Showing how the founders of startups have failed and how they have recovered

Sahil Ravingia, founder of '

Gumroad ', a service that can sell digital content easily online, how to make a mistake when leaving a former company and thus making a successful startup I write in the blog what I did.

Reflecting on My Failure to Build a Billion-Dollar Company

Ravingia was the second employee of Pinterest, but in 2011 he left Pinterest and launched Gumroad. When it was launched, 'I'm going to be a $ 1 billion company with hundreds of employees, maybe even an IPO, and work at Gumroad until I die,' said Ravingia. But that was not the case.

Although he is now in the position of a successful software business, he thought that it had been a failure for many years. At the worst time, 75 percent of the employees had to be fired, including friends. However, it seems that Mr. Ravingia does not think that such failure is a shame any longer. He also said, 'It took years to realize that it was misplaced from the beginning.'

◆ 01: A start-up on which the weekend project was funded
The basic idea of Gumroad was as simple as 'creators should be able to sell their products directly with one link.' Gumroad was created on the weekend, and it was unexpectedly noticed that it will be published on Hacker News on Monday morning, and 52,000 people visited it on the first day. Later, in the second half of 2011, Ravignia retired from Pinterest to focus on Gumroad, which is likely to be a life-long job. Soon after Gumroad was launched, it raised funds of $ 1.1 million (approximately ¥ 88 million in 2011) from prominent angel investors and venture capital (VC). A few months later, in May 2012, we raised another $ 7 million (about 560 million yen in 2012).

Ravingia is in the world Peak ( Thank you ) It felt like he was staying in At only 19 years old, he started his own company, had more than $ 8 million in deposits, and had 3 employees. And the world was starting to pay attention. Ravingia grew up the team and continued to focus on the product. The numbers on the moon began to grow ... and at some point growth stopped.

In order not to die the product, Mr. Ravingia fired 75% of the members of the company. Ravingia told himself 'I'm sure it will work' for this nasty event, but on TechCrunch '

Gumroad Layoffs : Rebuilding E-Commerce Startups (Layoffs As The E-Commerce Startup Restructures)' An article was posted, and Ravingia's failure public ( Good night ) It will be

That week, Ravingia relies on Gumroad on the business, and wants to read the downfall news and wants to know if it is necessary to consider another service. wiping ( Fukusuku ) It seems that he was devoted to doing things. 'Although some of the top creators have left Gumroad, it hurts, but they don't blame them for trying to minimize their business risks,' said Ravingia.

◆ 02: What went wrong
The figure below shows the monthly turnover up to the layoff. It looks as if it is not so bad as it draws a rising trend in a quick look.

But Gumroad is a venture, which is like a double or nothing game. You can get euphoric when things are going well, but if things go wrong you will suffocate. Ravingia is seeking to grow the team, the timing of the second major procurement is the timing of the second major procurement of $ 15 million (about 1.8 billion yen as of 2015) growth speed to procure $ 15 million It was too late. A growth rate of less than 20% in all months should have been received as a danger signal.

However, at that time, Mr. Ravingia seemed to think that it was not a problem. There was money in the bank, the product was fit for the market, and everything seemed to be good if we continued offering the product. The creator activity online has just begun, and it seems like the timing of the change is coming. And it's not Ravinga's responsibility that the timing does not come.

Mr. Ravingia now understands that the problem is not the responsibility, and also understands that growth has stopped after reaching a peak in November 2014. Many creators loved Gumroad, but the market size was too small, so it was necessary to find a new and larger market to raise funds to get to the stage of being acquired or IPOed.

In January 2015, the balance of the bank account updated the minimum line of 18 months. After taking the

last steps, Ravingia said to the team of 20 people, “These nine months are a critical moment. Trying every hand to lower the priority of non-core functions of the business and increase the monthly turnover. 'The word of encouragement of the content of' 'was told. Hopefully you can raise money from VC, hire more people, and resume your journey. If you fail, you will need to reduce the number of people from the company.

No one left Gumroad in nine months, and it seems that everyone worked harder than ever. Gumroad has added a mountain of new features, including the Small Product Lab, which teaches how to grow and sell to new creators. But I did not reach the numbers I needed.

◆ 03: Do you fold or shrink your company?
Looking back, it's good to see that the numbers have not been delivered, Ravingya says. If it worked there, the possibility that it would only lead to a more spectacular failure was very realistic.

However, at the time there were three options available:

・ Fold the company, return the remaining money to investors, and try something new
· Keep the company smaller and keep running to survive
・ We raise acquisitions

Some of the investors wanted to close the business, and Mr. Ravingia also agreed with the heart. However, Gumroad was more responsible to employees than investors, and was more responsible for creators than employees. Gumroad helps thousands of creators get paid each month, and that money is spent on creators' rent, loans, children's college funds, and so on. I can not stop it.

And when it comes to being acquired, it means that Mr. Ravingia can not control Gumroad's fate. We promise to be an exciting future, and we can not stop talking about products that will be abolished in one year after the acquisition talks that show the best synergy.

It was tempting to sell the company, collect more money and start over again, but Ravingia was responsible for the creators who use Gumroad. In the next year, we reduced the number of employees, who were 20, to 5 and found an office with a rent of $ 25,000 a month and spent the remaining resources on launching premium services.

The financial status per month of several months before dismissal in June 2015 is as follows.

