文章分析 Gumroad 以 400 万美元收购社区产品 Small Bets 的交易背景与合理性。
There was some big online community news this week:
He went on to share the details:
• $3.6M sale price• 50% cash / 50% stock options.• Cash payment in 2 parts: $900K received last week, $900K in 12 months.• Options vest in 10% increments every 6 months.• He will continue to run Small Bets for 5 years. • If he quits, he loses any unvested options.• He will also be helping part-time to make Gumroad better.
Valuation
• Gumroad acquired 10% of Small Bets last year for $500K.• $3.6M for 90% = $4M valuation.• Small Bets made almost $500K in profit last year, excluding Gumroad fees. Based on 2024 earnings, this sale would represent an 8X profit multiple. Under the Gumroad umbrella, we expect to grow this business to $1M in profit within the first 2 years, which would be a forward-looking 4X profit multiple.
And community exits are rare. David Spinks sold CMX to Bevy in 2019, I sold a previous community to Smart Passive Income in 2020, and Sam Parr sold Trends as part of the acquisition of The Hustle by Hubspot in 2021.
I'm sure there are other examples, but it's uncommon. We more frequently see software companies buying media companies – and not for their revenue, but for their audience and distribution.
Disclosure: I'm a tiny investor in Gumroad and own a Small Bets membership. Neither one of those facts really influenced my interest in writing this piece – my main interest in examining this deal is because my membership (The Lab) has revenues similar to Small Bets (albeit with a very different pricing model).
Communities seem like attractive acquisition targets because they often have recurring revenue like SaaS companies. However, communities have a much different dynamic with their customers than software companies, even if their MRR/ARR resembles SaaS (and I'll explain those risks later).
When SPI acquired my first community, the deal was 1x expected revenue for the following year (which was not life-changing money). I ran a paid, 12-week mastermind program on Zoom, and alumni stuck around in Slack afterwards. Sounds pretty unremarkable, but in 2017, people were often using Zoom AND Slack for the first time!
There was no recurring revenue there. Just a roster of ~120 program alumni that we gave a year of SPI Pro for free (with the hope that some of them would want to stick around afterwards). The value to SPI wasn't really the community – they bought the opportunity to bring me in-house and lead their community team.
This is common of acquisitions, community or otherwise – they are acqui-hires. Acquiring the company/asset for the purpose of hiring a talented person.
Back to Small Bets – it's a lifetime purchase model (priced at $199, currently selling for $99 with a coupon automatically applied at checkout). The community itself has nearly 6,800 members. A one-time purchase is an attractive model for members, which makes it a great marketing lever.
The problem is incentives.
With a lifetime purchase, the community builder captures all financial value up front and is liable to support that person...forever.
When the value of a community is derived from the interaction between members, the best-case scenario is that members are active and supporting one another. But the more active members you have, the more support is needed. Yes, you hope the community self-sustains in many ways, but there will always be support tickets, costs, and communication. So with a lifetime purchase, when things are working, the support cost (or effort) increases without additional compensation.
To solve the compensation problem, the incentive is to attract new members. But that increases the support cost! You can hire for that, but you'll need to continuously pull in more members to pay for the help, which requires you to bring in more members, which require more help to support...
And then you have the participation challenge.
One-time purchases lead to impulse buys. We buy it now because we'll have it forever, and may want to use it someday. But it doesn't encourage member participation, because there's no urgency to participate right now (the costs are sunk). Gina Bianchini, the founder of Mighty Networks, likes to say, "You value what you pay for," and I completely agree. As a result, one-time purchase communities grow in overall members, but the percentage of active members may actually decline.
On the sales front, as you run through your warmest community leads, selling the membership becomes harder. You need strong top-of-funnel audience growth, or sales start to slow down. If that happens, you may drop the price. Eventually, you can reach the end of your total addressable market. And then what? You promised lifetime access, after all.
If you couldn't tell, I just don't see lifetime pricing model as a sustainable strategy.
The alternative is a recurring model, where the community builder is incentivized to optimize for renewals as much as new memberships. The financial incentive is the same, but a renewed member strengthens the community and will likely be a vocal advocate.
The billing frequency doesn't matter – monthly, quarterly, biannually, or annually. Members who value the community continue to pay for it, and your percentage of active members stays steady.
Your incentive is to cultivate a space people want to continue to pay to be a part of, which is, admittedly, quite difficult (and the difficulty scales with the price).
Communities have a different relationship to their customers than software companies. A software company is "hired" as a utility to perform a specific job. As long as it continues to do that job (and the brand itself doesn't have a bad reputation), then the owner of that tool doesn't really matter.
But communities are a lot more intertwined with the leaders of that community. Communities are never "finished" the way software can be. Communities are more like gardens that need constant care to ensure the right conditions for the value to "grow" from the space.
When a community is sold, the members will consider whether they trust the gardener to stick around or are optimistic about the new gardener. Signs of change can cause people to disengage. And if reputable members disengage, it can start a mass exodus.
Simply put, selling a community can create a flight risk.
However, this risk is lower in a one-time purchase community because the costs have already been incurred.
Final thoughts on Small Bets
Acquisitions are hard. According to Harvard Business Review, 70-90% of acquisitions fail (for the acquiring company).
