because, the cool thing is, I persist, and my reputation persists, and I would only be more interesting, famous, successful, and whatever. The cool thing is I have investors like Naval and other people who are not like, “No, no, no! Don’t do that? You’re thinking about kamikaze? Why would you even say that?” I would love to do it, to be honest. I spend a lot of my time looking at all the cool stuff that’s happening in Web3. Frankly, getting jealous too. 

1:15:04 • Tom
We haven’t seen a Web2 company that has such a fantastic relationship with not only their customers, but the people building on them, like all of your creators – we haven’t seen them move to Web3 in a big way. I could totally be blanking on who it is…but to see someone make that shift, that in itself would be pretty big.

1:15:29 • Sahil
The thing I would love to do too is figure out how to bring everybody along. I would love to bring a bunch of crypto people onto the traditional cap table that we have as part of figuring this thing out, while also giving everybody who owns Gumroad equity a token that they were never promised but they just get as a gift. Blending those two things together would be really important. Gumroad is uniquely positioned to do these sorts of things. Patreon is just too big. They have an IPO in the next couple years. They’re not going to rock the boat. Gumroad gets off on rocking the boat though, that’s our thing. I’m super excited. I remain optimistic, whether it’s on Ethereum or Solana or Cardano (probably not).

1:16:20 • Tom
Sahil, don’t make me jump through man. I liked you.

1:16:24 • Sahil
Yeah, just having fun.

1:16:28 • Tom
Look, I’m not trying to poach you and I had no designs over this podcast, but it’s just incredible who has a Web2 company and who has such a good relationship. There’s so much you could do here. You could do curation with your community, you could share revenue, there’s a lot of ways you could do it.

1:16:47 • Sahil
We could share revenue, but why can’t we share everything else? Like decisions? Even, we have a marketplace. Maybe there’s curation built into that. Or, maybe you don’t get the revenue but you get to vote on what we do with it. What investments do we make? There’s a lot. The transitory period would include a lot of these things. We’ll see. Definitely my 2022 holidays are coming up, I’ll be spending a lot of time thinking about crypto. My big project is to take my book (I have this book that came out, The Minimalist Entrepreneur), so I saw this very old school process of writing a book, and I can’t help but think – what’s the crypto version of this? Like, I talked about how the incentives are still broken, the earliest fans get the worst financial outcome, and the latest people get the best deal…it’s totally broken. So, I’m going to write some code and playing with Unity and seeing what a Web3 book looks like.

1:18:02 • Tom
I definitely want to check out the book. I was going to ask you a question about it. Building off what you just said, the whole creator economy / social tokens base is obviously super nascent. Crypto is young to begin with, but I don’t think anyone has really nailed how to do it. Jess from Seed Club does a fantastic job iterating here. He might be one of the ones to figure it out. Other than that, it’s early, so definitely open to see what you could do here.

1:18:30 • Sahil
It’s so early. That’s the important thing for me and for everyone listening, is that you’re going to feel FOMO because you can look back at the past but you can’t look at the future. Try to start a company, try to send money over the internet. It’s terrible. It’s so bad. How many times do you reset your password for email? It’s so bad. 

1:19:00 • Tom
It’s terrible. Especially, at our fund, certain people have certain sign-ins, and you have to go to their house, shoot them down, and ask them to do it, and then they forget their password.

1:19:16 • Sahil
Then you text them and they only have 5 minutes to respond and it’s 2 in the morning. We’re still figuring out how to work with teams in many time zones. It’s so early. I’m excited for the next 10 years. Delphi’s definitely playing in the future. Hopefully, Gumroad will be too.

1:19:40 • Tom
To close out this incredible convo, and I’ll just say I’m excited to hopefully do another one or help you with any Web3 plans you have, Delphi is at your disposal here…but with your book, the Minimalist Entrepreneur, your book, what would you say is the biggest takeaway? Not like preconceived notions when you wrote it, but you wrote the book and now it’s out there, and you’re thinking about it in the past, and you see, “Hey, this point had the most impact in reality.” What would you say that is?

