Gumroad’s Pricing Disaster with Sahil Lavingia

Reading Time: 48 minutes

Recently, the creator economy learned that Gumroad, a platform where creators have been building their businesses by selling their services and products, increased their prices significantly. That caused a lot of backlash in the community, with people threatening to switch to other platforms and criticizing how the price hike was communicated. It’s been an intense topic of community discussion.

Today, I am talking to Sahil, the CEO of Gumroad, about what prompted this change, what happened to cause such a stir, and where Gumroad is heading in the future. Here’s Sahil.

Arvid Kahl
Hello everyone and welcome to a Bootstrapped Founder bonus episode. Yesterday, the creator economy learned that Gumroad, a platform where creators have been building their businesses by selling their services and products increased their prices significantly. And that caused a lot of backlash in the community, with people threatening to switch to other platforms, and criticizing how that price hike was communicated. And it’s been an intense topic of community discussion. Today, I’m talking to Sahil, the CEO of Gumroad, about what prompted this change. What happens to cause such a stir, and where Gumroad is heading in the future? Here’s Sahil. Thanks so much for talking to me today. Let’s just dive right in. The creator economy has shown a little reaction to Gumroad ‘s latest price increase, and was quite the surprise on many levels, both the change and the intensity of the reaction. I’m a Gumroad customer, myself and I’m also a founder. And I’m very interested in just the intention, the cause, the effect behind this and how the community dealt with it and how you will deal with the community. So where did this all start? What caused this significant increase in price for Gumroad that triggered all these things?

Sahil Lavingia
Yeah, I mean, I think I’ve been thinking about this, basically, since the day I started Gumroad, which was why I launched it on Hacker News. You can go find that post. And I said something like, you know, I don’t know how much we’ll charge for this 15%, 30%. I don’t know. And it’s always been like an open question for me, because Gumroad has always been this weird service, you know, frankly, right? It has a weird name. It’s sort of not built for very specific things. What ends up, you know, we kind of found our way to something I think is pretty valuable. We do about $200 million in GMV a year. But as I just look back, and especially as I look forward at the next 10 years, we’re headed into a very different environment, in my view, right? Where for the last 10 years, we’ve effectively been in a 0% interest rate environment, which is massively sort of incentivized venture capital crowdfunding. Basically, is sort of a focus on growth, less so profits, right? It’s sort of the simple way to look at it. And so we’ve basically been able to avoid asking that question for the last 10 years, where I’ve never actually really needed to say, because Gumroad is done relatively well over time. Like, are we too cheap? Like, we have all these customers who use Gumroad to process like a million dollars a year. But basically all of that money goes straight to Stripe. We don’t really make any money on that. There’s been some kind of tweets about that, too. And we’ve wanted to keep them because you know, growth, because GMV because, you know, it sucks to lose people always, right? You never want to see a customer choose another platform for whatever reason. But I think as I just look at the future and look at, you know, the word that I keep coming back to is like sustainable, like, what is sustainable. And to me sustainable means like, I’m not looking for something else, right? Like, I’m not looking for an exit. I’m not looking for an IPO. I’m not looking to do secondary sales on my Gumroad stock. You know, there’s a bunch of different ways to monetize your equity in the company, right? One of those ways is to charge money and sort of pay yourself a salary or do dividends and that’s kind of the direction that we’re starting to go and is like, what does sustainability look like? You know, when you buy eggs at the grocery store that are sustainable, guess what? They’re not as cheap as the less sustainable ones, right? And so I just kind of looked at, like, look, we run a super transparent company. So whatever decision I come to is going to take over the internet for a day, right? In the creator economy sphere, at least like that was 100% expected. I had, it’s actually much less than I thought. I thought it was gonna be much worse. And it might get much worse, who knows. But you know, we have 30,000 creators who make money on the platform every month. And so that’s actually 30,000 people who have the right to be upset, right? At me, at the team, at Gumroad, at whoever. And so I think the reaction is, was sort of expected and deserved, frankly. Like, I think it’s completely deserved on my part, but I think that’s the job. That’s the hard job of a CEO. That is one reason that many people don’t wanna sign up for it, which is when things are great and interest rates are zero, and you can effectively raise a crowdfunding round and spend $5 million on engineers and offer really cheap service to people. You know, for years, really, it’s awesome, right? Everyone loves you. But at the end of the day, when I look back, or look forward, it’s like, well, we have to, this has to be a real business at the end of the day, right? And heading into an environment with interest rates now are 4.5%. It’s hard to it’s kind of like gravity has been turned on in a sense is kind of how I think about it. And at the end of the day, like when the tide goes out, you know, you see who’s swimming naked, right? And at the end of the day, I looked at my business, I said, look, this is gonna happen over the next year or two or five or ten that these businesses are going to be valued for the business, what they have built, right? And I just felt like what was sustainable for Gumroad was I looked at a lot of options and I said which companies do I really admire? Which companies do I think are gonna be fine over the next 10 years? That was Bandcamp, which charges 10%. That was Substack, which charges 10%. That was Patreon, which charges up to 12%. Obviously, there are other options, right? There’s Kajabi, there’s podia, there’s like there’s ConvertKit. There’s a bunch of great options for folks. But when I looked at what do I like, where do I want Gumroad to be in 10 years, what’s the pricing that’s gonna get us there? It’s gonna hurt, no doubt about it. Like, I think this is sort of like ripping off the bandage of like, this is gonna be really painful. But I think this is a necessary step to get us to where Gumroad needs to be. A lot of people I assume will turn, will leave the platform. But I think that’s like, part of the honest, like, that’s honest. Like I need that to be able to refocus Gumroad on the direction that we need to go in. We basically need focus. And what is focus? You know, less, right? Like, less is more in a way. So anyway, that’s some of the context. There’s more, I’m happy to kind of elaborate on it. You know, obviously, this is like a huge decision. It’s not like, it wasn’t impromptu. I think if anything reacting to Twitter, what would be impromptu? So I do plan to react. I do plan to talk and have a conversation. And but at the end of the day, I think, you know, we made a decision. I think it’s relatively well thought through. There may be some tweaks here and there. But overall, I think I’m pretty confident that we overall made the right decision.

Arvid Kahl
Yeah, thanks for sharing this. I feel I’m trying to look at this from a neutral perspective, both from the founder perspective. Obviously, this is a business decision that doesn’t come out of nowhere, or at least even within the public board meeting that you shared on YouTube, which is very interesting to watch. For anybody who is involved in this conversation, I think they should see where this is coming from and what the context of it is. Even in that video, you mentioned, like there’s, you’re looking at sustainability. You’re looking at profitability. And this is the Bootstrapped Founder podcast. Like we are looking at revenue here. We’re looking at trying to be self sustainable over a long time, building wealth over that long period of time. And obviously, that is something that has a cost attached, quite literally, right? So I can see that from the founder perspective. But then again, from the creator perspective, I have to say, like for myself, like as a Gumroad user, maybe not your top 1%. But you know, somewhere in your spectrum, the thing that you increase prices in the time of recession, or, you know, the whole interest rate situation that you just explained, that is understandable. What I found kind of problematic about this is not that you made a choice, and not what choice you made 10%. We can talk about this, too, is still somewhat reasonable in relationship to other other things. But the way it was communicated, I felt was was pretty problematic. And I think looking at the context of the conversation that I’m talking about on Twitter mostly, because that’s where all the founders and the creator economy constituents are. Most people don’t really complain about the change. They understand that, you know, you can sustain what is unsustainable without making a change for the more expensive but also choosing life in that situation. The way it was communicated was a bit problematic because it was not very empathetic. And that is my personal opinion. Like, what went into your decision to essentially send out an email and tweet about it at the same time?