Income: $ 89,000 (approximately 980,000 yen)
Gross profit: $ 17,000 (approximately ¥ 1900,000)
Operating expenses: $ 364,000 (approximately 40 million yen)
Net profit: -351,000 dollars (about 38.6 million yen)

One year later, as of June 2016, it was as follows.

Revenue: $ 176,000 (approximately 19 million yen)
Gross profit: $ 42,000 (approximately ¥ 460,000)
Operating expenses: $ 32,000 (approximately 3.5 million yen)
Net income: $ 10,000 (approximately ¥ 1,100,000)

◆ 04: 1
Although the profit was outstanding, it continued to deteriorate from there. Gumroad is no longer a fast-growing start-up, other employees have found other opportunities, and the number of five was reduced to one.

Ravingia is now alone, with no team or office. In the city of San Francisco, where start-up companies gather money, build great teams, and ship great products, as some of their friends become billionaires, Ravingia has to keep a small business It was Ravingia was in charge of all Gumroad support and tried to fix all bugs. In many cases, I needed the help of a former Gumroad engineer. The former engineers all found another job, but they always helped me.

Happiness for Mr. Ravingia was to expect something positive change to happen. That year was the first time in my life that I felt worse than the previous year. Life in San Francisco was already difficult, and when Trump won the presidential election, Mr. Ravingia left San Francisco.

◆ 05: A new beginning
However, one day the situation changes completely. On November 27, 2017, Ravingia received a single email from the main stakeholder KPCB, 'KP wants to sell Gumroad to Gumroad for $ 1. Can we discuss this week?' The

The officer who was in charge of Gumroad at KPCB retired, but KPCB did not want to have the trouble of appointing a new officer. Also in terms of taxation, sales worked favorably. Suddenly, the right of preferential allocation of residual assets, that is, preferential right of preferential distribution to preferred shareholders, decreased from $ 16.5 million (approximately ¥ 1.8 billion) to $ 2.5 million (approximately ¥ 275 million).

New investors have joined and started to focus on the future. Ravingia had a small team and bought back stocks. Gumroad did not seem to be a $ 1 billion company, but it did not seem to be a problem either.

◆ 06: What supports growth
The eight years Ravigna worked at Gumroad was a big change. There were months when I worked 16 hours a day and when I only worked 4 hours a week. Below is the trend of monthly settlements since the company's establishment, but I do not know what time it was. I had a sales team for several years. However, it can not be read from the graph.

Regardless of how good the product is or how fast it will work, what market you are in will determine most of your growth. Good or bad, Gumroad grew at about the same rate every month. This is the growth rate determined by the market.

Instead of pretending to have a vision when making a billion dollar company, Ravingia has concentrated on making Gumroad better for existing customers. Gumroad is supported by such customers, says Ravingia.

◆ 07: Creation of value and acquisition of value
Bill Gates was on stage at the CEO Summit many years ago. I asked how someone dealt with the failure to gain value. Microsoft is certainly a huge company, but it is extremely small given the impact Microsoft has had on the world. Bill Gates replied as below.

Certainly that's right. But is that true for all companies?
Companies can create value and collect only a few of the values they create.

--- Bill Gates

Ravingia now seems to focus on creating value rather than gathering value. 'I want to have the greatest impact possible, but it doesn't matter if it's not direct, it doesn't matter if it's collected in the form of revenue or valuation,' says Ravingia.

◆ 08: Another way to create value
After the layoff, Ravingia told nobody about Gumroad. And when I left San Francisco, I felt I was disconnected from the startup community. So we decided to disclose Gumroad's financial status as a way to rejoin the community. The newcomers can learn from Gumroad's mistakes and use the data to make better decisions.

Disclosure of the financial situation is horrible. If you are not growing each month, prospects may be separated. It is an act that will never be done if the startup is looking for VC. But Gumroad is profitable, and it won't change even if there are no growth months. And we decided to publish monthly financial condition from April 2018.

Ironically, the publicity of the company has brought more attention from more investors, and more and more people want to contribute to Gumroad. Creators who are users started to act more honestly without being upset by how small Gumroad is.

Soon Gumroad will make its products open source. Without Gumroad in between, everyone will be able to deploy customized Gumroad as they like and sell what they like.

◆ Not 08: 0 or 1
For many years, Ravingia's only success criterion was to create a $ 1 billion company. Now I realize that it was a terrible goal. Mr. Ravingia certainly failed, but there is also a part that succeeded. With $ 10 million (approx. 1.1 billion yen) of invested capital of $ 178 million (approx. 19.6 billion yen), we are focusing on making the best products for creators. Above all, it generates value beyond products that generate revenue.

Mr. Ravingia now thinks that he has succeeded. He believes that the goals of Ravingia's $ 1 billion company are inherited from a society that worships wealth. A long time ago, he had thought that success was linked to net worth. When he heard that someone was successful, he thought that he did not improve the lives of the people around him, but that he had found a way to make money. Wealth may be an indicator of success if you invest heavily in charity like Bill Gates, but wealth is not the only way to assess success, nor is it the best way to go. Says.

'There's nothing wrong with trying to make the next Microsoft, nor does the billionaires think that they are evil,' said Rovingia. Yes, but it's good or bad, I'm in the situation I wrote above, it's my way not to create a $ 1 billion company, there are many such ways, but the one above is my It's a thing, 'concludes the blog.

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