Pod Insights How I Built This with Guy Raz Shopify: Tobias Lütke About this episode In 2004, German programmer Tobias Lütke was living in Ottawa with his girlfriend. An avid snowboarder, he wanted to launch an online snowboard shop, but found the e-commerce software available at the time to be clunky and expensive. So he decided to write his own e-commerce software. After he launched his online snowboard business, called Snowdevil, other online merchants were so impressed with what he built that they started asking to license Tobi's software to run their own stores. Tobi and his co-founder realized that software had more potential than snowboards, so they launched the e-commerce platform Shopify in 2006. Since then, it has grown into a publicly-traded company with over 4,000 employees and $1 billion in revenue. PLUS in our postscript "How You Built That," after Barb Heilman invented a device that easily releases child car seat buckles, she started a business with her daughter Becca Davison called Unbuckle Me.
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Transcript 11,652 words · 4 speakers
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0:00 Guy Raz? Really quick before we start the show, I want to let you know that there are just a few tickets left for the How I Built This Summit, supported by American Express. It's happening October 22nd and 23rd at the Yerba Buena Center in San Francisco. It is going to be an incredible event. You'll be able to hear from and probably even meet founders from companies like Away, Slack, Instagram, Spanx, JetBlue, Clifbar, Jenny's Splendid Ice Cream, and many, many more. You can get your tickets and learn more about the summit, including how it can help grow your business or build your big ideas, at summit.npr.org. I also want to let you know about a few How I Built This live shows we've got coming up on the East Coast this fall, also supported by American Express.
0:45 Guy Raz? We'll be heading to New York on September 10th, where I'll be talking with Christina Tosi of Milk Bar. And then we'll be in Washington, DC on September 12th with Tristan Walker of Walker & Company. You can get tickets and find out more about our East Coast tour at nprpresents.org.
1:05 Guy Raz? So how are you doing as the CEO of the company?
1:12 Speaker 01 Not good. I mean, my team was very, very patient with me. There was a lot to learn. It's a very subtle job. You know, wonderful things about computers is when you tell them what to do, they'll keep doing it, and they'll do it forever until you stop. Turns out, humans are not like that.
1:27 Guy Raz? Humans are different, yes.
1:28 Speaker 01 So there was a very large learning curve.
1:36 Guy Raz? From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
1:50 Guy Raz? I'm Guy Raz, and on the show today, how a young programmer's ambition to sell some snowboards on the internet grew into Shopify, a platform that now powers billions of dollars of e-commerce every month.
2:07 Guy Raz? So back in August of 2018, and you might remember this, Kylie Jenner made the cover of Forbes. The issue was dedicated to female billionaires. And Kylie Jenner made her fortune from a cosmetics empire called Kylie Cosmetics. Now, when I started to read the article, I was struck by a few things in particular, things that just weren't possible even five years ago. For starters, Kylie's billion-dollar company employs just seven full-time people. All of the products are manufactured and packaged by a private-label cosmetics producer in Oxnard, California. Kylie's PR and marketing team is her iPhone, from which she can reach 140 million of her
2:52 Guy Raz? Instagram followers. And this is the thing that really blew me away: all the sales and fulfillment. This is handled entirely by a software platform called Shopify. Shopify does all the stuff behind the scenes to make e-commerce work. When you click "add to cart" or "buy," it makes sure the transaction will happen seamlessly. If you've bought something online outside of Amazon or eBay, there's a pretty good chance you bought it from a store powered by Shopify. It is now used by more than 800,000 e-commerce companies around the world. Now, within two years, online sales will account for 13% of all retail transactions
3:34 Guy Raz? in the US, so you can imagine, this is a big business. Last year alone, Shopify processed more than $40 billion in sales for its customers. The company went public in 2015, and Shopify's market cap is now just below General Motors and Ford. And yet, unless you're in tech or have an online shop, there's a chance you have never heard of Shopify, which, in a way, fits the personality of the company's co-founder and CEO, Toby Lutke. Toby's a low-key guy. He's the kind of guy who literally rode his used bike to VC pitch meetings. And even as recently as five years ago, at a time Shopify had already raised well
4:18 Guy Raz? over $100 million in venture capital funding, Toby was still living in a spare room at his in-laws' house to save money. But before all that, Toby grew up in Koblenz in Germany. And as a kid, it was pretty clear to his parents that Toby was bright, but he also struggled with learning.
4:38 Speaker 01 I mean, I got diagnosed with all sorts of learning disabilities, and it was very hard for me to perform well in the tests and so on. And I don't think I ended up getting a full diagnosis of it. But now, it was a pretty clear-cut way of ADHD. I grew up dyslexic, so, you know, just reading was hard.
5:00 Guy Raz? Yeah.
5:01 Speaker 01 And it was always a big question about what exactly was going on, but basically I was bored. Back then, the way the curriculum in Germany was taught, it was really, basically, here's all these solutions you might find useful later in life, with very, very little time spent talking about the particular problems that those solutions would help you with. And if I don't understand the problem I'm trying to solve, it's very hard for me to learn a solution to a problem.
5:27 Guy Raz? Huh.
5:28 Speaker 01 And so that, but that just particularly didn't work well for me.
5:30 Guy Raz? So after he finished the 10th grade, Toby realized that school wasn't the right fit. So he left and joined a German apprenticeship program to learn how to become a software engineer. And he ended up starting as an apprentice on a small team at a subsidiary of the German manufacturing giant, Siemens.
5:50 Speaker 01 I found this one team which just seemed really fun. We were sort of in the basement. It was run by this wonderful guy. His name's Jürgen Saar, who's like fantastic engineer programmer. And he would always come on his BMW motorcycle to work, and he would have long hair, and he was not wearing a suit, like he was supposed to. And so it's like a total rebel. But so good that no one could complain, you know? And I just, I immediately gravitated to him and his little group of rebels. They were working on really interesting things. They were often prototyping new things for customers and so on. And so I wanted to be part of their group. And so, starting with sixteen or rather seventeen and year two of my apprenticeship,
6:35 Speaker 01 I started getting paid to program all day and that's all I did.
6:38 Guy Raz? And you loved it?
6:39 Speaker 01 I loved it. And I still love it. It's computer programming is, you can, you can forget all time around you. You just can, like I can turn everything off if I'm working on an interesting problem.
6:51 Guy Raz? Huh. And there's another part of your life, which I'm curious how you got into, which is snowboarding, right? You were a snowboarder. Did you grow up snowboarding? Did you just come to it on your own?
7:01 Speaker 01 No, my, I mean, my parents had a place in the Alps we'd often drove to. That was a five hour drive and we skied.
7:09 Guy Raz? Yeah.
7:09 Speaker 01 You know, fast forward a little bit, took some friends. We took this vacation. Initially tried to go to the United States, but then like the Canadian dollar was so low that we decided to go to,
7:21 Guy Raz? To Canada.
7:21 Speaker 01 To Canada, to Westlife.
7:23 Guy Raz? This is like two thousand.
7:24 Speaker 01 This is around two thousand.
7:25 Guy Raz? Yeah.
7:26 Speaker 01 Yeah. And so this was the first time I said, okay, I'm just gonna snowboard. I'm not gonna take skis. Like this is like, this is spend all our time there. And that's really when I fell in love with, with snowboarding. And also on that same trip, met my now wife.
7:41 Guy Raz? Yeah. How did you, this is Fiona, your wife. How did you meet her? Just there, at the mountain?
7:46 Speaker 01 That's it, right?
7:46 Guy Raz? I mean, you meet her on the ski trip and what you say, I'm going back to Germany, but I think, like, I think there's something here.
7:53 Speaker 01 Yeah, exactly. I mean, we stayed in contact afterwards and she just said, you know what? I'm done with my bachelor's degree. Why don't I just come to Germany?
8:01 Guy Raz? Her parents must have thought she was nuts. They was, you meet this guy skiing and you're gonna go move to Germany?
8:07 Speaker 01 I'm perpetually impressed by her parents too. They are the most wonderful people.