1:20:05 • Sahil
The thing that resonated the most and feels like the most impactful idea is that it just shrinks the cognitive overhead of what a business even is. There’s so much narrative…if you google ‘business’ what comes up? Facebook. Microsoft. Just like, when people think of banks, they think of big buildings that have existed for millenia. Like, how do you start a bank? I can’t draw the line from where I”m at today to that skyscraper, right? So, I think the book will really help people think, “Oh, that’s it? That’s all a business is?” It’s like a little thing, where you sell some product or service, people give you money, and then you pay with it, you pay taxes with it, and everything else is kind of optional. It’s actually what made it click. Like, DAOs had this moment. Someone said, “On-Chain corporations,” and I thought that’s impossible because corporations do a ton of stuff. I don’t understand how you put all the stuff on a chain. Then you see, it’s really just that money comes in and you decide where to send the money. I guess that’s really all a company does. It’s like, money comes into our bank account, and then we pay people with it and we give some to the government and we do it again the next year. That’s it. 

1:21:22 • Sahil
That’s probably the key takeaway. When you’re building a business, it can be really, really tiny. It should be something that anyone can do. That’s what I love about the creator economy, is that it really feels approachable and accessible to everybody. Like, “Oh yeah, I can be a YouTuber.” The only difference between you making a YouTube video and some famous person like Casey Neistat is that he’s done it for a long time and has gotten real good at it and has a big audience. He has a business and you don’t, but there’s no real difference. You have a laptop and an iPhone and so does he. The gap is a lot smaller than you think. Whenever someone tells me that, that makes me feel great. I remember when I was a kid and thought I wanted to build software and that means I have to get a degree and work in an office because I’m going to need a supercomputer which will require an office, etc. Literally, that’s what I thought. I remember when Microsoft invested in Facebook, I just assumed that Facebook was like a Microsoft property or company. My vision of reality was so distorted. I love that idea that I can just make reality more real for someone so they think, “Oh, that’s it? I can do that.” The more of that, the better, right? The more people who can read the Uniswap or Bitcoin whitepaper and think, “Oh, that’s it?” Obviously, it’s not easy to implement, but it’s possible. You can do it. The story of Uniswap is incredibly inspiring. You have to be very smart, but you can do it, and you can certainly contribute to doing it. That was a big takeaway.

1:22:57 • Sahil
The other one is the idea of starting and learning. There are so many people that feel they need to learn and learn and learn and be super ready, but the truth is you’ll never be ready, and you probably have most of what you need to make your first step. You don’t need to figure out steps 2-10 before you take step 1. And, how you take step 1 will change step 2 anyway. The market will react to you taking step 1 and you’ll think that either that was dumb or that was great, and you’ll do more of that or less of that or try something new. I think feedback from the market is the most important thing, and that only comes by starting and putting yourself out there, either as a business or with your ideas and words. But, you have to take the things in your head and put them out of your head, and put them in a place where other people can see it, comment on them, get value on them, etc. Those are some of the things in the book that I think hopefully people will like.

1:23:46 • Tom
I love it. It’s awesome talking to you. This is a lot of fun. You clearly know your stuff. If you need any help with anything you’re doing, just let us know.

1:23:55 • Sahil
Yeah, I’d love to work together on some of this stuff.

1:24:00 • Tom
Thanks so much, Sahil.

Show Notes: 

(00:00:00) – Introduction.

(00:01:28) – Sahil’s background.

(00:05:24) – The decision to leave Pinterest / Starting Gumroad. 

(00:13:41) – Working through adversity. 

(00:21:45) – Advice to crypto founders. 

(00:36:56) – Decentralizing Gumroad. 

(00:45:31) – Thoughts on merging Web2 and Web3. 

(00:48:48) – Social credit and pseudonymity. 

(00:53:07) – Why Web2 and Web3 are not mutually exclusive.

(01:02:27) – Web3’s edge over Web2. 

(01:09:15) – Pushing change forward on the societal level. 

(01:13:41) – Sahil and Gumroad’s shift into Web3. 

(01:20:35) – The most impactful idea in Sahil’s book.

(01:23:43) – Closing