The Exchanges

Q Most recent acquisition and why you said yes publicly announced this is?

A The most recent acquisition is a company called Oberlo that does product sourcing, and so the reasons we said yes were, number one, data. We're a heavily data-driven company, and we understand that one of the biggest challenges for our merchants and their path to entrepreneurship is trying new products to sell. The second piece of it was really the vision around what these founders wanted to do with the company and how big that vision truly was, and the third piece of it really was a cultural fit. These founders were individuals who had built several companies and really Had a great, including e-commerce companies, and had great empathy for what our merchants were going through and really wanted to solve a hard problem for them.

AI assessment note: “The most recent acquisition is a company called Oberlo that does product sourcing”

Q success is based on consistent strategy. So one might attribute kind of a certain geographic specificity as to your Kind of consistent strategy. I'm intrigued because you also then recently acquired an agency in San Francisco. How do you think about kind of consistent strategy playing into the success of an M&A program, and then kind of deviating away from that with maybe an outlier like the San Francisco hire?

A Actually, the, the team in San Francisco was a product acquisition. It was an incredible team out in San Francisco called Kit CRM, which was building a text-based interface to simplify a A merchant experience. Their core initial offering was around simple marketing simplification. That's actually, that was actually a product category that falls into the product roadmap acceleration piece of our strategy, and it just so happened that they had been in San Francisco. We had been, you know, searching around to where our next geography might be in North America, and just found this great team with a great product, building a great strategy for our merchants, and decided to Acquire them and keep that as our San Francisco office.

AI assessment note: “falls into the product roadmap acceleration piece of our strategy”

Q Can I ask, diving into the nitty-gritty, what does the acquisition decision-making process look like? In VCs, we have ICs, and they progress through IC, and once that's signed off, What does acquisition decision-making look like?

A Yeah, it's a, it's a, it's a good parallel. Having come from the VC background, so it's structured in a very similar way. We have an individual who I work with who would sort of be the partner on the transaction, really pushing and championing what we call a champion of the deal, pushing it through the company and pushing it through the various pieces of the decision-making process. RIC equivalent would be our executive team, and so once myself, as well as the deal champion, Have an opportunity to really do the full due diligence and understand that this is an incredible opportunity that we want to look at. We will present the full investment or acquisition thesis really into the executive team who will give us the full support to move forward.

AI assessment note: “We will present the full investment or acquisition thesis really into the executive team”

Q success is based on consistent strategy. So one might attribute kind of a certain geographic specificity as to your Kind of consistent strategy. I'm intrigued because you also then recently acquired an agency in San Francisco. How do you think about kind of consistent strategy playing into the success of an M&A program, and then kind of deviating away from that with maybe an outlier like the San Francisco hire?

A Actually, the, the team in San Francisco was a product acquisition. It was an incredible team out in San Francisco called Kit CRM, which was building a text-based interface to simplify a A merchant experience. Their core initial offering was around simple marketing simplification. That's actually, that was actually a product category that falls into the product roadmap acceleration piece of our strategy, and it just so happened that they had been in San Francisco. We had been, you know, searching around to where our next geography might be in North America, and just found this great team with a great product, building a great strategy for our merchants, and decided to Acquire them and keep that as our San Francisco office.

AI assessment note: “that was actually a product category that falls into the product roadmap acceleration piece”

Q We discussed the product focus there with regards to M&A, and you've said before that you don't necessarily acquire a tool based on revenue. I'm intrigued on another factor where a lot acquire often now with regards to, and that's being team. So with such a product-focused emanation, actually, how do you evaluate Aqua hires and their potential attractiveness?

