THE CEO OF THE YEAR YOU’VE PROBABLY NEVER HEARD OF
A profile of Shopify’s Tobias Lütke
By Trevor Cole
(Published Thursday, Nov. 27 2014, 1:24 PM EST)
Tobi Lütke wears his pink hard hat with pride. “I like it,” he says. “I’m the only person with a pink hard hat in the entire house.”
By “house” he means “building.” Lütke moved to Canada from Germany 12 years ago, at 22, and he will, to his chagrin, misplay a word now and then. In fact, at this moment, Lütke and his entourage are touring a six-storey construction site inside 150 Elgin St., the most impressive new office tower in Ottawa.
The tower is finished, but in this particular six-floor section, work continues according to the tenant’s rather extraordinary specifications. Close to 180,000 pounds of eight-inch concrete have been cut out of several of the floors to open vast holes allowing large staircases to connect one level to another. Each floor gets a theme—here, where brick walls are being mortared, it’s “Urban Street.” One floor above, it’s 1920s gangster Chicago, with plans for a poker room and a library with fake bookshelves that hide a secret, all-white boardroom. There’s a Transportation floor. There are also Canadian- and Scandinavian-themed floors, and one they’re calling the Back Alley. Throughout, there will be meeting spaces and professional kitchens. There will be banks of video monitors and a lot of high-tech soundproofing. And somewhere there will be a slide, because of course there will be a slide.
This is the enormous new home of Shopify, a company growing so fast that it is taking over two more floors of this tower than it needs, because it will surely need them soon.
Congratulate yourself if you’ve heard of Shopify, but don’t worry if you haven’t. The company actually prefers it that way. Despite becoming a darling among venture capital firms, drawing a total of $122 million in VC investment, and despite attracting a spate of recent coverage in The New York Times, The Wall Street Journal, Fast Company, Forbes and a dozen other media outlets, Shopify likes to remain hidden, like plumbing. It wants its customers to be the name brands.
Shopify’s customers are stores. There are more than 120,000 of them, all over the world, paying monthly subscription fees to use Shopify’s e-commerce software. In fact, if you have bought something online from a store other than eBay or Amazon, you’ve probably bought from a Shopify-powered merchant. A few of them, like the online stores of General Electric and Wikipedia and Gatoradeand CrossFit, are quite large. But the great majority are small. They’re the online stores belonging to craftspeople, local retailers, the little companies churned out by Kickstarter campaigns. They’re the people who, till now, could never get a seat on the mass retailing bus represented by department and big-box stores.
Now, for $14 to $179 a month, Shopify gives them a plug-in, omni-channel (online, mobile and point-of-sale) retail operation. (There’s a whole other level that starts at $1,000 for enterprise clients.) They get access to customizable store templates, marketing tools, sales analytics and inventory management. With a few clicks, and no expertise, they get everything they need to sell whatever they want.
Perhaps as a result of its ease, Shopify-powered stores do a lot of business, recently surpassing $5 billion in total sales. And with global e-commerce sales predicted to surpass $1.7 trillion (U.S.) in 2015, there would appear to be no upper limit.
This is why Shopify, seemingly out of nowhere, now employs some 500 people—400 of them in Ottawa, the rest in Toronto and Montreal—devoted largely to software R&D (45% of the workforce) or customer support (34%). This is why the company has been valued at $1 billion, and why, in the wake of Nortel and RIM, it may be the next great hope of Canada’s high-tech sector.
This is why it’s time we paid attention to the man in the pink hard hat.
Not that he wants us to. A quiet, studious introvert, Tobi Lütke enjoys media attention as much as an owl likes the midday sun. He practically winces as he insists, “I’m actually not as important to the whole story as it might seem.”
But this is nonsense. Ask anyone associated with Shopify and they’ll tell you Lütke is a visionary, that his talents have led directly to Shopify’s explosive growth. Ask Jeremy Levine of Bessemer Venture Partners, a VC firm that has backed the entrepreneurs behind the likes of Skype, LinkedIn and Yelp: “We certainly think Tobi is in that same class.” Ask Scott Lake, the company’s co-founder, who left before it became huge. “He is the brain trust,” says Lake. “Tobi is Shopify.”
