Shopify: Tobias Lütke

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. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy 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.

• 0:45Guy 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.

• 1:05Guy Raz?

  So how are you doing as the CEO of the company?

• 1:12Speaker 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.

• 1:27Guy Raz?

  Humans are different, yes.

• 1:28Speaker 01

  So there was a very large learning curve.

• 1:36Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:50Guy 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.

• 2:07Guy 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

• 2:52Guy 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

• 3:34Guy 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

• 4:18Guy 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.

• 4:38Speaker 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.

• 5:00Guy Raz?

  Yeah.

• 5:01Speaker 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.

• 5:27Guy Raz?

  Huh.

• 5:28Speaker 01

  And so that, but that just particularly didn't work well for me.

• 5:30Guy 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.

• 5:50Speaker 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,

• 6:35Speaker 01

  I started getting paid to program all day and that's all I did.

• 6:38Guy Raz?

  And you loved it?

• 6:39Speaker 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.

• 6:51Guy 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?

• 7:01Speaker 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.

• 7:09Guy Raz?

  Yeah.

• 7:09Speaker 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,

• 7:21Guy Raz?

  To Canada.

• 7:21Speaker 01

  To Canada, to Westlife.

• 7:23Guy Raz?

  This is like two thousand.

• 7:24Speaker 01

  This is around two thousand.

• 7:25Guy Raz?

  Yeah.

• 7:26Speaker 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.

• 7:41Guy Raz?

  Yeah. How did you, this is Fiona, your wife. How did you meet her? Just there, at the mountain?

• 7:46Speaker 01

  That's it, right?

• 7:46Guy 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.

• 7:53Speaker 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?

• 8:01Guy Raz?

  Her parents must have thought she was nuts. They was, you meet this guy skiing and you're gonna go move to Germany?

• 8:07Speaker 01

  I'm perpetually impressed by her parents too. They are the most wonderful people.

• 8:11Guy Raz?

  So she comes to Germany. You are working, programming for who at that point?

• 8:16Speaker 01

  Yeah, before, that was a little startup in Dortmund, yeah.

• 8:19Guy Raz?

  And what did she do during that year?

• 8:21Speaker 01

  She ended up getting a job editing academic writing.

• 8:27Speaker 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.

• 8:38Guy Raz?

  Because you could take what you know and do it anywhere.

• 8:41Speaker 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.

• 9:02Guy 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?

• 9:12Speaker 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.

• 9:23Guy Raz?

  Just email contact, right, yeah. What was the startup?

• 9:26Speaker 01

  It was an attempt at writing a different browser.

• 9:30Guy Raz?

  Okay.

• 9:30Speaker 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.

• 9:41Guy 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?

• 9:57Speaker 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.

• 10:13Guy Raz?

  To work for a big company?

• 10:14Speaker 01

  Yeah.

• 10:14Guy Raz?

  Why?

• 10:16Speaker 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.

• 10:43Guy Raz?

  Yeah.

• 10:45Speaker 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.

• 10:56Guy Raz?

  Nine months out of the year, you basically, eight months out of the year.

• 10:58Speaker 01

  It's six months.

• 11:00Guy Raz?

  Six months, alright.

• 11:00Speaker 01

  It might feel like nine months.

• 11:01Guy Raz?

  Okay.

• 11:02Speaker 01

  But, but, but you can't run a strategy of waiting for summer, you really have to do something with the winter.

• 11:07Guy Raz?

  Yeah, yeah.

• 11:08Speaker 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.

• 11:36Guy Raz?

  An internet business selling snowboards?

• 11:37Speaker 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.

• 11:58Guy Raz?

  You were not legal.

• 12:00Speaker 01

  I, well, I was allowed to be there because I was under, in the process of getting a permanent residency.

• 12:05Guy Raz?

  Okay.

• 12:06Speaker 01

  I wasn't illegal in the country, but my status didn't give me work permit.

• 12:10Guy Raz?

  Right.

• 12:11Speaker 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.

• 12:23Guy Raz?

  So you could not go work for this company, but you were, you could, essentially, that was your only option?

• 12:29Speaker 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

• 12:50Guy Raz?

  To sell snowboards.

• 12:51Speaker 01

  Sell snowboards, make money while snowboarding hopefully and have a good life.

• 12:56Guy 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.

• 13:02Speaker 01

  Yeah.

• 13:02Guy Raz?

  How'd you meet him?

