Shopify was founded in 2004 by Tobias Lütke, Daniel Weinand, and Scott Lake after attempting to open Snowdevil, an online store for snowboarding equipment. Dissatisfied with the existing e-commerce products on the market, Lütke, a computer programmer by trade, instead built his own. Lütke used the open source web application framework Ruby on Rails to build Snowdevil’s online store, and launched it after two months of development.
The Snowdevil founders launched the platform as Shopify also shopify as we know it today was founded in Ottawa by Tobias Lütke, Daniel Weinand, and Scott Lake.
The company was making around $8,000 a month and had a very small customer base of some Rails community members and design-minded individuals from Weinand’s circles. But the most important thing was that they had paying customers.
In an interview, Lütke called this year a turning point because the company changed the way they charged customers. Previously, they had charged transaction fees as a percentage of sales—which actually discouraged merchants who would be making more money on their Shopify store. They switched to a subscription-based plan and tacked on a small transaction fee that decreased as plan size increased. This way, Shopify still saw a cut of all of the sales happening across their tools, but they also incentivized greater sales revenue for customers.
This is when the alignment between business model and customer success fell into place. Shopify now focused their product development on building features that helped customers sell more because every sale for a customer meant more revenue in transaction fees for Shopify. For instance, they built analytics into the product to help merchants track their inventory and sales, which early users loved.
That same year, a Toronto-based angel investor John Phillips wrote Shopify a $250,000 check. He valued them at $3 million.
Shopify nailed the alignment between an easy-to-use product and beginner-friendly branding. The company’s website and content emphasized ease of use and offered helpful tips. Shopify saw their customers’ success in their own bottom line—the company was now doing $60,000 in MRR.
One of the subtle brand hallmarks of Shopify during this time was accessibility. In addition to making the product as intuitive as possible, the company also created simple guides and extensive FAQ pages to help users sell online. This helped new merchants sell more and gave almost anyone the ability to be a Shopify user.
But Lütke and Weinand saw potential for an even bigger market. They knew from their own developer backgrounds, and from talking with friends in the developer community, that people might be interested in building out their own customizations and apps for Shopify stores. If the Shopify team could create a platform for people to share and sell those apps, they could take a cut of those transactions.
On the company’s third birthday, Shopify released an API platform and app store. Both were meant to help the existing base of Shopify merchants and a new base of developers. In the press release, Lütke said:
“E-commerce is a highly individualized business. Every store wants to offer a unique buying experience but providing too many features makes the software cumbersome and difficult to use. The Shopify API solves this by allowing merchants to install exactly the features they need to get the most out of their store…and our Partners can get a recurring source of revenue by developing great applications for these stores.”
That meant even more people and businesses became invested in the e-commerce platform.
In the app store, developers could sell their apps and merchants could browse, buy, and directly install apps. Now merchants had ways to quickly customize and improve their online storefronts.
The option for merchants to cherry-pick the most helpful add-ons helped Shopify stay true to the original premise of the product: easier e-commerce for everyone.
Late in the year, Shopify raised a Series A round of financing worth $7 million from from Bessemer Venture Partners, FirstMark Capital and Felicis Ventures. Alex Ferrara, a Bessemer partner, joined Shopify’s board. At the time, Shopify was processing $100 million in revenue for customers. At the time, Shopify was processing $100 million in revenue for customers.
Shopify was now supporting 11,300+ stores, and generating over $125 million in revenue across those stores. With so many users of all levels, Shopify wanted to expand access to professional support. They released Shopify Experts, which was an “online directory of experienced Shopify pros” that had extensive knowledge of Shopify and could pass down advice to less experienced sellers
Profit Magazine named Shopify “Canada’s Smartest Company” in 2012. By the end of that year, Shopify—with 150 employees at the time—had grown to 40,000 stores across 90 countries selling $740 million worth of product.
In 2012, Shopify was a finalist for Startup of the Year in the Canadian Startup Awards. Founder Lütke was a finalist for Entrepreneur of the Year.
Shopify unveiled a major platform redesign, Shopify 2, that included over 60 new features. They’d sourced feedback from their customer base—now over 50,000 merchants—and added updates like refund management, better search functionality, easier-to-use admin features, and a live theme editor. All of these aspects of the redesign were focused on making it easier for merchants to manage a store on the Shopify platform.