It’s true, perhaps, that you could say something similar of many a brilliant young entrepreneur who’s launched a roaring start-up. But there’s a difference. Usually those companies get sold. Start-ups get started with the exit in mind. Launching a company is very different from running it, and the people who are good at the first thing aren’t often good at the second.
We need to pay attention to Tobi Lütke because, as his company has grown from a two-person storefront to a six-storey success, the man himself has negotiated an even rarer and more challenging turn, morphing from a code-obsessed creator into a remarkable leader.
Even by the loose standards of the high-tech world, he seems nothing like a CEO. Short and boyishly slender, almost elfin in aspect, working in shirt sleeves or a hoodie, sometimes with slippers on his feet, Lütke could be just another of the many talented young programmers or support “gurus” wandering through the halls of Shopify’s headquarters. He owns a Tesla, but mostly rides his bike to work. His first name is Tobias, but everyone just calls him “Tobi.” In the lounge serving the free catered food Shopify always provides, he sits tucked into a couch with other employees, quietly tapping away on his laptop.
When he speaks—with the German accent he once considered training himself out of, until his wife (a Canadian diplomat) objected—he grapples for clarity with an introvert’s earnestness. When he smiles or chuckles, he seems to do so out of a sense of obligation, to be polite. His intelligence is vivid, but it’s unassuming. A few years ago, Lew Cirne, a Silicon Valley-based entrepreneur, asked Lütke for feedback on a software product he was developing. “It was clear to me the guy was a genius,” says Cirne. But what struck Cirne as much as Lütke’s raw intelligence was his humility. “Often that level of brilliance is accompanied with a level of arrogance,” he says. “Tobi never tried to make it about him being smarter than anyone else in the conversation.”
An autodidact who goes through “a fairly ridiculous amount of books” (two of his favourites: Drive by Daniel Pink and High Output Management by Andrew S. Grove), Lütke relates to software the way a musician relates to the music he plays. He regards computers and code as being “extremely tactile.” Programming comes so easily to him, “it’s almost meditative.” It’s easy to see how someone so inclined could become a brilliant software engineer. But start a company? “I think I probably had to start a company,” he admits, “because I don’t think I can work for other people.”
So how did he get here? How did this small, intense man come to lead hundreds, so effectively? We shall chart Lütke’s path like a software release.
From an early age, Lütke had what he calls “authority problems.” In school in Koblenz, Germany, he preferred to deconstruct the questions teachers gave him rather than deliver the expected answers. He took shortcuts, determining the minimum number of hours he needed to spend in a particular class and still pass, so that he could spend most of his time with his computer. His parents (his father is an internist, his mother a teacher of special-needs children) had given him the equivalent of a Commodore 64 at the age of 6, and by the time he was 11 or 12, he was not only playing games but rewriting the code, creating new games. Or he was modifying the computer itself, taking the train to get new parts to solder in. His obsession so worried his parents, they took him for frequent assessments.
“I’d be carted off to all sorts of psychoanalysis,” Lütke remembers, “trying to diagnose all sorts of learning disabilities, which of course never manifested themselves.”
Lütke never went to university. Instead, after Grade 10, he entered an innovative apprenticeship program designed to produce Germany’s next generation of computer programmers. He apprenticed with Siemens, eventually balking at the restrictive programming language—Java—he was required to use. “It felt wrong to me because it was trying to control me,” says Lütke. “I felt I would be much more productive in other systems.”
Besides computers and video games, Lütke had one other significant interest: snowboarding. This would turn out to be crucial. On a trip to Whistler, B.C., he got to know a girl named Fiona McKean. Before long, he’d persuaded her to come live with him in Germany. After a year, it was his turn to move to her home. And this is how the nation’s capital managed to land the next great high-tech star: Tobi Lütke had fallen in love with a girl from Ottawa.
