[HN Gopher] Paying freelancers in equity and dividends
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Paying freelancers in equity and dividends
Author : sahillavingia
Score : 87 points
Date : 2024-05-20 14:35 UTC (8 hours ago)
(HTM) web link (sahillavingia.com)
(TXT) w3m dump (sahillavingia.com)
| satvikpendem wrote:
| I invested $1,000 in Gumroad back when they did the public
| fundraise, and I got back ~$70 so far. At this rate it'll take
| multiple years to break even, much less earn a multiplier. But oh
| well, I liked the Gumroad team so I wasn't looking for much of a
| profit anyway.
|
| Related, I thought it was hilarious how so many creators on
| Twitter publicly stated they were leaving Gumroad when the 10%
| fee change was enacted, only to have the fee actually be a
| success. It's Netflix all over again, it just goes to show how
| the internet and the people on it create a vast but very vocal
| minority of opinions that are not worth listening to in the real
| world. Anyone worth listening to is not shitposting on Twitter
| and other social media.
| ta1243 wrote:
| > it just goes to show how the internet and the people on it
| create a vast but very vocal minority of opinions that are not
| worth listening to in the real world
|
| I saw this criticism of Twitter, way before Musk bought it,
| possibly even before Trump became president. This [0] story
| from 2018 was about journalists paying too much attention
|
| It does feel like Twitter and Facebook are shadows of their
| former selves though - partly because on the rare days I go to
| facebook, it rarely has anything on from humans, partly because
| it's not covered in news that "Blah Blah said Blah on
| Platform". That's a good thing.
|
| I'm uncertain what drives Meta's continual growth
|
| [0] https://www.cjr.org/the_media_today/journalists-on-
| twitter-s...
| lotsofpulp wrote:
| Instagram and WhatsApp are very popular. Also, Facebook
| marketplace.
| jjice wrote:
| Sorry, but to confirm, they charge a 10% flat fee and that's
| it? That's insanely good compared to every other platform I've
| seen for any type of commerce. Sure, Amazon, Apple, and the
| like also help offer exposure and some other services, but 10%
| flat seems completely worth it until you hit a critical mass
| where it makes sense to handle things yourself. I imagine that
| number is very high though.
| satvikpendem wrote:
| Well it was more so compared to LemonSqueezy which is 5% or
| Stripe Checkout which is 3%. But I believe both don't offer
| hosting of the actual products such as ebooks or videos while
| Gumroad does.
| omnimus wrote:
| LemonSqueezy didnt exist when Gumroad changed the pricing.
| Lemon has some hidden fees on top of the 5% but they are a
| lot cheaper. Stripe checkout is not Merchant of Record so
| completely different product.
|
| The company that was (still is) eating Gumroad is Paddle
| that have true 5% + 50C/ pricing.
|
| Gumroad, Lemon, Paddle all do digital files fulfilment.
| Paddle wont give you website just pay links / overlay. I
| guess thats main reason why some people choose
| Gumroad/Lemon over Paddle.
| satvikpendem wrote:
| LemonSqueezy was founded in 2020. Gumroad changed their
| pricing to a flat 10% on January 31, 2023, as stated in
| the article.
|
| Yes, Paddle is also a competitor but my main point was
| that many people on social media thought Gumroad was too
| expensive yet it turns out no sellers in the real world
| actually cared. The benefits of Gumroad (apparently to
| them) outweigh the extra 5% they pay.
| Wytwwww wrote:
| > Sure, Amazon, Apple, and the like also help offer exposure
| and some other services
|
| Considering you'd only be paying Apple 15% (I doubt many
| people on Gumroad are making more than $1 million) it still
| seems like a relatively good deal in comparison.
| Aurornis wrote:
| > I invested $1,000 in Gumroad back when they did the public
| fundraise, and I got back ~$70 so far. At this rate it'll take
| multiple years to break even, much less earn a multiplier. But
| oh well, I liked the Gumroad team so I wasn't looking for much
| of a profit anyway.
|
| It's great that you wanted to fund the company with no
| expectation of return, but this is a perfect example of what
| contractors would need to consider when they choose to trade
| some of their compensation for equity.
| satvikpendem wrote:
| Indeed, I would've made more money if I put it into VTI. It's
| always tenuous to hold equity in such companies, especially
| at a 100 million dollar valuation which means my 1k would
| become 10k at most if Gumroad reaches a billion dollar
| valuation, which might be quite a while from now.
| azmodeus wrote:
| I love seeing into Gumroad so much. Very curious if it's worth
| 100 M at the moment based on dividends
|
| In 2023: 20.7 M Revenue - 8.9 M net income - 5.34 M dividend
|
| With no net income growth would take about 19 years for the
| dividends to pay out your original investment
|
| Will be interesting to see the 2024 numbers.