8:11 Guy Raz? So she comes to Germany. You are working, programming for who at that point?
8:16 Speaker 01 Yeah, before, that was a little startup in Dortmund, yeah.
8:19 Guy Raz? And what did she do during that year?
8:21 Speaker 01 She ended up getting a job editing academic writing.
8:27 Speaker 01 Yeah, we lived together for 10 months and she said, okay, well, I need to go back and start my master's program in Ottawa. And she asked me if I want to come and I said, yes.
8:38 Guy Raz? Because you could take what you know and do it anywhere.
8:41 Speaker 01 Yeah, well, the reason why I went is because I grew up on American media, like everything cool in the world came from the United States. I always sort of figured I'm, that's where I want to end up. I would like to move. And then, you know, you arrive there and you figure out, oh, you know what, Canada is America for Europeans. And this is great.
9:02 Guy Raz? So, so 2002, you moved to Canada, you're 22, you're like, whatever, let me try this. What was the job that you did there?
9:12 Speaker 01 So I was working still with people from the startup like remotely, but that was doomed to failure because the tools weren't there. There was no Slack, there was no, you know.
9:23 Guy Raz? Just email contact, right, yeah. What was the startup?
9:26 Speaker 01 It was an attempt at writing a different browser.
9:30 Guy Raz? Okay.
9:30 Speaker 01 Anyways, but it's sort of, I basically ran out the clock. It was everyone, we knew it wasn't going to do anything. People were starting to leave. We're talking like after the dot com crash.
9:41 Guy Raz? Well, that's what I'm wondering. I mean, you're 22, 23 at this point. Was there any part of you nervous, like, I'm in Canada, I'm living with this woman, like, I don't really, you know, know what I'm going to do with my life? Like, were you feeling any anxiety to just like get something stable?
9:57 Speaker 01 Hey, boss. I would be lying if I wasn't. I, I knew I had very valuable skills. I could always do more of a thing I was doing recently or was doing for Siemens. I was just hoping I kind of didn't have to in some way.
10:13 Guy Raz? To work for a big company?
10:14 Speaker 01 Yeah.
10:14 Guy Raz? Why?
10:16 Speaker 01 Like, working for Siemens has been probably one of the most important things I've ever done in my life because it kind of taught me what I don't want. It was, in so many ways, a strange company culture in the way that it felt exceptionally mistrusting of everyone, right? Like even, you know, fairly strict dress codes, which is basically the company saying, hey, we don't trust you guys to dress yourself. And it was, there was so much of that, which just felt wrong.
10:43 Guy Raz? Yeah.
10:45 Speaker 01 Twenty year old Toby would not have a career there. And so, um, over time, I was, it's up in Canada, we are in Ottawa, very cold place in the winter.
10:56 Guy Raz? Nine months out of the year, you basically, eight months out of the year.
10:58 Speaker 01 It's six months.
11:00 Guy Raz? Six months, alright.
11:00 Speaker 01 It might feel like nine months.
11:01 Guy Raz? Okay.
11:02 Speaker 01 But, but, but you can't run a strategy of waiting for summer, you really have to do something with the winter.
11:07 Guy Raz? Yeah, yeah.
11:08 Speaker 01 And for me, that was go to hills and snowboard, and I got increasingly into that. And as I do, I researched everything there was about snowboarding. I, I, I wanted to know every option that existed and build these big spreadsheets of every technology that you can use to build a snowboard. And at some point, it clicked and said, maybe using my technical skills to start an internet business selling snowboards would be a way to do it.
11:36 Guy Raz? An internet business selling snowboards?
11:37 Speaker 01 Yes. Like, I, I did get a job offer from a fun, small, local company that I, I was actually really interested in working for. But then I went to the, basically to sign the papers and, and one of the topics that came up was the topic of a work permit, which I like found out at this point that I needed a work permit to, to, to.
11:58 Guy Raz? You were not legal.
12:00 Speaker 01 I, well, I was allowed to be there because I was under, in the process of getting a permanent residency.
12:05 Guy Raz? Okay.
12:06 Speaker 01 I wasn't illegal in the country, but my status didn't give me work permit.
12:10 Guy Raz? Right.
12:11 Speaker 01 And I, I talked with a friend of family, an employment lawyer, and he said, it's gonna take you a while, basically, until you get a permanent residency to, until you get this. But just so you know, you can start a business.
12:23 Guy Raz? So you could not go work for this company, but you were, you could, essentially, that was your only option?
12:29 Speaker 01 But that basically was my only option. Like, I, I could try to work remotely again for a German company or something like this, oddly enough, that's okay. But I couldn't work for a local company, and so what I ended up doing is. I use my technical skills. I was thinking of setting up some online store software because I figured that would exist and then use that as a way to
12:50 Guy Raz? To sell snowboards.
12:51 Speaker 01 Sell snowboards, make money while snowboarding hopefully and have a good life.
12:56 Guy Raz? All right. So there's a guy that you met around this time named Scott Lake, who would go on to become your co-founder.
13:02 Speaker 01 Yeah.
13:02 Guy Raz? How'd you meet him?
13:03 Speaker 01 So Scott worked for that company I almost got hired for.
13:07 Guy Raz? Ah.
13:07 Speaker 01 And so we kept talking and he was a friend of her family and
13:10 Guy Raz? He was a friend of Fiona's family.
13:12 Speaker 01 Exactly, exactly. Who we were also living with at that time.
13:15 Guy Raz? You were living with where?
13:16 Speaker 01 With Fiona's parents.
13:18 Guy Raz? Oh, you were living with her parents in Ottawa?
13:19 Speaker 01 Yes, in Ottawa, exactly.
13:20 Guy Raz? Was that uncomfortable? I mean, I mean, you're like this German kid dating their daughter. You're living in their house. It must've been a little weird.
13:27 Speaker 01 They were amazingly supportive and honestly, here's the reality. I don't think I could live with anyone's parents, but I can live with Dale and Bruce. They made it incredibly
13:41 Guy Raz? Wow.
13:41 Speaker 01 Easy. They are just the most kind, genuine, and played massive roles. Like Dale, she was diplomat for the Canadian government.
13:51 Guy Raz? This is your now mother-in-law?
13:52 Speaker 01 This is exactly my mother-in-law. And she ended up being our, like, after we had an office, which is a bit later, she did all the payroll and accounting and everything. And Bruce ended up saving the company later. So it's entrepreneurship is messy, right?
14:06 Guy Raz? Yeah.
14:07 Speaker 01 And it's a journey that you, like, even if you make the choice yourself to embark in entrepreneurship, kind of everyone around you is coming on to the trip. There's a lot of people who end up mattering a lot. And I clearly was naive about it. I probably would never have committed my surrounding towards the craziness that ended up the journey of Shopify, but it worked out.
14:29 Guy Raz? All right. So you are, you're living with her parents.
14:32 Speaker 01 Yeah.
14:32 Guy Raz? You've got this snowboard idea. You meet this guy Scott, who's working at this other company.
14:36 Speaker 01 Yeah.
14:36 Guy Raz? What does he come to you and say, hey, Toby, I think, I think I want to work with you?
14:40 Speaker 01 Yeah, we went snowboarding together. So he became like the person I, you know, I was saying, hey, you know, here's what I'm thinking. And he loved the idea and was super supportive and
14:52 Speaker 01 It was really Scott who ended up developing the relationships with the vendors and doing a lot of a business setup and all these kind of things. Like, I mean, this is a classical co-founder situation. I was looking after the technology and Scott after the business.
15:08 Guy Raz? He was dealing with the business side.
15:09 Speaker 01 Yeah.
15:10 Guy Raz? And I guess your startup costs were not incredibly insanely high because you were doing all the code programming and you had to obviously invest money in snowboards. You had to keep some inventory or would you?
15:22 Speaker 01 Yeah.
15:23 Guy Raz? Was the idea to wait until orders came in?
