jason fried
Auto Added by WPeMatico
Gumroad wants to make equity crowdfunding mainstream
Gumroad, a startup that helps creators sell their work, is raising $6 million at a $100 million valuation. While $1 million of that total is reserved for AngelList co-founder Naval Ravikant and Basecamp founder Jason Fried, the remaining $5 million is being raised with a twist: anyone willing to fork over at least $100 bucks can invest in the round.
Founded by Sahil Lavingia, Gumroad is using a new SEC regulation, passed today, that increases the maximum amount of money that can be raised in an equity crowdfunding campaign. Now, investors and founders can raise up to $5 million per year from crowdfunding, up from $1.07 million the year prior.
The increase might not turn heads in a world of $90+ billion valuations, but Lavingia thinks the new rules could revitalize a path to raising capital for venture capitalists and founders alike. Unaccredited investors — whether its users, friends or non-accredited investors — could become the new limited partners.
“If this works, startup founders will start to be able to go direct more frequently,” Lavingia said.
Despite venture capital growing as an asset class, alternative ways to raise are becoming increasingly popular to help founders maintain ownership and to access capital.
Up until this point, Gumroad has raised more than $8 million from investors, including Kleiner Perkins, First Round, Max Levchin and SV Angel, as well as others, since 2011. But today marks what Lavingia views as a long-term shift in how Gumroad raises capital. If all goes well, Gumroad will continue raising via crowdfunding on an annual basis until it goes public.
Now that companies can raise $5 million per year through crowdfunding, platforms like WeFunder, StartEngine, SeedInvest and Republic, which Lavingia is using, have a better chance to shake up the modern fundraise.
So far, Gumroad has raised $3.4 million of its $5 million goal across commitments from 3,458 investors. Investors in the crowdfund include part-time creators on Gumroad, Lavingia’s Twitter followers, YouTubers, as well as Figma founder Dylan Field and partners from VC firms. In order to promote a diversity of investors, Gumroad has capped total investments from individuals at $1,000 for the first few days.
The startup is giving up 6% of ownership as part of the financing event, and the investors will only receive equity stakes once the SAFE note turns into a round. This process could take a year, Lavingia said. The conversion round to make it happen could be an IPO, acquisition or $10 million priced round. The priced round will likely happen next year through a Reg A round, the annual limit of which is $75 million, the founder said.
The SAFE’s cap is placed at a present-day 3.5x revenue multiple. In 2020, Gumroad brought in $9.2 million in net revenue, up 87% from the year prior, generating $1.08 million in net profit, up 286% from the year prior.
Background
The new, higher crowdfunding investing cap has some downsides, according to institutional investors. A simple one is that it is an administrative burden to give hundreds of people equity in your company for a small amount of money. Another issue, one investor told TechCrunch, is that institutional investors are sometimes experts in investment areas, which is helpful in a way hundreds of smaller investors might not be. Finally, the max of crowdfunding is still $5 million a year, so the method may be less effective for later-stage companies like, say, Stripe, which needs traditional investors to buy in.
Despite these concerns, the recent Gumroad raise is a continuation of two trends of which Lavingia has been on the forefront: building in public and the democratization of venture capital. He livestreams every Gumroad board meeting through Clubhouse and Zoom, and shares business metrics that most private companies decline to report, such as revenue and profit. (In fact, I knew about this plan to raise months ago after reading one of his newsletters.)
Readers will also remember that Lavingia was one of the first people to use the AngelList platform to create a rolling fund, which uses a 506(c) SEC regulation that allows investors to publicly solicit investments on an ongoing basis. The move was met with controversy at first, since venture capital funds have historically been raised behind closed doors.
“People were upset at the rolling fund, so imagine when they see that you are cutting out the whole industry [of venture capital],” Lavingia said, referring to a conversation he had with AngelList’s Ravikant.
One thing to be wary of, Lavingia says, is the Testing the Waters dynamic. Under Reg CF and A+, startups are able to differentiate between offering and selling securities. Offering simply allows a founder to “test the waters” and see if interest is there for a crowdfunded round. Despite this guardrail, commitments aren’t capital. For example, a startup could get $1 million in commitments but wind up only raising $100,000, Lavingia said. The conversion rate for intended buys versus actual buys could leave some founders in a thorny spot.
His way for combating this is to be obvious about red flags and transparent, which is already in line with Gumroad’s thesis.
“I preceded this fundraise with a blog post that I’m the only person who works on Gumroad as an employee,” he said. “I want to scare off anyone who is like this is weird [from investing].”
Other than Lavingia, Backstage Capital’s Arlan Hamilton has used Republic to crowdfund her firm’s operating fees. Hamilton made history earlier this month when she raised $1 million in eight hours for her fund. Today, she similarly opened up investments in her firm in light of the new cap and has already closed $2.4 million.