• 13:03Speaker 01

  So Scott worked for that company I almost got hired for.

• 13:07Guy Raz?

  Ah.

• 13:07Speaker 01

  And so we kept talking and he was a friend of her family and

• 13:10Guy Raz?

  He was a friend of Fiona's family.

• 13:12Speaker 01

  Exactly, exactly. Who we were also living with at that time.

• 13:15Guy Raz?

  You were living with where?

• 13:16Speaker 01

  With Fiona's parents.

• 13:18Guy Raz?

  Oh, you were living with her parents in Ottawa?

• 13:19Speaker 01

  Yes, in Ottawa, exactly.

• 13:20Guy 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.

• 13:27Speaker 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

• 13:41Guy Raz?

  Wow.

• 13:41Speaker 01

  Easy. They are just the most kind, genuine, and played massive roles. Like Dale, she was diplomat for the Canadian government.

• 13:51Guy Raz?

  This is your now mother-in-law?

• 13:52Speaker 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?

• 14:06Guy Raz?

  Yeah.

• 14:07Speaker 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.

• 14:29Guy Raz?

  All right. So you are, you're living with her parents.

• 14:32Speaker 01

  Yeah.

• 14:32Guy Raz?

  You've got this snowboard idea. You meet this guy Scott, who's working at this other company.

• 14:36Speaker 01

  Yeah.

• 14:36Guy Raz?

  What does he come to you and say, hey, Toby, I think, I think I want to work with you?

• 14:40Speaker 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

• 14:52Speaker 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.

• 15:08Guy Raz?

  He was dealing with the business side.

• 15:09Speaker 01

  Yeah.

• 15:10Guy 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?

• 15:22Speaker 01

  Yeah.

• 15:23Guy Raz?

  Was the idea to wait until orders came in?

• 15:24Speaker 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.

• 15:35Guy Raz?

  What did you call it, by the way?

• 15:37Speaker 01

  It was called Snow Devil.

• 15:38Guy 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?

• 15:44Speaker 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...

• 15:53Guy Raz?

  Technology to, to like put it up on the internet?

• 15:55Speaker 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.

• 16:06Guy Raz?

  Eventually, okay.

• 16:07Speaker 01

  Yeah. And I budgeted maybe a week to get the online store online. This was my expectation.

• 16:14Guy Raz?

  So you would do it in a week?

• 16:15Speaker 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.

• 16:38Guy 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.

• 16:59Speaker 01

  Exactly.

• 17:00Guy Raz?

  And that wasn't easy to find off the shelf?

• 17:01Speaker 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.

• 17:34Guy Raz?

  Right.

• 17:34Speaker 01

  But they were just much too early.

• 17:37Guy 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?

• 17:50Speaker 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.

• 18:00Guy Raz?

  Which was your savings from programming?

• 18:01Speaker 01

  It was all I had.

• 18:03Guy Raz?

  It was all your money?

• 18:03Speaker 01

  Yeah. And one thing we did is we kept our costs really down, right? Like, no rent, no.

• 18:12Guy Raz?

  Like, where was your office?

• 18:14Speaker 01

  Various coffee shops.

• 18:15Guy Raz?

  Just, right.

• 18:16Speaker 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.

• 18:24Guy Raz?

  And you were living rent-free, basically?

• 18:26Speaker 01

  Yeah.

• 18:26Guy 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.

• 18:44Speaker 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.

• 18:52Guy Raz?

  Okay.

• 18:53Speaker 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.

• 19:03Guy 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?

• 19:13Speaker 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.

• 19:44Guy Raz?

  Yeah.

• 19:44Speaker 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.

• 19:54Guy Raz?

  Right.

• 19:55Speaker 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.

• 20:16Guy Raz?

  Open source?

• 20:17Speaker 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.

• 20:27Guy Raz?

  But the source code is in Latin, Latin characters.

• 20:30Speaker 01

  Latin characters at least, right.

• 20:31Guy Raz?

  But the, the instruction manual was in Japanese.

• 20:34Speaker 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.

• 20:46Guy 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?

• 20:57Speaker 01

  I, yeah, we launched, it's now about two and a half months later. So.

• 21:02Guy Raz?

  It's fast.

• 21:02Speaker 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.

• 21:25Guy Raz?

  So was it pretty quick from the time you launched the website to the time you got your first orders?

• 21:30Speaker 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.

• 21:47Speaker 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.

• 21:54Guy Raz?

  Yeah.

