Year in Review 2016: Shopify is Yahoo Canada Finance's company of the year

Ottawa-based Shopify is Yahoo Finance Canada’s company of the year
Tobi Lutke, CEO of Shopify, an online store, is seen in the company’s Montreal office, Wednesday, February 18, 2015. (THE CANADIAN PRESS/Paul Chiasson)

You may not recognize its name yet, but Shopify is powering the online business platforms of hundreds of thousands of stores around the world — as well as the ventures of some of the world’s biggest stars turned entrepreneurs.

The Ottawa-based, e-commerce software maker has leveraged its work into a fantastic year, marked by strong growth and the release of several new offerings.

And that’s why it’s Yahoo Canada Finance’s company of the year.

In its third-quarter data, released at the beginning of last month, Shopify reported revenues of US$99.6 million, or an 89 per cent increase from the same period last year.

It also posted revenues of $86.6 million in Q2 and $72.7 million in Q1. Shopify is projecting it will bring in between $379 million and $381 million over the entire year.

At the same time, the company’s stock has been tearing up Bay Street. In 2016, its price jumped by nearly 60 per cent and is currently valued at a shade under $59 as of Nov. 28.

This comes just over a year after Shopify’s IPO in May 2015, when it received a valuation of $1.27 billion at $17 per share. Just a decade before, CEO Tobias Lutke founded the company after he attempted to start an online snowboard shop and discovered that the e-commerce offerings on the market were sorely lacking.

Now, the cloud-based platform helps more than 325,000 small and medium-sized businesses design, set up, manage and market their stores across various media, including the web, mobile, social media, as well as traditional brick-and-mortar establishments.

Harley Finkelstein, the company’s Chief Operating Officer. who joined its ranks in 2009, told Yahoo Canada Finance that watching the company grow and put together a strong 2016 has been “extremely meaningful.

“I’m in my sixth year at Shopify. I’ve spent more than a fifth of my life at this company, so it’s more than just a business to me – I’m doing my life’s work here,” he said.

Part of the company’s success can be attributed to the roll out of several new offerings. Shopify receives the lion’s share of its revenue from its merchant fees, which are levied when customer orders are processed through Shopify’s payment system.

In particular, Finkelstein pointed to the new Shopify mobile app, which allows merchants to set up and run their entire business from their smartphone.

Finkelstein said this provides entrepreneurs who are just starting out, and perhaps still working full-time jobs, a chance to run their business on their lunch break or on their daily commute.

“The fact that they could run an entire business that could grow to be a multimillion (operation) from their iPhone is incredibly exciting for us,” he said.

Shopify also began offerings its clients the ability to sell their wares on Facebook Messenger. This new platform allows for a more free-flowing dialogue between customers and store owners, according to Finkelstein.

“(It) allows merchants to correspond and communicate with customers in a way that is … a lot more personal than most can do in an online digital fashion … in some ways that allows for a relationship to build,” he said, adding that it also creates a mechanism for “more effective” customer support.

Shopify also added Apple Pay to its roster, which allows users to pre-approve payment methods and finalize them with a touch of a finger.

The company’s product line has received an added boost from a long list of A-list celebrities who use the platform to sell their wares such as Drake and his OVO streetwear line, Kanye’s clothing and sneaker company Yeezy, as well as merchandise for Lady Gaga and Adele.

“What we’re doing is we’re able to provide these celebrities with a platform in some ways to better engage with their audiences,” he said.

“The fact is, Drake and Kanye are also entrepreneurs, they’re simply playing on a large scale and have a larger soapbox.”

Overall, Finkelstein said the e-commerce company has always tried to stay “a couple of steps ahead of the industry,” which is demonstrated through its early adoption of mobile technology.

He said now two-thirds of Shopify merchants’ traffic comes and more than 60 per cent of transactions are done using mobile.

“We’re not thinking about retail and commerce a la 2016, we’re trying to understand what the future of retail looks like and we’re building the tools now, so we’re ready it for it when it comes (and) when other people catch up, “he said.

“There is no resting on our laurels that exists at this company — this is a company that is constantly challenging and I think that is really healthy.”

Finkelstein said this attitude is ingrained in Shopify’s corporate culture and is another reason for its success.

He said one of the company’s core tenets is to “get s—t done” and that it has tried to cultivate an atmosphere where employees don’t have to “sit in approval meetings all day long,” and there’s minimal red tape involved.

“Whether you’re salesperson, marketer, engineer, designer or product person, this a culture where people get really comfortable being uncomfortable and we’ve created an environment where people who like that dynamic can do their life’s work and be very successful,” said Finkelstein, adding that similarly sized public companies move “like molasses.”

Finkelstein cited the creation of the company’s sales lab in its Waterloo, Ont., office as an example of its willingness to try new things. He said Shopify could’ve simply hired staff, given them scripts and asked them to start selling.

Instead, the lab is developing ways to improve and develop new techniques as well.

Finkelstein also attributed the company’s success to the strength of its employees.

He said that Canada’s talent pool is second to none and with its headquarters in Ottawa, offices in Toronto and Montreal, in addition to the aforementioned location in Waterloo, Shopify has been able to take advantage.

And now that the company has made its presence felt on the global stage, Finkelstein said it has become easier to convince workers to leave Silicon Valley, other tech hubs in U.S. and Europe for Canada and to hold onto its homegrown talent.

“We’re just able to find some of the most incredible people in the world,” he said.

“And the people that have been with us since the early days they’re also really scaling and that’s become really apparent to us.”

The one strike against Shopify is that despite all its promise and growing revenues, it is still not making money.

The company projects to lose between $38 and $40 million in 2016, but management told The Globe and Mail that it should be in the black by the fourth quarter of 2017.

While Shopify wouldn’t confirm this objective, Finkelstein said the company’s focus, for now, is on growth.

“I mean, look the history of the company: we were bootstrapped at an early stage, and so we were profitable once upon a time … and we would like to get back to profitability,” he said.

“But it’s also really important to invest in the future, and right now we see that there’s a lot of opportunities to invest in.”

And it’s a future that Finkelstein and others, including Amazon, which advised users of its now-shuttered Webstore to move to Shopify, are bullish about.

RBC Capital Markets also picked Shopify as one of the 20 Canadian stocks that are best positioned to gain from a Trump presidency, as 70 per cent of its revenues come from the U.S.

“We never set out to build the best company in Ottawa, or the best company in Ontario, or the best company in Canada. We set out to build the best company period. Full stop,” said Finkelstein.