Sahil Lavingia
Yeah, I mean, I think I try to treat everyone like an equal. And so my strategy has been to treat investors, creators, early investors, crowdfunding investors, and frankly, even myself. Like the minute I was like, we are going to do this, when we just actually said, okay, this is gonna happen. It was like, let’s schedule the thing. Let’s do the meeting. And let’s schedule the email. And like, let’s make sure everyone knows as soon as possible, because I wanna give people as much of a lead time as possible. And we can talk about the kind of lead time too, but I wanted, I don’t like the idea that there’s something in my head that isn’t in everybody else’s head too, right? And by the way, I’ve talked to plenty of CEOs, like Gumroad is not unique in this situation. We may be the first. Actually, we’re not the first because Teachable also increased pricing last week. But my guess is there will be many, many more. We might be quicker because we can move faster because we’re small. And generally we do move pretty fast.

Arvid Kahl
That’s the problem, right? Like, it’s like your ability to actually move this fast. Then you turn into the first mover and you get all the the attention about it.

Sahil Lavingia
Yeah, I mean, I think it has pros and cons. We can be the first company to raise 5 million via crowdfunding. We can be the first company to try out tiered pricing for our creators. Some of those experiments work, some of them don’t work. But I think I can promise that we will be first, right? Like we will always be first. We will be first to decrease pricing for our creators, and we will be the first to increase pricing for our creators, if we feel the need because other folks have just more bureaucracy. And so just generally, I can promise speed. I can promise sustainability. I can also kind of promise speed. In terms of empathy, I think you’re right. I think this is something I’ve always struggled with since the day I was born, that people have critiqued me for not being empathetic to friends, to family. My wife, like it’s a problem that I think I will probably die with. I have a way of speaking that is quite direct, quite blunt. And at the end of the day, what I think is really important is to be honest. And that’s why I started the email with, we’re increasing Gumroad’s price to be simpler and higher. Because every single pricing email I’ve ever read in my life has not mentioned the word higher. And so it was really, really, really important to me to put that word as close to the top as possible because to me anything else would have been dishonest. And so the goal was not to be, and I’m sure I could have done a better job. But the goal was to be as clear about the facts as possible. And this is such a huge change that it’s so easy to hide the ball. It’s so easy to say, we’re not increasing prices that much, but this is what you get with it. And I said no, I want everybody. I want, I know I’m gonna get “cancelled” on Twitter. I know that’s not the right word. People kind of overuse that, you know, the sentiment of that. I think people deserve the facts so that they can make that, they can react in the most in the way that I think they should. And so, you know, for me, it was like it doesn’t. And to be honest, I’ve been in this situation enough times having enough Twitter followers that it frankly, doesn’t matter how long the email gets. People will react similarly. At the end of the day, it is a huge price change for many creators. And they will be pissed of some of them and they should. And so I think, you know, it was and I you know, the reason I do the board meetings is for people who want more context. You want everything like everything we wrote of what’s coming next, the videos, the figma. Like the amount of depth people can get into the future of Gumroad compared to any other company is I would say, pretty unique. And so the other option, you know, the other thing that gives me is it shows me how many people want that, right? Because I can see how many people watch the video. My DMs have been open on Twitter since I started using Twitter. I’ve had tons of conversations with creators. So to be honest, at the end of the day, I basically I don’t ignore everything on Twitter because I follow a lot of you on Twitter and I see it, right? But at the end the day, what’s most valuable to me is I basically make a list of the people who I really wanna see on the platform, because I think that’s part of my vision for the next 10 years. And I make sure that they’re representative of a broader group. And I make sure that they that I hear them and I listen to them. I may not agree with them. You know, of course, the number of creators who want their prices to go up is zero, right? Like I use Gumroad. I don’t want my prices to go up on Gumroad either, right? But so, you know, putting into a poll is going to get to 0%, right? Again, this is the kind of the decisions that CEOs have to kind of make, I think. But anyway, that’s kind of what went into that. I think they’re definitely in hindsight, I probably would have tweaked the email a little bit. But, you know, not too much. I think the goal of the conversation, like the goal is to have the conversation now, right? Like just say, hey, this is happening. I know, it sucks. We got to get it out there. So everyone at least knows. And now I’m gonna spend the next month you know, I don’t have a lot of holiday plans, like my plan is to talk to a lot of people and not try to convince one, right? But just to say, hey, look like I’m listening. I understand it sucks. I think when we launched the tiers, for example, we probably should have been much more candid that this is an experiment. It’s kind of crazy. Even at the time, I was like, this is crazy. The chance of this working is probably less than 50%. And maybe we even did that. The problem is that, that doesn’t. Who remembers that, right? That’s the other thing is a lot of people say hey, your prices are up, you know, up a lot. And I’m like, “Well, really they’re going up because we kind of made them frankly too low most recently. And they used to be higher,” and but again, explaining that context, explaining interest rates, for example, right? And how interest rates have to do with this decision, I think is challenging. I’d say the other thing is that, you know, at the end of the day, a lot of, what a lot of other companies have done in the last two years is take a lot of secondary off the table. We did not do that at Gumroad, right? I sold about 100k or something. So I have a little bit of cash, right? Just in case. But a lot of the folks who run these critter economy companies have sold millions and millions of dollars in secondary stock at very, very high valuations in the last 24 months. And so they can basically operate breakeven businesses because they’re not their goal is not to do dividends. And I have my own opinions of that. Because I think when you have employees that are profit sharing, they don’t get the dividends. They don’t get the secondary opportunity as much as you do. They get the profit sharing. And so you’re actually incentivized to stay breakeven, right? Your profit sharing that only goes to existing people in the company, who are currently working at the company, not people who used to work at the company, and they only get a percent of profits. And so this is what movie studios do, right? They released a movie. They say everyone gets a share of profits and the movie makes no money. Everyone else does pretty well, because they were getting paid anyway. So anyway, there’s complexity to this kind of stuff. Yeah.

Arvid Kahl
And that complexity I think is lost in an email and no matter what email you write. That’s the thing and I was trying to investigate that particular email to see like where you could have rewritten certain things. But I think in the end, it’s gonna be a message that is gonna hurt no matter what. Like you said there’s nobody who wants to pay more, even if you were to communicate. This is an important thing for this platform to stay on, right? To stay available, if you need to raise prices, because we’re looking at this whole world currently trained to deal with, you know, the consequences of a catastrophic couple of years. Even if you communicate that in an empathetic way. And in the most possible empathetic way, you will still have people say, “Well, I don’t have money.” I am also involved in this, right? And I want to make as much. And I get this. It’s a catch 22 situation like either way, if you’re empathetic, or if you’re just honest, like bluntly honest, you’ll have the same outcome, which is you have raised prices. For people who wanna pay not much or not more, maybe we want better prices, too. I’m just thinking in this whole process of drafting this email, or even just coming up with the landing page copy that I saw and you know, in the video that your board meeting video and all these things, did you involve people from the community in this process of or was it a purely internal thing that you decided? Because I have this feeling that community tools need community involvement with particularly these sad or hurtful or painful changes that happen. Did you ever consider like reaching out to your top creators and see, like, how they would react before you?

Sahil Lavingia
Oh, yeah. Yeah, definitely. Oh, yeah, definitely did that. You know, email Daniel, for example. He was the one who suggested actually, the tiered pricing in the first place. He’s close to the company. So I emailed him and said, hey, you know, we’re thinking about doing this thing. We’re gonna make it 10% flat, obviously. I assume you’re not, you know, you’re not gonna be a fan. But I’d love your feedback as a friend, as a, you know, someone who’s, you know, super smart, etc, right?

Arvid Kahl
What did he say?