• 21:54Speaker 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.

• 22:29Guy Raz?

  And you see your first order and you're thinking, oh, my God, some guy in Pennsylvania is ordering from me.

• 22:33Speaker 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.

• 22:43Guy Raz?

  And how were people finding out about Snow Devil?

• 22:46Speaker 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.

• 22:56Guy Raz?

  Right.

• 22:57Speaker 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.

• 23:08Guy 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?

• 23:19Speaker 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.

• 23:32Guy Raz?

  Wow.

• 23:33Speaker 01

  But we had an excellent season.

• 23:35Guy Raz?

  I mean, you guys recouped your investment pretty quickly.

• 23:38Speaker 01

  Very quickly. And then we had some, a good amount of savings from that for the next phase.

• 23:44Guy 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?

• 23:51Speaker 01

  It was just the two of us. And we did everything. Mostly, Scott bent, brought snowboards to the post office.

• 23:58Guy Raz?

  He was literally driving them to the post office?

• 24:01Speaker 01

  Yeah, or biking them. We figured out a way to.

• 24:04Guy Raz?

  I'm imagining like a brown paper wrapped snowboard on his shoulder.

• 24:10Speaker 01

  Yeah, yeah, exactly. That's exactly the picture. It was fun. It was really fun.

• 24:15Guy 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?

• 24:25Speaker 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.

• 24:40Guy Raz?

  So you were considering, hey, it's the spring. Maybe we should do kiteboards and skateboards and other things.

• 24:46Speaker 01

  Yeah, I mean, that would have been the natural thing

• 24:49Guy Raz?

  Sure.

• 24:49Speaker 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.

• 25:19Guy Raz?

  Wow, people were saying, hey, can you just license? You built this.

• 25:22Speaker 01

  Yes.

• 25:23Guy Raz?

  Can we use it for our e-commerce shop?

• 25:25Speaker 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.

• 25:39Guy 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.

• 25:58Speaker 01

  Similar story.

• 25:59Guy Raz?

  Yeah.

• 25:59Speaker 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.

• 26:15Guy Raz?

  Right.

• 26:15Speaker 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.

• 26:26Guy Raz?

  So eventually, I guess, you bring in this guy, Daniel Weinand.

• 26:31Guy Raz?

  Who is he and why did you bring him aboard?

• 26:33Speaker 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.

• 26:52Guy Raz?

  So you and Daniel spend that summer, I guess, summer of 2005?

• 26:56Speaker 01

  That summer became like a year and a half, but yes.

• 26:58Guy Raz?

  Okay, a year and a half, trying to build this software together.

• 27:02Speaker 01

  Exactly.

• 27:02Guy Raz?

  At what point do you stop selling snowboards?

• 27:05Speaker 01

  Around that time.

• 27:06Guy Raz?

  Because you shut it?

• 27:07Speaker 01

  It was basically the summer and we didn't reopen afterwards.

• 27:10Guy Raz?

  You just didn't reopen. How did you come up with the name Shopify for this software?

• 27:14Speaker 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.

• 27:28Guy Raz?

  And there you go.

• 27:28Speaker 01

  That take people back and saying, oh, yeah, those times were different.

• 27:32Guy 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.

• 27:47Speaker 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.

• 28:03Guy Raz?

  Yeah.

• 28:04Speaker 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.

• 28:27Guy 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?

• 28:48Speaker 01

  So around that time, we asked friends and family for money.

• 28:52Guy Raz?

  This was like 2006, 2007?

• 28:54Speaker 01

  Yeah, 2000, around '05. We did it around.

• 28:57Guy Raz?

  Like Fiona's parents, anyone you knew with any cash?

• 29:00Speaker 01

  Fiona's parents, exactly. People from my family. I mean, amazing that people trusted us so much.

• 29:05Guy Raz?

  And how much money did you think you needed at that time?

• 29:09Speaker 01

  It was $200,000.

• 29:10Guy Raz?

  Which is a lot of money. And when people said, Toby, what do you need $200,000 for? What would you say?

• 29:17Speaker 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.

• 29:26Guy 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?

• 29:35Speaker 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.

• 29:44Guy Raz?

  And the landing page was Shopify.com or?

• 29:45Speaker 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.

• 30:00Guy Raz?

  Wow. All right. You've got the seed money. You've got...

• 30:04Speaker 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.

• 30:12Guy Raz?

  Okay.

• 30:12Speaker 01

  We actually, we never got internet line. We always used their wifi.

