Unexpected Success

Shopify CEO and co-founder Tobias Lutke. Shopify is worth $48 billion.

World-renowned entrepreneur Tobi

Tobi never expected his first online snowboard business to become a multimillion-dollar software corporation.

Tobi founded Shopify to establish a 20-person company.

The publicly traded corporation employs over 10,000 people.

Here's Tobi Lutke's incredible story.

Elon Musk tweeted his admiration for the Shopify creator.

30-October-2019.

Musk praised Shopify founder Tobi Lutke on Twitter.

Happened:

Explore this programmer's journey.

What difficulties did Tobi experience as a young child?

Germany raised Tobi.

Tobi's parents realized he was smart but had trouble learning as a toddler.

Tobi was learning disabled.

Tobi struggled with school tests.

Tobi's learning impairments were undiagnosed.

Tobi struggled to read as a dyslexic.

Tobi also found school boring.

Germany's curriculum didn't inspire Tobi's curiosity.

“The curriculum in Germany was taught like here are all the solutions you might find useful later in life, spending very little time talking about the problem…If I don’t understand the problem I’m trying to solve, it’s very hard for me to learn about a solution to a problem.”

Studying computer programming

After tenth grade, Tobi decided school wasn't for him and joined a German apprenticeship program.

This curriculum taught Tobi software engineering.

He was an apprentice in a small Siemens subsidiary team.

Tobi worked with rebellious Siemens employees.

Team members impressed Tobi.

Tobi joined the team for this reason.

Tobi was pleased to get paid to write programming all day.

His life could not have been better.

Devoted to snowboarding

Tobi loved snowboarding.

He drove 5 hours to ski at his folks' house.

His friends traveled to the US to snowboard when he was older.

However, the cheap dollar conversion rate led them to Canada.

2000.

Tobi originally decided to snowboard instead than ski.

Snowboarding captivated him in Canada.

On the trip to Canada, Tobi encounters his wife.

Tobi meets his wife Fiona McKean on his first Canadian ski trip.

They maintained in touch after the trip.

Fiona moved to Germany after graduating.

Tobi was a startup coder.

Fiona found work in Germany.

Her work included editing, writing, and academics.

“We lived together for 10 months and then she told me that she need to go back for the master's program.”

With Fiona, Tobi immigrated to Canada.

Fiona invites Tobi.

Tobi agreed to move to Canada.

Programming helped Tobi move in with his girlfriend.

Tobi was an excellent programmer, therefore what he did in Germany could be done anywhere.

He worked remotely for his German employer in Canada.

Tobi struggled with remote work.

Due to poor communication.

No slack, so he used email.

Programmers had trouble emailing.

Tobi's startup was developing a browser.

After the dot-com crash, individuals left that startup.

It ended.

Tobi didn't intend to work for any major corporations.

Tobi left his startup.

He believed he had important skills for any huge corporation.

He refused to join a huge corporation.

Because of Siemens.

Tobi learned to write professional code and about himself while working at Siemens in Germany.

Siemens culture was odd.

Employees were distrustful.

Siemens' rigorous dress code implies that the corporation doesn't trust employees' attire.

It wasn't Tobi's place.

“There was so much bad with it that it just felt wrong…20-year-old Tobi would not have a career there.”

Focused only on snowboarding

Tobi lived in Ottawa with his girlfriend.

Canada is frigid in winter.

Ottawa's winters last.

Almost half a year.

Tobi wanted to do something worthwhile now.

So he snowboarded.

Tobi began snowboarding seriously.

He sought every snowboarding knowledge.

He researched the greatest snowboarding gear first.

He created big spreadsheets for snowboard-making technologies.

Tobi grew interested in selling snowboards while researching.

He intended to sell snowboards online.

He had no choice but to start his own company.

A small local company offered Tobi a job.

Interested.

He must sign papers to join the local company.

He needed a work permit when he signed the documents.

Tobi had no work permit.

He was allowed to stay in Canada while applying for permanent residency.

“I wasn’t illegal in the country, but my state didn’t give me a work permit. I talked to a lawyer and he told me it’s going to take a while until I get a permanent residency.”

Tobi's lawyer told him he cannot get a work visa without permanent residence.

His lawyer said something else intriguing.

Tobis lawyer advised him to start a business.

Tobi declined this local company's job offer because of this.