A We find Aqua hires to be incredibly attractive. It's actually one of the things we've done the most, and, you know, we find that it comes in two different categories. The first that we've had a lot of success with is that we've found a number of agencies that have been local to the geographies that we operate in to join Shopify, and generally what we've found is that there's great product and technology teams at these agencies who are not Building long-term products that they're passionate about. They're working for incredible customers and building really unique, innovative products, but really they want to sink their teeth into products that they own for the long term, and so there's a number of acquisitions that Shopify has done that has really been aligned with great agencies building credible products for third parties and bringing them in-house to make them leaders within Shopify and own distinct product categories. The second piece of it really is acquihires on the Product side of things, and what we find with Aqua Hires is that what we're really looking for are incredibly strong leaders. We find that founders make the best long-term leaders within the company, and what we want to have is, is all founders who have opportunities and distinct paths to go down, an opportunity to join Shopify to become incredible leaders. It's one of, you know, I would say one of the core bu…

AI assessment note: “what we're really looking for are incredibly strong leaders”

Q Can I ask, diving into the nitty-gritty, what does the acquisition decision-making process look like? In VCs, we have ICs, and they progress through IC, and once that's signed off, What does acquisition decision-making look like?

A Yeah, it's a, it's a, it's a good parallel. Having come from the VC background, so it's structured in a very similar way. We have an individual who I work with who would sort of be the partner on the transaction, really pushing and championing what we call a champion of the deal, pushing it through the company and pushing it through the various pieces of the decision-making process. RIC equivalent would be our executive team, and so once myself, as well as the deal champion, Have an opportunity to really do the full due diligence and understand that this is an incredible opportunity that we want to look at. We will present the full investment or acquisition thesis really into the executive team who will give us the full support to move forward.

AI assessment note: “We will present the full investment or acquisition thesis really into the executive team”

Q We discussed the product focus there with regards to M&A, and you've said before that you don't necessarily acquire a tool based on revenue. I'm intrigued on another factor where a lot acquire often now with regards to, and that's being team. So with such a product-focused emanation, actually, how do you evaluate Aqua hires and their potential attractiveness?

A We find Aqua hires to be incredibly attractive. It's actually one of the things we've done the most, and, you know, we find that it comes in two different categories. The first that we've had a lot of success with is that we've found a number of agencies that have been local to the geographies that we operate in to join Shopify, and generally what we've found is that there's great product and technology teams at these agencies who are not Building long-term products that they're passionate about. They're working for incredible customers and building really unique, innovative products, but really they want to sink their teeth into products that they own for the long term, and so there's a number of acquisitions that Shopify has done that has really been aligned with great agencies building credible products for third parties and bringing them in-house to make them leaders within Shopify and own distinct product categories. The second piece of it really is acquihires on the Product side of things, and what we find with Aqua Hires is that what we're really looking for are incredibly strong leaders. We find that founders make the best long-term leaders within the company, and what we want to have is, is all founders who have opportunities and distinct paths to go down, an opportunity to join Shopify to become incredible leaders. It's one of, you know, I would say one of the core bu…

AI assessment note: “We find Aqua hires to be incredibly attractive. It's actually one of the things”

Q the startup founder hat, and you've said to me before that there are some top tips for founders to consider when engaging or contemplating this process. The first being strong relationships. Now, Rishi Gog at Mayfield told me before on the show that founders must look to build the pipe in terms of corp dev. Tell me, when is the right time to start building the pipe as a startup?

A I think that's a great piece of feedback, and there should always be incredible lines of communication between not only Founders and corp dev departments, but also founders and individuals at the company itself. And so that can be anywhere from developer advocates to product individuals or even engineering. And what I'd say at the right time in terms of starting to build that pipeline, I wouldn't say that there's a day one, start doing this, or once you have launched the product, start doing that. I would say that understand when there's distinct parts of the journey that there are shared learnings. And so what you really want to do is engage individuals within potential acquisition companies and In terms of what you're building, what you're learning, and how that applies to them. And so that's the best conversations that you can possibly have with individuals within the company is really, hey, this is what we're working on. This is what we learned doing that. What are you seeing in doing that? And it's just a two-way street in terms of communication and things that can be helpful on both sides. And so I don't think there's, there's a distinct moment in which you want to start building that pipeline, but understand from a product perspective, what are the shared challenges and have conversations around those at the right times.

