If You Want to Start a Business in 2024, Watch This Interview

A hundred billion dollar company.

This is a pretty exciting time for entrepreneurship.

You're at that point in your stage like this gets important.

The cost of failure of starting a business today is by far the lowest it's ever been.

Business advice to Harley, 10 years ago, you've got one thing you can tell. Welcome everybody to the game. I got a special episode for you guys today. As you know, I do not have many guests on my podcast. I don't like sharing spotlight. So if somebody's going to be on, they've got to be really, really special and have true expertise to give. And I think the person that I have with me today or that will be joining us today definitely meets that in spades. And so Harley is a God amongst men, a legend in the making and runs a small company. You may not have heard of it, Shopify, which right now is a publicly traded company. It's worth right now, I think it was 80 billion, if I'm not mistaken. Harley, correct me there closer to, I.

Think it's closer to 100 billion.

But yeah, that was 20 billion you.

Just rounded down by $20 billion. Which for someone like me, like, you know, this is like, I don't come from this world. This is, you know, I'm a tourist here. That's a lot of money.

So $100 billion company. So that's so 10, 10 figures is a billion. 11. 12. A 12 figure company. There you go. And just the only thing that rivals the business success that he has is just the humility that he brings to it. He was willing to hop on a call with me before this and we hit it off and I was like, I just, I know my audience would love to talk to you and just kind of hear your perspective of entrepreneurship. And you have such an interesting story that I think will relate to so many people in my audience, from the people who are just trying to figure out what they want to do to make money all the way to, you know, right now the 20% of my audience is, you know, winning entrepreneurs with, you know, large companies and so forth. So we definitely have the gamut from an entrepreneurship perspective, kind of beginning, middle and end. And yeah. So thank you so much for taking the time to join us today.

It's a great honor to be here. Alex, thank you so much. I'm a big fan of the pod and I think what you're doing is making business and entrepreneurship, I mean, very similar to the mission Chava. You're making it more accessible. And I think that is the coolest thing in the world. This idea that business was out of touch for most people, both financially from a capital perspective or because of knowledge and insight and experience. I think those days are long over. And I think we were going through an entrepreneurial renaissance right now. And I think people like you and your community is leading the way in that front.

Well, I appreciate it. And I mean, everything that we do is just for everybody on the pod is. I know Harley and I agree on this, is to just try and break down as many barriers between where people are and where they want to be. Right. A lot of people have this vision for their lives they want, and there are things that get in their way. Some of them are between your ears, some of them between your hands and a keyboard. And so Shopify has taken a lot of that between hands and keyboard out of the way to decrease the friction of actually getting a product launch, get it online, actually get customers. You can do it from anywhere in the world, which is, again, something that 30 years ago just wasn't really a thing. And now everyone can have access to this, though. So I'm going to go. I'm going to kind of break this pod into three kind of sections loosely. So first kind of chunk, I want to talk about looking back, and I think that'll. That'll relate to a lot of people who are listening or watching right now. Kind of like zero to hero, like, what. What got you to here? And all the things that.

That.

That come with that second chunk, we'll go over what's hero to. To superhero, right? Like, what is. What's the four what's forward look like, what's the future look? What do you see? And I'll dive into some more, you know, specific details around that stuff. And then at the very end, we'll go kind of like final nuggets and wrapping it up of. Of like forward and backwards. What are kind of like the principles and truths that. That you would try and pass on to the people who are listening. Cool.

Let's do it.

All right, that's our roadmap. So I know a little bit about the story, but my audience doesn't. Um, so you have this really unique thing of being Employee 1 and Customer 1. Can you walk us through, like, just the beginning of Shopify? Like, even the decision to jump into Shopify? What. What the risks that were associated with that? What was life prior to that? And then, like, what were the factors that got you into that Step one? Because I think that's where a lot of people are right now. Yeah.

So I was born in Montreal. I was born in Canada. Uh, I moved to South Florida with my parents and my sisters when I was very young. Uh, I was always entrepreneurial. My parents did not have a lot of money. Um, but my father, to his credit. My dad's an immigrant. He came to Canada from Hungary in the revolution. My grandparents are Holocaust survivors. I mean, we are.

You know, we were.

We were poor immigrants. Um, and although my dad never had much money to give me, because I always had these little silly business ideas when I was a kid, what my dad did for me, which was very valuable, was even, like, when I was, like, 10 years old, every silly business idea that I had, he would validate it by actually making me these business cards that would say the name of the business and my name on it. And I'm now a dad. I have two daughters, Bailey and Zoe, who are 5 and 7. And now that I think about parenting and stuff, I think a lot more about that story and those stories of my father making those business cards, because at the time, it didn't seem that profound. And in hindsight, now, as a father myself, I realize these small things that we do for our kids have this massive impact. And so, even though these businesses were all very silly, you know, trading, like, trading cards and lemonade stands and eventually a DJ business when I was 13 years old, I was always an entrepreneurial kid, and partially was because I thought entrepreneurship was this fun activity. Like, I wasn't really into sports, playing them or watching them. I wasn't really into video games. I was kind of into, like, this idea of, like, you know, selling something, and that was always fun for me. Moved to South Florida, went finished high school there and. And moved back to Canada when I was 17, 2001, to go to McGill University. McGill is in Montreal, where I live now. I went to McGill because it was cheap. My parents didn't have much money. And so because I was born in Canada, I kind of got this, like, in state tuition thing, unfortunately, very quickly. Once I moved to Montreal and sort of McGill, my dad got in some trouble and our family lost everything. And once again, I sort of pulled out this tool that I'd been tinkering with throughout my life called entrepreneurship to. To make some money. I started teacher business when I was at McGill. Made teachers for a bunch of universities across Canada, like the promotional T shirts you got the first day of school, Frosh, frosh, or orientation stuff. And I loved it. It was great. I wasn't necessarily passionate about T shirts, but I love this sort of idea of being, being able to support myself and, and help my, my family. I was really quick because I think, sure, absolutely. Jump in any way you want.