15:24 Speaker 01 No, no, we had the inventory. We ran this pretty old school in that way. We really wanted to build a brand, right? We wanted to build something, something which we hope would become big.
15:35 Guy Raz? What did you call it, by the way?
15:37 Speaker 01 It was called Snow Devil.
15:38 Guy Raz? Snow Devil, okay. Like, how were you going to get this out into the world to like make sure people were aware of it?
15:44 Speaker 01 So, I mean, step number one was let's go find technology. This was, ended up being a really, really important moment I didn't anticipate it because...
15:53 Guy Raz? Technology to, to like put it up on the internet?
15:55 Speaker 01 To start it. And so we were saying, start online first partly because it's cheaper. We didn't have the capital for signing a long-term lease. But we wanted to also have a physical store later on.
16:06 Guy Raz? Eventually, okay.
16:07 Speaker 01 Yeah. And I budgeted maybe a week to get the online store online. This was my expectation.
16:14 Guy Raz? So you would do it in a week?
16:15 Speaker 01 Yeah. And I first started with open source software and again, this is 2004 we're talking about. So I looked at some commercial software, but mostly we couldn't afford it. And I just got really confused because I, in 2004, was sitting in front of my computer absolutely stunned, realizing that we haven't figured out how to build online store software yet.
16:38 Guy Raz? I'm trying to go back to 2004. I mean, I would order books from Amazon and so you needed a way to get photos of the snowboards up on the site. You needed a way for people to search what snowboards were available. You needed a way for people to pay for the snowboards and then get a message to you somehow that an order came through that you could fulfill.
16:59 Speaker 01 Exactly.
17:00 Guy Raz? And that wasn't easy to find off the shelf?
17:01 Speaker 01 There's no software that would make this easy, and especially the credit card part. We also had, I think, novel or at least modern ideas about what, how we wanted the website to look. Like, we wanted to tell stories, like every snowboard that we sold, we actually took on a mountain. And we would chronicle the way we spent the day. You know, this is also the time of emergence of blogging. So what we had in mind was something that wrapped good storytelling around products that people are excited about. Like, trying to break away from the CS catalog metaphor.
17:34 Guy Raz? Right.
17:34 Speaker 01 But they were just much too early.
17:37 Guy Raz? I'm curious, when, when you and, and Scott sort of sat down and said, yeah, let's do this snowboard company. Let's, let's launch Snowdevil. Like, did you need, both of you need to put in money to start this? And do you remember how much money you needed?
17:50 Speaker 01 Yeah, we both put money into the company. I think we both took 20,000 Canadian dollars and put, that's the capital we had.
18:00 Guy Raz? Which was your savings from programming?
18:01 Speaker 01 It was all I had.
18:03 Guy Raz? It was all your money?
18:03 Speaker 01 Yeah. And one thing we did is we kept our costs really down, right? Like, no rent, no.
18:12 Guy Raz? Like, where was your office?
18:14 Speaker 01 Various coffee shops.
18:15 Guy Raz? Just, right.
18:16 Speaker 01 I tried to explore my new city of Ottawa by just taking random buses and walking until I found a coffee shop and walking from there.
18:24 Guy Raz? And you were living rent-free, basically?
18:26 Speaker 01 Yeah.
18:26 Guy Raz? All right, so you and Scott are working out of cafes. You both put in about 20,000 bucks. You start sourcing these snowboards. But there's no off-the-shelf software to actually mount the company. So, so you decide, I'm gonna write this thing, I'm gonna do it.
18:44 Speaker 01 So, exactly. I, I was like, there's only two ways forward. Like, I compromise my idea and do something that's very undifferentiated except for snowboards.
18:52 Guy Raz? Okay.
18:53 Speaker 01 Or I'm gonna fall back on my programming skills and I would build something that hopefully would be able to power this business.
19:03 Guy Raz? So what, what did you, how did you start to build it? I mean, I guess there was a, I, I read about this, this sort of language that you found called Ruby on Rails. What was that and why was that so significant?
19:13 Speaker 01 So I had this realization that I'm probably gonna be the only programmer that will ever work on this. So I don't actually have to choose something that lots of people know. I can actually choose just the best tool for the job. And so I've always, there's been this programming language called Ruby, which I just absolutely loved. It was, you know, people don't usually talk about programming languages like this, but I find, like, I really, really love the process of constructing something in your brain, having this idea. It's a little bit also like painting.
19:44 Guy Raz? Yeah.
19:44 Speaker 01 You have an idea for something, and then the programming language ends up being the mechanism for translating this perfect picture you have in your head onto a canvas.
19:54 Guy Raz? Right.
19:55 Speaker 01 And so, you know, if you have like an amazing landscape and they give you crayons, it's possible to make a masterpiece of crayons, but it will be, it will always be a crayon's painting. So this is sort of in the way Java and others, they just didn't match the way my brain ended up constructing the relationships that make up software. And so Ruby was this thing I sometimes played with.
20:16 Guy Raz? Open source?
20:17 Speaker 01 And it's open source Japanese. There's only Japanese documentation around this time for it. I learned the language by looking at the source code and.
20:27 Guy Raz? But the source code is in Latin, Latin characters.
20:30 Speaker 01 Latin characters at least, right.
20:31 Guy Raz? But the, the instruction manual was in Japanese.
20:34 Speaker 01 But exactly. So, and all the forms were in Japanese and all these kind of things. And like, I remembered that, hey, I have the power to choose the tool. And so why don't I go and use Ruby? Because that would be way more fun.
20:46 Guy Raz? Using this coding language, this programming language, to build the infrastructure that would allow you, how long did it take you to actually build the shop front?
20:57 Speaker 01 I, yeah, we launched, it's now about two and a half months later. So.
21:02 Guy Raz? It's fast.
21:02 Speaker 01 It was really good technology. And I mean, I also admit, I probably spent sixteen hours a day doing that. So a lot of Coca-Cola and pizza and very unhealthy lifestyle. But I, it didn't feel like I was doing crazy hours or anything like this. And I would never recommend anyone to do this. But like, there was literally nothing more interesting in the world for, toward this time.
21:25 Guy Raz? So was it pretty quick from the time you launched the website to the time you got your first orders?
21:30 Speaker 01 It took, um, let me, let me just double click on this because, you know, I was working from coffee shops at this time. I, I, I had my first order. I actually remember almost like everything about that day. This is actually ended up being a really profound experience because.
21:47 Speaker 01 I wrote the software. At some point during writing the software, I actually had to type the email that the software would send to me.
21:54 Guy Raz? Yeah.
21:54 Speaker 01 And so, you know, I went to a coffee shop, I opened my laptop, and it was a real order from a gentleman in Pennsylvania, no one I ever met. And it really felt like, I think that's what makes you an entrepreneur. Like, the first time you sell something, or first time someone hires you for when the phone rings or something like this. Because until then, you're just someone who builds something, which is already great. But like, it's that moment. And it's something, when I meet Shopify customers, I often ask them, like, hey, where were you when you got that first order? And everyone can remember it.
22:29 Guy Raz? And you see your first order and you're thinking, oh, my God, some guy in Pennsylvania is ordering from me.
22:33 Speaker 01 Yeah, yeah. I actually had to walk home to call Scott because I didn't have a cellphone to tell him that we had an order. And it was a cool day.
22:43 Guy Raz? And how were people finding out about Snow Devil?
22:46 Speaker 01 I mean, we tried to do basic promotions. We tried flyers and stuff like this. But the internet of 2004 was so different, right? Like, there was, Google AdWords was a new product.
22:56 Guy Raz? Right.
22:57 Speaker 01 In those days, it turns out that the minimum bid for an ad for click is 20 cents, and we paid minimum bid for almost every search, which ended up converting on a $500 snowboard.
23:08 Guy Raz? So you could get the word out through Google Ads. And there were not that many online snowboard shops, presumably. So how did Snow Devil do as a business?
23:19 Speaker 01 It did really well. Snowboards have really good, or had really good, profit margins on them. And our biggest problem was keeping inventory and getting inventory back. And we were just basically out of stock the entire time.