Sahil Lavingia
I can go try to find the email. But he said, you know, I can see where you’re coming from. I think the risk. I think he said this on Twitter, too, which is the risk is not, you know, we basically are making no money from these sort of very successful creators on a sort of net income basis. But we kind of knew that even with the tier thing. We kept them because we were growing. We thought we would reduce churn. And primarily that we thought that keeping these creators on the platform would effectively like be a good recruiting mechanism for like the next cohort, the next cohort, the next cohort. And that’s just not data that I found to be true. And so I was just like, Yeah, I mean at the end of the day, I think these folks who are paying 2.9%, which is what they would be paying Stripe, if they use Stripe directly. And they’re getting all this stuff for Gumroad for free. It just wasn’t sustainable. It’s too expensive. And I didn’t know a way to do it, besides just saying, look, we have to increase pricing. And you have to take that, you know, and the thing that no one has said, at least I haven’t seen on Twitter, no one has said this is gonna take me time. This is cost, everyone is focused on the pricing. But at the end of the day, I think what’s really burdensome, and something that I think I feel much more empathy for. And it’s kind of interesting, actually, why it hasn’t come up as much as I would have expected. That was actually what I was very concerned about more so. It’s just it’s gonna take time. Like if you’ve invested a lot in Gumroad and you wanna switch to some other service, you just have to like, download, upload. Or you probably put your stuff out locally, but you know, it’s gonna take some non trivial amount of time, maybe the services will help you do that. But that I think is actually like a huge burden. And it’s yeah, it’s kind of interesting that no one has really commented on like, yeah, just gonna take time to move. The pricing, I think is actually yeah, not too big of a deal. Because I think at the end of the day, it does refocus us, we probably couldn’t message it better. But I do think it’s kind of the right decision. We will probably, by the way, get rid of our discover fee. So everything is just 10%. There’s Discover just becomes a blended into the whole thing, which I think and that’s another thing. A lot of the creators I talked to are like, “Oh, you’re not charging 10% already?” Because so much of their sales were coming from Discover that they were like, this doesn’t actually affect me that much. So, you know, that’s the other thing. It’s always Gumroad’s always been in this interesting place where there’s no community that has a plurality of usage or a majority of usage on the platform, right? And so you have like musicians. You have artists, digital artists. You have publishing. You have, you know, a bunch of international stuff. You have all this stuff you see on Twitter. Indie hackers learn to code, design. So there’s all these groups fitness, that are all like 5, 10% of the platform. And so that’s the other thing is sometimes like a change, you know, may affect one community very differently than another community. And that’s also one reason I’m excited to kind of increase the pricing is frankly, to say, hey, maybe certain competing communities should actually use you know, some other service. That would be really good for them. And it would actually be a year from now they’re gonna look back and be like, I’m glad that I made this change because this service is built for my use case. And yeah, they’re a little bit more expensive than Gumroad was a 2.9 but they’re a better fit for me now. And hopefully that means we can kind of focus on who’s left.

Arvid Kahl
I was wondering because you were mentioning earlier and in your board meeting the likes of Substack and Patreon, which are kind of subscription based businesses like mostly almost exclusively. And I’ve always understood Gumroad as a hybrid platform. You have the digital downloads part and streamable video and that kind of stuff, which is like one purchase once and use for however much you like. And then you have the subscription, the regular kind of thing. You also added newsletters and these kinds of things to the platform. Is the move like towards a Substack or Patreon like price level, also of repositioning of the platform? Is that like a long term perspective to go more into subscription and further away from this kind of low mode and easy to transition, download your digital file and upload somewhere else. I know it takes some time, but it’s so much harder to migrate, like a subscription service or the offer office of subscription service than it is to upload a video file to a different service. Is that a shift that you intend to?

Sahil Lavingia
I think so, to a degree. Well, probably not, you know, be a majority of our row volume at any point. We do maybe about 2 million or 3 million a month via memberships now. So it’s getting, it’s about 15, 20% of Gumroad. But really, it’s more about, I think this is something that Substack has done super well, probably even better than Patreon is like be the place that people like the creators and the customers are talking to each other all the time, right? And so we may not be business model wise, you know, we may not sort of go all the way to subscriptions, but saying, hey, comments, community, all of these sorts of things. I think what’s really key honestly, is that people need to spend more time thinking about Gumroad, basically. And that 10%, I think you know really matters, if you want that for that 10%. But if you’re using Gumroad, as a lot of people do kind of like they get a Twitter DM and they’re like, here’s the link, you know, to buy my coaching call, or something like that. I think yeah, that’s probably not the best fit for Gumroad. Or like the really simple, easy downloads. I think Gumroad will always be really great at that. I think we don’t have a monthly fee. I don’t think we’ll ever introduce a monthly fee. Because we always do wanna be the easiest way to get set up and start. And I think that’s a sort of a unique thing. But I think it’s more about like making our apps better, getting more, you know, doing things like investing in AI and affiliates. These sorts of things that when you have this like charge processor thing. Frankly, we launched a feature and like most people don’t care, right? And that, by the way could have been maybe in a parallel universe, I could have said, hey, maybe we should just go completely in that direction. Make Gumroad you know, just get rid of all the features and just say we’re really good at the digital download stuff. But again, that would have worked a bunch of other people in different ways too, right? I felt like this was, you know, at the end of the day, like I think I wanna be really proud of what we built too, you know. And just talking to creators, I would just get the vibe that they were like, “Yeah, we use Gumroad because it’s the cheapest,” you know, and it’s like that doesn’t feel great.

Arvid Kahl
Yeah. It doesn’t have to be either, right? Like you wanna be part of the community. And I’ve always considered Gumroad, which is why I’m honestly, that’s why I wanna talk to you. Because I feel this has been such a big part of the creator economy in facilitating and empowering so many people to just put their thing on there, and then start a business from the platform that I feel, it’s kind of why I wanna talk to you is there’s one thing that I really wanna bring up. And that’s something that I’ve heard a couple people, like if several dozens of people mentioned in many different ways. And I’m kind of wanna have your take on this, like the tiers that you implemented a couple of years ago. I really enjoyed it, like the idea of being able to level up in a certain way, right? On a single platform and a lot of founders, a lot of creators went to Gumroad with that in mind. They wanted to become one of the top in that tier. Obviously, 2.9% just really only the Stripe fee and nothing else, maybe not the best tier for monetization. But you know, that is a mistake that could be corrected differently than charging a flat 10% fee. And that aside, I think a lot of people invested a lot of effort and a lot of commitment on their own creator journey. Like they said, I’m gonna I have all these options. I could sell on so many platforms. I’m going to Gumroad and I’m gonna level up my sales until I reach this 5% tier. And the 10% flat fee is just really a slap in the face for these people. That’s what I mean with empathetic, right? It’s not about writing an email that just is nice and fluffy. It’s kinda yeah, we do this and we see it hurts you. Sorry about that. That’s kind of what many people would have wanted to be.

Sahil Lavingia
Yeah. That’s true. And I think I definitely plan to compile all of this data in my head and write another email and say, “Hey, update on the pricing update.” You know, we’re not probably you know, we’ll probably not gonna change the 10%. We are gonna stick to that, is my guess. You know, there’s a week full of conversations I’m having so we’ll see where this goes. But yeah, I think that does, you know, it does suck. And I think in hindsight, I honestly wish we never did the tiers in the first place because it was

Arvid Kahl
I was wondering about that because honestly, I loved it. That’s such a, it feels like it’s an alignment thing. It’s well aligned, maybe it’s not for you, but for the community, right? It was, oh, yeah, I can sell more and more. And the more I sell, the less I have to give away. But I kind of locked myself into the platform, because like I use Gumroad in a way where I show how many items I have sold. And you know, the more you have already sold, the more people are willing to buy one more. So that there is a lock in that is not just file upload, download there and on the platform, but it’s the tiers. Tell me more about what went into that decision in the beginning and

Sahil Lavingia
Yeah

Arvid Kahl
Particularly what went into that top tier that made you no money. Talk to me about that.