Scott Lake looks and sounds like a CEO. In high school he was a jock. He speaks well, he has an ease with people, and he’s clearly ambitious. He’s the kind of guy who makes connections. By 2004, he’d spent some time in a start-up launched by a couple of friends, and he wanted to try one of his own. As it happened, he was friends with someone whose daughter was now living with a computer programmer from Germany. Lake would get invited to McKean family events, and Fiona would be there with her new boyfriend. Lake and Lütke, who was 12 years younger, got to talking. They decided to start a business.
“At the beginning, there was no grand plan,” says Lake. “We just said let’s do e-commerce, let’s sell some snowboards, and eventually it became Snowdevil.”
It was supposed to be simple—just an online store to sell some high-end snowboards from small snowboard companies. Lütke enjoyed selling—as a boy in school, he’d made some money buying items in bulk and selling them at a mark-up to other school kids. And he was frankly happy to take a break from writing code for a living. At 24, he’d already been at it for 10 years, and lately he’d been writing bits of software (including a vehicle-assessment system for used car dealerships) for Siemens, who’d paid for his move to Ottawa. He was burned out.
The trouble was, the e-commerce software available at the time was, as far as Lütke was concerned, crap. It seemed to have been designed by people who had no experience in retailing. “The terminology was wrong, approach was wrong,” says Lütke. “I’m like, You can’t organize a business the way this software forces you to.”
With a craftsman’s furious need to see a job done right, he began building his e-commerce store from scratch. One of the tools he wanted to use was an obscure Japanese programming language for which there was no written documentation in German or English. It didn’t matter that Lütke couldn’t read Japanese. He figured out the code anyway, just by studying it. It was called Ruby.
In looking back on how Shopify came to be what it is now, Tobi Lütke likes to talk about the many interventions of luck. In this case, luck brought the sudden, coincidental appearance of a new framework for using Ruby, called “Ruby on Rails,” devised by Danish programmer David Heinemeier Hansson. Lütke immediately began using this system to create Snowdevil’s e-commerce software, and because Ruby on Rails was so new, Lütke’s work gained notice. He began sharing some of the software components he was creating with the Rails community (a way to process credit cards, for example), and quickly became one of a select group of core Rails developers.
Even as they packaged up snowboards and sent them off to customers, Lütke and Lake both began to realize that their e-commerce software might be an even better product to sell. They persuaded a group of 10 friends and family members (in particular, McKean’s father, and Lütke’s uncle, an entrepreneur who had also immigrated to Canada) to stake them to a starting fund of about $200,000. They named their company Jaded Pixel, later adding the descriptive line “Rockstar E-commerce,” which sounds like a Scott Lake flourish. Lake also came up with the name of the software Lütke was building: Shopify.
That was 2006. Soon they officially launched Shopify the product (it became the company’s name later). They’d also begun to add people. The first was Daniel Weinand, a fellow German programmer and friend of Lütke’s with a strong artistic sense (and whom they consider a co-founder). Their first office was a few chairs pulled around a table in the Bridgehead coffee shop on Elgin Street. For the month of October, 2006, their revenue was $8,000. By the time Lake decided to leave the company, in 2008, it had about 10 people on staff and was making more than $60,000 a month. (These numbers are Lake’s recollections; Lütke refuses to divulge any figures.)
Why did Lake leave? Because he’s a classic start-up guy. “I really enjoyed the starting of it,” he says from the office of his new company, Source Metrics. “By the end it was less exciting for me. It was more lawyers, accountants.” Running a company requires different skills, a different mindset. “Keeping all of this stuff going starts to grate on you after a while.”
There were other irritations too. If Shopify was going to grow, it needed money. It had an investor in John Phillips, formerly a Toronto corporate lawyer and executive with Clearnet Communications and Telus Mobility, who has given angel money to at least 35 companies through his Klister Credit Corp. Phillips was impressed by the “elegance” of Shopify’s software and, using his simple formula of great management team + great product + market validation in the form of sales, had valued the nascent Shopify at $3 million and written a $250,000 cheque. But Shopify needed more. Lake had been game to push for a venture capital infusion, but Lütke was torn. He couldn’t decide whether he wanted to be involved in a growth company (inherent with any VC investment) or what he calls a “lifestyle company” that stayed small, made great software and churned out dividends.