The point that Harley just made, I just want to underline, which is that the first business he had one. I don't think that you thought this was going to be the business I will have for the rest of my life. This is my dream, this is my vision. You were trying to make money. Right. And I think a lot of people who are aspiring are trying to find this perfect puzzle piece that's going to fit all of these things. It's going to be my passion, it's going to be fulfilling. It can be the next Amazon when a lot of times I think it's a big fallacy because the first business just gives you a little bit of light to show you what the next step to take is. Because you learned a bunch of stuff from that first business. That's right. And so I just want to just take the pause for the audience that everyone's like, I got to find the perfect thing when promo shirts for freshmen and sophomores. It was glamorous, right?

Yeah, it's not glamorous. And in fact, the only unfair advantage that I had was that I was selling T shirts to a customer who was who. I also was part of that demographic, meaning like I was selling T shirts to the student council treasurer or procurement office so they can give them out to students. And I myself was a student. And so the pitch that I made was that one, I have very low overhead because it's just me. I was, I was the CEO and the janitor. I was, I was printing T shirts myself. So one, I'm going to be cheaper. Two, I'm going to care a lot because I really need this to work. And three, I am going to make T shirts for people like me. And so I kind of know what your students want because I myself am one of your students. Just to go step back because I think you said it was super interesting, so I sort of skipped over this. But when I was 13 years old, the business that really got start, like started being entrepreneurship, a real business was again, I was 13. So, you know, I wouldn't put too much, you know, credence on the fact there's a real business, but it was a real thing was I wanted to be a dj. I'm Jewish, I went to a lot of bar mitzvahs when I was 13 years old and I thought the DJs were the coolest people in the world. They were sort of magicians, in my mind. They would take a group of people that were sitting down, eating some rubber chicken dinner in some hotel ballroom, and like, three minutes later, using their voice and using lighting and music, there'd be a conga line. I just thought they were just. They were like magicians. I called around a bunch of DJ companies to ask them if they would hire me, and of course they said no, because I was 13, had no experience and didn't know how to DJ. But because I had this sort of, you know, like, silly confidence that these business cards had provided for me, I had this idea to start my own DJ company and hire myself. So that was sort of when this idea of entrepreneurship as a tool to solve problems was sort of cemented in my. In my very, you know, immature young brain. And then when I needed to make Money again at 17, as an undergrad in college, I, once again, I didn't even think about, you know, I should go get a job somewhere. Immediately. My thought was, all right, I gotta start another business to make some money here. So it began. I began to form this, what is now effectively my. I think it's Shopify's mission. It's also my personal mission, which is an. Entrepreneurship is this incredibly powerful tool because it's democratic and it allows anyone and anybody around to start something with very little. It doesn't matter who you are, what your last name is, and. And who your parents are. My parents were nobodies. It matters how much value you add. And so I ran this teacher business all throughout college and developed a really good set of mentors along the way. People that I sort of met. And some people were lawyers and others were these random entrepreneurs. And, you know, Dove Charney from American Apparel, now he's sort of, I guess, disgraced. At the time, he was a very big deal starting American Apparel. He was another Jewish entrepreneur from Montreal. And I met these people along the way. And one of those. One of those mentors convinced me when I finished college to go to law school, not to become a lawyer, but rather to become a better entrepreneur, almost like finishing school for entrepreneurship. And I was incredibly impressionable. I was 21 when I was finishing college again. I had a little bit of money from the T shirts, but not much. And he said, look, I'm going to teach law next year at the University of Ottawa, which is the capital of Canada. Why don't you come to Ottawa?

Go to.

Go to law school here? I'll be in town. I can sort of help you navigate the city. And, and you'll go to law school. Not with the mandate to, to, to get called to the bar or ever litigate or practice law, but rather as a way to accumulate more skills that will be very valuable as you think about scaling a business longer term. And so it was 2005, moved to Ottawa, no friends, no family there. And by this point entrepreneurship was a part of my identity. And so like I always did when I moved to a new place, I asked where the entrepreneurs hung out. And very, very fortunately, very luckily, I was directed to a coffee shop. And I was told that there's a group of entrepreneurs that hung out at this coffee shop every Friday evening. And they called themselves the Young Entrepreneurs Club, the Yeche. And I started showing up there every Friday and meeting these young entrepreneurs. And one of those entrepreneurs was this brilliant programmer named Toby who had just moved to Canada, I think a couple about a year earlier from Germany. And he moved to Canada because he met a girl and he wanted to go be close to that girl.

Her name is as all people move for that reason.

Right, Very good, very good reason. Love is always a good reason to move somewhere. And Toby had moved to Canada from Germany, didn't have papers to work. And so he was told that even as a new immigrant he could start a business. And being in Canada, where it's very cold, a lot of snow, he loves snowboarding. He decided he wanted to build a snowboard shop on the Internet. In 2005, there were two ways to sell a product on the Internet. The first way was to sell it through a marketplace. At the time, like ebay was really the more the most prominent one. Amazon I don't think at the time allowed for third party sellers. It was still a first party marketplace. So you had ebay and you had a bunch of these sort of very nichy marketplaces. But ebay being the big one. So you could sell on a marketplace or you would pay a company like IBM, they had WebSphere or Oracle or at or, or SAP. All these big enterprise companies had some sort of e commerce functionality for very large enterprises for like Walmart. And that would be like a couple million bucks. And Toby did not like the idea of, of renting customers from a marketplace. And he did not like the idea of, well, he didn't have a million dollars to spend on, on enterprise software. So that was impossible. So he wrote this piece of software using Ruby on Rails where he was a sort of core developer, Ruby on RA days with DHH and a bunch of really interesting people. And he wrote this piece of silver to sell his snowboards. And that's around the time where I met him. He was like, just you selling these snowboards. And it was, it was a really neat little business. He was making real money. And around that and, and, and again I was, I'm in law school now. And so I'd asked him if I can use the software to sell my own, my own products, which in my case would be T shirts. And by that point he had already sort of figured out that the snowboard business was a good idea. But the software that he had written to sell these snowboards was a great idea. And, and shortly thereafter I ended up building a store on Shopify. This is 2006 at the time. And I became one of the first people to use what would become, at the time it was called Jaded Pixel, wasn't actually called Shopify originally. And I would be one of the first people to use the software. And I built this, I ran this T shirt business as direct to consumer licensed T shirt business all throughout law school. And, and that was sort of my first entry into, into Shopify. Meeting Toby. And then when I finished, finished grad school, I called Toby and said, look, like I love entrepreneurship. It's, it's everything. I think it's, it's the greatest thing for me. It's my passion, my hobby. I want to, I want to increase the surface area for more people. And honestly what I experienced building a beautiful scalable store sitting in my tax law class on Shopify, I think more people should experience that. And, and I joined him about a year later in, in 2009 or so. And I was like the first non engineer to join the company. And, and it was amazing. It was one of the greatest. I mean I just, it was, I have really fond memories of those very early days. But that's long answer, short question of how I got to Shopify.

