Welcome to the 10th edition of GrowthDeck! If you enjoy reading deep dives like this, please share it with your friends or colleagues who would appreciate it. Now, let's dive in!

All of us know about startups that raise multiple rounds of venture capital, grow into billion-dollar companies, and finally IPO. It’s a fairytale journey for every founder.

But what happens when companies don’t follow this traditional path or fail to do so?

Gumroad originally started as a weekend project to solve a problem Sahil Lavingia had. He wanted to sell a digital icon but couldn’t figure out any easy platform that could seamlessly connect creators to buyers.

12 years later, Gumroad now clocks millions in revenue every month.

But the journey was anything but smooth.

Gumroad was first built over a weekend in April 2011 by Sahil. He would soon go on to raise over $ 8 million from a number of angel investors the following year. They enjoyed growing at a moderate rate over the course of the next 2 years, until they hit a peak in November 2014.

Soon everything collapsed, the company got buried in liquidation preferences, and major layoffs plagued the Gumroad team. The situation was so bad that at one point it was just Sahil alone building Gumroad after having moved to Provo, Utah, away from the bustling city of San Francisco.

TechCrunch got wind of the layoffs and published “Layoffs Hit Gumroad As The E-Commerce Startup Restructures.”. The failure was suddenly public, and everyone started wondering if Gumroad would ever bounce back.

Now let’s look at some amazing growth drivers that Sahil leveraged to scale Gumroad.

Gumroad’s Growth Drivers

🎆 1 - Cold emailing

The majority of Gumroad’s growth came from cold emailing and word of mouth. As Sahil mentions in the following tweet:

Sahil says “We never invested heavily in paid marketing, SEO, or anything like that. We tried content marketing; it worked okay, not great. Manual "sales" worked the best, by far. Word of mouth grew us beyond that. Those two things are responsible for 99% of Gumroad's growth. It's not a glamorous answer, but it's true.”

The team at Gumroad scoured the web to find people who would benefit from the product and sent thousands of emails. These philosophies were crucial in converting visitors into customers,

In the early days of the business, cold emailing was important for exposure. Lavingia emphasises that in the early days, when no one knew about Gumroad, personally reaching out was the greatest way to create traction.

Traditional marketing tactics did not drive Gumroad's development. Human interactions and true value propositions were prioritised over paid marketing, SEO, and content marketing.

Delighting early consumers resulted in a tremendous word-of-mouth effect. Users who were delighted with their purchases naturally shared their positive experiences, broadening Gumroad's reach beyond what cold emails alone could do.

Gumroad's tale shows that, while flashy tactics exist, the foundations remain crucial. Although cold emailing and word of mouth lack glamour, they give genuineness and long-term influence.

Here is a quick chat by Sahil to one of the questions around cold email/dm.

📈 2 - Creating Value (not only through valuation)

Even at the brink of extinction, Sahil kept going since he knew there were hundreds of creators dependent on Gumroad. This transformed Sahil’s original goal to turn Gumroad into a billion-dollar business into making Gumroad a sustainable lifestyle business.

Gumroad launched the Gumroad’s Creators Fund to give back to the community of creators on the platform.

Eventually, people like Austed Allred, who first started on Gumroad, started building their own VC-backed startups.

Many more, like Nathan Barry, funded their startups through sales on Gumroad. Thus, even though Gumroad is yet to be crowned a billion-dollar company, its impact is seen across the world: be it through people building startups of their own or product ideas from Gumroad making the entire web a better place.

🌀 3- Referral-Driven Growth

This growth mechanism was a pivotal driver in the company's expansion. The core idea is that satisfied creators who used Gumroad's platform to sell their products were incentivized to refer others to the platform, effectively becoming brand ambassadors.

Mechanisms of Referral-Driven Growth:

Network Effect: As more artists joined Gumroad and began selling their items on the network, the platform's value grew for both existing and new consumers. The network effect increased Gumroad's reach and value as artists referred their colleagues and friends to the site.

User-Centric Approach: Gumroad's dedication to its primary creators developed a feeling of community. Creators who had success on the site were more inclined to tell others about their experiences, encouraging them to join Gumroad as well.

Low Marketing Costs: Gumroad minimised its reliance on traditional marketing methods by focusing on developing close relationships with its user base. When compared to sponsored marketing strategies, word-of-mouth recommendations from artists had a more real and impactful influence.

Creators who linked people to Gumroad served as reliable information sources. Their actual experience and success stories were more persuasive than traditional advertising in attracting new users.

Community Engagement: Gumroad's partnership with low-income and new producers fostered a sense of inclusion and belonging. This level of community participation encourages authors to suggest others who may benefit from the platform's offerings.

Here is a perfect tweet by Sahil to sum it up all:

💎 4 - Building and Failing in public

Since Gumroad wasn’t venture backed anymore, it was easier for Sahil to be more transparent and open about what was happening inside the company.

In April 2018, Sahil started to release monthly financial reports publicly. To help other startup founders learn from their mistakes.

He started to write blogs, and tweets about his failures and the learnings that he had gathered over the years. This transparency in decision-making and company statistics made Gumroad more trustworthy to the thousands of creators it was home to.

Sahil started keeping board meetings public for anyone to jump into. A few months ago, public emails were also sent to inform creators about pricing changes.

As a result, creators are more loyal and feel like they’re also stakeholders in the growth of Gumroad. Today, Gumroad has over 30k creators, and the community is growing every day.

Even before starting, Gumroad, Sahil always belived in transparency and publically shared all of his insights and journey:

At Gumroad, everything is public. Sahil has shared almost each and every piece of information about their numbers:

If you want to take a detailed look at Gumroad’s metrics, take a look (here).

Brb running to read a book my him The Minimalist Entrepreneur: How Great Founders Do More with Less here is the link if you are interested.

That’s all for today. This edition took us about 15 hours of effort. If you think your friends or colleagues would like this, please share this link with them. Thanks for reading and don’t be shy to leave a comment if you have any. Also, please consider following us on Twitter (Keval Jagani, Meet Shukla) and sharing this blog post.