Gumroad

Growth Stage

Powering the online creator economy

Analytics

Raised to Date: Raised: $5,000,000

Aggregate Commitments $

Platform

Republic

Start Date

03/16/2021

Close Date

04/11/2021

Min. Goal

$25,000

Max. Goal

$5,000,000

Min. Investment

$100

Security Type

SAFE

Funding Type

RegCF

Series

Series A

Valuation Cap

$100,000,000

Discount Rate

20%

Rolling Commitments $

Status
Funded
Reporting Date

04/30/2021

Days Remaining
Funded
% of Min. Goal

20,000%

% of Max. Goal

100%

Likelihood of Max
Funded
Avg. Daily Raise

$192,308

Momentum
Funded
Log in or create a free account today to gain access to KingsCrowd analytics.
Location

MOUNTAIN VIEW, California

Industry

Business Services, Software, & Applications

Tech Sector

CommerceTech

Distribution Model

B2B

Margin

High

Capital Intensity

Low

Business Type

High Growth

Gumroad, with a valuation cap of $100 million, is raising funds on Republic. The company has developed a platform that empowers the online creator economy and makes it simple to sell online. The services offered include building products and checkout pages, handling payment processing, and managing customers. Sahil Lavingia founded Gumroad in 2011. The current crowdfunding campaign has a minimum raise of $25,000 and a maximum raise of $5,000,000, and the proceeds will be used to grow the team, add more resources, and expand the offerings. Gumroad has helped over 74,000 creators earn more than $390 million. The company generated $9.2 million net revenue in 2020, up 87% from 2019.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$4,923,912

$2,600,950

COGS

$3,615,674

$2,600,950

Tax

$0

$0

 

 

Net Income

$288,092

$154,849

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$3,324,634

$2,481,407

Accounts Receivable

$0

$0

Total Assets

$4,445,980

$3,052,290

Short-Term Debt

$4,055,945

$2,899,347

Long-Term Debt

$0

$0

Total Liabilities

$4,055,945

$2,899,347

Financials as of: 03/16/2021
Log in or create a free account today to gain access to KingsCrowd analytics.

Upgrade to gain access

Pay Monthly
Annually (Save 17%)

Starter

$8.33 /month
billed annually
Free portfolio tracking. Limited reports and filters.
Plan Includes:
Everything in Free, plus
Advanced company search ( limited filters)
Founder profiles and exclusive webinars
2 Analyst Reports per month
Get Starter Annual

Pro

$25 /month
billed annually
Unlimited analyst reports and market analytics.
Plan Includes:
Everything in Starter, plus
Full access to all Analyst Reports
Filter on Analyst Reports (e.g. Top Deal, Deal to Watch, etc.)
Market Analytics
Get Pro Annual

Merlin

$41.67 /month
billed annually
Full site access including Merlin ratings.
Plan Includes:
Everything in Pro, plus
Search and filter companies by Merlin ratings
Company specific Merlin rating and risk assessment
Get Merlin Annual
Already a member? Log in here.

Ratings KingsCrowd Startup Rating Methodology Article

Analyst Report Analyst Report Methodology Article

Synopsis

Gumroad is looking to make it easier for content creators to be paid for what they are producing. The company provides a platform for customers to subscribe to or buy directly from their favorite creators. Gumroad began operations in 2011 and now boasts more than 74,000 creators utilizing its platform, with combined $390 million in sales across all of those creators.

The digital content creation market has seen a recent uptick in mainstream acceptance due to the COVID-19 pandemic. This trend has allowed industry competitors like Patreon to grow its user base rapidly, which could be an indication of good things to come for Gumroad. The concern that this market will not continue its rapid growth after the pandemic ends is something to consider, however. Gumroad’s growth in this market over the last 9 years has been impressive, reaching profitability off of nearly $5 million in revenue in 2020.

Gumroad’s current raise on Republic has been rated a Deal to Watch by the KingsCrowd investment team.

Price

Gumroad is raising via a SAFE at a $100 million valuation with a 20% discount. The company’s valuation is quite high when compared to other early-stage startups that are pursuing crowdfunding. However, when taken in the context of Gumroad’s steady and strong growth paired with healthy revenue and recent profitability, the valuation becomes much more reasonable. As a result of these factors, the price score for Gumroad is above average.

Market

The global digital content creation market was estimated at $11 billion in 2019, and it has only seen increases due to COVID-19. In March 2020, as the pandemic was just beginning to take hold in the United States, Patreon noted that 30k new creators joined the platform — a figure markedly higher than usual. These competitor increases, on one hand, bode well for Gumroad because it shows that the entire industry is moving forward. However, it also means that new arrivals onto the scene have a harder time outpacing the already established competitors. Both Patreon and OnlyFans offer very similar services, and the average creator will have heard of (and potentially have friends or acquaintances who use) one of those two large platforms.

