Wen | Deep Sound Liu Yalan
Sahil Lavingia started his business at the age of 15, dropped out of school at the age of 18, and became the number two employee of Pinterest, a unicorn valued at more than 10 billion dollars.
Most people will cast envious eyes on him when they hear this story, and the winner in life is just that. But his story wasn't finished.
At the age of 19, Sahil suddenly had a new entrepreneurial idea, he gave up his options, left Pinterest, and started a new company, Gumroad, in 2012. Gumroad did raise millions of dollars when it started, and he rightfully assumed that Gumroad would rise quickly and become a $1 billion public company with hundreds of employees. So he started the unicorn chase, recruiting from Yelp, Amazon, Stripe and other companies, and quickly built a world-class talent team.
"I believed it wouldn't be long before I was walking around Allen's annual Sun Valley Summit and talking to Bill Gates and Warren Buffett about how to fight malaria. In my heart, Gumroad was never founded for money – I wanted to impact the world, silently. I imagined that once I became famous, I would be the kind of "down-to-earth" tech giant introduced in the magazine. Sahil recalled.
But in fact, Sahil neither went to Sun Valley nor talked to Bill Gates about poetry and philosophy of life. Soon, the situation took a turn for the worse – in 2015, growth fell short of expectations, and Sahil had to lay off his staff drastically, leaving only 5 employees; By 2016, there was only one person left in the company, Sahil himself.
Since then, Sahil, accustomed to seeing successful people looking for each other, has put aside his obsession with unicorns and began to re-evaluate his business, business logic and inner state.
By chance, Sahil and I had a long conversation. In fact, due to my work, my daily work is to deal with decision-makers, investors, and entrepreneurs of various businesses, which are inevitably true.
Sahil's candor was astonishing, and he did not shy away from talking about his past "hubris", dissecting his psychological state along the way without disguise. His thinking also validates the point we have always wanted to convey - don't deviate from the profit awkward talk pattern, don't deviate from the actual empty dream.
"When the mainstream media and the 'bigger is better' social culture keep telling us that unicorns are the only ones worth starting, it's not cool enough, even weird, to say that different desire in your heart." Sahil admitted: "Some companies may indeed take the unicorn path, but more companies are not suitable." Many start-ups have to look for venture capital to raise a lot of money just in the early stages of their startups, because they have not been able to find a sustainable profit model to maintain the normal development of the company, and they can only fall into the market cycle of blindly seeking big and winner-take-all. Expansion becomes the most important goal of the business, not revenue, profit or sustainable growth. ”
Slowly, Sahil realized that the essence of the dilemma lay not with Gumroad, but with himself.
He admits that he is obsessed with the unreachable unicorn and ignores the value of Gumroad itself. Gumroad is a powerful but simple creator enabler and digital content sales tool platform that may be a terrible project for some investors, but a good product for the customers it serves.
The year after the layoffs, Gumroad brought platform creators close to $40 million in revenue while Sahil went it alone, and in 2019, Sahil was determined to regain his strength, turning down many opportunities that he would have accepted without hesitation to focus only on the product. In 2020, Gumroad generated $140 million in revenue for creators on the platform, while remaining profitable itself.
"Gumroad may not be enough to be on the cover of a glamorous high-end magazine, but it empowers the founders, customers, and employees of the business."
Sahil's experience may shed some light on entrepreneurs who are swimming through the grand narrative curse: the premise of "doing great things" is "doing good things", and entrepreneurs must become themselves and then entrepreneurs.
The following is a partial transcript of the interview after Shen Xiang:
Shen Xiang: What is the reason why everyone wants to be a big company?
Sahil Lavingia: I think a lot of people want to do big things because we always read success stories about doing big things. If you turn on newspapers, TV, Twitter, you see a bunch of billionaires, and then you assume as if everyone should be like this, or if there are many more of these people out there. This is a sampling bias.
Trying to build a big company, trying to get rich, these things are not necessarily wrong. But this can only be possible if it is of real value to the world. Statistically, startups are likely not to develop into large enterprises, and only a very small number can. So I think the lesson for us is that you'd better recognize that properly and build the best business you can build under limited conditions.
Unfortunately, in the venture capital ecosystem, entrepreneurs have to assume they can get big, which is not true. Just like when you play basketball, you shouldn't always think about becoming an NBA superstar.
Deep Sound: Is venture capital misleading us? How do you see the role of venture capital in the entrepreneurial process?
Sahil Lavingia: The most important role of VC is to tell founders – hey, this business doesn't mean much to VCs. I personally believe that VCs, including us, can do a better job of encouraging people not to raise money.
I also joked yesterday with a founder that the most helpful thing for a VC is to generate interest from other VCs. It's a bit ironic, like saying that the most valuable thing about a doctor is to introduce other doctors to each other. Ideally, your doctor is good enough that you don't need other doctors.
