Sahil Lavingia, a 19-year-old app designer behind Pinterest and Turntable.fm, wondered why selling digital goods online couldn’t be as easy as sharing on Twitter. So he built a simple service called Gumroad that lets anyone monetize a link — a PDF, blog post, song or playlist — without having to set up their own store or use an existing commerce marketplace.
The service, which launched in February, attracted a number of investors, including SV Angel, Accel Partners, Chris Sacca, Josh Kopelman, Max Levchin and others, who put $1.1 million into Gumroad’s seed round. But just three months later, Gumroad is announcing a $7 million Series A investment that is being led by Kleiner Perkins with participation from Crunchfund and existing investors. Kleiner Perkins partner Michael Abbott is joining Gumroad’s board.
Gumroad works by letting sellers post a URL to Gumroad, which creates a unique shortened link that leads back to Gumroad. Or they can upload a file of up to 1 GB in size. Sellers can set their price or leave it open to buyers as to how much over a certain amount they want to pay. Buyers who clicked on the link are presented with a simple product page with a description of the item and a button to buy. To purchase, they just need to enter in their email address and a credit card number. Buyers then get a link as well as an email receipt giving them access to the content.
Sellers are paid monthly via a PayPal (s ebay) account, minus Gumroad’s take, which is 5 percent of the purchase price plus 25 cents. Gumroad can be an attractive way for people to sell directly to users because it allows them to tap the channels they already use to interact with fans and followers such as Facebook and Twitter. Instead of having to set up their own commerce site or submitting their stuff to an existing market that takes a heavy cut, Gumroad offers a pretty streamlined way to sell.
In some ways, it reminds me of Chirpify, a service that lets people transact directly through Twitter. But that service also requires payment through PayPal, which not everyone has and it takes some getting used to buying directly through @replies on Twitter. Gumroad handles its own payments so it doesn’t have to depend on anyone else to complete the transaction.
There are still some questions about Gumroad. For instance, if I sell a link to my YouTube(s GOOG) video, there’s still a chance that someone could just go there directly without paying. With a new payment service, you also have to trust that Gumroad is completely secure. And I’m not sure how Gumroad prevents me from monetizing someone else’s link. Lavingia told me that Gumroad monitors downloads to make sure people are not sharing links and it responds quickly to take down requests if someone tries to sell another person’s goods. And he said that the service is fully PCI compliant.
I think Gumroad is another great tool that is helping creators make money by going directly to fans. We’ve seen comedians like Louis CK sell their work online, bypassing some of the existing sales channels. Now, with more options like Gumroad, Chirpify and Kout, they can hold on to a greater portion of the revenue and also serve more savvy online fans who are ready to buy in more non-traditional ways. It doesn’t mean the old selling ways are gone, but these new tools are changing the game for how much freedom artists have to sell their wares.