• 30:15Guy Raz?

  Right.

• 30:17Speaker 01

  Built some desks and that's from where we worked.

• 30:19Guy 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?

• 30:29Speaker 01

  Exactly what we did. So just a blast email.

• 30:32Guy Raz?

  And what was the response?

• 30:33Speaker 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.

• 30:46Speaker 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.

• 30:52Guy Raz?

  Right.

• 30:52Speaker 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.

• 31:01Guy Raz?

  And was it free initially?

• 31:03Speaker 01

  It started out free. The first year, we decided against the multiple tier monthly costs.

• 31:10Guy Raz?

  Subscription, right, okay.

• 31:10Speaker 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.

• 31:44Guy Raz?

  The night before your wedding, you switched to a subscription model?

• 31:47Speaker 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.

• 32:01Guy Raz?

  So you changed the model in 2007.

• 32:05Speaker 01

  Yes.

• 32:05Guy Raz?

  Still living with your in-laws.

• 32:06Speaker 01

  Yes.

• 32:06Guy Raz?

  Now married with your in-laws.

• 32:08Speaker 01

  Yeah, yeah.

• 32:10Guy Raz?

  How many people, do you remember, like in those early days, like the first year or so, actually signed up for the service?

• 32:18Speaker 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.

• 32:35Guy Raz?

  Yep.

• 32:35Speaker 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."

• 32:48Guy Raz?

  Oh, wow.

• 32:49Speaker 01

  Like a front, like a picture of

• 32:50Guy Raz?

  On the T-shirt.

• 32:51Speaker 01

  What the newspaper would look like if they actually happened to win.

• 32:53Guy Raz?

  Yeah.

• 32:54Speaker 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

• 33:13Guy Raz?

  Yeah.

• 33:14Speaker 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.

• 33:27Guy 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?

• 33:42Speaker 01

  Yeah.

• 33:42Guy Raz?

  How was the money situation? Were you, was it just self generating? Were you?

• 33:46Speaker 01

  No, no. It was, we had paying customers, but we were going trending towards zero fast.

• 33:55Guy Raz?

  Yeah.

• 33:55Speaker 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.

• 34:28Guy 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?

• 34:42Speaker 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.

• 35:11Guy Raz?

  Were you worried about it? Because he was a CEO.

• 35:14Speaker 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

• 35:27Guy Raz?

  A CEO.

• 35:27Speaker 01

  The right kind of CEO.

• 35:29Guy Raz?

  Yeah.

• 35:29Speaker 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.

• 35:39Guy 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.

• 35:48Speaker 01

  Yeah.

• 35:48Guy Raz?

  So you fly out there, 2008.

• 35:51Speaker 01

  Yeah.

• 35:52Guy Raz?

  With a couple of appointments?

• 35:54Speaker 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.

• 36:01Guy Raz?

  Did you have a deck?

• 36:02Speaker 01

  Absolutely not. My intention was to build a 20-person company. That's what I wanted to do.

• 36:09Guy 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.

• 36:20Speaker 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

• 36:33Guy Raz?

  To fly to the Bay Area.

• 36:35Speaker 01

  And accommodations and so on.

• 36:37Guy Raz?

  Where did you stay?

• 36:38Speaker 01

  Stayed at a little hostel.

• 36:40Guy Raz?

  At a youth hostel?

• 36:41Speaker 01

  Yeah, yeah, yeah.

• 36:41Guy Raz?

  Like in a bunk bedroom?

• 36:42Speaker 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.

• 36:50Guy Raz?

  And did you go for a week or two weeks?

• 36:52Speaker 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.

• 37:06Guy Raz?

  From the youth hostel?

• 37:07Speaker 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.

• 37:50Guy Raz?

  Yeah.

• 37:51Speaker 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.

• 38:20Guy Raz?

  From that meeting, from that, from that visit.

• 38:22Speaker 01

  Yeah, probably from meeting three by the time I kind of figured out.

• 38:25Guy Raz?

  So people actually really were, there were some people who were interested.

• 38:28Speaker 01

  Some people were interested, but all the offers were always conditional on moving a company to second value.

• 38:34Guy Raz?

  They all said, we'll, we'll support you. You got to move it here.

• 38:37Speaker 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.

• 38:48Guy Raz?

  Because you did not want to be CEO.

• 38:50Speaker 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.

• 39:00Guy Raz?

  Eventually. So you figured I don't need to.