Sahil Lavingia
Yeah it was, Daniel is a very good negotiator. You know, he said, “Look, at the end of the day, Gumroad isn’t really built for these mega cases. They’re probably all gonna leave anyway. But if we can keep them by effectively offering a rate that Stripe would offer them, maybe we get a little bit of a thing, because you know, there’s some Stripe volume discount where they might go a little bit lower. It doesn’t, to be honest, get that much lower. And we’ll see Stripe, that’s the other unknown, right? Is that we’re all built on top of Stripe and so Stripe could change their fees, right? Like, that’s a big question mark. You know that.

Arvid Kahl
Well, they have in the past, but they always legacied in the customers at that point in time. And that’s another thing I wanna ask you. Did you consider with the term grandfathering? You’re not supposed to use that anymore. But you know, legacy customering.

Sahil Lavingia
Yeah, I did think about it. And we did with the tiers. We allowed people to stay on the previous so before the tiers, and just to provide a little bit of context on why the tiers. It was you know, that 2.9 was cool, but it really was about simplification. And it was about we had when we were almost going bankrupt in 2015. We instituted the premium offering to kind of have a floor on revenue every, like GMV could go up and down. But at least we have this. And but what it meant is every creditor now had to do math. Like, should I pay 10 bucks a month and get you know, 3.5% plus this? Or should I pay nothing, but then I get 8.5 or whatever? I think back then if I could really wind back the clock, I think I should have just increased the prices to 10% then and said hey, look, but maybe if everyone left, we would have died. You know, like it’s different kind of situation. But anyway, then the tiers kind of came was like, what if we just did the math for people? And we said, you know, we’re just gonna figure out. Okay, we start at just this fee that’s slightly higher than we had before is 8.5 goes to 9. And then but again, Gumroad’s down over time and kind of creates this curve and it’s kind of cool. And no one else does this. So it’s probably stupid. Honestly, I remember thinking that like no one else does this. So it’s probably dumb. And, you know, Gumroad’s weird in many ways. We can try things that frankly, wouldn’t get past, you know, a team of PMs. They would say this is dumb, you know? And so yeah, it was kind of an experiment in that way. And I think, you know, like, there’s a couple of things like about the grandfathering. Like, I think, at the end Gumroad is an economy, right? And the way that I think about it is like what is the most fair tax rate for the economy. And in my view, a discount for high volume creators is a little bit like tax cuts for the rich, which is like I wanna help creators get started. That’s my primary thing. I’ve always said that an on ramp to the creator economy and that’s always gonna be our focus. And the way that countries work, economies work is the people who succeed. You know, they pay generally. They actually pay less as a percent, but they pay more as an absolute basis. And then that allows you to build infrastructure for the next generation or whatever. And so, you know, I just felt like, you know, it is an experiment to see, hey, maybe we can retain these people for longer, and it makes sense in some other way. But at the end of the day, like if they’re not actually subsidizing the new growth, and if they frankly, if we have a price increase, and they all leave to another platform, to me, it’s like, well, they’ve chosen a higher fee. Or they’ve chosen to disregard the lifetime earnings anyway. Thing on Gumroad or leaving, they’ve said that the lifetime earnings don’t matter to them, right? And so, like, yeah, I just find that like, when I look at my favorite countries, I look at Singapore. I look at a Estonia. They charge a flat tax. I think that’s super simple, super fair. It makes, you know, collecting taxes a lot easier. And so I just felt like, you know, and I did think about it. What if we did 10, you know, 12.5 or 10%. And then we did 5% for people over 100 grand or, you know, that would probably retain quite a few people. And so far I’ve said I don’t think that’s fair. I don’t think that’s fair to creators getting started. I think what’s most fair and what’s most sustainable is to charge 10% to everybody. And the people who feel like they’ve grown should leave, find a different country, you know. Like, build their own thing. Use Stripe Connect, you know. There’s so much amazing open source stuff out there. And you just like watching the support team do emails. They’re gonna, you know, like, just like the amount of burden that these large creators, you know, like we thought that was the other thing is we thought that, you know, basically once you hit a certain stage, it would basically cost us nothing to help to keep you on Gumroad. But that’s just not true. We haven’t found that at all. Like, basically, you still have support. You still have fraud. You still have all of these things still exist. And so yeah, I just felt like, you know, I wanna charge the same fee to everybody. And I felt like 10% is a good number for that.

Arvid Kahl
Were other numbers considered? Like, did you go for five? Did the math with that?

Sahil Lavingia
Yeah, we did do the math. We did the math on keeping the tiers and increasing them. We did the math on a 9.5%, 9%. I think our original fee was 7.5%. So we did the math on a bunch of different ones. The basically the, at the end of the day, what it came down to is, the reaction I felt was going to be roughly the same no matter what change we made. Whether we went to 5% plus Stripe, whether we went to 7%, plus Stripe, whether we went to 10% plus Stripe. But if you’re making 100 grand on Gumroad, 10 grand versus seven grand, versus five grand, I really believe that we have a team that can deliver that value. And at the end of the day, if you’re gonna leave at 5%, you’re gonna leave at 10%. It just wasn’t going to be the difference. And that’s, I believe that we can build a product that’s gonna generate value. I think we have, you know. A lot of folks have said, what are we getting for this? And it’s like, well, everything. Everything we built, you know. Everything we’ve built, when we charge, you know, 2.9% is still there, you know. We basically built all of this software by spending $5 million of crowdfunding money. And not we’re basically breakeven for that whole time. Like, that’s all the stuff you get, you know, when you get Gumroad, right? Like this thing that we’ve built. Hopefully, you feel it’s a good deal. If you don’t, also reasonable to leave. But yeah, I think.

Arvid Kahl
It’s interesting that you see your product, not like as a destination, but something for in the beginning and the middle of the journey, and then people are gonna do their own thing. Anyway, that’s a new perspective that I didn’t have about the platform just yet. I was thinking that if people like Daniel Vassallo can make what is it? 400k a year on a community, a book, and, of course, all of which are very good. Daniel was on the show. And I like his work. I liked the way he built in public and the way he interacts with the community and all that stuff. And like, if he can make this on that platform, why would anybody aspire to not do this? Then again, you have a lot of founders or a lot of creators who take their product and build their own thing, like build it all by themselves. Or set it on top of Shopify or whatever, customize it in a certain way. Did you ever have this idea? Or at least the conversation about like, allowing people to do like, very customized self hosted things? Or is that not part of the Gumroad vision at all?

Sahil Lavingia
We did think about it. And we’ve always toyed with the idea of open sourcing Gumroad itself, so that people could actually use Gumroad. And just not pay for it. If they don’t wanna pay, they don’t have to, that sort of thing we’re gonna enable Stripe Connect too so people can at least opt out of using Gumroad for payments. That should roll out in the next like two weeks. Yeah, I mean, do we? Sorry, what was the question? Do we

Arvid Kahl
Question was like, did you ever consider building customizability into the product as you have it right now?