When Hamilton spoke about the raise at TC Sessions: Justice, she said she expects another asset class to be born because venture is a “broken” and “old” system.
“I’ll probably pivot Backstage, we’ll find ways and we’ve already started,” she said. “If you look at our raise we did in the Republic, it didn’t exist the way we wanted it to exist, this ability to go to the crowd as a fund.”
2014: income <$10,000
2016: raised first $1.2M fund
2020: deployed first $1M “check”
2021: raised $1M in 8 hoursDon’t give up.
— Arlan
(@ArlanWasHere) March 15, 2021
“The way it starts is not by a normal person doing it,” Lavingia said. “It’s by someone who is at the tip of the spear, someone who has an interesting angle, and then it gets sort of democratized over time.”
The fact that a founder turned part-time venture capitalist is using crowdfunding to raise money for his own company is a meta headache on its own. But the founder sees this as an opportunity to make crowdfunding mainstream and an attractive asset class.
Long-term, a public crowdfunding round in startups could be just a small drop in a startup’s financing pre-exit, but one that could empower thousands of normal people to own startup equity for the first time.
“I’m basically trying to become a private-market Chamath,” he said, referring to the billionaire behind Social Capital credited with the recent boom in popularity around SPACs. “I want to build a huge brand associated with investing in private equities, startups, and having an army of people that I can use and wield in different ways.”
Powered by WPeMatico
Email is broken and Hey’s Jason Fried is here to fix it
Email is a critical tool in modern-day communications, so it’s natural that many entrepreneurs have tried to overhaul it over the years.
In the last decade, email client Mailbox came and went, Slack launched to try to give people an alternative to email and Superhuman emerged to help people more easily reach the promised land of Inbox Zero.
The latest startup to tackle email is project management software maker Basecamp, which launched Hey last month. Within its first 11 days of release, Hey received 125,000 signups, Basecamp founder and CEO Jason Fried tells TechCrunch. Those initial days also included some drama with the Apple App Store, but that’s not what this story is about. Instead, it’s about Hey’s approach, why Fried felt the need to try to rebuild email from the ground up and how he approaches product development.
“The last time people were really excited about email, really, in a broad scale was 16 years ago when Gmail came out in 2004,” Fried says. “I remember it feeling different in a lot of ways. It was really fast, they had archiving, which was a new concept at the time. It worked differently than what I was coming from, which was Yahoo Mail, which was sort of stuck in the past. And I think that’s where Gmail is today — stuck in the past and we’re trying to bring out something brand new with new thinking and new philosophies and a new point of view.”
At its core, Hey is about giving people control over their email and minimizing clutter so users can hear from the people who matter most, Fried says. But control comes at a price: Hey costs $99 per year, with additional fees for three- and two-character email addresses (two-character email addresses are $999 per year and three-character addresses are $349 per year).
“We got a taste of our own medicine because it was not cheap to buy hey.com,” Fried says. “So anything that short in the domain world just costs more. It’s like beachfront property almost, because it’s scarce — more desirable. So given that we have a three-letter domain, two- and three-letter email addresses are just going to cost more. There’s fewer of them and they’re more desirable.”
Hey’s current iteration is targeted toward individual users, but by the end of the year, the plan is to launch a formal enterprise version with collaborative features like shared messages and inboxes. In this unified Imbox (not a typo), people will be able to specify that they don’t want to see work email past a certain time or on weekends.
“A lot of email is collaborative in nature,” Fried says. “People end up forwarding emails around to show someone to get their take. We think that’s totally broken and really antiquated. So we have some stuff built into Hey for work, which lets people share threads with one another in a very different way and be able to have backchannel conversations about threads without having to have those conversations in another product or somewhere that is separate from the actual thread itself.”
There’s much more to this conversation, like how Hey landed on its hypothesis, why control is so important, how email shouldn’t feel like work and more. Below are Fried’s insights.
Powered by WPeMatico
Remote workers and nomads represent the next tech hub
Amid calls for a dozen different global cities to replace Silicon Valley — Austin, Beijing, London, New York — nobody has yet nominated “nowhere.” But it’s now a possibility.
There are two trends to unpack here. The first is startups that are fully, or almost fully, remote, with employees distributed around the world. There’s a growing list of significant companies in this category: Automattic, Buffer, GitLab, Invision, Toptal and Zapier all have from 100 to nearly 1,000 remote employees.
The second trend is nomadic founders with no fixed location. For a generation of founders, moving to Silicon Valley was de rigueur. Later, the emergence of accelerators and investors worldwide allowed a wider range of potential home bases. But now there’s a third wave: a culture of traveling with its own, growing support networks and best practices.