“I think Scott was frustrated with me,” says Lütke, “based on me changing my position on this so often.”
And it wasn’t as though they were getting a lot of positive feedback from investors. The Canadian investment community had no appetite for the risk entailed in a software start-up. A few Silicon Valley venture capitalists, aware that Lütke was doing interesting things with Ruby on Rails, made inquiries. But when they heard what Shopify was developing, they did a collective spit-take. E-commerce? Are you nuts? Wasn’t that a ’90s thing? Didn’t it lead to the dot-com collapse? Not interested.
“My early interactions with VCs were really, really poor,” says Lütke. “People just did not understand what I was doing.”
With the departure of Scott Lake, solving that issue, and any other, became entirely Tobi Lütke’s problem.
Until Lake left in 2008, Lütke had focused exclusively on product development and treated the financial aspects of Shopify as a black box. He had virtually no business background. “When I took over as CEO,” he says, “I had to essentially get an MBA in a couple of weeks.”
Lütke has a unique way of tackling such challenges. First, he defines what he calls the “problem domain,” and then he directs an intense amount of focus and brain power at it. “Any given thing,” he says, “like how to do finances of a company, how to organize a company internally, and HR, these things are problem domains to me. I’ll try to just understand them as I would try to understand something I need to build software for.”
He read a lot. Quickly. And as part of his self-directed crash course, he decided to fly to SiliconValley. He set up meetings with venture capitalists and listened to their questions about Shopify’s attrition rates and conversion rates and “funnel” (the various means by which a company attracts the attention, and secures the commitment, of new customers). He had no idea what they were talking about, but he wrote down the terms. Then he went back to the hostel he was staying in and looked everything up on Wikipedia. He would read up on how to calculate contribution margin ratio (the amount by which sales exceed variable production costs), then go to Shopify’s database to get the numbers. “Oh,” he’d think, “that’s an interesting way to look at the business.” Then, at the next meeting, he was able to answer one more question.
And through these same meetings, Lütke hoped to find Shopify’s next CEO. He had no intention of handling the job permanently. As someone whose mental reward system was based on the joys of creating and refining software, he found business matters a frustrating waste of his time. “I had to spend an entire day not doing any programming,” he says. “And it always felt like I didn’t do anything. I was really unhappy.” It took him about a year to “rewire” his brain and begin to see such meetings as useful contributions to the company’s progress. “That was a rough transition.”
There was also the matter of money. In Ottawa, he and McKean were staying with her parents
and living off savings. Cash flow was so tight that McKean’s father, and others, had to write cheques so that Shopify could meet its small payroll.
Lütke took the burden of this stress entirely on himself. He told no one at the company. “I was sitting in meetings,” he remembers, “talking with my peers about building things that would take us a year, when I knew we didn’t have four weeks of money left. And I could not let anyone know that.”
He knew the minute he did, their focus would naturally shift to the short-term, to work on things for immediate benefit. For Shopify to succeed, he needed them to keep thinking long-term.
Lütke looks back on his early days as CEO and says that, except for programming, “I think I was bad at everything. A hundred per cent of everything.”
Among the skills that challenged him most was a fairly crucial one: personal interactions. How to work with people in a team? How to encourage better work? Lütke had no idea. He admits, “I’m still terrible at giving people feedback.”
This is, apparently, an accurate self-assessment.
“Be prepared to be crushed,” says Shopify’s vice-president of revenue, Toby Shannan. “If you can’t be crushed, you don’t make it on the executive team. You need a thick skin.”
It’s not that Lütke shouts, or treats people meanly. He’s simply direct. Unfiltered. When he looks at the fruits of someone’s labour, he says what he thinks. Even if what he thinks is: “This is shit.”
Mark MacLeod, who acted as Shopify’s first CFO, believes it has something to do with Lütke’s programming background. “Software engineers can be brutally honest and frank with each other,” he says. “You are expected to be very smart, know your stuff, be able to think on your feet, and be open tobeing challenged at any moment. That approach very much informs how Tobi operates.”