Sahil Lavingia
Yeah, I think at the end of the day, and this is also kind of a macro change that I think has affected Gumroad quite a bit, is that I think there’s just amazing stuff out there that we can’t compete with anymore. There’s just it’s just too good. If you know, if you’re as competent as Daniel, any money you choose to pay on top of Stripe is a choice, right? Because at the end of the day, he’s competent enough to hook up these things using Zapier and open source, you know, stuff on Vercel. And like, there’s just amazing tech. And so yeah, I just felt like, it is cool that Daniel gets to use Gumroad. And I hope he stays, you know, I really do hope he stays past this pricing change. It would make me feel absolutely awesome. But you know, it’s the same feeling I felt when we bent over backwards to keep Eminem and Bon Jovi and Taylor Swift using Gumroad. People may not realize this, but Gumroad had a long past in different industries, people, you know. And we did tons of stuff to keep them first and at the end of the day, you know, it goes back to what is Gumroad for? What are we really good at? Where can we provide the most value? And if there’s a better service, people should go and use that better service. I don’t think Gumroad will ever be the best service for example for selling SaaS, right? Like for selling true SaaS. There are a lot of people use it for that. And a lot of the emails I have in my inbox are from people who say hey, I use Gumroad for SaaS. It doesn’t make sense for me to pay 10% fee to use Gumroad for SaaS, right? And my answer is like, it never really made sense to use Gumroad for SaaS. You chose Gumroad because it made sense with the pricing, with international, with other things that you may have already had other products on Gumroad. And so you chose to use Gumroad for SaaS too. But at the end of the day, maybe there’s, you know, maybe you should go use Paddle, you know, or Lemon Squeezy or something like that, that’s really good for that. And hopefully, we will get better at that. But we will only get better at that if it’s worth paying us 10% to get better at it, right? Like, at the end of the day, we will build amazing products for the creators who continue to use Gumroad. And we will be able to build them and even better. And then the folks that leave will say, “Okay, cool.” Yeah, like, it turns out that, you know, that’s not really where we should have invested our time. Like, we shouldn’t have built all this crazy physical shipping stuff for Eminem, you know? And it’s yeah, at the end of the day, it’s sort of, I think the only way to sort of say, who are we really for, is to charge more money to rip off the bandage. And that was also partly why, you know, we gave him until January 31st because I felt like we need to know, we need to know who this is for, ASAP. And if we give people three months or six months, most people frankly, will make all the changes in the same. You know, what I do at least is I just you know, the day before the deadline, I do all the work anyway, right? So I’m like, okay, let me just like book out my calendar, so I can be super available, help people for this 45 day period. And then we’ll know who are we for? Who is Gumroad for? And people have said, what if everyone leaves? What if, you know, what if 80%, 90% of the volume leaves, you know? And then the answer is Gumroad is not worth 10% to anybody, you know, and like we found out the hard way, right? Or the easy way, I guess I don’t know. But at the end of the day, we’re a business. We’re building a product. Our goal is to build a valuable thing we think we have, you know. We wouldn’t have made this change if we think that’s gonna happen, right? You know, we’ll see what happens. And maybe that number will get high enough where I’m like, oh, we shouldn’t have made the change, or it should have been 7.5% instead of 10 or something like that. But I think the turn would have to be dramatic for it to be a regret, I think.

Arvid Kahl
I’m glad you’re open to, you know, hearing feedback from the community, like just being present or listening at this point. And hopefully drafting something for people to understand.

Sahil Lavingia
Yeah

Arvid Kahl
Not just that it’s about 10%, right? It’s not about making more off your creators, but it’s about also positioning, it kind of sharpening the brand. It’s kind of what it feels like, because when you just mentioned like the whole SaaS situation. I personally, I probably wouldn’t use Gumroad for SaaS because I know other ways. But if Gumroad is to me, the creator economy brand, I might try to stick it in there in some way, right? Because the brand is so strong as we are serving everybody in this economy.

Sahil Lavingia
Imagine you’ve already qualified for 2.9% because of other products. Yeah, might as well just put this on Gumroad because it’s gonna cost the same as Stripe. And then all of a sudden, we think half our volume is coming from this stuff. We need to build all this stuff, even though we aren’t making any money off.

Arvid Kahl
Well I was wondering because like, obviously, you don’t wanna scrape the bottom of the barrel, right? There are you looking at the Patreon and Substack with the kind of higher tier subscription based systems that have 10% to 12 to 13, or whatever percent they have. Your competitors also exist in a much, much lower tier, if you look at Payhip with their weird 5% or 2% plus 29 bucks a month situation. Now looking at what the world is turning into and what you expect the economy to look like, do you think these platforms that are kind of, you know, the bottom of the barrel side, like trying to lower prices significantly compared to Gumroad? Are they gonna see the necessity to increase prices too?

Sahil Lavingia
That’s a really good question. I would assume so. I can’t speak for them. And I don’t know, you know, where they’re based, or like what their local, you know, environment may look like in terms of or what their goals are, right? That’s the other thing is I started Gumroad when I was 19. I’m 30. Like there are all these things that kind of may go into this equation. I wouldn’t, I would guess, to be honest, I played the game that they played, right? Which is I want Gumroad to be the most affordable, cheapest way. I wanted to be better at every single thing. I wanted the best product at the cheapest pricing. And the only way that was even possible was because of venture capital, to be honest, like there was no other way. And these Payhip and some of these other competitors. I think the only way they’re able to do it is basically by paying, you know, basically global engineers not that much money to keep the site up. And then I don’t know, frankly, how much GMV they do or how much money they make or how good their products are. But yeah, my guess is that they go up in pricing but even if they don’t, I’ve just never been impressed. And to be honest, like when Gumroad creators left Gumroad because we’ve of course had churn even with this pricing. To be honest, they’ve never gone to those. They’ve never actually paid less is what I found. They actually end up paying more. And so, and the reason is because they’re going to a platform that’s built for that use case because they’ve scaled to, you know, 100k a month or whatever. And so they go specifically to FastSpring. And FastSpring does all this stuff and it charges like 70 grand ACB or whatever. And so to be honest, like my advice, and frankly, I’ve talked to some of them because they were thinking about selling their business to Gumroad. This is maybe a year or two ago, so I don’t know where they’re at now. Some of them actually, like, send out I think, sold to somebody. So it’s operated by somebody else now. I think there will always be these services that are super cheap and free on the internet. You know, it doesn’t take that much to build like a Gumroad MVP, right? So there will always be that option. But generally, I just think it’s just not fun. It’s just not fun when you’re, you know, I you know, like when people say, hey, you know, I slept with you because you were the cheapest hooker in the bar, you know. Or there’s like, nah, it’s not exactly the rhetoric that I’m interested in. I wanna build the best product and I want people to pick me up to pay for the Tesla, you know. Like, I wanna build Tesla’s not Toyota’s. And, you know, yeah, that’s kind of that’s just kind of how I feel. But I’ll definitely watch them. I’m very interested. I think, at the end of the day, the real true, you know, risk to Gumroad. And the thing that really made me realize, okay, something’s gonna have to change at some point was when Stripe launched Payment Links. Because ultimately, when Stripe launched Payment Links, which I believe was about mid 2020, that was when I was like, “Okay, that is dangerous.” In terms of existential threat to Gumroad, Stripe offering more and more of this stuff. That to me, is actually the most worrisome thing, not any of these other competitors. Because it’s not that hard to build Gumroad, What’s hard is building the brand and getting the network effect and getting everyone’s payment information, making it simple and smooth. And like all the many, tiny features here and there that most of these competitors don’t have, because you need a big engineering team to offer these sorts of features. But the big fear and the reason, the core reason behind that, you know, 10%, you know, tenure sustainability is because Stripe will never charge 10%, right? And so we think we can and we can build something that’s worth it. And it might look like Notion. It might look like a website builder with payments built in, like we will see where that develops over time for us. We have a very kind of incremental view on how we build and react. But that’s kind of where I think we’ll go is basically Notion plus payments and products is kind of the direction. But yeah, that’s the biggest fear is that, you know, Stripe will eventually just kind of do more and more and more. And basically kind of like ConvertKit effectively be able to offer it for free. Because they have, I have a sort of a core business. And I’ve talked to, Stripe has been interested in buying Gumroad actually to kind of offer it as just like a, you know, to have kind of a almost like a customer within the company, you know, using Stripe Connect, etc. You know, they looked at the business, and we’re like, this is not that interesting us. It’s like the, you know, like, you’re not making enough money or whatever, right? So like, yeah, it’s interesting, you know. I mean, this is the crazy thing about software and capitalism and things. It’s just like, things are constantly changing, right? You’re never safe. You’re constantly building. I mean, you could see what’s happening on Twitter right now to see that. Like, nothing is too big to fail, in a sense, you know? And so hopefully, you know, we’re iterating. We’ll try to end up in a better place, build a better product. But yeah, it won’t be, capitalism is also you know, there’s lots of anxiety. There’s lots of cortisol, fight or flight response. It’s not fun to you know, like, some of my best friends are Gumroad creators who are like, “Hey, you’re not charging me.”