23:32 Guy Raz? Wow.
23:33 Speaker 01 But we had an excellent season.
23:35 Guy Raz? I mean, you guys recouped your investment pretty quickly.
23:38 Speaker 01 Very quickly. And then we had some, a good amount of savings from that for the next phase.
23:44 Guy Raz? And it was just you and Scott? Or did you quickly have to grow and bring in other people to help you with inventory and shipping and fulfillment?
23:51 Speaker 01 It was just the two of us. And we did everything. Mostly, Scott bent, brought snowboards to the post office.
23:58 Guy Raz? He was literally driving them to the post office?
24:01 Speaker 01 Yeah, or biking them. We figured out a way to.
24:04 Guy Raz? I'm imagining like a brown paper wrapped snowboard on his shoulder.
24:10 Speaker 01 Yeah, yeah, exactly. That's exactly the picture. It was fun. It was really fun.
24:15 Guy Raz? Okay, so you're running the snowboard business with Scott, and it sounds like it's going pretty well. You guys are making money. And I mean, what happened next?
24:25 Speaker 01 Here's what happened. The sales slowed, obviously, in spring. And we sort of had, began the conversations around, you know, to make this a really sustainable year around business, we need to either sell skateboards, surfboards, kiteboards, or do something else.
24:40 Guy Raz? So you were considering, hey, it's the spring. Maybe we should do kiteboards and skateboards and other things.
24:46 Speaker 01 Yeah, I mean, that would have been the natural thing
24:49 Guy Raz? Sure.
24:49 Speaker 01 to do, to go year round. Again, Scott and I said we wanted to start a location in town. But I really, during the development of it, I was now spending all this time, like I was tweaking the software. I did not stop programming. I was just, okay, now let me try things. Let me make it faster. Let me use different approaches. And so increasingly, I got people sending me emails and asking me if I would license Snow Devil to them because they wanted to start something similar.
25:19 Guy Raz? Wow, people were saying, hey, can you just license? You built this.
25:22 Speaker 01 Yes.
25:23 Guy Raz? Can we use it for our e-commerce shop?
25:25 Speaker 01 Right, and exactly, because it was just different. It wasn't the normal grid. It was, it told stories. It was clearly modern. It was sort of Web 2.0-y. And so people were saying, I would love to just build my business based on that foundation.
25:39 Guy Raz? I mean, amazing. It reminds me so much of the story of Squarespace. And Squarespace was essentially started because the founder, he couldn't find a good way to do a blog and a website all in one. And so he basically created his own way to build a website, right? He did it himself. It's a similar story here.
25:58 Speaker 01 Similar story.
25:59 Guy Raz? Yeah.
25:59 Speaker 01 But what I needed was something that helps me in the journey of entrepreneurship from scratch. And I'm not that different from other people. Like, if I needed this at some point, there's going to be at least a couple thousand people who also need this.
26:15 Guy Raz? Right.
26:15 Speaker 01 So this was like, spring 2005. At some point, Scott and I just said, okay, skateboards or software? It was pretty obvious that we should go with software.
26:26 Guy Raz? So eventually, I guess, you bring in this guy, Daniel Weinand.
26:31 Guy Raz? Who is he and why did you bring him aboard?
26:33 Speaker 01 Yeah, so we decided it's going to be software. And I called Daniel, who's a really good friend, my best friend, really, who was in Germany, and said, hey, here's what I would like to do, and I think I need another half year to build this. Do you want to spend the summer in Canada and we do this together? And we could work together and that would be fun.
26:52 Guy Raz? So you and Daniel spend that summer, I guess, summer of 2005?
26:56 Speaker 01 That summer became like a year and a half, but yes.
26:58 Guy Raz? Okay, a year and a half, trying to build this software together.
27:02 Speaker 01 Exactly.
27:02 Guy Raz? At what point do you stop selling snowboards?
27:05 Speaker 01 Around that time.
27:06 Guy Raz? Because you shut it?
27:07 Speaker 01 It was basically the summer and we didn't reopen afterwards.
27:10 Guy Raz? You just didn't reopen. How did you come up with the name Shopify for this software?
27:14 Speaker 01 It was Scott's idea. It was, we talked about what we wanted it and putting shop and simplify together was pretty straightforward. And when we went, I think, on GoDaddy and regisitube.com.
27:28 Guy Raz? And there you go.
27:28 Speaker 01 That take people back and saying, oh, yeah, those times were different.
27:32 Guy Raz? All right, so you've got Shopify, you're building this thing. And really, it sounds like from that moment, from the beginning, you're thinking, this is going to be our business. We're going to build the software that will enable people to open e-commerce sites easily and simply.
27:47 Speaker 01 Exactly. It's, you know, there's so much to building business. There's so much complexity. And like, if you get an order, how does the money make it to you? How do you get, where do you get shipping labels from? How do you make a truck show up to actually send it anywhere? Like Shopify just does all these things for you.
28:03 Guy Raz? Yeah.
28:04 Speaker 01 That was the goal. Because you know that moment that I described where I got my first sale, we got our first sale? From that point on, I can never get that again. But that was such a profound moment. Like, what I want to spend my time on is like, can't I just have other people have that experience? That became sort of a guiding principle of how we built the company.
28:27 Guy Raz? And I have to imagine that you got to, at some point, raise some money to pay for server space, pay for, you know, the kind of the costs associated with building this technology and then marketing it. When did you first start to think about bringing in some money?
28:48 Speaker 01 So around that time, we asked friends and family for money.
28:52 Guy Raz? This was like 2006, 2007?
28:54 Speaker 01 Yeah, 2000, around '05. We did it around.
28:57 Guy Raz? Like Fiona's parents, anyone you knew with any cash?
29:00 Speaker 01 Fiona's parents, exactly. People from my family. I mean, amazing that people trusted us so much.
29:05 Guy Raz? And how much money did you think you needed at that time?
29:09 Speaker 01 It was $200,000.
29:10 Guy Raz? Which is a lot of money. And when people said, Toby, what do you need $200,000 for? What would you say?
29:17 Speaker 01 Here's my experience up to this point. This is valuable. I know it's valuable because I would have needed it and there are more people like me.
29:26 Guy Raz? But meantime, all these sort of like, people were still asking you for this. And what were you saying to them? Were you saying, hang on, we're working on something, just hold tight, we'll get it to you?
29:35 Speaker 01 Yeah, I kept a weblog where I sort of talked about my experience building it. I also had a landing page collecting emails, which is now of course part of it.
29:44 Guy Raz? And the landing page was Shopify.com or?
29:45 Speaker 01 Yeah. And here's like a demo, which we pointed people to Snow Devil to explain why we were doing this. And by the time we launched in 2006, I think we had four or 5,000 emails. So it's not, that seemed like a lot.
30:00 Guy Raz? Wow. All right. You've got the seed money. You've got...
30:04 Speaker 01 A small office. We ended up taking a very small office space. We actually moved above the coffee shop. I got that first sale.
30:12 Guy Raz? Okay.
30:12 Speaker 01 We actually, we never got internet line. We always used their wifi.
30:15 Guy Raz? Right.
30:17 Speaker 01 Built some desks and that's from where we worked.
30:19 Guy Raz? And it's time to launch. You've got 4,000 emails or so from the landing page. And did you just send like a blast of emails saying, okay, we're live, we're here, we're ready to go? Is that how you launched it?
30:29 Speaker 01 Exactly what we did. So just a blast email.
30:32 Guy Raz? And what was the response?
30:33 Speaker 01 So people signed up to just try it out, which was really, really exciting. And frankly, we are still business running on Shopify. But that actually started on that day, which is remarkable.
30:46 Speaker 01 But it was a lot. I mean, you know, think about what an online store is. It's to most of our customers, this is their livelihood.
30:52 Guy Raz? Right.
30:52 Speaker 01 If that thing is not there suddenly, or something goes wrong, the business is defunct, which is a huge responsibility. And people were trusting free guys in Canada.