Tobi considered opening an internet store with his technical skills.

He sold snowboards online.

“I was thinking of setting up an online store software because I figured that would exist and use it as a way to sell snowboards…make money while snowboarding and hopefully have a good life.”

What brought Tobi and his co-founder together, and how did he support Tobi?

Tobi lived with his girlfriend's parents.

In Ottawa, Tobi encounters Scott Lake.

Scott was Tobis girlfriend's family friend and worked for Tobi's future employer.

Scott and Tobi snowboarded.

Tobi pitched Scott his snowboard sales software idea.

Scott liked the idea.

They planned a business together.

“I was looking after the technology and Scott was dealing with the business side…It was Scott who ended up developing relationships with vendors and doing all the business set-up.”

Issues they ran into when attempting to launch their business online

Neither could afford a long-term lease.

That prompted their online business idea.

They would open a store.

Tobi anticipated opening an internet store in a week.

Tobi seeks open-source software.

Most existing software was pricey.

Tobi and Scott couldn't afford pricey software.

“In 2004, I was sitting in front of my computer absolutely stunned realising that we hadn’t figured out how to create software for online stores.”

They required software to:

• to upload snowboard images to the website.

• people to look up the types of snowboards that were offered on the website. There must be a search feature in the software.

• Online users transmit payments, and the merchant must receive them.

• notifying vendors of the recently received order.

No online selling software existed at the time.

Online credit card payments were difficult.

How did they advance the software while keeping expenses down?

Tobi and Scott needed money to start selling snowboards.

Tobi and Scott funded their firm with savings.

“We both put money into the company…I think the capital we had was around CAD 20,000(Canadian Dollars).”

Despite investing their savings.

They minimized costs.

They tried to conserve.

No office rental.

They worked in several coffee shops.

Tobi lived rent-free at his girlfriend's parents.

He installed software in coffee cafes.

How were the software issues handled?

Tobi found no online snowboard sales software.

Two choices remained:

1. Change your mind and try something else.

2. Use his programming expertise to produce something that will aid in the expansion of this company.

Tobi knew he was the sole programmer working on such a project from the start.

“I had this realisation that I’m going to be the only programmer who has ever worked on this, so I don’t have to choose something that lots of people know. I can choose just the best tool for the job…There is been this programming language called Ruby which I just absolutely loved ”

Ruby was open-source and only had Japanese documentation.

Latin is the source code.

Tobi used Ruby twice.

He assumed he could pick the tool this time.

Why not build with Ruby?

How did they find their first time operating a business?

Tobi writes applications in Ruby.

He wrote the initial software version in 2.5 months.

Tobi and Scott founded Snowdevil to sell snowboards.

Tobi coded for 16 hours a day.

His lifestyle was unhealthy.

He enjoyed pizza and coke.

“I would never recommend this to anyone, but at the time there was nothing more interesting to me in the world.”

Their initial purchase and encounter with it

Tobi worked in cafes then.

“I was working in a coffee shop at this time and I remember everything about that day…At some time, while I was writing the software, I had to type the email that the software would send to tell me about the order.”

Tobi recalls everything.

He checked the order on his laptop at the coffee shop.

Pennsylvanian ordered snowboard.

Tobi walked home and called Scott. Tobi told Scott their first order.

They loved the order.

How were people made aware about Snowdevil?

2004 was very different.

Tobi and Scott attempted simple website advertising.

Google AdWords was new.

Ad clicks cost 20 cents.

Online snowboard stores were scarce at the time.

Google ads propelled the snowdevil brand.

Snowdevil prospered.

They swiftly recouped their original investment in the snowboard business because to its high profit margin.

Tobi and Scott struggled with inventories.

“Snowboards had really good profit margins…Our biggest problem was keeping inventory and getting it back…We were out of stock all the time.”

Selling snowboards returned their investment and saved them money.

They did not appoint a business manager.

They accomplished everything alone.

Sales dipped in the spring, but something magical happened.

Spring sales plummeted.

They considered stocking different boards.

They naturally wanted to add boards and grow the business.

However, magic occurred.

Tobi coded and improved software while running Snowdevil.

He modified software constantly. He wanted speedier software.

He experimented to make the software more resilient.

Tobi received emails requesting the Snowdevil license.

They intended to create something similar.