No, this is perfect because that's, this is a great pause point because I was writing down some notes just for the audience and then I want to definitely we're going to go from like, okay, you're now in Shopify and what are the trials and tribulations? Because of course I'm sure going from that to 100 billion was probably just straight line, very smooth sailing, you haven't had any issues. And I'm sure everyone will be glad to hear that. Very short story, but we'll get to that one. But just everyone who's listening. Number one, the first business that Harley started was just for money and it wasn't just some magical thing that was going to be perfect. He did what he had to do and he learned a ton of skills that really valuable along the way. Second thing is that, and I want to emphasize this is people a lot of times are like, man, I don't know what to sell or what business should I start? And I think the easiest one to use is just solve your own problem, scratch your own itch.

Totally.

But like almost every business I've had, well, every, every really good business I've had has come from that which is like, like, I mean even the furthest one we have now because of.com is a family office. And I wish I had had this available to me when I was scaling up our companies. Like somebody who'd already been there, sold multiple times and like had a vested interest, etc. But scratching your own itch. Also I want to highlight some people kind of get segmented in one thing or the other. Like you did a physical products business, but earlier you're done a DJ thing, even though it was not. Yeah, you made money so you made a profit. And so like in my mind, like self employed, whatever. Like it was a service based business. So you had a service business and you also had a physical product. So you were flexible in terms of how you were willing to make money.

And I was agnostic. I was agnostic to what I was selling. To your point. You know, I think one of the easiest ways to figure out what to sell you, you know, you said scratch your own itch. Another way to do it is simply just to like tell a bunch of people that you're thinking of starting a business and just leave it out in the ether. The reason that I started selling T shirts universities was as I told people that my dad wasn't around anymore, mom had no money, I needed to make some money. And you start a business. The more people I spoke to about that, a lot of the ideas that I got were dumb. But, but more and more people started telling me, hey, what about this? Hey, what about that? Most of the things that they mentioned were not great ideas. But then someone randomly, his name is Jamie once told, told me, remember this? Like they perfectly clear it. He said, hey, just so you know, McGill spends $25,000 a semester on, on T shirts, on printed, on printed promotional T shirts. It turned out he was wrong. These universities spent a quarter million dollars.

Yeah, right.

But because I was putting it out there, this thing that I was looking sort of business, a bunch of people sort of became almost like idea generation. Machine. And so this whole idea that, like, I know there's. There's a lot out there about, like, don't tell people your goals and, And, And. And keep things to yourself. I, I call bullshit. I think do things and tell people is super important, even at the early stages of starting these things.

Well, I'm a big. I mean, my second book, $100 million leads advertising is the process of making known. And so if no one knows about your stuff, no one can buy it. They must first know about it in order to buy it. And so if you just think about it from a first principles perspective, ain't no customers if they don't know. So first way to do that. So two things that I also want to highlight. So you talked about two different types of people that you surround yourself with. One was mentors. So just for everyone in my audience, we're talking people ahead, right. And the other thing was the community of peers, right? He had the coffee shop where you met Toby, who ultimately, you know, got. Got you into this thing again by chance. But both of those things increase your luck surface area, the amount of different potential opportunities for exposing opportunity. Well, yeah, and so I just want to highlight that because a lot of people feel like entrepreneurship is lonely and it can be, but to a degree, it is a choice, right? And if you can't physically move environments, you can do it online now. And that wasn't available back then, but now we've got online communities, you've got school, we've got, you know, all these things where people can connect. And when I say school, skol.com school people can actually connect and meet one another. All right, now the last one is resourcefulness. And so this kind of ties well into kind of the next. The next chapter of this journey, which is that, like, you did all this stuff like you. Toby wrote code so that he could. So he could sell his snowboards, right? Like, it's. There's just. There's a. There's this whole, like, everything. Of course, our whole mission is to make things easier, make things more accessible to people. But on some level, like, it's the fact that it becomes difficult is what makes the goal worthwhile, right? And if everyone could do it, that everyone would do it, and then it would no longer be worthy, right? Everyone can tie their shoes, everyone can get dressed. And so no one's like, congratulations. There's this whole, I think, Chris Rock's kit where he's like, what do you want, a cookie? He's like, man, I never been prison. He's like, you ain't supposed to go to jail, right? And he goes, this whole thing. And so right now, like, the fact that it's difficult is just another barrier that somebody might have to compete with, will have to go over. And so it gives yourself a little stripe that you can show yourself about who you really are. All right.