Arvid Kahl
That’s just such a funny phrase to hear. Yeah.

Sahil Lavingia
I know, yeah. I mean, really, it’s like, when I sent out that email, I’m like, wow, I just sent out like, 30,000 of my closest peers, that I’m now charging them more money. Like, this is gonna, it’s gonna be a tough week, right? It’s gonna be a tough week. But that’s the, and I’ll say one other thing. I had a conversation with somebody about this, too. Which is they were like, why don’t you just sell Gumroad, right? Why don’t you sell Gumroad, you make 100 million, you make 50 million or whatever you make? Or less now, who knows? And then you just right off in the sunset, and then basically make some PE firm, do all the dirty work. Like this is happening at some other companies in our space right now. And I was just like, that seems dishonest, right? It’s kind of like selling, you know, selling the company so someone else gets to take the hit. And I’d rather just make those changes myself, if those are the right changes to make for the business and, you know, long term I’d rather you know, I’m a CEO. I’m happy to grow. I’m happy to you know, that’s what I get paid for it, theoretically. So, you know, I’m learning. You know. I’m learning. I’m trying to do what I can and stuff too.

I appreciate it. And I appreciate the fact that you’re talking about it here and that you’re doing all of this in public too. Like not just the reaction right now, but also did the board meetings and just sharing where things are going, what things are, you know, the long term perspective, short term actions, all that kind of stuff. You’ve been pretty good at building in public and I quite appreciate that. I’m trying to build in public myself.

If Gumroad dies, it’ll die in public. You know, like, in March, we’ll do another public board meeting. And I’ll report back, like what is churn, you know. This is the change to our revenue. This is a change to our creators. These are how many people have left. And again, just like, it’s not, you know, and hopefully it doesn’t feel like a victory lap, if not that many people leave. Or it’s just, we’re building a business. This is what it is. And you know, like, when we did this laid off, the hardest thing I’ve ever done in the history of Gumroad, was when we laid off people the first time around that was like 20 or 22. And we went from 20, down to three or four people. And we almost died, got to profitable and it ended up working out. But I was just stressed. I was like, this is crazy. It’s end of the world, like, and then like, everybody got a job immediately, you know. So not to say that, you know, to say, oh, everyone will just find another Gumroad thing immediately or anything like that. But I do think it’s important to say like, the people who use Gumroad are super smart, competent people, and they will like, they will be fine. And, you know, I just kind of keep that in mind. Like, I need to do the right thing. And the honest thing, and I think doing it in public helps me do that. Because otherwise I could just pretend not to or I could charge fees over here. And you know, a lot of folks do that. But I have to do it in public. And when we do dividends, I’m gonna have to do that in public and like, you know. But I think frankly, I think this is kind of what we need in I think, late stage capitalism, like, it just doesn’t, it feels like we just hit we’re hitting a wall or hitting an iceberg, right? Or something with 5% interest rates, and people aren’t ready for this at all. I talked to friends who are like, what do you mean? I’m like, interested, like, your house is effectively twice as expensive as it was like three months ago. We’d like we haven’t reacted yet, you know. And so that’s the other thing at the end of the day that you know, like, I wanna be first. And hopefully, you know, six months from now people look back and were like, “Oh, crap, actually, the changes that Gumroad made was actually pretty prescient and pretty smart.” They are worth

Arvid Kahl
I have a very strong feeling that even though it hurts right now, to see this price increase, this is one of the first we’re gonna see over a multitude of tools. And then we’re gonna be, “Oh, yeah, apparently, that’s the thing that everybody needs to do.” And it’s like, people sometimes forget how recessions look, because you want to forget. I’m just thinking about 2008 and stuff, right? I don’t wanna remember those days.

Sahil Lavingia
You know, and I just, I hit the all time. And it’s like, it goes to like 20% in 1980. And it’s like, no one wants that. No one wants to imagine what it would look like if interest rates, you know, if inflation all these sorts of things can happen. We denied inflation for you know, a couple years because no one wants to deal with that, right? That concept. And what is inflation? Inflation is the prices of goods and services go up. And I think, you know, if you told me a year from now and said, hey, Stripe is now 3.1% You know, Pay Pal is now this. Patreon is now this. Substack is now this. I’d say, I’d be like, yeah, that’s believable to me because at the end of the day, when interest rates go from 0% to 5%.

Arvid Kahl
Something has to give, right?

Sahil Lavingia
Something and it’s things have been giving, right? People have been seeing that in lots of different parts in their lives. I think in software, we’ve mostly been seeing it in layoffs. Because it’s frankly, easier to lay people off, because you can do it silently and privately. And it only affects you know, 1000 people or 100 people or 50 people or 10 people. So layoffs proceed harder changes. And so it’s only gonna get worse layoffs precede salary cuts, which will start to happen, no one wants to do that. We did that at Gumroad to, and then price increases. So you know, we’re kind of starting along that as an industry and I think it is a contingent, right? At the end of the day, we’re all looking at each other and trying to, you know, trying to make the right decisions in the right time. So yeah, we’ll see or maybe not. Maybe, you know, maybe things go swimmingly well and

Arvid Kahl
Totally

Sahil Lavingia
And you know

Arvid Kahl
That’s wishful thinking there.

Sahil Lavingia
You know, I would admit defeat. I’d say, yep, I were completely wrong. And awesome, you know, like, awesome for the world, right?

Arvid Kahl
No, you can always change, right? That’s the flexibility that you have. And like that the thing that and I think that is part of the problem. Honestly, the whole backlash that I’ve seen on Twitter that you are experiencing firsthand, it’s not that there are changes. It’s the fact that people really release, like they crave consistency. Like these people, founders, creators out there who want to build a living out of something that is a side project, like they need to know right? Or they think they need to know that this is gonna be 5% until next year, when I’m doubling in size and then it’s 2.9% the year after. That, it’s not that, they look exact numbers, it’s that they don’t want the numbers to change a couple of years from now, because you know, they have their plan. And obviously, with the world economy changing, that’s problematic assumption about anything. But I think that’s why people are so intensely reacting to this.

Sahil Lavingia
Yes. That’s actually really amazing point. Yeah, I think stability and feeling like, yeah, like, I’m gonna wake up tomorrow, and the sun’s gonna rise at the same day, you know, at the same time, like feeling like, this is my life. This is my projections. This is like the car that I’m budgeting for. And when you realize, and it is a harsh reminder, because basically every TOS is written kind of the same, which is, we can kind of charge whatever we want, at any, you know, like. And actually, I am a big believer in the EU, and a lot of what they’re doing because I think ultimately a lot of this stuff should not be allowed, frankly. It should be enforced by government bodies, at least in my view. I’m sure there’s critiques on, you know, on this too, but I’m generally more of a kind of libertarian person. But yeah, in this case, I think, you know, we shouldn’t be able to. Or we should say, look, every time we have a price change, it has to last for two years or three years. I can say it, you know, my plan is never to change pricing again, right? And it hurt because I wanna make a change that we don’t have to. Just say, “Oh, it was 5%, now it’s 1.5.” And two years from now, it’s you know, I thought about that, by the way, like, what if we just every year?