31:01 Guy Raz? And was it free initially?
31:03 Speaker 01 It started out free. The first year, we decided against the multiple tier monthly costs.
31:10 Guy Raz? Subscription, right, okay.
31:10 Speaker 01 Because we figured that it's gonna be so hard to get people to trust us, that making it cheaper would be more likely for people to give it a try. And the model was, I think we charged like three and a half or 3.75% per sale. It was a complete failure of a business model because what basically everyone who didn't expect to have sales thought it was amazing. And people who expected to sell a lot, that was way too much money. So we ended up switching it a year after launch, actually the night before my wedding, for a reason I will never figure out why I did that.
31:44 Guy Raz? The night before your wedding, you switched to a subscription model?
31:47 Speaker 01 Yeah. And we grandfathered everyone, but suddenly everyone called us and said, "Hey, I promised my so-and-so that they can use this for free." And suddenly it cost money. And so I got all these phone calls like during my wedding. So it's a bit stressful.
32:01 Guy Raz? So you changed the model in 2007.
32:05 Speaker 01 Yes.
32:05 Guy Raz? Still living with your in-laws.
32:06 Speaker 01 Yes.
32:06 Guy Raz? Now married with your in-laws.
32:08 Speaker 01 Yeah, yeah.
32:10 Guy Raz? How many people, do you remember, like in those early days, like the first year or so, actually signed up for the service?
32:18 Speaker 01 I mean, there was a couple of thousand accounts, and I would say like maybe 100 active. And in the year two, we had an interesting event. I mean, this is, I think the Indianapolis team won the Super Bowl around that time.
32:35 Guy Raz? Yep.
32:35 Speaker 01 And they actually had a, or a local newspaper actually had a Shopify store created, which they started like two days before the Super Bowl. And it just was selling T-shirts with the front page saying, "We won the Super Bowl."
32:48 Guy Raz? Oh, wow.
32:49 Speaker 01 Like a front, like a picture of
32:50 Guy Raz? On the T-shirt.
32:51 Speaker 01 What the newspaper would look like if they actually happened to win.
32:53 Guy Raz? Yeah.
32:54 Speaker 01 And then they ended up winning. And they sold tens of thousands, I think hundreds of thousands of dollars worth of these T-shirts on that day. And that was like a stunning experience for us because that was that was so like someone just had a really good idea in an office and turned it into like a real economic
33:13 Guy Raz? Yeah.
33:14 Speaker 01 event. You know, these events started accumulating. People were kind of experimenting more with online retail. The new businesses were starting instead of people coming to us saying, hey, we want to reduce costs and switch to you.
33:27 Guy Raz? It sounds like it was a slow burn, though. It wasn't like an overwhelming rush. It was like incremental, you know, 2006, 2007. But you're still, at this point, you're still operating off of the seed money you raised and any revenue you were generating?
33:42 Speaker 01 Yeah.
33:42 Guy Raz? How was the money situation? Were you, was it just self generating? Were you?
33:46 Speaker 01 No, no. It was, we had paying customers, but we were going trending towards zero fast.
33:55 Guy Raz? Yeah.
33:55 Speaker 01 Like, we eventually, I mean, we did basically run out of money around this time. We luckily met an angel investor who ended up putting, I think, $400,000 around 2007, and that saved us. It was an individual by the name of John Phillips. I think part of the reason why I invested is because his parents were in Ottawa, and I think he wanted something else to do in town rather than just visit his parents. But he also really liked the business. So he ended up becoming our investor and basically mentor to the company.
34:28 Guy Raz? It was a very prescient investment because I think at that time, the company was valued at $3 million. Around this time, 2008, Scott leaves. He decides, I want to move on. What do you, what do you remember about that decision?
34:42 Speaker 01 I mean, it was, he had the job of CEO. I think he just realized at some point that where the software industry was going is most of the people who were CEOs were actually highly technical parts of the founding teams. I think he also realized that I will end up being the person who will care most about this company in the long run. And so, you know, that was okay. We decided to part ways at this point.
35:11 Guy Raz? Were you worried about it? Because he was a CEO.
35:14 Speaker 01 I was hugely worried about it because like I was not convinced that I should have a CEO job. But someone gave me, told me that if a great VC invests in your company, they would have a network to find
35:27 Guy Raz? A CEO.
35:27 Speaker 01 The right kind of CEO.
35:29 Guy Raz? Yeah.
35:29 Speaker 01 And so I was like, okay, well, maybe I really should talk to venture capitalists. And that was the time I, I traveled to Silicon Valley to talk with VCs.
35:39 Guy Raz? So just to be clear, this is 2008. You decide, I better go to Silicon Valley, find a venture investor, who then can help me find a CEO.
35:48 Speaker 01 Yeah.
35:48 Guy Raz? So you fly out there, 2008.
35:51 Speaker 01 Yeah.
35:52 Guy Raz? With a couple of appointments?
35:54 Speaker 01 Yeah, a couple of appointments and then just drinks with friends and people I knew in Silicon Valley. It was the first time I was, I came to Silicon Valley.
36:01 Guy Raz? Did you have a deck?
36:02 Speaker 01 Absolutely not. My intention was to build a 20-person company. That's what I wanted to do.
36:09 Guy Raz? A 20-person company, super efficient, providing the software to people, not a massive company. Because you wanted to have, you just wanted a sustainable, nice life.
36:20 Speaker 01 Yeah. I didn't need the money because I didn't think this was a venture I was building. And so I went not really being too worried about the results. I was more worried about the amount of money it would cost for me to fly
36:33 Guy Raz? To fly to the Bay Area.
36:35 Speaker 01 And accommodations and so on.
36:37 Guy Raz? Where did you stay?
36:38 Speaker 01 Stayed at a little hostel.
36:40 Guy Raz? At a youth hostel?
36:41 Speaker 01 Yeah, yeah, yeah.
36:41 Guy Raz? Like in a bunk bedroom?
36:42 Speaker 01 Yeah, I had a roommate. Like incidentally, who was also a computer programmer, so it was actually great. I actually bought a bicycle on Craigslist.
36:50 Guy Raz? And did you go for a week or two weeks?
36:52 Speaker 01 I was scheduled to be there for a week. I ended up staying, I think, two and a half, maybe. Because what happened pretty quickly is, you know, I would have my first meeting. And again, this is me biking.
37:06 Guy Raz? From the youth hostel?
37:07 Speaker 01 From the youth hostel, down Central Road. And showing up and they probably already thought, who is this? And so I, I would have my, the first meeting and I had my notepad. And they would ask me, it started out, I was sort of explaining the business. And, but then they would ask me some questions about, you know, usage and market size and this kind of things. And some of those I could answer and they would get really interested. But the problem was that very quickly, they asked me questions I couldn't answer. Like there was questions around CAC ratios and lifetime value and all these kind of things. I would write down the terms. I would then look up what they meant.
37:50 Guy Raz? Yeah.
37:51 Speaker 01 Usually I would get an equation back because it's some equation that you're supposed to apply to a business. I would then go to our database and get all the relevant data, plug them in the equation. I would get the numbers. So I had one more question I could answer at the next meeting. And so basically, this is how I went through these meetings. I remember that, I mean, I ended up getting the kinds of term sheets people actually, frankly, dream about, which I was mostly, like, I got benchmark offers and.
38:20 Guy Raz? From that meeting, from that, from that visit.
38:22 Speaker 01 Yeah, probably from meeting three by the time I kind of figured out.
38:25 Guy Raz? So people actually really were, there were some people who were interested.
38:28 Speaker 01 Some people were interested, but all the offers were always conditional on moving a company to second value.
38:34 Guy Raz? They all said, we'll, we'll support you. You got to move it here.
38:37 Speaker 01 Yes. So I got the offers, I got term sheets, and some of them referred me to potential CEOs. I had a bunch of late night meetings with people who could take over as CEO of a company.
38:48 Guy Raz? Because you did not want to be CEO.