Also remember, remember this. He's going to think about, like, if you kind of go back to, I don't know, go back 200 years and you think about starting a business, the one thing that besides capital to get started and knowledge and understanding and technology to help you do it, forget all that stuff for a second. One of the big risks of starting a business historically was that the cost of failure could affect your life in a very adverse way. Meaning when my grandfather came to North America from Eastern Europe, he started an egg business. He had a little egg stall at a local farmer's market, which actually still stands today. My UN Currently runs it. But he had to take a loan out on his home in order to afford the. The fee and the. The cost of actually renting this particular stall. If this did not work, the result of that would be no food on the table, no roof over their head. And that is. That is effectively how businesses were built, so that people with more capital were able to take more risks. People that had more capital were able to invest more. People that had more capital were able to have, you know, be able to mitigate the cost of failure. Well, one thing that has changed dramatically, and I would say today, like, literally right now, Alex, you and I are talking about this. The cost of failure of starting a business today is by far the lowest it's ever been. Whether you use a product like Shopify or use whatever you decide to do, the cost of failure is effectively $39. If it works, you scale it literally, like three feet from me. I have. It was a gift from Ben Francis, who's the founder of gymshark. And it's a Christmas gift he gave me, a holiday gift he gave me. It's the original screen print from the original gymshark, the first T shirt he made. It was. It was. Ben's been a big part of my life, and I've been, I think, a big part of his life. And so his gift was the original screen that created the first t shirt for Gymshark. When Ben started, it was 2012, out of his dorm room. If it would have gone, if it would have failed, he would have gone back to class. I mean, he was literally also delivering pizzas I think for Pizza Hut at the time, if I get that right, or some, some pizza company. But if it worked, he would go on to build a multi billion dollar company called Gymshark. So think about that. The upside, and that was 2012, that was like, you know, 12 years ago. The upside today of starting a business is effectively infinite growth. If you do it well and you're smart and you're adding great value, the downside is a couple less cups of coffee or a couple of Starbucks for that week. That is remarkable.

And I think that, I mean if there's anything that, like if there's one underlying point here, it's the, it's risk adjusted return, right? Is that everyone here now can get endless shots on goal right now because of how accessible entrepreneurship is. You basically just keep taking lottery tickets and if you lose, then you just buy another scratch off, right? And you try it again. And so you still have the upside. Except the thing is it's not rigged for you to lose. Like there actually is a lot of people who want you to win and there's an entire economy around you.

Well, not just that. Right now, what that's created is nearly a quarter. 25% of US consumers in 2024 are considering starting a business. That's the highest I believe it's ever been. Number two is since 2021, there's been 15.5 million new business applications in the U.S. an 85% increase from 2004 to 2021. The White House put out a bunch of stats on this recently. I mean, that is the reason that is happening is not just because technology is getting better and not just because of great podcasts like, like and content like you're putting out there. It's because people are realizing entrepreneurship may be the vehicle for them to actually find their life's work, make their life better, create independence, like, do the thing that they love most. This is a pretty exciting time for entrepreneurship and I think the cost of failure thing is a big part of it.

So now you're employee number one, not non developer employee number one. You've used the product, you fell in love with it, and this is now aligned with your calling. So walk me through kind of the stages of growth and I'll just, if you can give kind of like internal, external. So this is what's happening externally, maybe revenue levels, customer levels, things like that. And then mirrored, what does that look like internally? So I'm shifting a little bit towards my business owners right now. All right, so now we're talking like okay, we've got the business, we're generating revenue or is it cash flow positive? Do they have investor like how, how, what's. Yeah, just give me the, the scoop.

So we were bootstrapped. We had a very, very small angel investor in early on which his name is John. He's, he's now a multi billionaire I believe. And, and so is his wife separately because she also put some money in. But it was a very small amount of money. We were bootstrapped, we were profitable and we, we, when I joined, we didn't have a cfo, we didn't have a cmo. I mean part of what I viewed my role as and anyone who's listening who is joining a very early stage company as a non engineer at the person not running, you know, writing code or building product. The role that I wanted, that I felt I should play and that I think I did play was this Swiss army knife. Let me figure out everything and anything that is going to be valuable to the people that are writing code and whether that's commercialization or sales or support or I mean literally figuring out like where we're going to like work out of like, like figure negotiating the lease forward or figuring out, you know, what are we, who are we paying for? I think we were paying rack space at the time, like negotiating a rack space contract. I think at the time we only had one payment integration which was PayPal negotiating the PayPal Rev share. Those very early days, this sort of Swiss army knife type model I think was really, really important because I mean the, the, you can be the greatest salesperson or marketer in the world if you have a great product matched with a great ability to sell and commercialize. That's where this thing gets really interesting. And I deeply believe that Shopify, even back, you know, in 2010 had this incredible product leaps and bounds better than all the competition. The competition at the time was like Yahoo Stores or a couple other like that, but very, very few competitors. And so this idea of being a Swiss army knife was important and that's what I did. You know, if there was an opportunity for me to tell the story publicly to a local newspaper in Ottawa, Canada, I would take that opportunity. If there was an opportunity for me to help someone get a job done internally, I would take that opportunity. But that Swiss army knife was that that sort of model of that was very, very helpful. And as part of that I think I earned the trust of, of Toby in particular, but also, you know, the other engineers because I was just there to add Value. That's it. In fact, I'd actually been called to the bar. And so I think my, like I was, I was also the company's lawyer. And again, I'd been out of law school for all of 10 months. I think at whatever I could do, I was going to do that. And it was only a couple of years later we raised our Series A. About a year later, I think it was a $7 million investment from Bessemer who led it on a $25 million, I think post. And then, and that's really when we began to realize that, okay, there is a real there there, that this company could be something remarkable large, scalable and we can really make a dent on. At the time it was really, we were focused on SMBs and E commerce only. Very different than today where we do businesses of all sizes and retail everywhere. But it was SMBs and, and, and it was, it was E commerce only. And it was only until, you know, after our Series B and C that we began really figuring out like, okay, what, what are each other's superpowers? And, and this idea of rather than all of us become these sort of, well, rounded objects, these sort of river stones. What if we all were very precise on the thing that we think we could be the best in the world at and spend our time level.

Did you start doing that? So if we're walking through this, because.

Right now, probably around, probably like around Series B or Series C hired a cfo, we hired a cmo, we hired a head of sales. It was around that time where we felt we were well capitalized. I think our, our Series B was about a hundred, $100 million valuation. This is like 2013 or so around that time. So like don't. I have no idea. I mean, it was okay. Yeah, I'm not sure. A lot less than, than a hundred million dollars.

How many employees were around that? Just, I'm just trying to get a.

Probably, probably 50 to 100 at that point.

Okay, yeah, yeah, okay, got it. So like low, small, mid sized. Got it. Yeah.