Arvid Kahl
Yeah

Sahil Lavingia
Increase it by point five.

Arvid Kahl
I was gonna ask you. Why don’t you, a gradual system. I mean, it’s boiling the frog, right? It hurts the frog. But over time, people forget. That’s gonna happen one day on Twitter.

Sahil Lavingia
It just felt dishonest to me to be like, if I knew that I was gonna do two increases, that I’d rather just do it now. And like, just deal with the pain and recalibrate the brand and sharpen the brand and do that all in 2023 instead of overtime. But yeah, I did think about that. But yeah, it’s gonna be interesting. I think 2023 is gonna surprise all of us. And I just need to run a business where I feel like I can be surprised, you know. Like, if Stripe increases their fees, and now we’re reacting to them, you just I think would have been quite difficult. But we’ll see. I mean, I think it’s fascinating. I love the feedback. I mean, I think like one of the most satisfying things. And the reason I think I am a decent CEO is because I get insane amount of feedback on everything I do, the power of Twitter, the power of community. It’s amazing. Like, if I was making all these decisions, completely blind, you know, Gumroad would have died a long time ago, you know. So I think that’s super, super helpful.

Arvid Kahl
It helps to have access to like, a quarter of a million people, right? That’s certainly and the best and in the worst ways. So obviously, like, your feedback is gonna be great. But you’re also gonna have the, you know, that the shitposting quadrant of all these people that are just gonna tear

Sahil Lavingia
Yeah

Arvid Kahl
You because they can

Sahil Lavingia
They can and there’s incentives too. And, you know, luckily, I’ve been using Twitter long enough that I kind of tried to understand what’s like, I’m the CEO of Gumroad sometimes not Sahil, you know. Like, there, you have to kind of separate the two. It’s always weird when like a friend of yours, like cancels you on Twitter, and you’re like, “Hey, dude, what’s going on? Like, we need to talk.” You know, it’s like, are we not friends, like, but then I realized, Oh, you’re playing kind of this game for your audience.

Arvid Kahl
Formative tweeting

Sahil Lavingia
It’s all a little, you know, it’s unfortunate that maybe you fix everything, but doesn’t seem like,

Arvid Kahl
Well, I’m not without fault here, too. I jumped onto the bandwagon as well, because I felt like I wanna you know, share my opinion here, too. But it led to this wonderful conversation. So that that was worth it.

Sahil Lavingia
Yeah. And I saw it. And I was like, this is a great middle of the road, like, this is like apathetic on your part to me. And so, you know, I was like, I wannna talk to you, right? If you know, and like, there are other people I’m like, yeah, I’d rather probably not show up on this podcast right now. You know, like, I’d rather wait, maybe but yeah, I think it is super key. And I think at the end of the day, like, I hope to always run Gumroad transparently. I’ve seen a couple other companies turn off their metrics or say they will. I think partly, by the way, that’s a result of them increasing prices soon. And so as they start to make more money, they don’t want people to maybe know that. So we’ll see. I think this sort of, there’ll be a lot of knock on effects. But I hope to just show people like, this is what running, you know, Gumroad looks like. At the end of the day, I think that’s a service that, you know, I can offer uniquely that very few other people can and hopefully Gumroad exists, so I can continue to do that. And the good and the bad, and the ugly will always, you know, show up in the board meetings, you know, forever so that people can look back and be like, oh, yeah, we shouldn’t have done tiers or we should have or we, you know, like the decisions that other. I assume other CEOs are looking at the Gumroad reaction, or talk to a couple folks at least, and they’re like, “Hey, how’s it going?” You know, and I’m like, well, I’ll get back. I’ll send you you know, a comprehensive update. You know, we’ve been cancelled for NFTs. We’ve been canceled for a couple things on Twitter before. Everyone gets super loud and says they’re gonna leave in the next month we do more GMV. So this is, of course, completely different because this is an actual business decision. I think we will see far more churn than we’ve ever seen before. If we don’t, I would be surprised, honestly. I do expect it. But again, if we don’t, then you know, the writing’s on the wall for a lot of other companies, which is other companies will see this and be like, “Wait, what? No one turned?” And to be honest, that’s a big reason we did it because I looked at Substack. And I said, this is way too expensive. And then I looked at what people say about Substack, and I say, they’ve delivered a product that’s worth it for enough people. And I hope we can do the same. I really do hope. And we’ll you know, we’ll see.

Arvid Kahl
More definitely hope so too. I mean, the creator economy has been built in many ways on Gumroad for many, many people. And I think it’s Gumroad should remember that and the creator economy should remember that. And I think you looking at this through the CEO lens of this is yet another experiment. It’s a painful one, but it is one. I think that clarifies for me, at least a lot of the the communication around it. And also the intentionality behind it. I think that you just sharing all of this right now and in the public board meetings, also makes this more approachable to the people who care about Gumroad not just who care about jumping on yet another cancellation hype train. But you know, trying to figure out what this business that is part of the infrastructure of our little creator economy space here, why these choices are made. So thank you so much for sharing this with me today. I think I now know a little bit better, in many ways where this came from. It’s just interesting to see like pricing in general, and how almost every choice you make is kind of something that backfires in some capacity, because it doesn’t matter. If you raise prices, bad. Lower prices, then you suffer, right? It’s change prices, now you confuse people. It’s always something with prices.

Sahil Lavingia
Well, that is why I think everyone is you know, is secretly a communist is because no one everyone wants that no one likes. I mean, I was talking to my wife, and she’s like, “This sucks.” And I’m like, yeah. It’s I like if everything was free, you know, like life would be awesome. But it’s just there is this, you know, at least we’re not, you know, I prefer this over like, you know, getting into a fight with a lion at least, right? Which may have been the alternative.

Arvid Kahl
Something to say about civilization that certainly helps. Yeah, honestly, I think that one thing that that I’ve really noticed in all of this, and I’ve been thinking about this for the last couple of years being a person on Twitter, and you with the following your size, that is what is it? Like almost four times mine, which I can barely believe that I have a following the size of mine. And then it’s crazy to see yours, but like the platform risk that we are all exposed to as people on social media. Now you kind of can see this also on Gumroad. Now you have to deal with the fact that Stripe may or may not do something that you have to react to. And then you have to integrate another payment provider because Stripe might not.

Sahil Lavingia
Yeah

Arvid Kahl
Like there’s so many things.

Sahil Lavingia
Oh, I mean, I haven’t even talked about one, you know, like taxes. One huge thing that’s happened in the last year is that every jurisdiction basically on planet Earth is now saying we need to collect digital sales tax.

Arvid Kahl
Yup

Sahil Lavingia
So we have like two or three engineers who are spent building like infrastructure to deal with this stuff. You know, Wisconsin. Yeah, so like, just, you know

Arvid Kahl
These poor people

Sahil Lavingia
I know, I know, right? And that’s just the you know, it’s gonna it’s and guess what? Payhip, every single person who accepts payments on the internet is gonna have to deal with GDPR. You know, like, there’s all this constant stuff. But yeah, I do think it you know, I think George. What’s his name? George Lee, pragmatic engineer on Twitter. Yeah, he said something, which was like, it’s just, you know, it’s just business or like, you know, at the end of the day, you can’t keep me because I built my infrastructure in order to be able to leave. And this is why, you know, in a sense, and I do think it’s important. Like people at the end of the day, we, you know, we choose to use Twitter instead of RSS, because it’s easy, because it’s convenient, because of distribution, because of save information and network effects, etc. But the cost is, you know, what if Elon says it’s eight bucks a month, right? Or what if Gumroad? What if I said, it’s 30%? You know, like, these sorts of things that, you know, we deal with this literally every day with Apple and Google who do charge 30%. And it’s like, wow, we could have built an amazing native consumption experience with buying and all these things in line and discovery and recommendations. Like, we have, like designs for this stuff. That would be amazing. But you know, we can’t really ship it because it’s gonna cost 30%. But now with 10%, maybe it’s like, oh, people are already willing to pay this. Maybe they are if it’s a toggle, we can turn it on. It’ll show up in the app and yes, they’ll get charged 30% or 40% or maybe 25 with the Apple fee, but we can now do this and it will make sense for this kind of product, you know, to have that 25% take rate you know. Kindle takes 75% of every sale or something insane.

