Sahil Lavingia, CEO of Gumroad, sees new crowdfunding options as an opportunity to create invested superfans.

Trevor Christensen

Shortly before the start of the crowdfunding campaign for his startup Gumroad, Sahil Lavingia was annoyed. Despite two big names in tech, AngelList founder Naval Ravikant and Basecamp CEO Jason Fried pledging a total of $ 1 million to invest in Gumroad, other investors cautioned Lavingia against becoming the first entrepreneur to become a sacrificial lamb tested the new rules of the SEC to extend the crowdfunding limit for a startup from 1 to 5 million US dollars.

Lavingia is no stranger herself, with 181,000 followers on Twitter and another 255,000 on the Clubhouse live audio app. But even he wasn’t sure how much demand there would be for tiny stakes in his company, which he valued at $ 100 million – at least $ 100, but not more than $ 1,000. “If we hadn’t gotten closer, if we had to remove it, the narrative and momentum would have been a little jeopardized,” says Lavingia.

Instead, Gumroad completed his lap in 12 hours. Lavingia spoke to Forbes about the results, the details of which were first published in the Midas Touch newsletter on Sunday, and discussed the results of the experiment, which included 7,303 investors and a waiting list of more than 1,000 others. His next such experiment soon took place in a clubhouse room.

The results

When asked if enough people would bother paying for small stakes in Gumroad, a company that offers software tools that developers can sell direct to customers, the next one was how much they wanted to buy. Gumroad backers invested $ 679, 48% investing the maximum amount and 18% investing the minimum amount. A mix of entrepreneurs and investors – many of whom are active on Clubhouse and Twitter or Lavingia acquaintances – have written similar checks for USD 1,000, including Austen Allred from Lambda School, Dylan Field from Figma, Sara Mauskopf from Winnie, and investors like Seven Seven Six’s Alexis Ohanian, Elizabeth Yin of Hustle Fund, and Arlan Hamilton, whose Backstage Capital recently sold out their $ 5 million donation with the same provider as Gumroad, Republic.

According to the republic, almost three quarters of the Gumroad participants were based in the USA, followed by India. Almost half were between 25 and 34 years old. Participants most likely had an estimated income of $ 100,000 to $ 150,000, or more than $ 200,000, with the next most active group being $ 150,000 to $ 200,000 and the cutoff being an accredited investor.

The income classes of the crowdfunding participants of Gumroad according to the republic.

The income classes of the crowdfunding participants of Gumroad according to the republic.


For the vast majority of non-accredited investors, it was their first investment in the republic. Almost 2,300 participants were creators on the Gumroad platform.

One shortcoming of the open increase that Lavingia addressed directly: the gender ratio of investors in Gumroad was identified as predominantly male at almost 91%. To start a public crowdfunding round, it has to be open to everyone, he says. In the future, Lavingia would encourage others to pique interest in specific communities and the opportunity to proactively share affinity groups. “There are a lot of things here that we can do better in the future,” he says.

The breakdown of the sexes of the Gumroad supporters, according to the Republic.

The gender breakdown by Gumroad supporters, according to the Republic, left a lot of room for improvement.


The SEC rules change also comes at a time when meme stocks, NFTs, and SPACs offer consumers a host of new investment opportunities that are not necessarily in the best interests. Lavingia says Gumroad likely could have met demand at a far higher valuation than he thinks it deserves. However, he insists that registering and listing a company on a service like Republic would be a cumbersome and inexpensive way to pump and dump an asset, especially since Gumroad can’t crowdfund for a year and the company’s shares are up essentially illiquid at this point. “There are better ways to scam people,” he says.

For now, at least, it is also expensive to rise up against the republic and its kind. Add up the republic cuts, legal fees, and other costs and Gumroad will pay back more than $ 200,000 of the total $ 6 million raised. Lavingia agrees with this – he sees it as the equivalent of a marketing campaign – but hopes the cost of listing a project will drop significantly over time.

A new model

In the near future – already in April – Lavingia and one or two other investors will interview an entrepreneur like Allred or Helena Price Hambrecht as part of the next phase of his crowdfunding ambitions at the aperitif startup house. While he can’t crowdfund through Gumroad for a while, there is Lavingia’s rolling fund through AngelList, which invests about $ 10 million a year. Lavingia hopes to use this fund to help another company build its own crowdfunding round. He doesn’t expect the model to be popular with VC firms that are aware of their allocation to a position, but hopes that several “solo capitalists” like Josh Buckley or Elad Gil will join such an increase.

The hardest person to convince, Lavingia says, is likely to be an entrepreneur who pokes fun at a large, messy cap table, or the same potential for embarrassment that he’s endured recently. His pitch: “Blur the line between investor and customer” and create super fans or spokespeople for a company that will support and exaggerate it in the future, similar to the way Bitcoin or Tesla stakes produce die-hard super fans. For Gumroad, that’s more than two thousand creators who bought the equity – Lavingia hopes they’ll become more loyal in the years to come.

“You’ve invested a tiny amount in Bitcoin, and that’s pretty stupid sometimes because you spend an hour a day thinking about it. The relationship doesn’t make sense, ”says Lavingia. “Imagine if Robinhood had a crazy event after going public,” says Lavingia. “I suspect they would have had a lot more people who would defend them, do more diligence and try to develop a much more rounded perspective than just move on [CEO] Vlad [Tenev]. ”

Much of the model’s sustainability depends on platforms like Republic, on which CEO Kendrick Nguyen says he’s fighting a misconception that vetted, legitimate startups are inherently riskier than public stocks, let alone a call option on a meme Share. The republic only accepts about 2% of the projects submitted on the platform, says Nguyen. The company also invests in training tools to help users responsibly support projects.

For his part, Lavingia is confident that most people who write a $ 100 check to a startup they have an affinity for don’t expect to get rich. “For most people, it wasn’t like me doing this to make a lot of money. That won’t really happen for most people anyway, unless some crazy event happens, ”says Lavingia of Gumroway’s raise. “I think people are excited to even get the chance. People generally cannot get access to these deals. “

Still, he encourages the new wave of unaccredited investors to pursue basic strategies, such as: For example, investing in a portfolio of five or more companies over a period of a few years and investing with uniform amounts – a lesson he learned from a blog post by Ilya Sukhar of Matrix Partners. “Don’t put all your eggs in one basket, even if it will be tempting to do so,” says Lavingia.

As for an entrepreneur who bites, it can’t be long. Lavingia says he recently spoke to Stripe’s Patrick Collison, who, while Stripe is too far off with his new $ 95 billion valuation, has expressed his support for the community-building idea. He’s pioneering another company, Startup Front for Work Collaboration, when CEO Mathilde Collin raised $ 59 million from a group of investors, mostly other software CEOs, last year.

Lavingia and Collin hadn’t talked last week, but when asked about the crowdfunding tactic, Collin told Forbes it was a “brilliant idea”. She had recently visited a local ice cream parlor in her San Francisco neighborhood that offered customers an opportunity to keep their operations going by participating in their debts. A move that Collin found wise: she would appear much more often in a business in the success of which she had played a small part.

If Lavingia’s tactics had been available when Collin picked her up last January, she would have been all ears. “The feeling of being part of the journey makes people in the community very happy,” she says. “I would have done that for sure.”