38:50 Speaker 01 Because I wanted to play with technology. That was what I was good at. That was my identity. So I said, okay, clearly, if you want to be, do this now, and if I get good numbers, you're going to give me this later.
39:00 Guy Raz? Eventually. So you figured I don't need to.
39:02 Speaker 01 Let's slow this down. I go back, I talk with my team, I think about this.
39:08 Guy Raz? And how many people are on your team at this point?
39:10 Speaker 01 There's about just five people. I had someone for customer support. I was doing all the customer support initially, and then eventually the rest of my team told me my English wasn't good enough, so.
39:18 Guy Raz? By the way, how are you paying people?
39:21 Speaker 01 This was now after we got angel investment. I still wasn't taking salary.
39:25 Guy Raz? But your runway was not very long.
39:28 Speaker 01 No, it's, but there was income now. It was, it was, we were still burning, but it was, it got slower and slower.
39:34 Guy Raz? Because there was income coming in from subscribers.
39:36 Speaker 01 Exactly. So I go back, and then we're talking 2008. So Lehman Brothers at some point. Now, the world was falling apart.
39:46 Guy Raz? Lehman Brothers collapsed, markets collapsed, 2008, you've got term sheets that you've kind of rejected, and now you're about to face a global financial crisis.
39:57 Speaker 01 So basically, I got this, around this time, notice that term sheets will no longer be honored, because everyone needs tighten bells and so on. Basically, initially, I thought we were toast.
40:11 Guy Raz? When we come back after the break, how the global recession actually turned out to be a huge opportunity for Shopify, and how Toby Lutka learned to do the job of CEO, a job he never wanted in the first place. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.
40:49 Guy Raz? Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's 2008, and the global financial crisis hits. At this point, Toby Lutka is the CEO of Shopify. The VCs, who had been interested in investing, weren't quite so interested anymore. And Shopify didn't have that much runway. The money was running out. But then, something surprising happened. It turned out that lots of people who were newly laid off had lots of ideas about starting their own online stores.
41:23 Speaker 01 People who lost their jobs could reach for their own independence and engage in entrepreneurship using Shopify. And they said, why don't I give this a go? Like, I'm gonna try this thing I always wanted to try, right? I'm going like-
41:38 Guy Raz? I mean, did you see, start to see users and subscribers start to tick up?
41:43 Speaker 01 Yes.
41:44 Guy Raz? You saw measurable change in 2008, 2009?
41:47 Speaker 01 We thought the numbers would fall off a cliff. And what they actually did is they started climbing and accelerating.
41:52 Guy Raz? So you just anticipated a completely different outcome?
41:56 Speaker 01 Yes. I was ready to think about how to-
41:59 Guy Raz? Shutter the thing.
42:00 Speaker 01 -tell people that I can't meet payroll at some point. And instead, basically, in 2009, the company now hit first time sort of cash flow neutral. Like, we can ride out whatever downturn this is and start thinking about long-term investment, like infrastructure projects and so on again.
42:18 Guy Raz? OK, meantime, you are the CEO. How are you doing as the CEO of the company?
42:25 Speaker 01 I don't... Not good. I mean, my team was very, very patient with me. There was a lot to learn. It's a very subtle job. And- You know, wonderful things about computers is when you tell them what to do, they'll keep doing it and they'll do it forever until you stop.
42:41 Guy Raz? Right.
42:42 Speaker 01 It turns out humans are not like that.
42:43 Guy Raz? Humans are different, yes.
42:44 Speaker 01 So there was a very large learning curve. And I would say 2009 to 2010, I truly held the company back from what it could have and should have probably become.
42:56 Guy Raz? You held it back?
42:57 Speaker 01 Yeah.
42:58 Guy Raz? What do you mean?
42:58 Speaker 01 Like, if you come from engineering, you know, something is always a bottleneck. And the moment you remove that, something else becomes a bottleneck. And it's, same goes for companies. At this point, I intentionally slowed down the growth of the company a little bit, just because I needed it to be manageable for me. And I was wavering on the most important decision, which was, is this a lifestyle business or is this actually a venture?
43:24 Guy Raz? And by this point, your revenue is over a million dollars a year.
43:27 Speaker 01 Yeah.
43:27 Guy Raz? Right? But, which sounds like a lot, but obviously you've got huge expenses, you've got a growing staff.
43:33 Speaker 01 Yeah.
43:34 Guy Raz? Did you ever get the feeling like, oh, my God, all these programmers and people are now like working for me and they're depending on this thing? And I don't know if this is gonna work.
43:42 Speaker 01 Guys, it's crushing. It's a crushing responsibility, right? Like, it's, you're responsible for everyone who is there, right?
43:51 Guy Raz? Do people have families?
43:53 Speaker 01 People had families, people had kids. My family, like, it's not a wealthy family. Like, it's, I mean, people gave me money they didn't really have. Like, up till this point, it was really just money from John Phillips, from my family, and then for the last year, from my father-in-law, who gave me money for, to meet payroll.
44:14 Guy Raz? He was giving you money to meet payroll?
44:16 Speaker 01 And we were living together and had dinner together. It's amazing that this worked. I mean, I just couldn't believe he was doing that. Because he's like, he was a bureaucrat. This was his savings. Basically, he was putting his life savings into this money bonfire. Everyone was just unbelievably supportive because they somehow believed in this idea.
44:39 Guy Raz? Did you have trouble sleeping at night?
44:41 Speaker 01 Pretty often, yeah. You know, like, so one thing I found about the entrepreneurial journey, or at least mine, is you basically exist in two different states. There's the state of things are coming together, and I think if we do this, we are unbeatable. And this state of complete dread and we are dead, we are dead, we are dead tonight. And I don't think that actually ever went away. I still to this day have this. The thing that changed is it used to be like a month in one state and a month another. And then eventually it became a week and now a day and now this can happen. Like I can switch three, three times before breakfast, you know, like, but at the bottoms,
45:21 Speaker 01 like the bottoms are deep and the implications of what failure means is it just means so much. It changes everyone's life story to a significant degree, right?
45:32 Guy Raz? How did you manage that? Did you go for long runs? Did you take Prozac? Did you, what did you do?
45:39 Speaker 01 I, um, no, I basically just programmed, which actually often wasn't the best use of my time.
45:45 Guy Raz? Did you talk, would you talk to Fiona about it, to your wife?
45:47 Speaker 01 Yeah, she was unbelievable, so supportive.
45:49 Guy Raz? Yeah. So, I mean, around this 2009 period, you're like really wavering on this decision, right? Which is like, do you build a nice, stable lifestyle business with Shopify? Or do you try again for, for big money, for VC money and make this thing huge? So what happened?
46:09 Speaker 01 So I would look at my bank account multiple times a month and just compare, you know, what it was last time. And I, if it was going up, basically I said, okay, should we invest this in another team member or should we attempt a marketing? So I finally said, okay, I'm gonna save and try five different ideas for marketing programs. We said if any of those meaningfully accelerate our growth, then I have to go fundraising again and actually go on the clock towards an IPO or to eventual exit.
46:42 Guy Raz? Cause the money really you needed for marketing at this point.
46:44 Speaker 01 At this point, it, we were held back by not engaging in marketing.
46:48 Guy Raz? You got five projects and you went to your team and you said, you guys come up with something?
46:53 Speaker 01 We need, we need ideas. We voted on ideas. We came up with things and we tried them.
46:58 Guy Raz? And what worked? They all work.
47:02 Speaker 01 Every single one of them.
47:03 Guy Raz? What were the ideas?
47:04 Speaker 01 We did adverts. This took a little bit longer, but we released a book on the concept. We just tried to like we sponsored actually a podcast, you know, like every one of those we tracked and it's like these were directly mathematically trackable. Like we made the money back in like five, six months of these investments. And then we're like, okay, now we're not talking about fundraising anymore based on isn't it cool that we're going after this market? Now we're talking about I have a formula and I need to plug bigger numbers into the formula. And so then picked up a phone, called the venture capitalists, which really impressed me and said, okay, you were right, this is a venture.