• 39:02Speaker 01

  Let's slow this down. I go back, I talk with my team, I think about this.

• 39:08Guy Raz?

  And how many people are on your team at this point?

• 39:10Speaker 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.

• 39:18Guy Raz?

  By the way, how are you paying people?

• 39:21Speaker 01

  This was now after we got angel investment. I still wasn't taking salary.

• 39:25Guy Raz?

  But your runway was not very long.

• 39:28Speaker 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.

• 39:34Guy Raz?

  Because there was income coming in from subscribers.

• 39:36Speaker 01

  Exactly. So I go back, and then we're talking 2008. So Lehman Brothers at some point. Now, the world was falling apart.

• 39:46Guy 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.

• 39:57Speaker 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.

• 40:11Guy 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.

• 40:49Guy 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.

• 41:23Speaker 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-

• 41:38Guy Raz?

  I mean, did you see, start to see users and subscribers start to tick up?

• 41:43Speaker 01

  Yes.

• 41:44Guy Raz?

  You saw measurable change in 2008, 2009?

• 41:47Speaker 01

  We thought the numbers would fall off a cliff. And what they actually did is they started climbing and accelerating.

• 41:52Guy Raz?

  So you just anticipated a completely different outcome?

• 41:56Speaker 01

  Yes. I was ready to think about how to-

• 41:59Guy Raz?

  Shutter the thing.

• 42:00Speaker 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.

• 42:18Guy Raz?

  OK, meantime, you are the CEO. How are you doing as the CEO of the company?

• 42:25Speaker 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.

• 42:41Guy Raz?

  Right.

• 42:42Speaker 01

  It turns out humans are not like that.

• 42:43Guy Raz?

  Humans are different, yes.

• 42:44Speaker 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.

• 42:56Guy Raz?

  You held it back?

• 42:57Speaker 01

  Yeah.

• 42:58Guy Raz?

  What do you mean?

• 42:58Speaker 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?

• 43:24Guy Raz?

  And by this point, your revenue is over a million dollars a year.

• 43:27Speaker 01

  Yeah.

• 43:27Guy Raz?

  Right? But, which sounds like a lot, but obviously you've got huge expenses, you've got a growing staff.

• 43:33Speaker 01

  Yeah.

• 43:34Guy 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.

• 43:42Speaker 01

  Guys, it's crushing. It's a crushing responsibility, right? Like, it's, you're responsible for everyone who is there, right?

• 43:51Guy Raz?

  Do people have families?

• 43:53Speaker 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.

• 44:14Guy Raz?

  He was giving you money to meet payroll?

• 44:16Speaker 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.

• 44:39Guy Raz?

  Did you have trouble sleeping at night?

• 44:41Speaker 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,

• 45:21Speaker 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?

• 45:32Guy Raz?

  How did you manage that? Did you go for long runs? Did you take Prozac? Did you, what did you do?

• 45:39Speaker 01

  I, um, no, I basically just programmed, which actually often wasn't the best use of my time.

• 45:45Guy Raz?

  Did you talk, would you talk to Fiona about it, to your wife?

• 45:47Speaker 01

  Yeah, she was unbelievable, so supportive.

• 45:49Guy 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?

• 46:09Speaker 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.

• 46:42Guy Raz?

  Cause the money really you needed for marketing at this point.

• 46:44Speaker 01

  At this point, it, we were held back by not engaging in marketing.

• 46:48Guy Raz?

  You got five projects and you went to your team and you said, you guys come up with something?

• 46:53Speaker 01

  We need, we need ideas. We voted on ideas. We came up with things and we tried them.

• 46:58Guy Raz?

  And what worked? They all work.

• 47:02Speaker 01

  Every single one of them.

• 47:03Guy Raz?

  What were the ideas?

• 47:04Speaker 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.

• 47:48Speaker 01

  I have data.

• 47:50Guy Raz?

  So you you go back out to Silicon Valley, you convince a few VC firms to invest. You raised, I think, $7 million.

• 48:00Speaker 01

  Yeah, so fairly modest. I mean, this this sounds like massive numbers to those, to the years of our time.

• 48:05Guy Raz?

  It was insane. And do you remember what the valuation was?

• 48:07Speaker 01

  Like 25?

• 48:08Guy 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?

• 48:29Speaker 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.

• 49:04Guy Raz?

  Did you have to, I mean, was it still five or 10 people? Was it still at that?