Okay, cool. And a lot of what we were trying to do then is like find, you know, find at least a lot of how I spend my time is find new channels. This idea that, okay, we can only sell so many people on Shopify, but there's this massive ecosystem of web agencies and freelancers and developers who are in Oklahoma and are in, you know, places like South America and they're in Singapore and they're in Vancouver and they're in, you know, New Mexico and What if we actually created something whereby if someone walked in to their agency, to their business and said, I need an online store, what could we do to actually make it so that they would say by default, great, we'll build it on Shopify. That's sort of on the referral side, on the product side. Another thing that was really, that we created around that time was the Shopify App Store, which I believe today is one of the largest ecosystems of third party developers on the planet. I mean, if you are building an app for commerce today, if the best, most effective go to market strategy is to put it in the Shopify App Store because you have millions of customers, free applications that, that now seems, you know, polished and a really healthy kind of flywheel of an ecosystem. But originally the reason that the App Store is really set up was all these different merchants were coming to us and they all had a very unique and a very particular business. And so we really focused on let's make Shopify's core offering what most people need most of the time. Checkout, payments, inventory, marketing, analytics, let's make that like world class. But everything that is very specific to a particular merchant's business, let's invite third parties from all over the world to build apps on top of it. Which meant that no matter what the particular needs your business might be, you would find 100% product market fit using Shopify because of this app ecosystem. And we didn't have to build everything ourself, which would have been impossible. And so some of these things now in hindsight seem like, wow, Shopify's ecosystem is really cool and the App Store is humming. But originally it was done because we couldn't build every feature ourself, nor should we.

So what were some of the absolute key decisions or business principles that you learned? Kind of scaling through this focus was.

Really important, not being everything to everyone. I mean today, last week was the National Retail Federation's big show, literally like the most important conference in enterprise retail. And I sit on the board now of NRF with like the likes of the CEO of, of, you know, Brian from Target and John from Walmart and like, you know, these amazing people like that that run effectively all, all of retail all over the world. And so now we're really obviously, you know, getting some of the biggest retailers who Shopify. But there was absolutely no way we were even considering that in those days because fundamentally we wanted to win our particular market, which was SMBs in English speaking countries that wanted to sell on the Internet. And so one thing that Was really valuable, was like, focus, don't sort of. And a lot of our competitors, by the way, ended up going out of business because they kind of ran up market way too soon and they left the entire base of SMBs available. They didn't like the idea that SMBs, you know, some churn and not every business succeeds. And we thought, well, what if we just slightly increase the chance of success and mitigated the risk if every single person thinking about starting a business like in the, in the shower, in the morning, then did so with Shopify, even though not all will succeed, as long as the ones that do stay with us indefinitely, they will offset the cost of ones that leave. And so one was really making sure we were very, very focused. The second thing that was really important to us, I think, was that the product was super simple. And, you know, now companies like, I don't know, Mars or, or Mattel or Staples or, you know, Glossier, Aloe, Yoga Viewer, all these amazing brands, all you Shopify skims like. And what's neat even today about Shopify is that the complexity of the product almost reveals itself over time rather than simply being inundated with every single feature and functionality. Shopify can be used by someone just setting up a store at their mom's kitchen table. It also can be used by Trina, who runs Figs, which is a publicly traded company. They make uniform scrubs, uniform scrubs, hospital scrubs. And the fact that the same code base can make those things was something that was always important. Keep it really, really simple. And credit to Toby and his sort of vision around product, because that's really what he, he drilled in all of us, was that the product has to be incredibly simple. So first is focus. Second is simplicity. And the third one was we really tried to run a really tight business, meaning we knew what our sort of CAC to LTV ratio is. So cost of customer acquisition on one side versus lifetime value. And as long I don't know if you're. I want to make sure I define all the acronyms.

My audience knows that stuff. Okay.

Okay. So we knew what our CAC to LTV ratio was. And once we got it above one effectively, it meant that, okay, now it's time to go raise money. Because the more dollars you put on the left side, the more $80s or whatever the ratio was, we got on on the right side. And so by being meticulous and thoughtful about that, I think it was really helpful. Maybe the last thing I'll say, which seems a little bit soft, but it's important to say is we were really, really like patient. Meaning we want like even today we want to build a hundred year business. We're now about 20 years into it. We had 80 years left to go. But even then when we were, you know, five, eight, 10 years in, we still thought about this like really long term business focused which meant that we were not willing to pull forward future profits at a discount like pretty much most of our competitors I think were doing at that point.

So what were, what were some of the key growth kind of levers that you were able to pull throughout this process that like really accelerated? Like if you had to name the three biggest things in the first 10 years of Shopify that like man, if we hadn't done this we wouldn't have been able to get to the next level.

I mean I think the App Store, the ecosystem is really important both on making sure the product had a product, had 100% product market fit and also in the referral. So I think that was really important because it meant that we had a, we had effectively a distributed salesforce that wasn't on our payroll and just something small on that that really matters. I remember at the time the Apple iOS store had an 8020 Rev share split. So if you built something on, on Apple, excuse me, had a 7030 rev share split. So you built something on Apple, you as a developer keep 70%, 30% goes to Apple. And I remember when we were talking about our rev share for our App Store we actually said 80 20. Not that we were competing with the Apple, the iOS store. I mean we were, we were a small little nothing company in Canada. But this idea that we would be more generous than the incumbents might be was very important. And the truth is the additional 1010 points didn't really change it for us. But it just meant that when you built on Shopify you deeply understood that you were going to get a very fair and a generous rev share split. And that was one. I think the second one we, we really hammered hard was this thing called the Build a business competition. It was like our big aha moment and it was, you know, we, we had an article in New York Times about it. But it started in a very kind of simple way. We had met Tim Ferriss I think in 2009 or so and he became an advisor and Tim is now a very good friend to both me and Toby and, and we've done his pod. He's a great guy. But Tim looked at Shopify and said great product you guys are missing something. Most people, even though your product is great, easy to use, and you're making entrepreneurship more accessible, most people have a risk aversion to something called entrepreneurship for one of two reasons. Either too expensive or they don't know how to use it. And he had this idea that we should create a competition whereby someone would start a brand new business on Shopify like Jan1, and six months later the store with the highest sales would win. I think we said $10,000 and then Tim said it's got to be a hundred thousand. We did not have a hundred thousand dollars to give out that way. But our hope was that by the time the competition ended, we would actually have that type of money. And we launched the. The first Build A business competition in 2010. And it got us, you know, I think the article in the New York Times, I have to go check, but I'm sure your listeners will keep me honest here. But I think it's like a startup starts their own startup competition. Like launch their own startup company. It was because it was kind of a silly thing that we ourselves were starting competition. The winner that year was a company called Dodo Case. They made these beautiful, beautiful leather iPad cases the year the iPad was coming out. And so that was one of those ways where if you sort of read sort of the Jeffrey Moore. I think it's Jeffrey Moore Crossing the Chasm book where he talks about, you know, technology adoption cycles go from early adopters to mainstream. It felt like the Build A Business competition helped us crossed the chasm from early adopters to the mainstream and. And over, over. I think we did the Build the Business competition for like five years after that. And ultimately the stores were getting like gymshark won one year and like some Nick Square one one year. Like these big companies ended up winning. But so we couldn't give out 100,000 anymore. So we had to come with these new ideas like how do we incentivize the creation new businesses? And we did things like the winner would spend a week with Richard Branson on Necker island and the winner would go and spend like go have lunch with Seth Godin. And so we created this stuff. But I would say that's probably the second sort of vector in terms of growth. We found a way for us to cross the chasm.