| prewett wrote:
| At a price of $100m and net income of $8.9m, that would be a
| P/E of 11 and a dividend yield of 5.34%. Assuming limited net
| income growth, such as a large corporation such as Coca-Cola
| (KO), this is a great stock! KO is kind of the poster-child for
| a stable, terminal business (how much more Coca-Cola / soft
| drinks can the world drink?), and it has a P/E of 25 and a
| dividend yield of 3.1 %. But, in fact, Gumroad is likely to
| grow earnings (and presumably the dividend), so this is an even
| better deal.
| niles wrote:
| I wish you addressed your original hypothesis with concrete
| examples (is this fair, does being early matter, is it clear)
|
| Eg, you gave equity to early contributors, how much and what did
| that translate to? If those same people work as freelance now,
| are they paid the same relative equity? Same class?
|
| How long would someone allocating to equity need to work before
| they see the equivalent in dividends? Calculator seems like 25
| years. Or working as more or less full time for 12 years with a
| 50% split.
|
| For me by the end I was left with more questions than answers, so
| I side with mom, but I like the general idea of
| https://flexile.com/
| greenie_beans wrote:
| why would this platform need to have the answers to those
| questions? i would guess that all of those questions should be
| left up to each individual company. that is something to be
| figured out by the company, not the platform. it seems like
| flexile is simply a platform for facilitating those types of
| labor agreements. i doubt they want to be opinionated about all
| of that, and i think they shouldn't be. the platform is a
| system to make those deals easier, regardless of how the equity
| is structured etc.
|
| at least, this is my hope as a broke ass peasant who invested
| in gumroad's "funding" offering, and also as somebody who sees
| this tool as a simple way to facilitate alternative labor
| relationships.
| shreezus wrote:
| I think Flexile is a great concept, and there's tremendous value
| in simplifying things like equity & dividends. I'd like to see
| dividends become the norm for other companies!
| Aurornis wrote:
| > It wasn't always this way; from 2015-2019, everyone at Gumroad
| was paid cash, no equity. No one wanted any.
|
| Gumroad started in 2011 and raised $8 million. The reason "no one
| wanted" any equity in 2015 was because they laid most employees
| off, replaced them with contractors, and the investors wrote
| their equity down to $1 as a gift to the founder. The founder got
| to keep the IP, ditch the founding employees, and continue
| running the company.
|
| The founder wrote a couple articles about the experience:
|
| https://www.businessinsider.com/startup-failure-gumroad-why-...
|
| https://sahillavingia.com/reflecting
|
| What's not pictured in these articles is the employee
| perspective. The founder got to keep his company, got the
| company's IP handed to him, and I don't know what became of the
| employees' equity. Probably nothing, given that the company had
| to be written down to nearly $0 for this transfer.
|
| I remember reading a very angry Twitter rant from an ex employee
| who was burned. I wish I could find it now, but that was nearly a
| decade ago. It was one of my cautionary tales about taking equity
| in startups at the time. It hadn't ever crossed my mind that
| someone could take VC money, pay employees (partially with
| equity) to build a company, then everyone gets laid off, equity
| declared worthless, but the founder gets to continue operating
| the company at a profit.
|
| It's also interesting to note that the Tweets embedded in both of
| those articles above come from Austen Allred, the now-infamous
| founder of Lambda School. Lambda School was rebranded to
| BloomTech after their first wave of scandals, which was rebranded
| again to Bloom Institute of Technology after their recent scandal
| (which resulted in Austen being banned from all student-lending
| related activities for 10 years). The two of them are prolific
| social media users and have an incredible ability to rewrite
| their own stories through sheer volume of social media postings
| and articles.
| AndrewKemendo wrote:
| Everything you wrote was par for the course for a private
| equity company (note that venture capital is a tiny subclass of
| private equity)
|
| The founder kept everything because investors expect that their
| relationship with this person is going to continue and
| eventually this person is going to "make the fund" in a future
| venture
|
| That's the key thing here, as a CEO/founder if you have gotten
| the stamp of approval from venture/capital class (in the form
| of a series A conversion on a note, or some kind of liquidity
| event), as long as you've pledged allegiance to returning
| investors capital above all things, you can "fail" a lot
| actually, and it's pretty much ok as a writedown.
|
| Provided that you keep investors legally at the front of the
| line, they will be willing to continue to invest in you.
|
| This is why you see all these people put "serial founder" in
| their bios, they want to signal that they are a reliable person
| for finance to come to
| earnesti wrote:
| I'm not sure that VC's will be investing in the company of a
| failed entrepreneur. At least something should have changed
| to make the company "better". In Gumroads case the truth was
| that the money would be pretty much gone, the company is not
| going to be valuable. He didn't raise this time from VC's,
| but from clueless retail investors, which is quite a
| different thing.