AI assessment note: “understand when there's distinct parts of the journey that there are shared learnings”

Q Mm-hmm. You've also said that founders must look to understand culture. So what must the founders contemplate and examine with regards to this culture fit? And how can they really determine the true culture when not being integrated into the culture itself?

A I think that the cultural aspect of it is really understanding what the core mission of the acquiring company is. And I can speak to Shopify and we're an entrepreneurship company. What that breaks down to is that our culture is really driven by empathy towards the 500,000 plus merchants on our platform. And so From a Shopify perspective, who we serve is our merchants, and that is what defines our culture, and what we've seen in every one of the cases that we've done acquisitions is that founders really embody that empathy towards those merchants. As you look at the broader ecosystem of acquirers, it's the same thing, you know, I think that if you're looking at a major enterprise company as an acquirer, understand who their customers are and who your shared customers amongst them, and having that same empathy towards those customers. If you're a consumer-facing company, and you're looking at consumer-facing acquirers, it's the exact Same thing. You know, who are the users of that company? Who are the shared users? Who are the new users? And what are the distinct things that, that you share with those individuals? So that, that cultural piece is really about understanding what drives the ultimate product of the acquiring company.

AI assessment note: “cultural aspect of it is really understanding what the core mission of the acquiring company is”

Q And before we move into the quick fire and completely reversing from culture to completely pretty much the opposite being cold, hard cash, there's always hype around the media with regards to figures surrounding acquisitions. But you said before that founders must look to the bigger picture So what does the bigger picture mean, and how should that affect founder thinking in this contemplation phase?

A There's two ways I would say that it should affect the founder's thinking at this phase, and the first is that you should really understand why you're being acquired by this company and why you want to join this company as a founder, and so that should create a really great long-term alignment between the two. I mean, you just, if you're just sort of thinking that this is a great fit For the team and the product, and you don't have a long-term alignment with the acquiring company, that's one way to do it, but more strategically, I think it's important to think about the long-term, and so the bigger picture is really about how it's structured in your favor to acquire a great piece of, a great ROI on your investment, which is really you joining the company for the long-term, and so rather than just thinking about what's coming to myself as founder or the employees or the investors, I At the time, you know, that we joined this company, what are the really great things that can happen to us in the long term? And one of our core values at Shopify is that we build for the long term. That stretches into our M&A strategy where we also buy for the long term.

AI assessment note: “There's two ways I would say that it should affect the founder's thinking”

Q So first, we'll discuss it from the point of view of the acquirer, and then we'll switch to the founder perspective. So if we start from the starting point, looking for potential M&A for Shopify, you've said to me before and discussed Shopify uses corp dev as a platform to accelerate product roadmap. I'm intrigued then. What does that really mean, and how does that differ from maybe traditional M&A?

A Yeah, that's exactly right here. It's a really exciting opportunity here for us at Shopify, where we look out and say, we are a hugely ambitious company, and we have a lot of product and a lot of new opportunities that we're really trying to capture really quickly, and our resources are incredibly constrained. You know, we, we have a large company building at a really high pace, and, and, One of the things that we are really excited about is just building all those products faster, and M&A allows us the opportunity to really accelerate a lot of what we're doing, and so what that means at a low level is I spend the majority of my time working with our product team and understanding what that roadmap looks like for the next one, two, three, five, 10 years, and we have an opportunity to look at each area and find out which of those specifically can be great candidates for M&A to bring in great founders, great Teams and great products to really accelerate exactly what we're trying to build, which is empowering entrepreneurs through software.

AI assessment note: “I spend the majority of my time working with our product team and understanding what that roadmap looks like”

Q So once you and the product team have identified then a potential target, What does that internal conviction building process look like?