I just want. I'll pause right there. We. I'm a huge fan of the. The Build a Business competition and.

Oh, you know about it. Oh, cool.

Yeah, yeah, yeah. Super, super well acquainted with it.

Oh, that's so Bring it up. Yeah, that was, I mean that like that was something that was really, really important. Maybe the third thing that I think was probably really valuable was we began to look at what are the other things, like what is the relationship that our product has in the lives of people that use it. And the relationship started to look like when someone said they were going to work in the morning, what they meant was they were opening up their Shopify admin on their laptop or on their desktop. So if we were becoming the center of like their day to day work where they added products and fulfilled orders and added new SKUs and ran marketing campaigns, what else can we do to be valuable, to be helpful? There's one thing that most people don't realize today, which is the case, I'll bring it back in a second, is that if you were to pretend today that Shopify was a single retailer, like if you were to aggregate all our stores just in the US alone, we would be the second largest online retailer in America after Amazon. Okay, why is it important? Because if you are the second largest online retailer in America and you go to negotiate rates with payment gateways and shipping companies and banks and all these different types of ancillary services, the economy of scale that you have is so massive. Well, even in the early days back, going back, I don't say, 2013, 2014 or so, as we were thinking about adding new features, new functionality we call merchant solutions, we began to think of it in that way whereby could we go and negotiate the best rates from the payment gateways as if we were the second largest retailer. We weren't second, we were the 20th at that point or the 30th that point. But we were able to get economies of scale because of the aggregated size of our merchant base. And instead of keeping those economies of scale for ourselves, we gave them directly to the merchants. We took a little bit of margin because we want to make money, but we gave. So using Shopify, you know, to buy a domain, using Shopify to, to figure out who's going to process your credit card payments in your merchant gateway, it became much better to you to do it through us than do it on your own. And over time, that has turned into things like Shopify Payments and Shopify Capital and Shopify Shipping. All these big parts of our business today were built on this philosophy that we have an unfair advantage because these economies of scale. And if we give it to merchants, it means that Shopify plays an even larger role in their lives.

So the three big growth strategies, the first One is you had referral partners so you made it easy for other people to basically work on the platform and promote your platform. Because if, if you're a web agency and people want to store, then if you make it easy for them and maybe they get some sort of financial.

Incentive and they got, they got a rev share for it. Yeah, we gave them the rev share I think at the time in perpetuity, like 20% of whatever we took, they got.

Which is awesome.

Which is for an agency is as you probably know like recurring cash flow is king.

Yeah. And it's on. And what's interesting about it is it's on a business. Right. So it's not like. So basically as long as the, as long as the customer continues to sell stuff, you get a rev share basically forever on the business, which is a great long term. I mean it's a, it's an incentivizing offer.

And also these, these agencies are not going to build their own E commerce stack. Right. So they needed someone might as well use Shopify.

And I bring this up because a lot of the business owners that I have, you know, they're like, how do I, how do I grow? Right. And that's why I wanted to really zero in on some of these growth strategies. So one is you had referral partners, you brought it, you were generous with them to the app developers and to the web stores. They got 20% of the, of your cut. Awesome. The second one was you, you had a really sexy competition. And so I talk about this in terms of like making offers to, to an audience. It's like, how can we make it so good? People feel stupid saying no. Right. Like, and so for. I would say that obviously it worked. I mean I've heard about it. We modeled it@school.com. i just made the largest investment I've made into a platform.

Amazing.

We saw that. And so we had the school games and so we really looked at a lot of the stuff that you guys did there. Try to make it fun and, but the, the key point is that you made it fun, you made it competitive, you got, you got customers to compete against one another, but they're all winning. And the major. And this was one point I still wanted to ask. So is it was the New York Times the only promotion that you did for that or was there other things that you did? Or like was it all word of mouth? Like how.

Well, at this point, like when we started this, like Tim was just sort of coming out the four hour work week I think was in Its second edition. But he had this massive audience. And so part of the cool part, part of the beauty and the value of working with Tim was not just to give us a great idea, but we're like, great, Tim now you got to help us tell the world about it also. So if we would have gone to Tim with this idea, I don't know if he would have said yes. But the fact that it was like Tim's. We got Tim to generate an idea for us. It was his idea, he felt personally invested in. In fact, I've heard him say this on his own show where he'll say like, you know, he's one of the co founders of the build a business competition. I love that because we created a real vested interest in him to actually make this a success. And it wasn't just New York Times. I mean there was a lot of articles written about it, but it also, it gave us a narrative, a thing that we were able to go and talk about. It was difficult for me to go around and talk about. I'm like, you know, I'm shopping chief storyteller. It was difficult for me to go around and talk about like software, Ruby on Rails or the simplicity of E commerce. But it wasn't as difficult for me to go around and say, hey, we created this thing. We think, we think everyone has, you know, Nike convinced the world that if you have a body, you're an athlete, like mind blowing. So, so brilliant. We were trying to go around and convince the world if you have ambition, you could be an entrepreneur. And so I had now this new beautiful asset, piece of ammunition that I was able to go around to media and to the, anyone that would listen to me, to blogs, to celebrities and say, there's a thing here we'd love you to talk about. Like, oh, that's kind of cool. That was really helpful.

