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Shopify co-founder and CEO Tobias Lütke (Ben Courtice)
Shopify co-founder and CEO Tobias Lütke (Ben Courtice)

SUCCESS STORIES

Fluke and luck: Shopify’s co-founder profited from both Add to ...

Q: How did you get your initial funding?

A: The snowboard sales generated a bit of money but we didn’t spend much at the start. It was just me doing programming. I worked out of coffee shops, didn’t take a salary and moved in with my parents-in-law, so the burn rate was pretty low. Eventually we needed help to get some designers, so we did an investment round to raise money and launch the product. We found a Toronto angel who invested in the company.

Q: What’s your approach when speaking to potential investors?

A: Years later, when I asked our angel investor why he put money in our company, he said, first, his parents were in Ottawa and he needed an excuse to go there more often, and second, he liked that I wouldn’t take shit from anyone. Somehow, that’s how I impressed him. It’s such a case-by-case situation that it’s hard to extrapolate any advice out of this. But it’s different out there right now. Seed investment usually doesn’t come from someone who made millions of dollars but from something like FounderFuel [and] accelerators. I think that’s actually a better model for a young company.

So why did I succeed? I think my first round of financing was largely a fluke. After that, I always raised money because we were already a profitable company. If you take a calculator and put some numbers in, then it’s easy to convince investors they can probably get a return on that investment. So the biggest selling point is a profitable company. But our real funding – the money that really made a difference – all came from our customers.

Q: Did you charge for the product from the beginning?

A: The product was free for three months just because I hadn’t finished the code yet. Once it was completed, we charged money. That’s different from how a lot of other companies do it. Most companies, particularly startups, don’t charge any money and just try to grab as much land as possible. That’s fine if you’re as successful as Twitter and Facebook to go back and figure out how you can make money with all these people. But I’m not interested in that. Maybe it’s my European background, but I like making a product people really like and charging money for it. That’s still the nicest business model. It couldn’t be simpler.

I think it’s wrong to offer product for free. There’s data that show if you charge people for a product, they’re more motivated to actually build on it or use it – probably because if you don’t pay for something, you just don’t simply assign it the same kind of value.

Q: What’s the biggest challenge with rapid growth?

A: The growth itself is challenging. We went from 30 people to over 100 last year. Now it’s 130. The first people you attract come to you because you’re small. It’s very much a choice they made. So the super-challenging thing is that you need to convince people that’s a false dichotomy – that’s not why they like working for you. What they like is that one individual can have a lot of impact and can move fast because there’s no unnecessary bureaucracy. So it requires an extremely active process of trying to avoid putting in unnecessary processes or red tape. You have to navigate to keep people with you while you’re going through rapid growth. It’s much harder than I initially thought.

Q: Does Canada have the right talent?

A: It’s almost too good. Everyone assumes we’re in San Francisco but I’m so glad we’re not there right now. There are way too few engineers for all the companies. Every single company I know that’s doing all right is trying to hire engineers and designers, so you have to come up with special ways of attracting and keeping people. So it’s good to be the largest fish in a medium-sized pond. We have really good relationships with the universities here; people are extremely smart, loyal and unbelievably driven. Whenever we’ve had to hire someone that’s really tricky to find because we’re looking for crazy experience in this or that, we’ve found someone in Canada every single time.

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