“I didn’t stop programming, I was just like Ok now let me try things, let me make it faster and try different approaches…Increasingly I got people sending me emails and asking me If I would like to licence snowdevil to them. People wanted to start something similar.”

Software or skateboards, your choice

Scott and Tobi had to choose a hobby in 2005.

They might sell alternative boards or use software.

The software was a no-brainer from demand.

Daniel Weinand is invited to join Tobi's business.

Tobis German best friend is Daniel.

Tobi and Scott chose to use the software.

Tobi and Scott kept the software service.

Tobi called Daniel to invite him to Canada to collaborate.

Scott and Tobi had quit snowboarding until then.

How was Shopify launched, and whence did the name come from?

The three chose Shopify.

Named from two words.

First:

• Shop

Final part:

• Simplify

Shopify

Shopify's crew has always had one goal:

• creating software that would make it simple and easy for people to launch online storefronts.

Launched Shopify after raising money for the first time.

Shopify began fundraising in 2005.

First, they borrowed from family and friends.

They needed roughly $200k to run the company efficiently.

$200k was a lot then.

When questioned why they require so much money. Tobi told them to trust him with their goals. The team raised seed money from family and friends.

Shopify.com has a landing page. A demo of their goal was on the landing page.

In 2006, Shopify had about 4,000 emails.

Shopify rented an Ottawa office.

“We sent a blast of emails…Some people signed up just to try it out, which was exciting.”

How things developed after Scott left the company

Shopify co-founder Scott Lake left in 2008.

Scott was CEO.

“He(Scott) realized at some point that where the software industry was going, most of the people who were the CEOs were actually the highly technical person on the founding team.”

Scott leaving the company worried Tobi.

Tobis worried about finding a new CEO.

To Tobi:

A great VC will have the network to identify the perfect CEO for your firm.

Tobi started visiting Silicon Valley to meet with venture capitalists to recruit a CEO.

Initially visiting Silicon Valley

Tobi came to Silicon Valley to start a 20-person company.

This company creates eCommerce store software.

Tobi never wanted a big corporation. He desired a fulfilling existence.

“I stayed in a hostel in the Bay Area. I had one roommate who was also a computer programmer. I bought a bicycle on Craiglist. I was there for a week, but ended up staying two and a half weeks.”

Tobi arrived unprepared.

When venture capitalists asked him business questions.

He answered few queries.

Tobi didn't comprehend VC meetings' terminology.

He wrote the terms down and looked them up.

Some were fascinated after he couldn't answer all these queries.

“I ended up getting the kind of term sheets people dream about…All the offers were conditional on moving our company to Silicon Valley.”

Canada received Tobi.

He wanted to consult his team before deciding. Shopify had five employees at the time.

2008.

A global recession greeted Tobi in Canada. The recession hurt the market.

His term sheets were useless.

The economic downturn in the world provided Shopify with a fantastic opportunity.

The global recession caused significant job losses.

Fired employees had several ideas.

They wanted online stores.

Entrepreneurship was desired. They wanted to quit work.

People took risks and tried new things during the global slump.

Shopify subscribers skyrocketed during the recession.

“In 2009, the company reached neutral cash flow for the first time…We were in a position to think about long-term investments, such as infrastructure projects.”

Then, Tobi Lutke became CEO.

How did Tobi perform as the company's CEO?

“I wasn’t good. My team was very patient with me, but I had a lot to learn…It’s a very subtle job.”

2009–2010.

Tobi limited the company's potential.

He deliberately restrained company growth.

Tobi had one costly problem:

• Whether Shopify is a venture or a lifestyle business.

The company's annual revenue approached $1 million.

Tobi battled with the firm and himself despite good revenue.

His wife was supportive, but the responsibility was crushing him.

“It’s a crushing responsibility…People had families and kids…I just couldn’t believe what was going on…My father-in-law gave me money to cover the payroll and it was his life-saving.”

Throughout this trip, everyone supported Tobi.

They believed it.

$7 million in donations received

Tobi couldn't decide if this was a lifestyle or a business.

Shopify struggled with marketing then.

Later, Tobi tried 5 marketing methods.

He told himself that if any marketing method greatly increased their growth, he would call it a venture, otherwise a lifestyle.

The Shopify crew brainstormed and voted on marketing concepts.

Tested.