And so for the business owners at home, one big one obviously was Tim got involved. And so if you're like, how do I promote my business? Finding a brand champion or finding somebody who, I mean there's, if you've seen I think is it Air that movie that's it tells a story of Jordan's like, yeah, yeah. So like sometimes you need to, like if you're like, if you have an audience, awesome, then you already know what you're doing. But if you don't have an audience, you're more of a product person and you're like, shoot, how do I get this to the world? Sometimes finding your Michael Jordan. And in this instance, like Tim was probably the Michael Jordan for that era. For that.

For entrepreneurship, definitely.

Right. For entrepreneurship at that time. And so being willing to. And I'm sure that Tim had a good deal with Shopify for, you know, I'm sure that there was a deal with Tim that worked out. There was for sure that he's profited a lot from. And so sometimes you just got to be really generous. Like the Michael Jordan deals. First of its kind. It was, it was, it was kind of crazy that the, the founder, you know, the Phil was like, I don't know this, like, should I really go all in on this person? And sometimes you got to make bets, right? And obviously this bet paid off. The Michael Jordan bet paid off. And so you come up with something really sexy and then you find somebody who's the perfect fit for it and then you put it together, right? And so just as like.

And there's always a perfect fit, right? There's always someone out there. There's someone who, if, if, if you're, if you have a product, physical product, or a piece of software, digital production, there is someone out there that has purchased from you, even if you're a small business, who probably has some sort of leverage. Meaning they have an audience, they have a community, they have a big newsletter, they have a big following. They know a bunch of people. If they have bought your product organically and they have a connection to you organically, you asking them point blank, hey, I have this crazy idea. You seem to like my, my, my tea and I would love to feature you in a promotion. Would you be interested? That is very different than cold calling them and saying, hi, I'm Harley from this tea company from Fire Belly Tea, and I'd love you to be a spokesperson. Like, I think the days, by the way, especially go back, like to come to present day for a second. The days of Brad Pitt hawking Colgate or toothpaste are over. Nobody wants these artificial connections or sponsorships. When you look at what Jimmy, Mr. Beast has done with Feastables or Emma Chamberlain with coffee, or you see what Kim Kardashian is doing with, with skims, because these are all on Shopify, I have a very deep understanding of these businesses. These are authentic, real products that were built, curated, organized by these credible celebrities who care so deeply about the product. Like, so the days of artificial sponsorship, pay to play thing, I think are over. And I think, I think what we did with build a Business was almost like showcase that hey, Tim's for some reason interested in our business. Hey, Tim, how Do you think we can grow our business? Oh, that's a good idea. We'll do the competition. But by the way, we need your help for this competition.

And it's. It was really meta and I want to. I just really want to hit on this because this is what a lot of. A lot of businesses need. Growth, right? They've got a product, they're like, how do I let people know about it? And obviously you can, you can run ads or if you already have an audience and you already know that stuff. But if you're like, well, shoot, how do I do it? Scrappy, right? And so like, making an incentive that gives people a big reason to say yes. Right? Finding a brand champion that already has distribution can. Can be the unlock because all of that acquisition is really just based on the negotiation you have with that one person. And if they can bring a lot like every. You have the opportunity to make a true win win. And obviously Shopify one and Tim want and the main one, all of the people who built stores were the real winners here. And I'll bet you some of the winners on the stores also did the exact same strategy that Shopify was also doing. And so you've got a tea company and they find Mrs. T on, I don't know, on Instagram, who just loves. Tries teas all day. It's like, if she really did like the product, then she would be a spokesperson. And so just finding that out.

Okay, cool.

And then the third one you said, and I want to zero in on this was. It was the. You said growth strategies, and you talk more about the economies of scale. Was that just that. Because that seems a little bit more product focused and I'm game for that. I just want to make sure that.

I. Yeah, I think on that one, I mean, it's product focused, but it's also just simply like business focus. My. My ability to go and negotiate with a large payment gateway every year got easier and easier. Why? Because I was coming to them as a much larger merchant. Now, if you just take a very simple, you know, a very simple example, 10 individual merchants go to negotiate with the payment gateway on their own, they're all gonna get some rates. But if I do it in aggregate with all 10, my rates are gonna be much, much better. And I can literally give those 10 merchants the exact same rates, you know, less, maybe, you know, a couple basis points that I want to keep for myself from. From a profitability that kept getting bigger. That doesn't mean, by the way, we can talk about, you know, Shopify, you know, like our whole shipping thing because we divested Shopify Shipping, what's called sfn, Shopify Film Network a couple months ago, but a year ago at this point because there are sometimes we have gone into areas that were not main quests. We sort of call them side quests that maybe we shouldn't have done on our own. In fact, in the case of shipping, we found another company called Flexport whose main quest is an end to end logistics platform which is what we were trying to build ourself. And rather than build it ourselves, we're like, you just do it and that and what we can talk a bit about the value of what some companies are very, very good at. Partnership. I think Shopify is one of those companies. If you look at what we've done with a firm for buy now, pay later or globally around cross border payments, we've really, we pride ourselves in a company that is a really good company to partner with, which is very unique in tech, which is sort of all kind of frenemy esque.

Yeah. And I want to, and I'm going to bring this to the, the brick and mortar chiropractor like so just, just down to home base. Those relationships don't need to be these massive billion dollar deals. Obviously they work at scale. But you know, I think about my, I think okay, so if I'm a chiropractor, what are all the things that anybody who's my customer also gets? They might go to the gym, they might like smoothies, they might like yoga.

Right.