A It's a really great question. You know, one of the things that I do is I work very closely alongside a single individual who's looking to accelerate their product roadmap within the company on the product or one of our executive teams, and so once we've sort of identified a target, gaining conviction is really about understanding the company, the product, and the founders of that company, and bringing them into the Shopify fold, and so really, as we build not only the business But more importantly, a cultural alignment as well as product alignment and vision alignment. Conviction, I don't want to say it becomes easy, but it becomes natural as all those pieces of the puzzle and start to line up, and we have an executive team who's fully aligned with our product roadmap and has the opportunity to see what we believe is a way to accelerate all of that.

AI assessment note: “gaining conviction is really about understanding the company, the product, and the founders”

Q And before we move into the quick fire and completely reversing from culture to completely pretty much the opposite being cold, hard cash, there's always hype around the media with regards to figures surrounding acquisitions. But you said before that founders must look to the bigger picture So what does the bigger picture mean, and how should that affect founder thinking in this contemplation phase?

A There's two ways I would say that it should affect the founder's thinking at this phase, and the first is that you should really understand why you're being acquired by this company and why you want to join this company as a founder, and so that should create a really great long-term alignment between the two. I mean, you just, if you're just sort of thinking that this is a great fit For the team and the product, and you don't have a long-term alignment with the acquiring company, that's one way to do it, but more strategically, I think it's important to think about the long-term, and so the bigger picture is really about how it's structured in your favor to acquire a great piece of, a great ROI on your investment, which is really you joining the company for the long-term, and so rather than just thinking about what's coming to myself as founder or the employees or the investors, I At the time, you know, that we joined this company, what are the really great things that can happen to us in the long term? And one of our core values at Shopify is that we build for the long term. That stretches into our M&A strategy where we also buy for the long term.

AI assessment note: “There's two ways I would say that it should affect the founder's thinking”

Q I do want to switch sides of the table, not in terms of quite yet being the founder, but say we've made the acquisition now, they've joined the Shopify platform, fantastic news, but you've said to me before that one of the most important parts is the post-acquisition phase. So what does the ideal post-acquisition integration really look like to you?

A One of the core pieces of our M&A process is that we're We want the individuals on the company joining Shopify to have a better job day one than they did at their last day as an independent company, and that can come in a lot of flavors, and so really what we want to do is set everyone up for success in the areas that they are best at working on and take away all the challenges or the things that don't align with what they do on a day-to-day basis, and so the ideal post-acquisition integration really is a Incredibly smooth. I'd say that it doesn't even seem like they're lost or in a new company, and really what they've done is, is they continue on with the great job that they're doing and focusing on the areas that they're best at while we take over building a great team around them to take on all the challenges.

AI assessment note: “the ideal post-acquisition integration really is a Incredibly smooth.”

Q Mm-hmm. You've also said that founders must look to understand culture. So what must the founders contemplate and examine with regards to this culture fit? And how can they really determine the true culture when not being integrated into the culture itself?

A I think that the cultural aspect of it is really understanding what the core mission of the acquiring company is. And I can speak to Shopify and we're an entrepreneurship company. What that breaks down to is that our culture is really driven by empathy towards the 500,000 plus merchants on our platform. And so From a Shopify perspective, who we serve is our merchants, and that is what defines our culture, and what we've seen in every one of the cases that we've done acquisitions is that founders really embody that empathy towards those merchants. As you look at the broader ecosystem of acquirers, it's the same thing, you know, I think that if you're looking at a major enterprise company as an acquirer, understand who their customers are and who your shared customers amongst them, and having that same empathy towards those customers. If you're a consumer-facing company, and you're looking at consumer-facing acquirers, it's the exact Same thing. You know, who are the users of that company? Who are the shared users? Who are the new users? And what are the distinct things that, that you share with those individuals? So that, that cultural piece is really about understanding what drives the ultimate product of the acquiring company.

AI assessment note: “the cultural aspect of it is really understanding what the core mission of the acquiring company is.”

Q the startup founder hat, and you've said to me before that there are some top tips for founders to consider when engaging or contemplating this process. The first being strong relationships. Now, Rishi Gog at Mayfield told me before on the show that founders must look to build the pipe in terms of corp dev. Tell me, when is the right time to start building the pipe as a startup?