And yet, Lütke’s skill in reading people, and getting the most out of them, is one of the reasons angel investor John Phillips worked to persuade him to take on the CEO job permanently. “It is staggering how good he is with people,” says Phillips. “He is absolutely heroic.”
It seems that, in dealing with his human resources, Lütke is working on a whole other level. In fact, talking to him about people is a bit like talking to a bossy psychologist.
For instance, he rejects the use of “personas” in the workplace. The personality masks that many people wear, trying to fit in or act the part, are not tolerated at Shopify. “I have serious, serious problems with personas,” says Lütke, “with unauthentic individuals.” Nearly every lawyer he meets, for example, appears to be “the same 60-year-old, grey-haired, white guy,” regardless of the person’s actual age or gender. And too many executives have built their careers presenting a bluff, can-do image. Lütke finds it infuriating. “I spot it in a nanosecond and I want nothing to do with people who are like this.”
In practice, that means people who work at Shopify wear what they want to wear—shorts, flip-flops, whatever—and their interactions should reflect their actual feelings. He even strives to meet with executives in the places they feel most comfortable. Every Wednesday at 4 p.m., for example, Lütke and Toby Shannan have a standing meeting at a pub. “Tobi says, ‘I like to meet people in their most idiomatic-appropriate location.’ That is a quote,” says Shannan.
By demanding authenticity, Lütke wants to liberate people to get to the nub of the task quickly, without the interference of trying to maintain a guise. (It’s for this reason Lütke is also working on his feedback, because upsetting people makes things “less efficient.”)
The other thing Lütke demands of his executives, and by extension all his employees, is personal growth.
He likes to talk about boxes. People, he explains, exist within the box they find comfortable, until something forces them out of that box and into a new one. High school is a box. The first years are difficult, but then you figure out how it works. You find your comfort level, until graduation forces you into the new box of university, where you have to work toward comfort again.
“Everyone loves feeling comfortable,” says Lütke. “But it’s actually completely useless.” It’s during that period of discomfort where intense learning and growth happen. “So what I’m trying to create is an environment where almost everyone around me feels uncomfortable all the time, because I’m dragging them into the next box.”
Harley Finkelstein is a good example. As chief platform officer, Finkelstein’s job encompasses sales, business development, partnerships. But the focus of his efforts changes constantly. “Tobi has consistently pushed me to become comfortable with being uncomfortable,” says Finkelstein. “Once I get good at something, lo and behold he walks into this office and says, ‘You built that, and now you should take care of this thing.’”
Build a system for thousands of third-party agencies around the world to refer business to Shopify. Done? Now focus on increasing sales tenfold. Now scale up this third-party app store. Make it a hundred times bigger than it was. Finkelstein swallows hard and accepts each challenge. “He has created for me an insatiable desire to learn and grow every single day,” he says.
The fact that Finkelstein is even part of this company is testament to Lütke’s own personal growth. Always smiling, talking so quickly he sounds like a recording with the spaces removed, Finkelstein couldn’t be more different from his boss. He’s here because one day John Phillips mentioned to Lütke that everyone who worked with him was the same guy, everyone came from the same programming background as Lütke and Daniel Weinand. He thought Lütke should shake things up a bit.
So Lütke hired Finkelstein, and Toby Shannan, a warm, bearded, bear of a man, and several others from different backgrounds, and everything changed. All of a sudden there was diversity of opinion. Instantly there were a multitude of possible solutions to any given problem. “I made one change,” says Lütke, “based on one comment by John, and it massively impacted the company.” It got him to reconsider how big Shopify could be. “You know what?” he said to himself, “I think this is a growth company.”
And growth meant getting venture capital.
It was the summer of 2010. At Bessemer Venture Partners, one of Silicon Valley’s largest venture capital firms, Trevor Oelschig and Jeremy Levine were getting the sense that the field of e-commerce was picking up some tailwind. They (and a third partner, Alex Ferrara) began hunting for a software-as-a-service (SaaS) company to exploit the possibilities, and their research led them to Ottawa’s Byward Market. Here, they found a soft-spoken German software developer, and a team of now 20 people who, as a group, had very little experience. And something about it seemed special.