| cjbgkagh wrote:
| As best I can tell VCs largely attribute their 99% failure
| rate to largely random chance rather than their own
| inability to pick winners - so the failure of an
| entrepreneur is not a particularly strong mark against them
| and a weaker mark than the fact they got funding in the
| first place.
| beejiu wrote:
| > him, and I don't know what became of the employees' equity.
| Probably nothing, given that the company had to be written down
| to nearly $0 for this transfer.
|
| It is somewhat addressed (without specifics) in the article:
|
| > We also gave a token amount of equity to alumni who worked on
| Gumroad from 2011-2015, without whom you wouldn't be reading
| any of this. Thank you!
| kstrauser wrote:
| For sufficiently low values of "token", I might be likely to
| publicly tell them where to shove it. That's like leaving a
| $0.10 tip: "it's not that I _forgot_. I just didn 't think it
| was worth more."
|
| Frankly, I'd rather have nothing.
| warcher wrote:
| Yeah the math on what, 300k in equity on a 100MM "valuation"
| by retail investors is... hey it ain't nothing. 0.3% of 5MM
| dividends is 15K.
|
| For a dude who's only alive because his investors decided to
| walk away from their 8MM investment, that's kinda tight. But
| freelancers just want the cash, so if he's paying cash, this
| is just some weirdo being weird in tolerable ways.
|
| The whole performance here is off putting to me though. You
| got gifted a huge amount of money and kept almost all of it
| for yourself. Alright man. You got the right. Everybody is a
| big boy and agreed to the deal.
|
| But let's not play around about how you got rich, or how much
| of the pie goes in your own pocket versus everybody else's.
| throw383y8 wrote:
| > Today, Gumroad pays hourly freelancers around the world
| $125-$200/hr.
|
| Compliance with local laws is VERY difficult. I would not take
| this equity even for free. It triggers all sort of accounting
| laws, exceptions and so on. How should I estimate the price on my
| tax returns? What if I am on some sort of sanction list?
|
| Cash is the king when it comes to freelancers.
| jll29 wrote:
| I had a generalization of this idea once: not only giving
| freelancers equity, but giving EVERYONE equity who contributed to
| the success of the company. For a while, during my 2nd startup
| attempt, I carried a little paper notebook and documented anyone
| who helped me. (Alas, I did not raise funding the world was not
| ready for mobile search in 2004...)
| robertlagrant wrote:
| You could potentially move into an interesting related business:
| that of allowing people to draw down their salary whenever they
| like, so they can take it weekly or monthly or daily (if they
| liked). That's a very gig-economy-friendly feature.
| cjk2 wrote:
| Yeah I will only take cash -or- cash _and_ equity. One success
| story does not a model make...
| satvikpendem wrote:
| That is what is stated in the article, yes. Workers can take 0%
| to 80% of their compensation as equity, they are still paid at
| least 20% as cash.
| smarm52 wrote:
| I'd never heard of gumroad, so I took a look into it.
|
| The Wikipedia isn't much help, but does do a decent definition.
|
| "Gumroad enables creators to sell digital products, such as
| e-books, music, videos, software, and physical goods."
|
| https://en.wikipedia.org/wiki/Gumroad
|
| --
|
| Then MakeUseOf has an article, which makes it sound good. They
| compare it to Etsy as another site for selling things on.
|
| see: https://www.makeuseof.com/what-is-gumroad-what-can-you-
| sell-...
|
| --
|
| Checking on scamadvisor, the site rates it pretty highly, but
| user score is low. I'm guessing this has to do with creators
| getting burned by their history and/or price increases.
|
| see: https://www.scamadviser.com/check-website/gumroad.com
|
| --
|
| Some reddit posts have positive things to say. With a common
| theme of BYOA (Bring Your Own Audience), as gumroad seems to do a
| minimal job of pushing content; Which matches up with my
| experience of never having heard of it before.
|
| see:
| https://www.reddit.com/r/selfpublishing/comments/h02pls/anyo...
| https://www.reddit.com/r/artbusiness/comments/17ij8nz/is_gum...
|
| --
|
| Checking pitchbook and crunchbase shows it's a private company
| with pretty good financials. And so there's minimal risk of being
| "Actively Evil" that public companies can be; i.e., selling out
| the company for short term profits while grifting customers for
| all their worth.
|
| see: https://pitchbook.com/profiles/company/53830-99
| https://www.crunchbase.com/organization/gumroad/
|
| --
|
| One caveat is that they don't seem support commissions; That is,
| paying a fee to an artist or creator for a customized piece.
|
| see:
| https://www.reddit.com/r/selfpublishing/comments/h02pls/anyo...
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