Paying Freelancers in Equity and Dividends

Key takeaways

1. Lavingia says Gumroad lost $1M in 2022 while helping creators earn $185M, so in January 2023 it moved to a flat 10% fee (excluding payment processing) and became sustainable.
2. Early investors with preferred shares can block dividends to common stockholders, and Lavingia got approval from all of them by asking, then amended the charter to pay out 60% of net income each year.
3. A universal equity bonus confused the team: people couldn't value the stock, options carried an exercise price and a 90-day window after leaving, and some would have preferred cash.
4. Gumroad now lets each freelancer choose 0 to 80% of their $125-$200/hr pay in stock options, with no cliffs and 10 years after leaving to exercise. The 2024 average choice is 18.3%.
5. Lavingia compares dividends with profit-sharing: profit-sharing is a bonus taxed as income and lost if you leave, while qualified dividends are taxed at the long-term capital gains rate.