They make other things that are ancillary and they're things think, okay, well what if I go to each of those businesses and say hey, with every smoothie just put a coupon, you can slap it on there for a free adjustment. So they're going to get a free adjustment and a smooth like you're going to enhance the value proposition that you have to your customers at no cost to you. But then I get free leads and so they get a win and then I get free customers or at least a free shot at a customer. And so these partnerships and you know this has been a huge core to every business that I've built has. I mean I think I've built almost the same amount of revenue from partnerships and affiliate relationships as I have just from actually, you know, direct sales and generating them ourselves.

Because you are known as like, I mean, you know, you and I know each other sort of from the community, our own communities. Like you were known as being a good partner, meaning you leave enough on the table so your partners can make money from it. You know, doctors actually does really, really well on their own referral side. Meaning if you go to see a doctor and that doctor can help you, great, they'll, they'll, they'll work on you. If they can't, they'll recommend someone else if you. What I've noticed is that a lot of them recommend like it's almost like a closed loop circuit where Dr. A, if they can help you, always recommends Dr. B, who always recommends Dr. C and, and Dr. C always recommends Dr. A. And it's sort of this, I think if you're a chiropractor, for example, you, if you sort of Venn diagram out, meaning you look at your customer base and you ask them, you know, where do you go? Where do you work out? What clothing do you like to wear? What, like where do you go to get your smoothies, for example? You probably have your own version of that. But also the people hanging out in the smoothie bar are also asking the smoothie person, hey, do you any good chiropractors? And the yoga instructor is also saying, hey, I think you need a chiropractor as well. And so creating your own version of an affiliate program, even if it's not called an affiliate program, it's sort of your own creation of it actually is incredibly effective. And if you over deliver, meaning every time the chiropractor recommends the yoga instructor, the, you know, the yoga instructor's client comes back and says, man, that yoga instructor you recommended is amazing. You should send more clients to that yoga instructor. And so there is an opportunity to sort of over deliver, to create even more leverage in this sort of closed ecosystem of reciprocity.

And I'm going to give everyone three quick tips on this. Number one, if you're going to create one of these relationships, give them customers first. If you give them customers first, they're way more like send them five people and then make the call. Be like, hey, by the way, I thought maybe it'd make sense if we did some now they're going to want more of what you just gave them and they're going to be happy to talk. Second one is in terms of generosity, like if you know what your cost to acquire a customer is, you should be willing to give at least that for referral to a referral partner. Because like you either pay zuck right or you just pay another small business owner. And I can almost promise you that a referral from a partner is going to be worth more in ltv. So you still get a better LTV to CAC ratio by going to a stronger channel with, like, a referral partner. And one little thing, that Layla's really good at this, and she has just drilled it into me over time, which has been helpful for partnerships. She says, never count the other guy's money. And so just because you're making someone else a ton of money, like, it has nothing. Like, if you take out how much that person makes and you just look at your side of the table, make the deal make sense for you. If they make a killing, awesome. They're going to be an amazing partner. Right. And so I just want to underline that for. Because some of the mistakes I made early on is I want to. I saw how much I would make, but I lost deals because I got too greedy trying to say, well, he's going to make even more than me. And I would encourage you not to think that way, because if everyone grows.

It'S such an amazing reminder. So I don't. I don't watch sports. I don't really play sports. So my Sunday project, this is a little bit weird and nerdy, but I have this project. It's called Big Shot. It's an archive that I'm creating of the greatest stories of the greatest Jewish entrepreneurs of the last half century. And so I'm meeting these people. Most of them are in their 80s and 90s. And I sit down with them and I record it. I put it on YouTube. It's not a big podcast, just. It's mostly a personal project. But it's fascinating. And I've sat down with people like Izzy Sharpe, who's the founder of the Four Seasons Hotel, or a guy named Larry Silverstein, who's the owner of the World Trade Center. These were poor kids. I mean, these people grew up with nothing. Zero. Or Fran Weisler, who's the Queen of Broadway. These are very poor people that grew up and eventually created. You know, they're billionaires and they've created empires. When you ask them at 90 years old, and I think Izzy Sharp from the Four Seasons Hotel is 95 years old. When you ask these people, tell me one or two things that I don't know. I turned 40 this year. So, Izzy, tell me something I don't know that I should at my age almost to the. I've done about 12 of these interviews so far with these, like, older, you know, icons and legends on Titans, almost all of them to a T, say, make your partners really, really rich. Now, the reason I bring this up now is because these are people in their 90s, in their 90s who they got nothing. You know, they're not trying to have swagger, they're not trying to like flex. They're so, and the reason I love interviewing them is because they're so transparent. But to a te, every single one of them, from these titans of industry and real estate to the, the, the, the Queen of Broadway has always made their partners incredibly rich. And that is not something that is intuitive, but it's something that I think like is, is legitimate.

I, I, I love, I love this entire line of thinking because I mean it goes down to the just more of abundance mindset. Most of the people that I know that are wealthiest in the world just don't see business as a zero sum game. Yeah, right. It's just like everyone actually can win. Whereas in a lot of games it is, it, it isn't structured that way. Whereas like even just the build a business competition you mentioned earlier, like, sure, there was one winner, but do you think that number two to number 100 in on the list was like, oh man, I'm so bummed that I only got to 100.

That's the craziest part. Number two number and number 100 have built million dollar brands also. Right. And that's this idea of like positive some thinking I think is so important. I know there's like, you know, like I'm an optimist and I know you are, you were also Alex. But one thing that I think people miss is often when you go to raise money. For those of you that are looking to raise money, one criticism you often get from investors is this concept of tam total address market. How big is your market? And effectively what they're trying to say is that if you look at your market, it's a pie. And your TAM is effectively the pie. And your, your, your market share is a slice of the piece of. I think that's very flawed thinking. And I think if we would have done that at Shopify, we would not be $100 billion company. Our version was not let's take a piece of the pie, rather let's grow the pie itself. And so we'll get to the IPO in a second. But we took our company public in 2015, May 2015 on New York Stock Exchange. It was a billion dollar company at that point. So, but you know, 1% of the market cap that it is today.