Venture capital is a high-risk, high-yield investment strategy. VC funds exchange capital for early-stage equity in startups, essentially buying a portion of the future value of the companies they invest in. The effective operation of this model requires a small number of winners to pay for all the losers. The whole system relies on a small number of companies invested by venture capital firms to provide hundredfold returns to offset losses on other investments.
Be clear that no one cares that much about your startup, your employees will have new jobs, and your investors will invest in other companies.
Deep Sound: From big to small, what was the turning point in your thinking?
Sahil Lavingia: My transformation may feel like it happened overnight. But there is a lot of foreshadowing. In 2015 we tried to raise money and it didn't work, and that's when I said, OK, I don't know what happened to Gumroad, but we've got to keep going, we're going to dock. So we reduced the team to just five people, and in 2016 I was alone. Gumroad turned into an actual business that continued to grow as a business, but probably no longer interesting for everyone.
Once the bleeding has stopped, it is time for the company to re-evaluate. Gumroad was still operational at the time, but I felt like a complete failure. Many people in that circle are still staring at their $1 billion corporate dreams, constantly raising money and hiring people. Some people did, and I couldn't keep myself in Silicon Valley. I spent most of 2016 traveling and writing novels. I happened to see one of my favorite authors, Brandon Sanderson, teaching science fiction writing classes in Utah. So I moved to Utah in 2017 not wanting to miss the opportunity, but also to save some rent and save some face for myself. There, I was able to think about corporate restructuring without keeping Gumroad bankrupt.
The new friends I met there told me that I was crazy to start a $1 billion business in the first place. I couldn't understand their ideas at first, but after living in Provo for a few years away from Silicon Valley, a highly competitive hub of venture capital, I gradually embraced them. Although the unicorn I was chasing ended up being nothing more than a pony, the original vision was coming to fruition.
Slowly I realized that the essence of the problem was not Gumroad, but myself. Thinking about the unreachable unicorn ignores the value of Gumroad itself.
Shen Xiang: Have you ever questioned whether you are not capable enough to make a bigger enterprise, after all, someone has made it?
Sahil Lavingia: Absolutely. Especially in the beginning, I was too young to realize what it took to make a great business. So I believe I have the ability to do this and build a big company. But honestly, I've talked to a lot of people, there are financings, there are losses, there are successes, there are failures, and I don't think we need to build a so-called skill system. Because things are very subjective. Anyone can have skills, but there are many other factors in getting things done, such as the fact that some interest happens to intersect with the interests of some other person at the right time. I don't think it's the smartest people who build the biggest companies, but there's randomness that also works.
Shen Xiang: You are now advocating an entrepreneurial idea called "minimalism", can you explain? What are the signals that entrepreneurs need to think about minimalist entrepreneurship?
Sahil Lavingia: Minimalist entrepreneurs have their own characteristics, just as the path to success is different. I did my best to describe the characteristics:
1. Minimalist businesses must make money. To start making money from day one or soon, they make money by selling their products to users instead of selling them to advertisers.
2. Start a business based on the community.
3. When you really start a business, create only the parts that need them to create, and automate and outsource the rest.
4. Instead of spending time persuading customers, spending time teaching customers, using sales as an opportunity to talk to potential customers about their products one by one, while also teaching yourself to recognize the problem you are trying to solve for customers, this sales style is a long-distance running game based on relationships and weaknesses, not a one-day grand opening ceremony where you can then sell a product to a stranger.
5. Market your truest self and share your story, from the initial struggle to the final success.
6. Seek self-growth and enterprise growth attentively. Entrepreneurs lead businesses, not be led by them.
7. Build the house you want to live in. Minimalist entrepreneurs attract other minimalist entrepreneurs. Be clear and often emphasize your values early on, show others who you are, and they'll come to the door.
Honestly, I think most entrepreneurs should be minimalist. When I was writing fiction in my subject, my teacher told me that if you can't explain why you want to have a word or sentence, cut it out. Everything should have a purpose and meaning. Entrepreneurship is also a business, everything requires money and energy. I spend a lot of time thinking about waste, like hiring people you don't actually need.
Shen Xiang: Many MBA courses will say that short-term profits seem to make people ignore long-term opportunities, and is the pursuit of short-term, timely profits a short-sighted behavior?
Sahil Lavingia: It's hard to take a long-term view. It's really hard to get people to think about 10, 20 years, and think about things in a long-term time frame. But when we make decisions, we are largely convinced that business is not just for a year or two. For me, the decisions I make now will be important for the next 10 years. Once you realize the role of time, you realize the significance of certain decisions. And the pursuit of profit is just me returning to the founder state to think about what is most important for the company? I think it's a way to help people think.