Says Oelschig, “Tobi had built a culture, a product, and had a vision that rivalled anything that could be found 2,500 miles away in Silicon Valley.”
It didn’t hurt that, by now, Lütke’s company was making money. The 2008 crash and subsequent recession that had hurt everyone else had benefited Shopify hugely. Thousands of people who’d lost their jobs were opening online stores to survive. This was another example of the luck Lütke talks about. The worse things got for the economy, the more Shopify signups increased.
One of the things that struck the Bessemer group as remarkable was how much Lütke had accomplished in Ottawa, a city that seemed barely visibleto them on the software start-up landscape. Early on they’d even asked Lütke, ever so gently, if he’d consider moving his company to Silicon Valley,if only to help with recruiting. Says BVP’s Trevor Oelschig, “We just weren’t sure that there would be enough talented people.”
But Lütke was adamant about staying in Ottawa (where his wife, Fiona, is now a deputy director in Foreign Affairs), and he had no such concerns. “There’s a deep talent pool in Ottawa, and Canada as a whole,” he says. “Smartest people I’ve met anywhere in the world.” While the collapse of Nortel had a huge impact on the region’s high-tech sector, it spawned hundreds of smaller companies that still exist. Roughly 70,000 people in the region work in the industry, many of them in software.
In fact, as Shopify grew, it found the real challenge in recruiting was not a lack of available software expertise, but a perception that it employed only young people. Lütke wanted to bring more accomplished workers into the mix, and he was finding it nearly impossible. Then a typical moment of Shopify luck and ingenuity changed that.
Word had come that IBM’s Riverside office in Ottawa was laying off employees. Lütke and his team concocted a plan. The day of the layoffs, they set up Shopify’s recruiting booth on the street, right next to IBM. As laid-off workers left the building, they were immediately presented with the opportunity to work somewhere their talents were needed.
When John Phillips heard about it later, he was “aghast” at the impertinence. And Lütke understands: “We tend to be a bit cheeky.” But he says about 10 ex-IBMers now work at Shopify. “It accomplished exactly what we wanted it to do.”
Lütke knew that achieving success in an SaaS business required a willingness and an ability to change anything, at any time. He’d had a particularly vivid example of how difficult change can be when he decided to switch Shopify’s entire business model—the day before his wedding. Overnight, Shopify went from charging its merchants a percentage of sales to selling monthly subscriptions (a more reliable revenue stream), and Lütke was taking calls from furious customers into the night. “I sort of resolved on figuring out how I could build a company that celebrates change rather than be afraid of it,” he says. “Because I got a real dose about how much people didn’t like that.”
He needed a workforce that stayed happy and engaged, even as it expanded daily. “Shopify is a very culture-driven organization,” says Toby Shannan. “You can manage less if everyone believes more.” So Lütke named Daniel Weinand the company’s chief culture and design officer, making it Weinand’s job to ensure employees were happy and buying in. Now Shopify has become renowned for its employee-engagement innovations. There are quarterly “Hack Days” during which employees are encouraged to work on projects of their own design (it might be a complementary bit of software, or a suddenly huge collection of hot sauces in the eating lounge, or a wall of tongue-in-cheek portraits of Shopify executives in 17th-century French military uniforms). There’s the internal bonus system, called “Unicorn,” in which employees are able to nominate and vote for colleagues who’ve contributed something positive to the company. (Employees are able to nominate themselves, too—one of the internal company mantras is, “Do things. Tell people.”)
Lütke needed an executive team he could trust to be devoted to the ideals he espoused. “He has an operating system,” says Shannan. “To work with Tobi, you need to know this operating system or you cannot work with him. One of the things is: Things need to be simple.”
A bunch of smart people in a room can find themselves looking for more and more complicated answers, particularly as the scope of the business expands and the stakes increase. Lütke won’t have it. “I’m always deeply suspicious of people who try to solve problems by immediately running toward a complex solution to something that could be solved simply.”
There are consequences to raising Lütke’s suspicion. Among his executives, he uses a metaphor: the trust battery. When you first join, the trust battery hovers at about 50%. Every decision you make as an executive either adds to or drains the trust. Once enough good decisions push the trust level to 80%, you achieve autonomy.