“Every single idea worked…We did Adwords, published a book on the concept, sponsored a podcast and all the ones we tracked worked.”

To Silicon Valley once more

Shopify marketing concepts worked once.

Tobi returned to Silicon Valley to pitch investors.

He raised $7 million, valuing Shopify at $25 million.

All investors had board seats.

“I find it very helpful…I always had a fantastic relationship with everyone who’s invested in my company…I told them straight that I am not going to pretend I know things, I want you to help me.”

Tobi developed skills via running Shopify.

Shopify had 20 employees.

Leaving his wife's parents' home

Tobi left his wife's parents in 2014.

Tobi had a child.

Shopify has 80,000 customers and 300 staff in 2013.

Public offering in 2015

Shopify investors went public in 2015.

Shopify powers 4.1 million e-Commerce sites.

Shopify stores are 65% US-based.

It is currently valued at $48 billion.

How I monetized and sold an abandoned side project for $20,000

The Origin Story

I've always wanted to be an entrepreneur but never succeeded. I often had business ideas, made a landing page, and told my buddies. Never got customers.

In April 2021, I decided to try again with a new strategy. I noticed that I had trouble acquiring an initial set of customers, so I wanted to start by acquiring a product that had a small user base that I could grow.

I found a SaaS marketplace called MicroAcquire.com where you could buy and sell SaaS products. I liked Shareit.video, an online Loom-like screen recorder.

Shareit.video didn't generate revenue, but 50 people visited daily to record screencasts.

Purchasing a Failed Side Project

I eventually bought Shareit.video for $12,000 from its owner.

$12,000 was probably too much for a website without revenue or registered users.

I thought time was most important. I could have recreated the website, but it would take months. $12,000 would give me an organized code base and a working product with a few users to monetize.

I considered buying a screen recording website and trying to grow it versus buying a new car or investing in crypto with the $12K.

Buying the website would make me a real entrepreneur, which I wanted more than anything.

Putting down so much money would force me to commit to the project and prevent me from quitting too soon.

A Year of Development

I rebranded the website to be called RecordJoy and worked on it with my cousin for about a year. Within a year, we made $5000 and had 3000 users.

We spent $3500 on ads, hosting, and software to run the business.

AppSumo promoted our $120 Life Time Deal in exchange for 30% of the revenue.

We put RecordJoy on maintenance mode after 6 months because we couldn't find a scalable user acquisition channel.

We improved SEO and redesigned our landing page, but nothing worked.

Despite not being able to grow RecordJoy any further, I had already learned so much from working on the project so I was fine with putting it on maintenance mode. RecordJoy still made $500 a month, which was great lunch money.

Getting Taken Over

One of our customers emailed me asking for some feature requests and I replied that we weren’t going to add any more features in the near future. They asked if we'd sell.

We got on a call with the customer and I asked if he would be interested in buying RecordJoy for 15k. The customer wanted around $8k but would consider it.

Since we were negotiating with one buyer, we put RecordJoy on MicroAcquire to see if there were other offers.

We quickly received 10+ offers. We got 18.5k. There was also about $1000 in AppSumo that we could not withdraw, so we agreed to transfer that over for $600 since about 40% of our sales on AppSumo usually end up being refunded.

Lessons Learned

First, create an acquisition channel

We couldn't discover a scalable acquisition route for RecordJoy. If I had to start another project, I'd develop a robust acquisition channel first. It might be LinkedIn, Medium, or YouTube.

Purchase Power of the Buyer Affects Acquisition Price

Some of the buyers we spoke to were individuals looking to buy side projects, as well as companies looking to launch a new product category. Individual buyers had less budgets than organizations.

Customers of AppSumo vary.

AppSumo customers value lifetime deals and low prices, which may not be a good way to build a business with recurring revenue. Designed for AppSumo users, your product may not connect with other users.

Try to increase acquisition trust

Acquisition often fails. The buyer can go cold feet, cease communicating, or run away with your stuff. Trusting the buyer ensures a smooth asset exchange. First acquisition meeting was unpleasant and price negotiation was tight. In later meetings, we spent the first few minutes trying to get to know the buyer’s motivations and background before jumping into the negotiation, which helped build trust.

Operating expenses can reduce your earnings.

Monitor operating costs. We were really happy when we withdrew the $5000 we made from AppSumo and Stripe until we realized that we had spent $3500 in operating fees. Spend money on software and consultants to help you understand what to build.

