Pivoting to Put Customers First
About a year and a half ago, Sahil Lavingia moved from San Francisco to Provo, Utah—which he says is “the most unique thing” about him at the moment. He did so after his company Gumroad went from a high-flying startup to laying off 75% of its staff and, as Lavingia says, going through “that whole sort of failure cycle.” He had founded Gumroad to enable creators of all types—filmmakers, musicians, writers, designers—to sell directly to anyone, and the e-commerce platform has lead to sales totaling $193M for the creative people who form its user base.
He wrote about his move to Provo, and also his “Failure to Build a Billion-Dollar Company” in two pieces on Medium that have been widely shared for their candor about Silicon Valley and what success really means. “I think in hindsight it made perfect sense,” he says of his move and overall lifestyle change. “I just felt like that was not the right environment, learning-wise for me. I wasn’t really being pushed. I was very much in the center of the bubble, and I think it gave me the distance, quite literally, to rethink my life and my identity.”
Lavingina will speak at the 2019 Lean Startup Conference to share more about his journey to building Gumroad and how his definition of “success” ultimately shifted as he pivoted to running a smaller, leaner company. We spoke to him recently about a few of the things that make his life and work meaningful and productive.
What’s a business or professional principle that has been consistently useful or true for you?
That’s a good question. I think always seeking alignment and always seeking openness. I think one of the things that resonated so much in the article I wrote about Gumroad was that I wasn’t just an entrepreneur failing to build some enterprise video calling app or something like that. I was building a business that had a lot of valued creators and people saw that. I was helping other people get paid and that’s important. When we laid people off, I knew we were going to have to do it because creators come first. Creators are why we built this company and they’re more important than employees and the investors. All of the team was like, “That makes sense,” because everyone had signed up for that same reason. They joined Gumroad because they wanted to help creators. So when that pretty hard decision had to be made I think people were like, “Yeah. Okay, I get it. That’s why I joined the Gumroad so it would be so hypocritical to not want to leave Gumroad because of the same reasons.”
We benefit from being open and sharing numbers because our creators, all our users, are doing the same thing. They’re all trying to make it work. They’re trying to build businesses selling a product to their own audiences. They also have to think about these things. So when they see Gumroad has to worry about it they’re like, “Oh cool, we’re on the same team.”
I’ve been writing fiction. One of the tendencies of fiction is foreshadowing. It’s actually a really important principle in business as well. You should constantly be foreshadowing, giving a hint to your customers, to your employers, to your investors about what’s in the pipeline for you personally and for the company. I don’t think I specifically said, “We’re going to have to fire 75% of the staff.” But I implied that this was going to be a hard journey and raising money was going to be really difficult. The most expensive cost of our company by far is employees, and so you kind of have to assume the smarts of your audience, also similar to writing, and let them fill in the gap. I think if you paint a picture well enough then people aren’t surprised by it and don’t feel like they’re kept out in the dark but actually that they’re kept in the light most of the time.
What is an area in innovation transformation that nobody has tried yet?
Oh man…I feel like everyone is trying everything.
I’ve always been curious—but especially since I moved to Provo—about whether you could build a piece of software that was specifically for people who disagree with each other. What would that look like? Because I think right now TV is being televised to appeal to a core audience and social media is the same—AOC [U.S. Rep. Alexandria Ocasio-Cortez] doesn’t really have an incentive to appeal to conservative voters. I’m not saying she should necessarily, especially on Twitter, but it would be interesting, I think, to have software allow for nuance and meta-content and context that isn’t really provided on Twitter. What that means is the same statement can be read two very different ways based on your assumptions.
I think we need to figure out ways to have what we have in person, which is a tremendous amount of body language and non-verbal communication. That’s why we’ve supplemented social media with so many things like GIFs, emojis, filters and lenses on Snapchat. These are all ways of communicating non-verbally. I think there’s so much more there. You know? I can’t imagine that in 30 years we’ll still just be communicating via…basically telegram.
What’s a personal belief, unrelated to work, that you hold dear? And why?
I don’t believe anyone is evil. I don’t know if that’s a hot take or not anymore. I think in general assuming malice is a pretty ineffective practice. I’m sure some people do evil things some percentage of the time, including myself, but I think in general if someone called me out on it, it would not be effective anyway.
I think I’m happier for believing that a vast, vast, vast majority of people are really nice. It lets me live a little bit more freely and cheaply, too. I also think it’s important to understand incentives, which are incredibly powerful. Instead of trying to say this is something we should not allow, figure out how you create incentives to enable or disable a behavior from happening. You should really think about what you want people to do with software in a way that’s going to help the world.
Do you have a go-to stress relief method?
Sleep. I’ve never been the type of person that gets super stressed, and I think that’s a function of the fact that I’ve always prioritized my sleep. I never get less than seven hours of sleep a day. And if I do, I’m canceling everything—like, “Sorry guys I need to sleep.” It’s basic and it’s free and it’s very inarguable, you know? If someone tells me, “I can’t sleep.” I’m like, “Well you can.” It’s not that hard. It’s not like going for a run. Literally you have to do nothing. So if you can’t do nothing then I feel like there’s a deep-seated something else that you need to figure out.
Why are you speaking at the conference this year?
Because I was someone who had an idea, built it in a weekend, raised eight million dollars in a few months, hired a team, and just did it. We just built what we thought we should be building. We’re now in a very different place where literally we don’t have a road map. We don’t have OKRs [objectives and key results]. We just talk to creators every day and then we tell them what we’re building and then they tell us how we should be doing it better. We’re on the “faster horse” train—meaning I think a lot of people just want a better, faster, cheaper version of the thing they already have. We’re in what I call the obvious phase, where we’re just building very obvious things and it makes it really easy, and low stress and allows us to hire remotely and have low overhead because we’re not making these really intense decisions. Other people are spending around $350,000 a month on startups in the Bay Area with an office, etc. But what that means is that every single decision you make is like, “We’re going to spend $10,000 today regardless of what we do.”
That creates a massive amount of stress and I want to talk about that, and about the before and the after. I’m not a big believer in right and wrong. I don’t think what I’m doing now is right and what I was doing before is wrong. I just want to tell people “This is what we did. This is what we’re doing now.” And that patience is really important.