It’s not as easy as it seems. You might be inclined, as an executive with your eyes on the trust battery, to make safe decisions. That’s not going to work. Lütke’s expectations are too high.
“He often talks about, ‘Your work here needs to make an impact like a crater,’” says Shannan. “So it’s not like just good work, it’s not excellence; it’s like massive, cosmic impact. It needs to be visible from outer space.”
That means Shopify’s executives are required to take risks. That makes it easier to fail. And while Lütke understands failure and admires risk, and doesn’t want his executives to shy away from it, there’s no doubt that failure of the wrong kind will drain the trust battery.
“So,” says Shannan with a shrug, “that makes him very difficult to work for.”
In December of 2010, Bessemer organized a Series A funding of $7 million and purchased 20% of the company and two seats on the board. A Series B round, for $15 million, came the following October. And in 2013, a Series C round, led by OMERS Ventures and Insight Venture Partners, brought in $100 million, one of the largest VC investments in the high-tech space in recent years.
During that first funding round, Bessemer had valued Shopify in the “low tens of millions,” according to Jeremy Levine. Since then, Shopify has acquired two other software start-ups, Select Start Studios and Jet Cooper, opened offices in Montreal and Toronto, and reached a valuation of around $1 billion. And where once there were three main competitors in the field of e-commerce software—Shopify, Bigcommerce and Volusion—each at the time with 20,000 to 30,000 merchants, now Shopify has more than the other two combined.
“Now,” says Levine, “they do in about a half a month the amount of revenue that they did in the entire year before we invested.”
Arguably, Shopify has achieved that because Lütke has focused on everything but money. First he devoted himself exclusively to the incremental improvements and refinements to his product. Then he poured the same intense focus into the functioning of the people around him, and the company as a whole.
Now the focus is even bigger.
John Phillips considers it his job to go into Lütke’s office once in a while and get him to clear everything off his desk. As CEO, he feels, Lütke shouldn’t have any actual work to do. “He has guys to do that. And if he meddles in it, he’ll cause a problem.” Instead, he wants Lütke spending his time thinking big thoughts. “He’s got to be looking ahead.”
That really doesn’t seem to be a problem for Lütke. Shopify bought Select Start Studios because Lütke anticipated the explosion of mobile. It dropped the “e” off e-commerce because of its push into bricks-and-mortar stores. (Shopify merchants can now get point-of-sale kits, including iPad card readers, cash boxes and receipt printers, all tied into the Shopify inventory and analytics systems.)
Looking ahead now means thinking about when Shopify is headed to an IPO. No one believes Lütke intends to cash out and start something new, which—because VC investors expect a big payday—makes an IPO inevitable. Lütke doesn’t want to talk about it much, though, so he uses another school analogy. Taking angel money was grade school, VC money brought Shopify into high school, and an IPO would be graduation. There are plenty of reasons why people don’t make it out of high school, he says. “None of them good.” But if things continue going well, “at some point we will hopefully graduate.”
In the meantime for Lütke, looking ahead alsomeans thinking about how Apple’s new electronic payment system will alter mobile purchasing. It means considering how robotics will change the labour market, how 3-D printing will affect delivery times, and what all of that, and more besides, might mean for commerce.
His partner and friend, Daniel Weinand, says, “Sometimes it feels like he is going a few years into the future and is coming back with positive information and sharing it with us.”
And if you give him a moment, Lütke will gravitate to a discussion of something really big: what it means to change how people buy.
“Human history is the history of conducting commerce,” he says. “It started with trade caravans. Probably language developed because people needed to trade goods with each other.” And every time there were breakthroughs in the ways peopleconducted commerce, says Lütke, every time an innovation made commerce easier or faster, “that’s when civilization changed.”
The implication is that Shopify could be part of one of those breakthroughs. “We are engaged in making commerce more seamless.”
Tobi Lütke started off wanting to sell snowboards. Ten years later, he’s talking about changing the world. That’s some growth curve.
By Trevor Cole