Critical as I am about one-time purchase memberships, I think this was a very good deal for Daniel, depending on how much he enjoys his continued involvement over the next five years.
Many people have asked Daniel whether he could've earned more by continuing to run Small Bets independently, and he's repeatedly said, "I don't think so."
Let's look at why.
I've made some calculations by looking at the Small Bets P&L that Daniel shared publicly on X.
Here's a graph of New Members over time:
The spikes are all Black Friday/end-of-year sales.
If we look at revenue per month...
You'll notice spikes in 2024 that aren't reflected in the New Member Growth chart:
Daniel rolled out an unlimited 1:1 consultation product in 2024, accounting for ~$212,500 in 2024.
"This year, 85 people signed up, paying $2,500 each. Of those, 40 chose a payment plan of $625/month over four months, and 45 paid upfront."
Using those dates, figures, and some ChatGPT magic, the Monthly Revenue chart broken down by source looks something like this:
Revenue per year from the P&L shows:
- 2021: $80,040
- 2022: $445,690
- 2023: $455,447
- 2024: $650,750
But if we look at the annual revenue for the Small Bets membership specifically...
Membership revenue is ~$438,250 (the lowest of the last three years). But it's remarkably consistent; on average, Small Bets earns $446,462 annually.
For comparison, here's the annual revenue of the Small Bets membership compared to The Lab. Small Bets has nearly 7,000 lifetime members, and The Lab has 357 active subscriptions. I've included my 2025 projections, based on $132,866 earned in Q1.
Small Bets:
- 2021: $80,040
- 2022: $445,690
- 2023: $455,447
- 2024: $438,250
The Lab:
- 2021: NA
- 2022: $161,088
- 2023: $328,279
- 2024: $411,676
- 2025: $531,464 (projected)
Daniel was given $1.8M in cash and $1.8M in Gumroad stock options with the acquisition. Assuming revenue stayed consistent over four years, the Small Bets membership would've taken 4+ years to earn $1.8M. It's hard to say if that pace would've stayed consistent, increased, or decreased. With new AI coding tools, I could see the market growing – it's a question of marketing.
And that doesn't include the $1.8M in equity in Gumroad (which could be worth more or less depending on how the company grows)!
All that to say, it's a pretty great deal for Daniel.
With any deal like this, you have the other obvious question of, "What are they actually buying here?"
I assume that Gumroad is looking for:
- Daniel's community brain, experience, and time
- ~7000 potential new Gumroad customers
- New line of revenue?
My first assumption was that Small Bets would be a free resource for Gumroad customers. After all, helping Gumroad customers be more successful results in more commissions to Gumroad. But Daniel has said:
"Under the Gumroad umbrella, we expect to grow this business to $1M in profit within the first 2 years, which would be a forward-looking 4X profit multiple."
So maybe Gumroad is looking at this as a revenue play, too. They have tens of thousands (hundreds of thousands?) of customers, many of whom may be unfamiliar with Small Bets or not yet a customer, so this solves the top-of-funnel challenge for Small Bets.
This strategy feels unique. HubSpot shut down Trends after acquiring The Hustle. Generally, the playbook of software companies purchasing media companies/audiences is to monetize that audience with their EXISTING product (and not continue the existing revenue lines).
But if they continue running Small Bets like a semi-independent brand and directly monetizing it with the Gumroad audience, it could recoup this purchase in the next few years. Gumroad could still face the same problem of tapping out the potential market, but they'll likely extend that time horizon quite a bit.
Does Small Bets make Gumroad a more valuable company? That would depend on who is valuing it and their own goals. I imagine a large part of this strategy is increasing the number of Gumroad customers (and making those customers more successful), which would certainly make the company more valuable to a typical software acquirer.
Remember when I said communities have a difficult acquisition dynamic, especially for recurring revenue communities? It's an interesting paradox. Recurring revenue is typically more attractive to a potential buyer than one-time purchases, but the one-time purchase presents less of a "flight risk" on a community's members.
So, even though I believe a one-time purchase model is inherently unsustainable, did it make this acquisition (at an 8x profit multiple) a safer bet?
Sometimes people are hesitant to join LARGE, private communities. It's difficult to accommodate scale while still creating a net-positive experience for folks, but a net-positive experience also depends on the cost of entry. The cost of entry to Small Bets is low, and it's proven that it can continue attracting new members, even as the community grows. And Gumroad has an aligned audience of potential members!
It'll be interesting to see how this shakes out and the impact on the interest of new members in joining Small Bets. Adding new, Gumroad-related perks for being a member may make joining a no-brainer. Having a resource to make their customers more successful can help Gumroad.
I'm grateful for Daniel openly sharing so much of this data and excited to see what follow-on community activity this deal inspires. Despite the risks and challenges, I think community businesses are increasingly valuable. It’s telling that after selling The Hustle for $20M+, Sam Parr today is doubling down on a community product (Hampton) rather than a newsletter.
Bullish!
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What do you think of this deal? I'd love to hear your thoughts below!
PS: Interested in building your own membership? I'll show you how to earn recurring revenue with my course, Build A Beloved Membership:
Build A Beloved Membership
Earn recurring revenue with a membership community that people truly love.