A I think that's a great piece of feedback, and there should always be incredible lines of communication between not only Founders and corp dev departments, but also founders and individuals at the company itself. And so that can be anywhere from developer advocates to product individuals or even engineering. And what I'd say at the right time in terms of starting to build that pipeline, I wouldn't say that there's a day one, start doing this, or once you have launched the product, start doing that. I would say that understand when there's distinct parts of the journey that there are shared learnings. And so what you really want to do is engage individuals within potential acquisition companies and In terms of what you're building, what you're learning, and how that applies to them. And so that's the best conversations that you can possibly have with individuals within the company is really, hey, this is what we're working on. This is what we learned doing that. What are you seeing in doing that? And it's just a two-way street in terms of communication and things that can be helpful on both sides. And so I don't think there's, there's a distinct moment in which you want to start building that pipeline, but understand from a product perspective, what are the shared challenges and have conversations around those at the right times.

AI assessment note: “I don't think there's, there's a distinct moment in which you want to start”

Q I do want to switch sides of the table, not in terms of quite yet being the founder, but say we've made the acquisition now, they've joined the Shopify platform, fantastic news, but you've said to me before that one of the most important parts is the post-acquisition phase. So what does the ideal post-acquisition integration really look like to you?

A One of the core pieces of our M&A process is that we're We want the individuals on the company joining Shopify to have a better job day one than they did at their last day as an independent company, and that can come in a lot of flavors, and so really what we want to do is set everyone up for success in the areas that they are best at working on and take away all the challenges or the things that don't align with what they do on a day-to-day basis, and so the ideal post-acquisition integration really is a Incredibly smooth. I'd say that it doesn't even seem like they're lost or in a new company, and really what they've done is, is they continue on with the great job that they're doing and focusing on the areas that they're best at while we take over building a great team around them to take on all the challenges.

AI assessment note: “ideal post-acquisition integration really is a Incredibly smooth”

Q Can I ask, how do you kind of structure that, that process with the product team and really break down markets, and how do you think about that in terms of kind of allocating time to markets, and how long it takes you to really dive into certain ones?

A I would say it's really collaborative, and so I spend a lot of my time actually discussing all those products, then what the market opportunities are, and some of them obviously are much long-term opportunities, and some of them are a It's really, really a great conversation and assessment from a product team perspective in terms of how the direction we're taking and how big those opportunities are, and so really the product team drives their own roadmap. I get the privilege of sitting down with them once a quarter or once a month and learning what those priorities are, working off of their priorities to understand where to focus our time as it relates to M&A and that product roadmap.

AI assessment note: “sitting down with them once a quarter or once a month and learning what those priorities are”

Q So once you and the product team have identified then a potential target, What does that internal conviction building process look like?

A It's a really great question. You know, one of the things that I do is I work very closely alongside a single individual who's looking to accelerate their product roadmap within the company on the product or one of our executive teams, and so once we've sort of identified a target, gaining conviction is really about understanding the company, the product, and the founders of that company, and bringing them into the Shopify fold, and so really, as we build not only the business But more importantly, a cultural alignment as well as product alignment and vision alignment. Conviction, I don't want to say it becomes easy, but it becomes natural as all those pieces of the puzzle and start to line up, and we have an executive team who's fully aligned with our product roadmap and has the opportunity to see what we believe is a way to accelerate all of that.

AI assessment note: “gaining conviction is really about understanding the company, the product, and the founders”

Q I'm intrigued. You said that about kind of the product focus again. How do you evaluate price and price sensitivity when acquiring companies largely based on product focus and there's not the revenue backing to give it that kind of anchoring price?