Lütke said in a press release that this redesign was helping Shopify to “redefine how e-commerce works,” and that Shopify was “moving into a less traditional mentality of how we think about building webpages.” Shopify 2 helped designers prototype and release new stores and applications very quickly.
By the time they raised their $100 million Series C round in 2013, Shopify wasn’t just a tool that a retailer might choose among many tools to sell online. Shopify created an app ecosystem and a developer community, and turned themselves into an approachable authority on succeeding at e-commerce. The company had woven itself into the very fabric of doing business online.
2013 was also pivotal for Shopify because they started paying attention to how their merchants were selling offline. They released Shopify POS—which offered in-store and online inventory synching, out-of-the-box credit card processing, and reporting for merchants selling in brick-and-mortar shops. The new Shopify Payments feature was bundled in, too, so merchants could sync payments on- and offline.
During this period, Shopify was taking all of the necessary steps to double down on making merchants more successful and growing the number of online transactions. But they were also beginning to look to a completely different space for growth: offline commerce.
Shopify overhauled their app to accommodate offline sales. The new Shopify Mobile synched with Shopify POS. The app allowed merchants to accept payments with their phone in retail stores as a second register, add and edit inventory listings, and automatically update changes back to physical retail locations.
Lütke called Shopify’s new focus on mobile e-commerce a pivot to becoming a mobile-first company. And they did it at exactly the right time to capture the most value from their market. In 2014, when the company brought POS to Shopify Mobile, for the first time in history over half of all e-commerce traffic came from mobile devices.
Shopify also started doubling down on their services for larger merchants. This same year, they introduced Shopify Plus, a white-glove e-commerce service for merchants selling high volumes of inventory. It offered unlimited bandwidth, more storage, more customization options, and priority account management. They framed it as a way to help customers that grew with the platform, not a way to move upmarket. This was important because the company wanted to expand their customer base, but didn’t want to alienate the smaller users that were so valuable to their brand.
Shopify introduced Buy Buttons as a way to sell things from any website—not just an e-commerce storefront. Users can add Buy Buttons to their websites that they make with WordPress, Squarespace, and Tumblr.
With so many ways to sell with Shopify—including the e-commerce storefront, POS, and buy buttons—merchants needed a centralized place to manage their sales. So the same year, they added Multichannel Shopify to the platform, which included a dashboard for merchants to manage sales across multiple channels.
To merge the personalized touch of offline commerce with the convenience of e-commerce, Shopify introduced an integration with Facebook Messenger. Merchants could communicate with customers about orders and give them real-time service in a more personal channel.
Shopify closed the gap between online and offline shopping even further with Shopify QR codes. These allow shoppers to scan a code on a physical item with their phone camera and directly access the item in the merchant’s online store.
From 2013 to 2016, revenue from merchant services grew from 20% to 50%. The average subscription payment per merchant didn’t change by much—each merchant wasn’t upgrading their plan or paying more. But the average contract value increased because Shopify collected more service charges per billion dollars of GMV.
And strategically, with Shopify Plus, Shopify made sure that merchants wouldn’t outgrow their platform even as they increased their volume of sales. No matter what the size or selling activity of the merchant, Shopify could provide a helpful tool to make it easy for them to sell more.
Shopify announces plans to locate thousands of employees in Toronto’s King West neighborhood in 2022 as part of the “The Well” complex, jointly owned by Allied Properties REIT and RioCan REIT. Online cannabis sales in Ontario used Shopify’s software when the drug was legalized in October 2018.
Shopify announced the launch of Shopify Studios, a full-service television and film content and production house. Shopify and email marketing platform Mailchimp ended an integration agreement over disputes involving customer privacy and data collection and announced an integration with Snapchat to allow Shopify merchants to buy and manage Snapchat Story ads directly on the Shopify platform.
The company had previously secured similar integration partnerships with Facebook and Google. Shopify acquired Handshake, a business-to-business e-commerce platform for wholesale goods. The Handshake team was integrated into Shopify Plus, and Handshake founder and CEO Glen Coates was made Director of Product for Shopify Plus. Shopify acquired Handshake, a business-to-business e-commerce platform for wholesale goods. The Handshake team was integrated into Shopify Plus, and Handshake founder and CEO Glen Coates was made Director of Product for Shopify Plus. Shopify launched Shopify Chat, a new native chat function that allows merchants to have real-time conversations with customers visiting Shopify stores online.