 Overall, the massively growing market is more of a benefit than a risk. Additionally, there is no indication currently that this market cannot accommodate multiple winners. Thus, Gumroad’s market score is extremely high.

Team

Gumroad was founded by Sahil Lavingia in 2011. Lavingia previously worked at Pinterest and was the second employee brought on to work for the young company back in 2010. He is also an investor in companies much like his own, giving him the experience as a venture capitalist for a startup as well as the founder and CEO of a startup. This dual level of experience makes him well suited for his role at the head of Gumroad. However, he is the only member on the executive team, which limits the experience and expertise of the team as a whole. Gumroad’s team score is middle of the road due to its small employee list.

Differentiators

Currently, Gumroad offers only a platform for selling digital content. Gumroad creators are able to create a profile for themselves and directly sell their digital creations to customers. They can also set up membership subscriptions for customers who want to receive recurring content. This combination separates Gumroad from Patreon — Patreon only offers membership subscription services to its creators, positioning itself as a platform for creators and fans to interact and support each other. Gumroad brings ecommerce functionality to this structure. It may be more fair to compare Gumroad to OnlyFans, rather than Patreon. Both Gumroad and OnlyFans enable creators to directly monetize their digital content and offer membership subscriptions. Currently, the main differentiator Gumroad can boast against OnlyFans is its transparency. Gumroads publishes its monthly financials via Twitter and holds open board meetings on YouTube. Additionally, Gumroad has plans to expand into supporting the sale of physical creations via its platform, a distinction which would set it solidly apart from both Patreon and OnlyFans. 

The main concern for Gumroad is defensibility. The creation of a platform with similar offerings is not difficult, as already indicated by the number of competitors in the space. However, if Gumroad can continue to expand its functionality and features, it may maintain enough of a moat to stay ahead. Taken all together, the differentiators score for Gumroad is strong.

Performance

Gumroad’s performance thus far has been very strong. The company had just under $5 million in revenue in 2020, which was an increase from 2019’s revenue of $3.3 million. Since 2011, Gumroad has raised more than $8 million in various rounds of funding, showing widespread belief in the company’s product. 

 Not only has Gumroad been successful on financial sheets and with investors, but the company’s platform is also very impressive. With more than 74,000 active creators using the platform, Gumroad has seen its creators earn nearly $400 million. With a growing market, an already profitable business model, and continuously growing revenue year-over-year, Gumroad’s performance is a very attractive aspect of its raise. Thus, its performance score is near perfect.

Risk

Gumroad is a strong company with few glaring risks. Most notably, the company has a very small executive team, which could increase possible bad decisions made by leadership. Lavingia seems like a solid leader with good experience from Pinterest, but one errant decision with no advisors or larger team to offer advice could hurt the company. 

Bearish Outlook

Gumroad’s growth trajectory could be hindered by one simple fact – the space for platforms like Gumroad’s (which, simply put, allows content creators to sell their content directly to fans) is quickly filling up with competition. Companies like the aforementioned Patreon and OnlyFans have also been growing in popularity in this space as well. Some creators may opt for more ‘brand-name’ platforms, which could slow Gumroad’s growth. Additionally, digital content as a whole may see a decline in popularity after COVID-19 is a thing of the past. . Gumroad has seen good traction thus far, but it is by no means a sure-fire success.

Bullish Outlook

Gumroad ended the previous fiscal year profitable, thanks to large growth in revenue (up to $5 million from $3.3 million). The 74,000 creators that utilize Gumroad’s platform to promote and sell their content have made more than $390 million. This early traction and revenue growth that Gumroad has seen is very promising.

The company is also operating in an industry that has grown rapidly in the pandemic – if Gumroad can capitalize on this attainable market growth (online content creation has been on the rise in recent years as well), it may see its 74,000 creators turn into well over 100,000.

With solid financials and a rapidly growing attainable market, Gumroad is positioned to continue growing rapidly, much like industry competitor Patreon in recent months.

Executive Summary

Gumroad has a very solid financial sheet, running at a profit with close to $5 million in revenue in 2020. Industry competitors have seen recent rises in users, and Gumroad seems well positioned to follow suit. With $8.1 million raised since 2011, Gumroad has very solid backing. The main concern for the company is its one-man executive team, which brings increased risk for poor operational decisions to be made. Additionally, if the appetite for digital content decreases as the pandemic ends, the company may find its growth stunted. However, Gumroad’s impressive history thus far provides some reassurance against this risk. Thus, Gumroad is a Deal to Watch.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Ethan Thomas.

Create your first portfolio

Create your very own investment portfolio on KingsCrowd.

Now you can track all of your startup investments in one place utilizing our state-of-the-art portfolio tracker tools. To begin, create your first portfolio below.

Add to portfolio
Gumroad on Republic
$
Platform: Republic
Security Type: SAFE
Valuation: $100,000,000

Follow company

Follow Gumroad on Republic