[inuhj]

Gumroad took 10.35MM in investment to build a company that does 780k/yr (65k/mo*12mo) in profit. The numbers don't work out to call that a success.

If he bootstrapped and reached 780k/mo after 8 years of work that would be a successful lifestyle business and he should be absolutely proud.

I'm absolutely not trying to be judgmental as I've succeeded and failed at businesses myself.

[gnicholas]

> a company that does 780k/yr (65k/mo12mo)*

$65k is the gross profit, which appears to be before operating expenses are accounted for. He doesn't list the net profit in the tweet (as he does elsewhere in the post). In the other mention, net profit was just under 1/4 of gross profit. So he's probably netting somewhere around $15-25k/mo, depending on how much of his costs are fixed/variable. Still good, but considering how many millions went into the business, not great.

[eanzenberg]

That's actually not a bad return on investment (7.5% yearly)

[inuhj]

It's not a good return on investment because the underlying asset hasn't appreciated 7.5%/yr some 8 years later. I am not a valuation expert but as a small business I'd estimate a 3x EBITDA placing the valuation at 2.34MM. The investors presumably owned a fraction of that.

[nostrademons]

There's a time value on that money. If you'd put $10M into an S&P 500 index fund in 2011, it'd be worth about $22M now, which first of all is a fair bit more than 7.5% and secondly is the denominator you're looking for to figure out percentage returns on capital now. The company wasn't making $780K/year in profit in 2011, it took 7 years to get there.

[eanzenberg]

That's timing though, historically I believe s&p yields 7% per year on average.

[cecilpl2]

Assuming reinvested dividends, the S&P has returned 7% real, or 10% nominal over its lifetime.

[umeshunni]

And the return on venture capital during those slow periods are also presumably lower (due to recessions etc)

[jeremyjh]

Risk adjusted its a pretty poor return. Also you are completely ignoring the time value of money.

[Aeolun]

And it doesn’t stop there. The money certainly isn’t vaporized as with a failed business.

[enraged_camel]

>>If he bootstrapped and reached 780k/mo after 8 years of work that would be a successful lifestyle business

I find it difficult to call $10M/year a “lifestyle business.”

To me, lifestyle business means a business that can support the owner in their lifestyle. So unless the owner spends millions of dollars every year...

[notatoad]

I think the parent mistyped and meant $780k per year, not month. $780k/mo is an entirely different beast, and would be a success regardless of whether it were bootstrapped or had taken $10mm in capital.