Gumroad Raises $7M to Shake Up P2P Buying and Selling

Gumroad, the San Francisco-based startup that’s simplifying ecommerce transactions by making it possible for anyone to buy and sell with a single link, today announced that it has raised $7 million in a Series A round led by Kleiner Perkins Caulfield & Byers. According to CEO and founder Sahil Lavingia, the funding will be used to grow the team, which currently consists of three people. Long-term, Lavingia hopes that Gumroad can become an easy way for anyone to sell almost anything to anyone else.

Unlike other ecommerce solutions and venues for selling digital goods and services online, Gumroad doesn’t require that a potential customer be driven to an online marketplace or virtual storefront; sellers can create links for selling specific things, which they can then share directly on Facebook and Twitter. Users are then taken to a very simple checkout page where they can enter payment information and complete the transaction. Lavingia told BetaKit in an interview that the core principle behind Gumroad is simplicity, and operating where consumers already are.

“The way we differ from others is that we’re trying to fit in the flow that people already have,” he said. “It’s really hard to change user behavior, and everyone is consuming and communicating on a consolidation of sites, including Twitter, Facebook, Tumblr maybe and Pinterest. There’s very few sites people are spending a lot of time on these days.” It’s true that social networking sites account for a big chunk of time spent on the internet, occupying around 20 percent of online time as of last December.

The opportunity, Lavingia says, is in creating an ecommerce solution that mimics the way we now use the web, which has changed while shopping online has remained relatively stable. “Why do people sell the same way they did 10 years ago?,” Lavingia said. “Music is still sold through iTunes, iTunes still takes 30 percent. Books are still sold through Amazon, Amazon takes 50 percent. There’s no real way to sell like you share, and that’s what we’re trying to do.”

Gumroad, in contrast to retailers like Amazon and Apple, takes five percent per transaction to cover payment fees, along with 25 cents for credit card payments. That works out to be a much better deal for sellers, especially if they’re the creators of the content they’re selling. Of course, the downside is that people go to iTunes (for example) specifically to find music, which makes discovery less of an issue, but Lavingia notes that increasingly, users are turning to social networks to find media, content and service recommendations instead of seeking out marketplaces. In any case, he sees Gumroad as complimentary to single-focus marketplaces, not a complete replacement.

Competitors have sprung up for Gumroad since it started last year, including on-demand embedded sales platform ShopLocket. Lavingia thinks that Gumroad’s approach of trying to stick as closely as possible to social sharing is a better option, however, since that means the point-of-sale is right where discussion around products, goods and services is taking place. ShopLocket charges a $2 publishing fee, plus 2.5 percent of every transaction, a slightly different model than Gumroad, and it’s more focused on physical items than digital goods.

Currently, Gumroad is focused primarily on digital goods and services in terms of what it’s helping people sell, but Lavingia says that long-term it hopes to become a means to help sell whatever people are interested in offering. Greater focus on real-world goods will mean more challenges in terms of dealing with shipping options and international delivery and tariffs, however. But another opportunity Lavingia mentioned might prove more lucrative for the company in the short term: providing a way for experts to sell advisory and consulting services directly on social media, where they’re already having a lot of those types of discussions anyways. This would put them in direct competition with expert marketplaces like Wizpert and ExpertInsight.

It will be interesting to see whether Gumroad becomes what Craigslist has been for the past decade; a catch-all sales tool that can fit virtually any purpose, but this time with payment built-in and much more closely tied to the social channels that many consumers frequent on a daily basis.

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