A Yeah, I think that there, there often is some revenue. And so what I would say is I would break that price sensitivity into two different pieces. The first is opportunity, which is something that we really assess as a company. And we believe there are massive opportunities Opportunities that we really target from an M&A perspective in terms of accelerating our product roadmap. And so, as we look at, you know, there are also smaller opportunities, and that'll affect the price sensitivity. Those are more feature type of things. But as you look at major opportunities that have the chance, really, to build out a unique business within Shopify, that's how we define the opportunity and where price sensitivity can really be expanded when we see a massive opportunity. The second piece of that really is optionality, and so when you think of startups, one of the pieces of advice I give to all founders is build a great business. You can always keep yourself in a great situation once you have optionality. Optionality can come in one of three favors. That could be a sustainable business that's highly profitable. That's the best way to build optionality. Second best way is by having great funders behind you who are willing to really take this to the long term. The third is through M&A and really just That as a piece of the optionality is always a great thing to have in mind, especially when …

AI assessment note: “where price sensitivity can really be expanded when we see a massive opportunity.”

Q So first, we'll discuss it from the point of view of the acquirer, and then we'll switch to the founder perspective. So if we start from the starting point, looking for potential M&A for Shopify, you've said to me before and discussed Shopify uses corp dev as a platform to accelerate product roadmap. I'm intrigued then. What does that really mean, and how does that differ from maybe traditional M&A?

A Yeah, that's exactly right here. It's a really exciting opportunity here for us at Shopify, where we look out and say, we are a hugely ambitious company, and we have a lot of product and a lot of new opportunities that we're really trying to capture really quickly, and our resources are incredibly constrained. You know, we, we have a large company building at a really high pace, and, and, One of the things that we are really excited about is just building all those products faster, and M&A allows us the opportunity to really accelerate a lot of what we're doing, and so what that means at a low level is I spend the majority of my time working with our product team and understanding what that roadmap looks like for the next one, two, three, five, 10 years, and we have an opportunity to look at each area and find out which of those specifically can be great candidates for M&A to bring in great founders, great Teams and great products to really accelerate exactly what we're trying to build, which is empowering entrepreneurs through software.

AI assessment note: “I spend the majority of my time working with our product team”

Q I'm intrigued. You said that about kind of the product focus again. How do you evaluate price and price sensitivity when acquiring companies largely based on product focus and there's not the revenue backing to give it that kind of anchoring price?

A Yeah, I think that there, there often is some revenue. And so what I would say is I would break that price sensitivity into two different pieces. The first is opportunity, which is something that we really assess as a company. And we believe there are massive opportunities Opportunities that we really target from an M&A perspective in terms of accelerating our product roadmap. And so, as we look at, you know, there are also smaller opportunities, and that'll affect the price sensitivity. Those are more feature type of things. But as you look at major opportunities that have the chance, really, to build out a unique business within Shopify, that's how we define the opportunity and where price sensitivity can really be expanded when we see a massive opportunity. The second piece of that really is optionality, and so when you think of startups, one of the pieces of advice I give to all founders is build a great business. You can always keep yourself in a great situation once you have optionality. Optionality can come in one of three favors. That could be a sustainable business that's highly profitable. That's the best way to build optionality. Second best way is by having great funders behind you who are willing to really take this to the long term. The third is through M&A and really just That as a piece of the optionality is always a great thing to have in mind, especially when …

AI assessment note: “one of the pieces of advice I give to all founders is build a great business”

Q Can I ask, how do you kind of structure that, that process with the product team and really break down markets, and how do you think about that in terms of kind of allocating time to markets, and how long it takes you to really dive into certain ones?

A I would say it's really collaborative, and so I spend a lot of my time actually discussing all those products, then what the market opportunities are, and some of them obviously are much long-term opportunities, and some of them are a It's really, really a great conversation and assessment from a product team perspective in terms of how the direction we're taking and how big those opportunities are, and so really the product team drives their own roadmap. I get the privilege of sitting down with them once a quarter or once a month and learning what those priorities are, working off of their priorities to understand where to focus our time as it relates to M&A and that product roadmap.

AI assessment note: “sitting down with them once a quarter or once a month”