• 49:08Speaker 01

  I think at this point it was about 20.

• 49:10Guy 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?

• 49:20Speaker 01

  I mean, the internet direct businesses, new businesses, like, you know, sunglass business, watch business.

• 49:26Guy Raz?

  Right.

• 49:27Speaker 01

  You know, just. New ideas, boosted boards, like, you know, allbirds.

• 49:32Guy Raz?

  Yeah, allbirds, launchers, yeah, right.

• 49:34Speaker 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.

• 50:04Guy Raz?

  They said, "We see the potential here. We're going to give you $15 million more."

• 50:08Speaker 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.

• 50:17Guy 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?

• 50:25Speaker 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.

• 50:48Guy 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.

• 50:56Speaker 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.

• 51:06Guy Raz?

  You had raised $100 million in 2013. You're still nervous about...

• 51:13Speaker 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.

• 51:25Guy Raz?

  And presumably, your lifestyle wasn't, didn't require a whole lot of money.

• 51:28Speaker 01

  No. As long as I had my laptop, I was good.

• 51:30Guy 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.

• 51:50Speaker 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

• 52:16Guy Raz?

  Heard of you.

• 52:17Speaker 01

  Heard of you. And I said, you bought something with Shopify the last half year.

• 52:20Guy Raz?

  Amazing.

• 52:21Speaker 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.

• 52:38Guy Raz?

  You didn't put the name Shopify in the buildings?

• 52:41Speaker 01

  No, no.

• 52:42Guy 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.

• 53:02Speaker 01

  Yeah, exactly. It was pretty surreal. It's not something I was seeking.

• 53:09Guy 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.

• 53:17Speaker 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.

• 53:27Guy Raz?

  Yeah.

• 53:28Speaker 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.

• 53:41Guy Raz?

  Yeah.

• 53:42Speaker 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.

• 54:13Guy 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?

• 54:32Speaker 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.

• 55:17Speaker 01

  All of them fully trusted the company, and further good performance was not really buying us anything new.

• 55:24Guy 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.

• 55:36Speaker 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.

• 55:49Guy Raz?

  Wow.

• 55:50Speaker 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.

• 56:32Speaker 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-

• 56:46Guy Raz?

  It's not a technical client.

• 56:47Speaker 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.

• 57:14Guy 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.

• 57:31Speaker 01

  Exactly.

• 57:31Guy 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?

• 57:44Speaker 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.

• 58:28Speaker 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.

• 58:39Guy 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?

• 58:55Speaker 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%.

• 59:03Guy Raz?

  Luck.

• 59:04Speaker 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.

• 59:20Guy 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?

• 59:43Speaker 01

  Yes, of course.

• 59:43Guy Raz?

  You do?

• 59:44Speaker 01

  Yep.

• 59:44Guy Raz?

  What do you sell?

• 59:47Speaker 01

  Socks mainly is my best seller.

• 59:48Guy Raz?

  Really?

• 59:49Speaker 01

  Yeah.

• 59:50Guy Raz?

  What's the store called?

• 59:51Speaker 01

  I'm not telling you.

• 1:00:07Guy 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.

• 1:00:21Speaker 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.

• 1:00:29Guy 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.

• 1:00:38Speaker 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.

• 1:00:45Guy 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.

• 1:01:00Speaker 02

  I'm an occupational therapist.

• 1:01:02Guy 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.

• 1:01:15Speaker 02

  It's kind of a C-shaped device. And the upper arm has a peg in the center.

• 1:01:22Guy 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.

• 1:01:29Speaker 02

  And then you push and you kind of pinch, and that will release the buckle.

• 1:01:33Guy Raz?

  So a super simple idea that actually worked the first time Barb tried it.

• 1:01:39Speaker 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.

• 1:01:48Guy Raz?

  Enter Barb's daughter, Rebecca.

• 1:01:50Speaker 03

  Hi.

• 1:01:50Guy Raz?

  Rebecca is baby Eve's mom, and she also happens to have a background in business.

• 1:01:56Speaker 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.

• 1:02:04Guy 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.

• 1:02:16Speaker 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.

• 1:02:28Guy Raz?

  So they traveled to Las Vegas to go to this big convention.

• 1:02:32Speaker 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.

• 1:02:44Guy 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.

• 1:02:58Speaker 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.

• 1:03:12Guy 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.

• 1:03:25Speaker 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.

• 1:03:38Guy 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.

• 1:04:22Guy 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.