Arvid Kahl
Oh, I know.

Sahil Lavingia
It’s psychotic. It’s crazy.

Arvid Kahl
Yeah

Sahil Lavingia
I remember, I was the CEO saying, “That’s an insane fee, we only charge this.” And so I could see now CEOs and Gumroad searching in vain. So maybe there’s just like the circle of life thing that happens too. Who knows? But yeah, I am excited that at least we get to, we get to have this conversation and learn in public and all grow together, because I think it’s important. Every creator is kind of a CEO is a tiny. Some are some are small, some are bigger. But you know, we are all trying to make make these kinds of business decisions. And it’s not easy, you know, but we’re all human. We’re all trying to make it work. And hopefully, yeah, hopefully, no one suffers too much, you know.

Arvid Kahl
Well, that’s that is, I guess, up for the economy at large to decide, right? You are in many ways, you’re both making a choice, like thinking about the future, but also reacting to other things that happened in the past. So I can see that. I also increased prices on certain of my properties recently, like my doubled the price of my course. And I’ve told nobody, I just did it, and people are still buying it. Apparently, that’s the thing, raise your prices. People say that, right? It’s almost cliche at this point. But

Sahil Lavingia
Exactly. Charge more, you know, it’s like a, we did. Yeah, and we thought about that, too, by the way. Like, what if we just changed pricing and didn’t tell anyone just for new creators, you know?And frankly, like, that’s something I noticed is like, basically, I would observe users signing up for Gumroad, you know, UX testing and things like that. And literally not a single person would ever check the price. Like, they would just sign up and use it because other people do, you know. And obviously, I wanna pick a fair price. I don’t wanna pick an insane price to do it. But I really think like 10%, hopefully gets us to a good place.

Arvid Kahl
Other people use Gumroad, because people told them to use Gumroad. Because Gumroad is honest and truth about you know, the pricing structure. There’s a lot of word of mouth in our community. So like doing anything shady, that is not publicly communicated, that is gonna destroy like any and your trust is quickly destroyed, and really slowly built. And I think as much as this might be painful, I think at least you’re honest about it or not at least, mostly, right?

Sahil Lavingia
Exactly. And I think people say a lot, you know. There’ll be some people who say, hey, you’re not being as honest or trust or whatever. And I’m like, cool, awesome. Like, let’s get on the phone and talk about it. Because, you know, that’s the beauty of running a public business is that there’s, I really don’t think I’m hiding anything, you know. At the end of the day, I’m just trying to choose, you know, my P&L is relatively public, you know. People know the net income as of November and but you know, what happens when you know, what if we print money? What if no one turns and we started printing money, like, that’s also not good. Maybe we should have reduced, you know, so we’ll see what happens. But, yeah, I’m just super excited. I’m so glad you had that you were available to talk today.

Arvid Kahl
Yeah, thanks for taking the time to chat with me about this, too. I couldn’t concentrate on other things because it was such an ongoing, intense conversation with so many perspectives that I really wanted to like, funnel them through your mind and hear what you think about it. And I think this clears up a lot of things, maybe not for everybody. And it may not help everybody understand or appreciate the situation that you’re in. But hey, let’s just say that that’s the risk we all take when we build businesses, right?

Sahil Lavingia
Yeah, I think you’re right. I think, you know, like, at the end of the day, I think what your point around, you know, you can try to put it in the email, if you don’t like. That’s the thing a lot of people will read. And I do think I need to send out another email and try my hardest, even though it may not work, you know, to make sure that I can take all of these learnings, all these conversations and try to put them in a text format. Because at the end of the day, you know, 50,000 people will read the email, maybe 5000 people will check out that YouTube video. And so I do need to, and that’s something I honestly I always make I have a tendency to make this mistake is like, oh, if people care, they’ll just watch the hour long video, you know, and it’s like, that might be.

Arvid Kahl
We’ll see. Yeah.

Sahil Lavingia
We’ll see. Yeah.

Arvid Kahl
People want the quick and dirty and unfortunately, often it has to be dirty to be quick, right? So

Sahil Lavingia
Exactly.

Arvid Kahl
It’s a lot of lossy compression, when it comes to this particular kind of deeply felt, honest message.

Sahil Lavingia
I wasn’t worried about that. Luckily, so far, I haven’t felt like anyone has said something wrong in the sense that people have generally said this is the changes that Gumroad is making and this is why they’re bad or whatever. Every once in a while sometimes, it’s like something completely wrong gets shared and then goes viral. And then you’re like dealing with like no, we’re not doing we are yes doing this but not that, you know. So at least in this context, that’s something I do think that email does well is it just is at least puts it out there so that people generally are like they’re all arguing about the facts. It’s not like one side things Gumroad is making it this and you know, everyone is aligned against me. I did that well, at least. So yeah, I’m excited to write that email. And I really do appreciate all your feedback like even this conversate. I mean, it’s been really helpful. I’m sure it will factor in so.

Arvid Kahl
Well, thank you for taking the time. I guess, this is the point where I ask you where people can follow the conversation. Yes, it’s fairly present. But yeah, where would you like people to contribute to this conversation?

Sahil Lavingia
Yeah, I mean, I think Twitter is probably the right place for this. Just you know, my handle is that @shl. But yeah, just yeah contribute on Twitter at reply us. And yeah, we’d love your thoughts.

Arvid Kahl
Thanks so much, Sahil. That was very insightful.

Sahil Lavingia
Thank you. Thanks so much for having me.

Arvid Kahl
And that’s it for today. Thank you for listening to the Bootstrapped Founder podcast bonus episode. You can find me on Twitter, @arvidkahl, ARVID KAHL. And you’ll find my books Zero to Sold, The Embedded Entrepreneur and my Twitter course, find your following there as well. If you wanna support me and the Bootstrapped Founder podcast, please follow my YouTube channel. Subscribe to the podcast and your podcast player of choice and leave a rating and a review by going to ratethispodcast.com/founder. Any of this will help the show and thank you very much for listening. And have a wonderful day. Bye bye.

Transcribed by https://otter.ai

Topics

00:00:00 Gumroad’s latest price increase
00:01:09 Gumroad is a Swiss Army knife
00:06:15 The decision to send out an email and tweet at the same time
00:10:48 The importance of having the facts
00:14:53 What’s lost in this email is complexity
00:17:45 The choice to increase pricing
00:22:58 A slap in the face for creators
00:26:38 The tiered pricing system as a failed experiment
00:32:04 Gumroad is not a destination, it’s a service
00:37:19 The bottom of the barrel side of the economy
00:40:42 The existential threat to Gumroad from Stripe
00:44:58 Building a business in public
00:49:17 Consistency is the key — or should be
00:55:44 Gumroad and the creative economy
01:00:41 What if we just changed pricing and didn’t tell?

One thought on “Gumroad’s Pricing Disaster with Sahil Lavingia

  1. I understand Gumroad’s decision much better now. I think it would have been useful if it had been communicated this way instead of as offering me simplicity. Instead, it’s really about keeping the company viable for the future. That’s a valid point and more honest. The “simplicity” if the pricing does not help me at all. But having Gumroad around for the forseable future is definitely in my interest.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.