47:48 Speaker 01 I have data.
47:50 Guy Raz? So you you go back out to Silicon Valley, you convince a few VC firms to invest. You raised, I think, $7 million.
48:00 Speaker 01 Yeah, so fairly modest. I mean, this this sounds like massive numbers to those, to the years of our time.
48:05 Guy Raz? It was insane. And do you remember what the valuation was?
48:07 Speaker 01 Like 25?
48:08 Guy Raz? $25 million. At this point, once you you're bringing in $7 million, those venture capitalists are also buying a seat on the board. You've got to develop a board. You're now, right, and there you gotta have regular calls with them. If they email you, they're expecting you to get back to them. Was that stressful or overwhelming or was it helpful?
48:29 Speaker 01 I thought it was very helpful. I've always had a fantastic relationship with all the people who invested in the company, partly because I told them straight off the bat, like saying, like, I'm not going to pretend I know things I don't know and I really hope you're going to help me in this journey. And so I think our relationship has always been, we were all on the same side of a table trying to build this thing. And I hope anyways that I'm fairly quick study, right? And so bit by bit, while running Shopify, it provided all the kind of situations I needed to to learn the skills I needed.
49:04 Guy Raz? Did you have to, I mean, was it still five or 10 people? Was it still at that?
49:08 Speaker 01 I think at this point it was about 20.
49:10 Guy Raz? About 20 people, okay. And so all of you guys are really doubling down on marketing, getting the word out. And what kind of businesses were being launched on Shopify?
49:20 Speaker 01 I mean, the internet direct businesses, new businesses, like, you know, sunglass business, watch business.
49:26 Guy Raz? Right.
49:27 Speaker 01 You know, just. New ideas, boosted boards, like, you know, allbirds.
49:32 Guy Raz? Yeah, allbirds, launchers, yeah, right.
49:34 Speaker 01 Great examples of the kind of business that were coming out. And 10 months after the Series A, Jeremy and Trevor from Bessemer came to me and said, "You are still massively constrained by money. How about, instead of you spending a bunch of months on fundraising, we'll just quadruple the valuation of the company and put much more money into this thing because you can grow this way faster." They basically said, they basically saved me from doing a fundraising round.
50:04 Guy Raz? They said, "We see the potential here. We're going to give you $15 million more."
50:08 Speaker 01 Yeah, yeah, exactly. It was just so obvious. And this is why I said earlier that I had the company back because I knew this would happen.
50:17 Guy Raz? You knew it would happen, but you said you had all this anxiety about all these people. So if you knew it, what explains the freaking out?
50:25 Speaker 01 I think I was looking at what I had to do, like the HR problems, the systems I had to build, the everything, like all the decisions. And I thought if I also would be sitting on a perpetually exploding rocket ship right now, on top of all that that's happening, I could not deal with it. I needed to take another year of a breather before I could actually deal with those things simultaneously.
50:48 Guy Raz? 2012, I think you finally move out from Fiona's parents' place. You have a kid at this point. Today, you've got three.
50:56 Speaker 01 Yeah, I think, I want to say, it must have been 2014 that we actually moved out. So it was, we were living, I think, for 13 years, actually.
51:06 Guy Raz? You had raised $100 million in 2013. You're still nervous about...
51:13 Speaker 01 Well, I was making basically minimum wage, so if Chopper would have given me more money, I would have probably given it back because I figured Chopper, if I could use it better than I did. So, yeah, and Fiona had income, so that happened.
51:25 Guy Raz? And presumably, your lifestyle wasn't, didn't require a whole lot of money.
51:28 Speaker 01 No. As long as I had my laptop, I was good.
51:30 Guy Raz? All right, so you guys are balancing, like, raising kids. And this company is really starting to take off. Like, end of 2013, you've got 80,000 customers, about like 300 employees. But in a lot of ways, I mean, you're still under the radar. Like, no one knew who you were.
51:50 Speaker 01 Yeah, well, like, that was by design. So like, my board members always said Shopify was turned out to be a company only Canadians could have built because we said our job is to make our merchants look good. Like, this is why we exist. So we wouldn't put Shopify on the merchant stores. Like, at this point, these investors we would meet would ask me, you know, like, I'm looking at these numbers, this is a significant company, how come I've never
52:16 Guy Raz? Heard of you.
52:17 Speaker 01 Heard of you. And I said, you bought something with Shopify the last half year.
52:20 Guy Raz? Amazing.
52:21 Speaker 01 Because basically, everyone did. So if you bought something online and it wasn't on Amazon and you liked the experience, it was Shopify. So it just doesn't say Shopify. You don't go to Shopify.com. It's other people's, like, it's where other people build their home on the internet. And so we are happy with that. We didn't even put Shopify on our buildings.
52:38 Guy Raz? You didn't put the name Shopify in the buildings?
52:41 Speaker 01 No, no.
52:42 Guy Raz? You were, in 2014, you were named the CEO of the Year by the Globe and Mail, which is one of the biggest papers in Canada. So that was really one of the first times people even heard of Tobias Lutka. Was that weird for you to, because like, now you're recognized and people are like, oh, my God, who's this guy? You just moved out of your in-laws' house.
53:02 Speaker 01 Yeah, exactly. It was pretty surreal. It's not something I was seeking.
53:09 Guy Raz? Especially because you thought you were a crappy CEO. They're naming you the CEO of the Year four years before that, you're still struggling to like, figure this out.
53:17 Speaker 01 Yeah, that's exactly, you perfectly summarize my experience, honestly. It's like, it was, I, we didn't quite know what they were writing, so it was a little bit of a surprise to me.
53:27 Guy Raz? Yeah.
53:28 Speaker 01 What came out of it. But I love, and this is something I and Daniel talked about, and Scott, we all talked about this in the early days of going for beer after a week of programming.
53:41 Guy Raz? Yeah.
53:42 Speaker 01 He said, what would happen if this just doesn't work? And this was before investments and so on, so it felt a little bit easier to even think and conceptualize these kind of issues. And we said, that would be okay. Because, you know what? No matter what, we're gonna learn a lot. This is gonna be part of all of our life's journeys and all of our stories. And we will be able for the rest of our lives to do things we couldn't do if we wouldn't embark on this journey, because there's no way that the residue learning of this is not going to be significant for all of us.
54:13 Guy Raz? You guys go public in 2015. You went public because presumably your investors wanted, you wanted to kind of give them return. People had waited a long time. This is 2015. People had started giving you money in 2004. Was that the reason why you went public?
54:32 Speaker 01 It probably would have become the reason eventually, but not at this point of time, because the investments only happened five years before that. And I took the investments knowing that I'm going to be racing the clock to either go public or get sold. That was the duality of outcome. And by the way, this is true for every person who sells shares in their company. Just most people don't realize that that's what's happening. But I went into the venture world pretty clear-eyed about what it means. And so I really wanted to set up a company to become an independent public company, because my private investors have all seen Shopify perform under promise, over deliver, month after month, and board meeting after board meeting.
55:17 Speaker 01 All of them fully trusted the company, and further good performance was not really buying us anything new.
55:24 Guy Raz? Today, I think there's more than 800,000 Shopify merchants. So there's a good chance that anyone listening will have purchased something on a site that's powered by Shopify. There's a very good chance.
55:36 Speaker 01 Exactly. And like, since we're talking about stats, here's the most gratifying of all the numbers related to Shopify. And it's actually the nostalgia of a company. Every 52 seconds, someone has that experience of getting a first sale.
55:49 Guy Raz? Wow.
55:50 Speaker 01 The one that I described. And in so many cases, someone is going from being a builder to now being an entrepreneur. You know, it's like, there's so few things that you can do that actually change your identity to a meaningful degree, right? And this company's heart is really, really for entrepreneurial process and trying to make this simpler. What's been so fascinating is that this initial idea behind Snow Devil, the idea that being able to write computer software is like a specialized tool on a climbing trip. If I wouldn't have had specialized tools with me, I would have had to turn around because some walls I just couldn't have overcome.
