Start-ups

Pinterest's employee No. 2 left before his equity vested—here's what he says of the decision that cost him millions

Sahil Lavingia with his first place award in the plein air painting competition in Midway, Utah, in July 2018.
Photo courtesy Sahil Lavingia

When Pinterest went public Thursday at a $10 billion valuation, key stakeholders got very wealthy. As of Monday, Pinterest is worth almost $13 billion and co-founder and CEO Ben Silbermann is worth $1.6 billion, according to Forbes.

But for the second employee ever at Pinterest, Sahil Lavingia, Thursday did not bring riches.

That's because the now 26-year-old Provo, Utah, resident left his job at Pinterest in 2011 — before his equity shares vested — to build Gumroad, an e-commerce platform for creators that he believed would become a billion-dollar company.

That's not what happened.

Lavingia says he was given 0.75 percent equity in what was then Pinterest's parent company, Cold Brew Labs, when he joined (at age 18) in 2010 — stock that would have vested as Pinterest stock if he stayed at the company for four years, he tells CNBC Make It.

That equity would likely be worth tens of millions of dollars with Thursday's IPO, he estimates. Lavingia's current assets, including Gumroad, are worth one-tenth as much money, he says.

"Financially, staying at Pinterest would have been definitely the right move if I was looking to maximize my bank balance," Lavingia says.

"It's tough, honestly. I don't think it is easy to watch a company that you contributed to, I would say pretty significantly — you know, I built Pinterest for iPhone — and not see the reward," he says. "Emotionally there is, I am sure, a lot of attachment there."

(Pinterest did not immediately respond to CNBC Make It's request for comment.)

Still, Lavingia says he does not regret his time at Pinterest despite his frustration watching the company going public without him. Working at a start-up in its early days was an irreplaceable experience, he says.

"Even though Pinterest is going to IPO for $10 billion and I am going to feel terrible for a week, it was still worth it," Lavingia told CNBC Make It on Wednesday.

Immediately after leaving Pinterest, Lavingia got off to an impressive start building Gumroad, raising more than $1 million from a collection of big-name angel investors and venture capitalists including Max Levchin, Chris Sacca, Ron Conway, Naval Ravikant, Collaborative Fund, Accel Partners and First Round Capital. Only a few months later, in May 2012, Gumroad raised another $7 million, led by Mike Abbott from the top-notch venture capital firm Kleiner Perkins Caufield & Byers, or KPCB.

But despite the glamorous launch and early growth at Gumroad, demand for what it was building was limited. "A lot of creators absolutely loved us, but there weren't enough of them who needed our specific product offering," Lavingia wrote in a February Medium post.

After a circuitous journey that included having to lay off virtually his entire team and moving out of the posh San Francisco offices, Gumroad is alive and supporting its customers, but it is not by any stretch a billion-dollar company, he says.

The roller coaster of Lavingia's business life forced the young entrepreneur to face his own failures and misjudgments — and it's also forced him to evolve his thinking about what it means to be successful. Where he used to be singularly obsessed with the idea of launching a unicorn start-up, now his goals are more nuanced.

"I would be lying if I say that there is no appeal to that anymore. I still think there is a lot of value that you can do and definitely I would not say no to it," Lavingia tells CNBC Make It.

But "if that happens, it is a side effect of building something awesome versus a goal," he says. "Before I was more intentional about, I want to work on problems that are going to get me to that point. Whereas now I am less excited about that, and more about solving something I really want to solve."

"And you know, maybe one day in the future Gumroad can get there, I don't know. But it's not, it's not the focus for me anymore, for sure."

Lavingia even left tech hub San Francisco in 2017.

"I wanted to work on something new, and I needed new ideas. So I moved to the place most full of people not like me: Provo, Utah," Lavingia says in a 2018 LinkedIn post. Lavingia's parents immigrated to New York from India and he spent most of his childhood in Singapore. "I gave away all of my furniture and landed in Provo on a Sunday, five suitcases in tow, hoping for some grand epiphany about my path forward."

"I am not a fundamentally different person than the one I was a year ago, but I am a little bit better," Lavingia wrote on LinkedIn.

Today, Lavingia is still working on Gumroad, which brought in $385,000 in revenue and $152,000 in gross profits in March, according to the company. And Lavingia was able to get out from under some of the intensity of having venture capital investors: Gumroad's lead investor, venture capital firm KPCB, wanted out when the executive in charge of the investment left to start his own company, and Gumroad has been able to buy back "a couple more" investors, he says.

That has given Lavingia room to build Gumroad more slowly.

"We would never become a billion-dollar company, and that started to feel okay," he wrote on Medium.

"For years, my only metric of success was building a billion-dollar company. Now, I realize that was a terrible goal. It's completely arbitrary and doesn't accurately reflect impact. I'm not making an excuse or pretending that I didn't fail. I'm not pretending that failure feels good. Everyone knows that the failure rate in startups — especially venture-funded ones — is super high, but it still sucks when you don't reach your goals. I failed, but I also succeeded at many other things," he wrote.

He's especially proud of the way Gumroad has helped creators. The experience has also taught him patience. For instance, he is enjoying trying his hand at oil painting, he says.

"I really enjoy spending a lot of time painting specifically because it gives me that perspective. My goal when I start to paint for three hours is just to paint, just to get better. There is no financial ROI [return on investment] on it, really. It is very time consuming, it is incredibly low scale, it's basically the opposite of technology in many ways."

See also:

Google execs reveal secrets to success they got from Silicon Valley's 'trillion dollar' business coach

Sam Adams founder: Unless you're a sociopath, being happy is better than being rich

Instagram co-founder on selling to Facebook for $1 billion: 'Money itself is no end. It doesn't make you happy'

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