Gumroad raises $7 million from KPCB | Hacker News Reader

Gumroad raises $7 million from KPCB

venturebeat.com

158 pointsthoughtpeddler65 comments

For anyone that doesn't recall, this was how Gumroad started: http://news.ycombinator.com/item?id=2406614

Thanks for the link. I was looking for it as I remember this post from what I thought was last year (apparently longer - boy does time fly). Glad to see them doing well.

Just love the way he said how he got early access to Stripe: "I'm friends with one of the founders + I asked repeatedly." :)

Most importantly he has used access to a key service early and executed it all very well. Congratulations & all the very best Sahil!

It's crazy that there was so much investment for such a simple idea. I mean the entire product is just a thin wrapper around Stripe. He must have some really serious plans to move in a new direction in order to attract that much interest and funding... I wonder what the plans are?

Based on the description "social payments" I think it's targeting a wider base than the original "paid link shortener"

For sure - are you thinking tighter integration with social networks like fb and twitter? This definitely has a lot of potential, but I bet they would need to work out some agreements with the social networks themselves to be able to do it really right, and without running into trouble...

Probably that is where the VC investment and connections come into play, to get those partnerships in place. These are certain advantages of having VC as a stakeholder in business than just being a profitable completely bootstrapped startup.

What's the record for the ratio of VC funding to days since the original weekend project appeared on HN?

Question to Sahil or anyone with more context. Where is success coming from? I'd love to learn.

What we see here is a beautifully executed very clever idea - which we all (as hackers we are) project into "this should be succesful" and then we see KPCB throwing $7M at it - so it all makes sense and we are happy as hackerdom is victorious.

However, what I'd really like to learn is where success if coming from in this case. ie., who is using this today? Who specifically this is being helpful to?

Is it TONS of small transactions, or have you found a high-priced vertical willing to pay your 30% cut?

I mean, how is growth looking like today? $7M is a lot of money!

Just asking because I am really interested in the details - since we all know that a "great idea" is not enough - there must have been a lot of dirty and beautiful tricks to get traction - and that's the part that is interesting!!

I think there is not an answer to this question...yet. I built Gumshow.com a few months ago half-way expecting to update and re-brand the site for whatever niche really takes off on Gumroad. However, I don't think that this has happened yet. While our team here is going to give Gumshow a face lift and $7mil makes me feel good that Gumroad is sure to stay in the game, I'm just not sure where the explosive growth is going to come from. I think, as one commenter here said, paying some higher profile artists (musicians, etc.) to use the site could be a very effective marketing move. It's also possible that a niche market product (that uses the Gumroad API, like Gumshow) could get things really rolling.

> While our team here is going to give Gumshow a face lift and $7mil makes me feel good that Gumroad is sure to stay in the game, I'm just not sure where the explosive growth is going to come from

I respect you alot, but shouldn't that be something you just don't simply say, especially after raising that kind of money? Further, are you saying "nobody at Gumroad knows", or rather "hey, I don't know I am just an engineer/owner, but we are raising this money, some guys with other-than-tech skills will come aboard and they will know where we going".

Sorry if I didn't make it clear that Gumshow is in no way part of Gumroad. I also do not work for Gumroad.

I have just been trying to figure out a way to build products on top of Gumroad's great and super easy to use api: https://gumroad.com/api/authentication.

I am most definitely cheerleading for Gumroad since I think more people building markets, etc over their payments system will enable more users making money for themselves.

Update: Not everyone has a Twitter account with many followers, so marketplaces combined with other ways of getting old and new products to Gumroad could go viral.

I believe he is not affiliated with Gumroad, but just using their api.

I don't think Gumshow.com is affiliated with Gumroad.com, it's just a site built on the public API.

ok sorry for confusion! I stand corrected!

For those of you who don't know, Sahil applied for YC and didn't get an interview [1] (I think this was before Pinterest and turntable.fm) - a great reminder that YC can help you succeed, but isn't necessary. [1]: http://askolo.com/sahil#4f96a68bebceb8b92300000f

FWIW Sahil applied to YC with an iPhone app called Dayta

Congrats to Sahil, I think a few of us have been watching this since day 1. His record speaks for itself.

It's also good that Gumroad was essentially made possible by Stripe's very accessible API (as far as I know). I think I speak for all Europeans when I say hurry up and get Stripe over here.

I'm always interested/a little depressed when I see Europeans telling Stripe to hurry up and get there. I've seen this comment many times now but have never come across a European saying "Will someone hurry up and do a Stripe here in Europe!?" I think if folks in the US saw a great European service that - due to regulatory issues - just couldn't also be available here in the U.S. there wouldn't be a lot of sitting around and waiting and hoping......Or maybe I'm reading way too much into this.

The Samwer brothers don't seem to like waiting, and see the hell that they are getting.

Spotify?

This is one of the greatest things about the United States. People figure things out and make things happen.

If someone European did it, that's great. The point is that Stripe are a long way down the road of working out how to achieve this. As for the comment below that the US just gets things done - well it's a whole lot easier when there's just one currency and one country's regulations to deal with.

I would love to know what their assumptions are, as well as their vision for the product. I hate being publicly critical of other peoples' startups, but from everything I've read I've really seen nothing that convinces me this is a good idea.

Not a good idea in what way? It's a terrible idea that people shouldn't use or it's an idea that should be used but won't take off?