You don’t have to look far to find startup gurus and VCs who strongly advise against being remote, much less a nomad. The basic reasoning is simple: Not having a location doesn’t add anything, so why do it? Startups are fragile, so it’s best to avoid any work practice that could disrupt delicate growth cycles.
Powered by WPeMatico
Distributed teams are rewriting the rules of office(less) politics
When we think about designing our dream home, we don’t think of having a thousand roommates in the same room with no doors or walls. Yet in today’s workplace where we spend most of our day, the purveyors of corporate office design insist that tearing down walls and bringing more people closer together in the same physical space will help foster better collaboration while dissolving the friction of traditional hierarchy and office politics.
But what happens when there is no office at all?
This is the reality for Jason Fried, Founder and CEO of Basecamp, and Matt Mullenweg, Founder and CEO of Automattic (makers of WordPress), who both run teams that are 100% distributed across six continents and many time zones. Fried and Mullenweg are the founding fathers of a movement that has inspired at least a dozen other companies to follow suit, including Zapier, Github, and Buffer. Both have either written a book, or have had a book written about them on the topic.
For all of the discussions about how to hire, fire, coordinate, motivate, and retain remote teams though, what is strangely missing is a discussion about how office politics changes when there is no office at all. To that end, I wanted to seek out the experience of these companies and ask: does remote work propagate, mitigate, or change the experience of office politics? What tactics are startups using to combat office politics, and are any of them effective?
“Can we take a step back here?”
Office politics is best described by a simple example. There is a project, with its goals, metrics, and timeline, and then there’s who gets to decide how it’s run, who gets to work on it, and who gets credit for it. The process for deciding this is a messy human one. While we all want to believe that these decisions are merit-based, data-driven, and objective, we all know the reality is very different. As a flood of research shows, they come with the baggage of human bias in perceptions, heuristics, and privilege.
Office politics is the internal maneuvering and positioning to shape these biases and perceptions to achieve a goal or influence a decision. When incentives are aligned, these goals point in same direction as the company. When they don’t, dysfunction ensues.
Perhaps this sounds too Darwinian, but it is a natural and inevitable outcome of being part of any organization where humans make the decisions. There is your work, and then there’s the management of your coworker’s and boss’s perception of your work.
There is no section in your employee handbook that will tell you how to navigate office politics. These are the tacit, unofficial rules that aren’t documented. This could include reworking your wardrobe to match your boss’s style (if you don’t believe me, ask how many people at Facebook own a pair of Nike Frees). Or making time to go to weekly happy hour not because you want to, but because it’s what you were told you needed to do to get ahead.
One of my favorite memes about workplace culture is Sarah Cooper’s “10 Tricks to Appear Smart in Meetings,” which includes…
- Encouraging everyone to “take a step back” and ask “what problem are we really trying to solve”
- Nodding continuously while appearing to take notes
- Stepping out to take an “important phone call”
- Jumping out of your seat to draw a Venn diagram on the whiteboard
Sarah Cooper, The Cooper Review
These cues and signals used in physical workplaces to shape and influence perceptions do not map onto the remote workplace, which gives us a unique opportunity to study how office politics can be different through the lens of the officeless.
Friends without benefits
For employees, the analogy that coworkers are like family is true in one sense — they are the roommates that we never got to choose. Learning to work together is difficult enough, but the physical office layers on the additional challenge of learning to live together. Contrast this with remote workplaces, which Mullenweg of Automattic believes helps alleviate the “cohabitation annoyances” that come with sharing the same space, allowing employees to focus on how to best work with each other, versus how their neighbor “talks too loud on the phone, listens to bad music, or eats smelly food.”
Additionally, remote workplaces free us of the tyranny of the tacit expectations and norms that might not have anything to do with work itself. At an investment bank, everyone knows that analysts come in before the managing director does, and leave after they do. This signals that you’re working hard.
Basecamp’s Fried calls this the “presence prison,” the need to be constantly aware of where your coworkers are and what they are doing at all times, both physically and virtually. And he’s waging a crusade against it, even to the point of removing the green dot on Basecamp’s product. “As a general rule, nobody at Basecamp really knows where anyone else is at any given moment. Are they working? Dunno. Are they taking a break? Dunno. Are they at lunch? Dunno. Are they picking up their kid from school? Dunno. Don’t care.”
There is credible basis for this practice. A study of factory workers by Harvard Business School showed that workers were 10% to 15% more productive when managers weren’t watching. This increase was attributed to giving workers the space and freedom to experiment with different approaches before explaining to managers, versus the control group which tended to follow prescribed instructions under the leery watch of their managers.
