Whop - Amazon For Digital Products

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Company & Team Introduction

Whop is the online marketplace that connects buyers and sellers of digital goods ranging from Notion templates to SaaS products. The company comes from humble beginnings, with the founders Jack Sharkey, Steven Schwartz, and Cameron Zoub initially meeting on a Facebook group to buy and sell limited edition sneakers at age 13. The trio initially built and sold sneaker bots together to increase people's odds of securing the most limited items before rolling over their profits into other software products, where they identified a massive problem in the market: software was hard to sell. Sellers struggled to generate traffic to their products; customers were routinely getting scammed by sellers offering low-quality products. The trio set out to fix the problem; their solution was to build a trustworthy marketplace for digital products with built-in discovery to help sellers attract new customers and increase their revenues while also protecting customers, focusing on a secure platform and a vetting system for products before they’re listed on the marketplace. Whop is based in Brooklyn, New York and has grown its team to ~40 employees.

Product Overview

Just as Gumroad created a platform for individual merchants to build stores to sell digital products via their own traffic as Shopify did for physical goods, Whop is building a marketplace to buy and sell digital products similar to Amazon’s. The discoverability of Whop’s platform separates it from larger, more established competition like Gumroad, and much like Amazon, Whop’s marketplace benefits from strong network effects; new sellers join Whop and offer new items, which brings in new buyers, and vice versa. Some other top features of Whop are their focus on high-quality customer service with live agents available 24/7, authentic reviews from others in the Whop community, the ability to offer free trials to potential customers easily, and the potential to be featured by Whop on their homepage.

Total Addressable Market

The market opportunity for Whop is nothing short of enormous. Market research from Goldman Sachs estimates the creator economy (the people building these digital products) was already worth 250B+ in 2023 and is expected to nearly double in the coming 5 years, expanding the total addressable market to ~480B annually.

Business Model & The Numbers

Whop utilizes a simple transaction-based business model to align its success with the sellers on its platform. Whop takes a small 3% fee from all purchases made through its platform, regardless of the payment processor the seller uses. If you’d like to sell using their Merchant of Record solution to help merchants with VAT taxes in the EU and UK, they charge 4.5% + 40 cents. For any sales driven by Whop’s marketplace, the company takes a 30% fee as they act as an affiliate of the sale. Over 263M in GMV has already been transacted through Whop’s marketplace, over 5M memberships sold, and over 9900 products for sale.

Traction

After seeing underwhelming traction from their initial launch, the founder’s confidence dwindled, unsure if there was enough demand for such a product. Within a few months, Whop’s marketplace had spread throughout X, hailed as a more secure platform to sell their digital goods than competing solutions. Whop’s marketplace receives over 700k unique visitors per month and has led to some massive success stories, for example, online sports betting group “Beat the Book”, which experienced rapid user growth from a series of very successful picks. With this new success, they needed to monetize, turning to Whop as the best option to paywall their community, and the results speak for themselves: Beat the Book saw a 150% YoY increase in memberships and generated 127 affiliates through Whop’s marketplace (90k+ in additional revenue).

Competitors

The competitive landscape for digital commerce marketplaces is cutthroat due to the massive market opportunity ahead. Here are some of Whop’s main competitors:

pep.live - Founded in early 2023 by Nav Agrawal, pep.live is an Indian-based digital commerce platform that allows people to sell various digital goods online, including live courses, 1-on-1 consultations, PDFs, audio, and video. The company is betting big that mobile will be the method of consumption for these products, with their mobile-only strategy. Content on the platform is female-oriented, with courses ranging from cooking, astrology, DIY, health & fitness, etc., giving them a differentiator from most competitors in the space who attempt to be everything to every customer, which is a difficult feat. In late 2023, the company raised a 2.5M seed round with investors such as India Quotient, Sanjeev Barnwal & Vidit Aatrey (co-founders of Meesho), and serial entrepreneur Kunal Shah (founder of CRED) participating in the round. The company has seen healthy early traction with over 100k downloads on the Google Play Store and an average 4.5-star rating based on 900+ reviews.

gumroad.com - Founded by Sahil Lavingia in 2011, Gumroad is a leading e-commerce platform that allows anyone to sell digital products. Products found on Gumroad are similar to those on Whop, such as courses, memberships, templates, software, digital art, ebooks, and more. The most significant differentiator between Gumroad and Whop is that sellers on Gumroad must drive their own traffic to their products. Similar to Shopify, sellers on Whop benefit from the discoverability of Whop’s marketplace, which drives organic traffic from users looking for a specific type of product, similar to Amazon. Gumroad’s business is massive; last valued at over 100M in 2021, it did over 11M in revenue in 2023, with impressive gross margins of ~70% and highly profitable, with operating margins of ~30-40%! It is also important to note that Gumroad takes a much larger 10% transaction fee on everything sold on their platform, compared to Whop’s 3%.

Funding

Whop has raised 2 rounds of funding, including an under-the-radar seed round raised in early 2022, where the company raised an undisclosed amount from firms such as JAM Fund, Pareto Holdings, and Edward Lando. The company saw impressive traction after its initial seed funding, which attracted a crowd of new investors. The company tapped the capital markets again in 2023, raising a monster 17M Series A round from a star-studded group of venture firms, angel investors, and celebrities alike. Insight Partners, Peter Thiel, James Harden, Cory Levy, The Chainsmokers, and Kevin O’Leary all participated in the round, which valued the company at a “whopping” 100M+.