Basically I see it as a useful product for certain situations. But what I question is:

- How big is the market of people who A) have something they want to sell and B) have a pre-existing audience who would buy it in significant enough volume to move the needle for both themselves and gumroad?

- How often is this actually the best tool for the job as opposed to using sales tools that tie into external distribution channels?

Again I'm not saying they're wrong, but nothing in any of the articles that have been written so far convinces me that they're right either.

Why would they need money for growth? They use Stripe and host on the cloud. If they aren't profitable now why would they be at 10x the size?

I have no idea, but I find it easy to find plausible reasons to raise money. Hiring a team of engineers to implement all the great things they have in the pipeline? Getting a sales team to get big deals with content producers? Buying lots of ads?

Engineers cost $20k a month. They want to hire them faster than they can add $666,000 of processed transactions a month. This suggests taking investment.

heard you throw this figure around before. Can you break that out more? How much of that is salary, and how much is benefits? And this is location dependent, no?

In USA, you can reasonably expect to pay a developer around 100k. Add 50% overhead and the cost to company is around 150k translating to 12.5k a month. Adjust this number towards 20k/month if you are hiring in the valley.

The difference between small business and a startup is that small businesses scale linearly while startups scale exponentially. And organic growth is usually more linear-ish. The investment makes in exponential.

No disrespect to the founder, but it is a strange world where 19 year-olds raise 7 million in 4 days...

They raised a $1.1 million seed round for Gumroad in just four days, though obviously the service and the people have been around longer. Three months later, Gumroad is announcing a $7 million Series A investment.

It boggles my mind that $1.1 million is a seed round these days.

This is pretty interesting, because Sahil just raised his seed like 3 months ago...

Is there a Gumroad for bitcoin?

Would be also interesting to encrypt content, keep it hosted somewhere or on a p2p network but only sell the private keys to access it (for bitcoins?)

Another idea would be to create a new blockchain and you get coins for uploading content into the network, and the more people that access your content, or the more content you store, the more coins you get. Maybe there can be a queue for content that builds up and determines price the moment it's released. There could also be limited run items such as tickets or coupons that are all unique and cannot be forged.

If I may say so, Gumroad is not pushing the envelope at all. I hope they do something revolutionary. Haven't digital goods been around for ages? They're just streamlining the process for grandma.. okay I'm jumping for joy right now.

Hasn't clickbank nailed this space already anyhow? http://www.clickbank.com

Are there any usage stats out? Are people actually using Gumroad?

No stats, but you can get an idea from here: https://twitter.com/#!/search/realtime/gumroad.com

Looks like it's growing like crazy in Japan!

There is huuuuge attention to this from the pixiv/doujinshi crowds here in Japan. Great service for them - since they can supplement their twice yearly Comikett hauls with regular boosts

edit: not to mention a thousand vocaloid / niconico-douga songs with producers looking for an easy way to monetize

It's a great idea, and i was actually working on something similar before. I've said it before, but what scares me to death is when folks start selling copyrighted material. There is nothing to protect against it and the whole things pretty much revolves around good user behavior.

You can fix that with a "report this" link.

But you wouldn't know what's in the file unless you buy it. So you can flag it after the copyright is infringed and the seller has money in his pocket.

I have a feeling Gumroad is going to the the In-App Purchasing system for the WEB.

Congrats to Sahil! I have been following his work since he offered to help me improve one of my hacks I submitted in Hacker News and I kind of saw this coming.

This kid is on fire.

This is going to kill paypal.

I love it.

Going to become a customer soon.

What is Gumroad's competitive advantage? It doesn't look like it's its technology but its brand.

Brand and product simplicity, elegance of implementation. What is Dropbox's competitive advantage, or Instagram's?

Dropbox and Instagram both have much stronger network effects.

well, if Gumroad is first of its kind, or the biggest one, and will not turn out a rip-off, don't you think that people who recommend it would be a "network effect" ?

Network effect means that the more people use a service, the more useful it becomes. That doesn't seem to be the case here.

But there is the built-in marketing aspect since every user must send a lot of people around them to Gumroad in order to benefit from it.

Gumroad's advantage is the obnoxious ease of use compared to similar players in the space. For anyone currently using Paypal, Amazon or Google's comparable services, Gumroad's simplicity makes it a no-brainer.

Like most competitive advantage: great execution.

Um, that's not a competitive advantage. Patents, huge barriers to entry, distribution channels. Those are competitive advantages.

Jessica Alba for Honest.com is another great one.

The ability to execute is absolutely a competitive advantage.

How much of that 7 million does the founder get to keep no matter what?

Who did the graphic design for their site? I really like it.

Very cool. Hopefully, they'll be more successful than Flattr.

Totally different model, as a side note Flattr (died/failed/didn't succeed) due to absolutely terrible product marketing and doing ludicrous things like an invite-only beta. They had a huge chance and screwed it up, from what Sahil has done so far I don't think he'll make the same mistakes, he doesn't seem so short sighted.

I hope to see something that is is more successful than Flattr.

At 25 cents plus 5% per transaction, Gumroad isn't really addressing micropayments at all.

I wonder what happens when a site wants to use the service but already has an existing payment gateway/merchant account? I think they'll need to de-couple, or offer alternatives, if they want to go further up market.

Grats Sahil, I remember when you first launched. We've all been captivated since.

Awesome! We have a similar service at www.ClientBiller.com that allows you to use your paypal, authorize.net, google checkout, and moneybookers accounts.

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