56:32 Speaker 01 And then what Shopify really is, it's a software I wish I would have found, right? Like it takes all these vertical walls and turns them into inclines. Like they're not, it's not flat. It's like still hard to build a business. But at no point do you need-
56:46 Guy Raz? It's not a technical client.
56:47 Speaker 01 Exactly. And so because of that, significantly more people succeed in building businesses. Because they are just not these discouraging experiences which make you give up even though you shouldn't have. And so what we have found is the best thing we can do for the business of Shopify is find another one of those things which is an incline and just flatten it as much as we can. And every single time we do it, more people succeed and more businesses get created.
57:14 Guy Raz? Toby, in 2004, you did not even have a work permit in Canada. Five years ago, you had moved out of your in-law's place. Today, I have to imagine that Shopify is easily the biggest employer in Ottawa, aside from the federal government, the Canadian government.
57:31 Speaker 01 Exactly.
57:31 Guy Raz? You are wealthier than you could probably have ever imagined and might be weird to be a billionaire. I mean, it's totally crazy. Is there any part of you that could have imagined this?
57:44 Speaker 01 No. Honestly, even now that you talk about this, it sounds crazy to me. I probably try to just not think too much about it. It's hugely gratifying, but it's also, I think the important thing is just that I remind myself how much of this was luck. The most amazing, welcoming, wonderful family here in Canada to support us along the way. The incredible timing of when we started. Like this is not a kind of company that could have been started even two years later, right? It needed to be started right then and it needed to be ready and good by the time the opportunity around the financial crisis came around. All these things, when we went public.
58:28 Speaker 01 And luck is such a major component of entire journey. So- Like, why am I the person who ended up, you know, winning the lottery five times in a row? I don't know.
58:39 Guy Raz? You like equations and numbers, so you sort of half answered my last question. But quantify it for me. What percentage do you think of this journey is luck? And what percentage do you think is your incredible skill as a programmer and your talent?
58:55 Speaker 01 I think it's, I don't know. You know what? I can't quantify it. It's a huge component. It might, I would say it's 90%.
59:03 Guy Raz? Luck.
59:04 Speaker 01 Basically, all I can do is enjoy it and be honest about what happened here. And it's definitely the best idea I've ever had. And I hope that I can run this to the end of my career because I think that would be amazing.
59:20 Guy Raz? That's Toby Lutka, co-founder and CEO of Shopify. Since its launch, the Shopify platform has been used for over $100 billion of e-commerce sales worldwide. And by the way, Toby has his own little side hustle on Shopify. Do you have like a secret Shopify store? Like J.K. Rowling has like, you know, pseudonyms? Do you have your own like secret shop?
59:43 Speaker 01 Yes, of course.
59:43 Guy Raz? You do?
59:44 Speaker 01 Yep.
59:44 Guy Raz? What do you sell?
59:47 Speaker 01 Socks mainly is my best seller.
59:48 Guy Raz? Really?
59:49 Speaker 01 Yeah.
59:50 Guy Raz? What's the store called?
59:51 Speaker 01 I'm not telling you.
1:00:07 Guy Raz? Hey, thanks for sticking around because it's time now for How You Built That. And today's story starts about four years ago in Houston, Texas, when Barb Heilmann was babysitting her granddaughter Eve and was quickly running out of things to do with her.
1:00:21 Speaker 02 I mean, I wanted to take her to Gymboree and I wanted to take her to the park. But then I said, but wait, I can't really put her in the car seat.
1:00:29 Guy Raz? And the reason Barb couldn't put Eve in the car seat is because she has arthritis in her thumb. And pushing that big red button to release the seat buckle? It's hard.
1:00:38 Speaker 02 Yes, it's very hard. I mean, it's just, I mean, even people that can do it sort of. Hate it because they have to struggle and it hurts.
1:00:45 Guy Raz? For safety reasons, it actually takes about nine pounds of pressure to release that red button. So how do you do that if you don't have enough strength in your hand? Well, fortunately for Barb, it turns out she had the perfect set of skills to solve this problem.
1:01:00 Speaker 02 I'm an occupational therapist.
1:01:02 Guy Raz? Which means her job is to help people with disabilities accomplish daily tasks. So using some pliable plastic that she had lying around the house, Barb made a tool that could help her release the buckle on Eve's car seat.
1:01:15 Speaker 02 It's kind of a C-shaped device. And the upper arm has a peg in the center.
1:01:22 Guy Raz? So, OK, you take this clamp-like thing, you slide it under the car seat buckle, you place the peg over the red button.
1:01:29 Speaker 02 And then you push and you kind of pinch, and that will release the buckle.
1:01:33 Guy Raz? So a super simple idea that actually worked the first time Barb tried it.
1:01:39 Speaker 02 I was pretty excited and honestly just started using it. And it was really Rebecca that said, Mom, there's probably other people that would like this.
1:01:48 Guy Raz? Enter Barb's daughter, Rebecca.
1:01:50 Speaker 03 Hi.
1:01:50 Guy Raz? Rebecca is baby Eve's mom, and she also happens to have a background in business.
1:01:56 Speaker 03 I think I said to her, I said, Mom, you know, what if we, what if we made this and sold it? What if this was a business? And, you know, I've always had kind of entrepreneurship in the back of my mind.
1:02:04 Guy Raz? But neither Rebecca nor Barb knew if they were really on to something. So while Barb kept working on different prototypes to get the clamp exactly right, Rebecca started to poke around a little to do some research.
1:02:16 Speaker 03 So I actually remember learning about the ABC Kids Expo, one of the largest juvenile product trade shows in the country. And we ended up going. It was kind of a last minute decision.
1:02:28 Guy Raz? So they traveled to Las Vegas to go to this big convention.
1:02:32 Speaker 03 Oh, my gosh, it was, it was amazing. It was one of the most, you know, energizing experiences I can remember. People just saw it and thought, yes, that is a need. And that is solving a problem that's in the market.
1:02:44 Guy Raz? Next came all the traditional milestones, a Kickstarter campaign, finding a manufacturer, and delivering the first orders. But then a Not so happy sign of success. Other vendors were starting to copy their device.
1:02:58 Speaker 03 You know, it's kind of a gut punch when you see it. We just both went, ugh. It just, it makes you feel just so defeated because, you know, you know that they haven't gone through the sweat and the iterations and the bucket full of prototypes.
1:03:12 Guy Raz? Rebecca and Barb did manage to get two patents for their product, and they've been able to shut down some of the knockoffs. And meanwhile, Rebecca says that by going into business with her mom, she has seen an entirely new side of her.
1:03:25 Speaker 03 When it comes to this business, I think my mom is such a go-getter. And she gets on the phone and she'll call up retailers and she's got the hustle. And it's really been kind of a cool experience.
1:03:38 Guy Raz? Rebecca Davidson and Barb Heilman's product is called Unbuckle Me. They're now selling it online and at some major chains like Buy Buy Baby. And since they launched the business two years ago, they've made about $350,000. If you want to find out more about their business or hear previous episodes, head to our podcast page, howibuiltthis.npr.org. And of course, if you want to tell us your story, go to build.npr.org. We love hearing what you're building. And thanks so much for listening to the show this week. You can subscribe at Apple Podcasts or wherever you get your podcasts. And while you're there, please do give us a review. You can also write to us at [email protected] . And if you want to send a tweet, it's at howibuiltthis.
1:04:22 Guy Raz? I'm at Guy Raz. Our show was produced this week by Casey Herman with music composed by Ramtin Arablouei. Thanks also to Julia Carney, Eva Grant, Sanaz Meshkhanpour, and Jeff Rogers. Our intern is David Jock. I'm Guy Raz, and you've been listening to How I Built This.
Previous Live Episode! Angie's BOOMCHICKAPOP: Angie & Dan Bastian Next Serial Entrepreneur: Marcia Kilgore (2018) Page updated October 26, 2026 · transcript and summary are machine-generated