Remote workplaces experience a similar phenomenon, but by coincidence. “Working hard” can’t be observed physically so it has to be explained, documented, measured, and shared across the company. Cultural norms are not left to chance, or steered by fear or pressure, which should give individuals the autonomy to focus on the work itself, versus how their work is perceived.
Lastly, while physical workplaces can be the source of meaningful friendships and community, recent research by the Wharton School of Business is just beginning to unravel the complexities behind workplace friendships, which can be fraught with tensions from obligations, reciprocity and allegiances. When conflicts arise, you need to choose between what’s best for the company, and what’s best for your relationship with that person or group. You’re not going to help Bob because your best friend Sally used to date him and he was a dick. Or you’re willing to do anything for Jim because he coaches your kid’s soccer team, and vouched for you to get that promotion.
In remote workplaces, you don’t share the same neighborhood, your kids don’t go to the same school, and you don’t have to worry about which coworkers to invite to dinner parties. Your physical/personal and work communities don’t overlap, which means you (and your company) unintentionally avoid many of the hazards of toxic workplace relationships.
On the other hand, these same relationships can be important to overall employee engagement and well-being. This is evidenced by one of the findings in Buffer’s 2018 State of Remote Work Report, which surveyed over 1900 remote workers around the world. It found that next to collaborating and communicating, loneliness was the biggest struggle for remote workers.
Graph by Buffer (State of Remote Work 2018)
So while you may be able to feel like your own boss and avoid playing office politics in your home office, ultimately being alone may be more challenging than putting on a pair of pants and going to work.
Feature, not a bug?
Physical offices can have workers butting heads with each other. Image by UpperCut Images via Getty Images.
For organizations, the single biggest difference between remote and physical teams is the greater dependence on writing to establish the permanence and portability of organizational culture, norms and habits. Writing is different than speaking because it forces concision, deliberation, and structure, and this impacts how politics plays out in remote teams.
Writing changes the politics of meetings. Every Friday, Zapier employees send out a bulletin with: (1) things I said I’d do this week and their results, (2) other issues that came up, (3) things I’m doing next week. Everyone spends the first 10 minutes of the meeting in silence reading everyone’s updates.
Remote teams practice this context setting out of necessity, but it also provides positive auxiliary benefits of “hearing” from everyone around the table, and not letting meetings default to the loudest or most senior in the room. This practice can be adopted by companies with physical workplaces as well (in fact, Zapier CEO Wade Foster borrowed this from Amazon), but it takes discipline and leadership to change behavior, particularly when it is much easier for everyone to just show up like they’re used to.
Writing changes the politics of information sharing and transparency. At Basecamp, there are no all-hands or town hall meetings. All updates, decisions, and subsequent discussions are posted publicly to the entire company. For companies, this is pretty bold. It’s like having a Facebook wall with all your friends chiming in on your questionable decisions of the distant past that you can’t erase. But the beauty is that there is now a body of written decisions and discussions that serves as a rich and permanent artifact of institutional knowledge, accessible to anyone in the company. Documenting major decisions in writing depoliticizes access to information.
Remote workplaces are not without their challenges. Even though communication can be asynchronous through writing, leadership is not. Maintaining an apolitical culture (or any culture) requires a real-time feedback loop of not only what is said, but what is done, and how it’s done. Leaders lead by example in how they speak, act, and make decisions. This is much harder in a remote setting.
A designer from WordPress notes the interpersonal challenges of leading a remote team. “I can’t always see my teammates’ faces when I deliver instructions, feedback, or design criticism. I can’t always tell how they feel. It’s difficult to know if someone is having a bad day or a bad week.”
Zapier’s Foster is also well aware of these challenges in interpersonal dynamics. In fact, he has written a 200-page manifesto on how to run remote teams, where he has an entire section devoted to coaching teammates on how to meet each other for the first time. “Because we’re wired to look for threats in any new situation… try to limit phone or video calls to 15 minutes.” Or “listen without interrupting or sharing your own stories.” And to “ask short, open ended questions.” For anyone looking for a grade school refresher on how to make new friends, Wade Foster is the Dale Carnegie of the remote workforce.
To office, or not to office
What we learn from companies like Basecamp, Automattic, and Zapier is that closer proximity is not the antidote for office politics, and certainly not the quick fix for a healthy, productive culture.
Maintaining a healthy culture takes work, with deliberate processes and planning. Remote teams have to work harder to design and maintain these processes because they don’t have the luxury of assuming shared context through a physical workspace.
The result is a wealth of new ideas for a healthier, less political culture — being thoughtful about when to bring people together, and when to give people their time apart (ending the presence prison), or when to speak, and when to read and write (to democratize meetings). It seems that remote teams have largely succeeded in turning a bug into a feature. For any company still considering tearing down those office walls and doors, it’s time to pay attention to the lessons of the officeless.
Powered by WPeMatico