Don't overspend on advertising

We invested $1500 on Google Ads but made little money. For a side project, it’s better to focus on organic traffic from SEO rather than paid ads unless you know your ads are going to have a positive ROI.

I pitched 10 brands per workday for a total of 200.

How did I do?

It was difficult.

I've never pitched so much.

What did this challenge teach me?

• the superiority of quality over quantity

• When you need help, outsource

• Don't disregard burnout in order to complete a challenge because it exists.

First, pitching brands for brand deals requires quality. Find firms that align with your brand to expose to your audience.

If you associate with any company, you'll lose audience loyalty. I didn't lose sight of that, but I couldn't resist finishing the task.

Outsourcing.

Delegating work to teammates is effective.

I wish I'd done it.

Three people can pitch 200 companies a month significantly faster than one.

One person does research, one to two do outreach, and one to two do follow-up and negotiating.

Simple.

In 2022, I'll outsource everything.

Burnout.

I felt this, so I slowed down at the end of the month.

Thanksgiving week in November was slow.

I was buying and decorating for Christmas. First time putting up outdoor holiday lights was fun.

Much was happening.

I'm not perfect.

I'm being honest.

The Outcomes

Less than 50 brands pitched.

Result: A deal with 3 brands.

I hoped for 4 brands with reaching out to 200 companies, so three with under 50 is wonderful.

That’s a 6% conversion rate!

Whoo-hoo!

I needed 2%.

Here's a screenshot from one of the deals I booked.

These companies fit my company well. Each campaign is different, but I've booked $2,450 in brand work with a couple of pending transactions for December and January.

$2,450 in brand work booked!

How did I do? You tell me.

Is this something you’d try yourself?

Its not a fuc*ing fad.

It's not about boring monkeys or photos as nfts; that's just what's been pushed up and made a lot of money. The technology underlying those ridiculous nft photos will one day prove your house and automobile ownership and tell you where your banana came from. Are you ready for web3? Soar!

People don't realize that absolutely anything can and will be part of the blockchain and smart contracts, making them even better. I'll tell you a secret: it will and is happening.

Why?

Why is something blockchain-based a good idea? So let’s speak about cars!

So a new Tesla car is manufactured, and when you buy it, it is bound to an NFT on the blockchain that proves current ownership. The NFT in the smart contract can contain some data about the current owner of the car and some data about the car's status, such as the number of miles driven, the car's overall quality, and so on, as well as a reference to a digital document bound to the NFT that has more information.

Now, 40 years from now, if you want to buy a used automobile, you can scan the car's serial number to view its NFT and see all of its history, each owner, how long they owned it, if it had damages, and more. Since it's on the blockchain, it can't be tampered with.

When you're ready to buy it, the owner posts it for sale, you buy it, and it's sent to your wallet. 5 seconds to change owner, 100% safe and verifiable.

Incorporate insurance logic into the car contract. If you crashed, your car's smart contract would take money from your insurance contract and deposit it in an insurance company wallet.

It's limitless. Your funds may be used by investors to provide insurance as they profit from everyone's investments.

Or suppose all car owners in a country deposit a fixed amount of money into an insurance smart contract that promises if something happens, we'll take care of it. It could be as little as $100-$500 per year, and in a country with 10 million people, maybe 3 million would do that, which would be $500 000 000 in that smart contract and it would be used by the insurance company to invest in assets or take a cut, literally endless possibilities.

Instead of $300 per month, you may pay $300 per year to be covered if something goes wrong, and that may include multiple insurances.

What about your grocery store banana, though?

Yes that too.

You can scan a banana to learn its complete history. You'll be able to see where it was cultivated, every middleman in the supply chain, and hopefully the banana's quality, farm, and ingredients used.

If you want locally decent bananas, you can only buy them, offering you transparency and options. I believe it will be an online marketplace where farmers publish their farms and products for trust and transparency. You might also buy bananas from the farmer.

And? Food security to finish the article. If an order of bananas included a toxin, you could easily track down every banana from the same origin and supply chain and uncover the root cause. This is a tremendous thing that will save lives and have a big impact; did you realize that 1 in 6 Americans gets poisoned by food every year? This could lower the number.

To summarize:

Smart contracts can issue nfts as proof of ownership and include functionality.