Short interview excerpt where Tobi Lutke recounts early VC skepticism that the market for online stores was too small (citing ~40k–50k stores). He argues Shopify succeeded by removing friction — making it simpler and cheaper to create online stores — which expanded the market and validated Shopify's approach.
Chapters
I was in Sandhill road pitching like.
2008, nine, something like this.
And I was with some VCs and they were seriously looking at a company.
But ended up not investing. And the reason they gave me is.
Because they thought the addressable market was too small for online stores.
They said at this point there was.
About 40, 50,000 online stores.
And so if you would get 50%.
Of that, that would still not be.
A big enough business.
And I actually met with a partner, same partner, recently, a couple years ago, and he asked me like, what did we miss there? And I pointed out saying you had.
It right, like you're actually correct.
What you didn't realize is Shopify was.
The solution to the very problem that you identified.
The reason why there was only 40,000 online stores is because it was hard, expensive.
And everyone who tried ran into all these brick walls of complexity which then.
Shopify, one after another smoothed over, made.
It simple to do.
What a lot of sort of free market thinkers don't understand is that between the demand and eventual supply lies friction. I actually think that friction is probably.
The most potent force for shaping the planet that people are just generally not acknowledge when politicians talk about, hey, we need.
Entrepreneurs are amazing, we need more of that. Usually the solution is like some kind.
Of incentive package, right? Funding some accelerators. Obviously it's not bad. It's just the problem is they try to increase the demand side.
I think the demand side is already.
So big, the friction in the middle is a problem. And that was my theory again.
When I turned my snowboard story to Shopify, there was a lot of more people like me, except there was too.
Much friction, which we needed to solve.
And so Shopify has proven out.
Every single time we make the process.
Simpler of setting up, there's more consumption.
At this point we have a million merchants on Shopify, which is like a mind blowing number. So friction is a major component. I think it's something that softbase is uniquely good at reducing the friction. And so.
