Aug 5, 2019 · 1h 4m · how-i-built-this
Shopify: Tobias Lütke
Tobias Lütke · 36m spoken Guy Raz · 20m spoken Rebecca Davidson · 55s spoken Barb Heilman · 35s spoken
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, host Guy Raz interviews Shopify co-founder and CEO Tobias Lütke about how an online snowboard storefront built to overcome Canadian work restrictions evolved into an e-commerce giant powering billions in global transactions.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 35.6% of the talking time here. How this is scored →
Guy as informed peer 2.5 Guest teaching 2.8 Guest disagreement 1.1 Guy pushing back 1.1
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 11:58 Toby refutes Guy's illegal status framing
When Guy Raz bluntly states 'You were not legal', Toby firmly corrects him, clarifying that he had lawful residency pending and was legally permitted to incorporate a business.
Hardest push from Guy ▶ 50:17 Guy Raz presses Toby on his conflicting statements about confidence and anxietyGuy refuses to let Toby glide past a contradiction, pressing him on how he could claim he knew the company would explode while simultaneously claiming extreme dread and freakouts.
Biggest teaching moment ▶ 54:32 Toby breaks down the reality of venture capital clocks and IPO dynamicsToby educates the audience and reframes Guy's question about going public by explaining that accepting venture investment inevitably starts a countdown toward an IPO or sale.
Guy holds their own ▶ 25:39 Guy connects Shopify's inception to the genesis of SquarespaceGuy displays deep domain knowledge of tech founding stories by drawing an accurate parallel between Toby building custom store tools and Anthony Casalena founding Squarespace.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Upcoming Live Shows and Summit Announcements | 0 | 1 | 0 | 0 | Introductory promo monologue from Guy Raz followed by a brief cold-open quote from Toby Lutke. Host-side scores are zeroed due to monologue guidelines. | |
| The Hidden Powerhouse Behind Modern E-Commerce | 0 | 0 | 0 | 0 | Guy Raz delivers a narrative monologue introducing the scale of Shopify using Kylie Cosmetics and economic data. Monologue scoring rules apply. | |
| Early Struggles with School and Finding Passion in Programming | 2 | 3 | 1 | 0 | Toby describes his early struggles in German schooling with ADHD and dyslexia and discovering programming at Siemens. Guy listens and prompts supportively. | |
| Moving to Canada and Legal Hurdles to Employment | 3 | 5 | 3 | 2 | Toby details moving to Ottawa, correcting Guy's assumptions about winter duration and legal status. When Guy asserts Toby was working illegally, Toby clarifies that he was legally awaiting permanent residency and could start a business. | |
| Partnering with Scott Lake to Launch Snow Devil | 3 | 3 | 1 | 1 | Toby shares launching Snow Devil with co-founder Scott Lake and discovering how primitive e-commerce tooling was in 2004. Guy contextualizes with contemporary comparisons to buying books on Amazon. | |
| Building E-Commerce Rails Software and the First Sale | 3 | 4 | 1 | 1 | Toby explains choosing Ruby on Rails and the pivotal feeling of receiving his first organic sale from Pennsylvania. Guy asks clarifying questions about early search ads and customer discovery. | |
| From Selling Snowboards to Building Shopify | 4 | 2 | 1 | 1 | Guy draws an insightful analogy between Toby's pivot to software and the founding story of Squarespace. Toby agrees and explains bringing in Daniel Winand. | |
| Early Bootstrap Challenges and Angel Investment | 3 | 3 | 1 | 1 | Toby recounts early bootstrap rounds, switching pricing models on the eve of his wedding, and getting saved by angel investor John Phillips. Guy follows the business model shift closely. | |
| Co-Founder Departure and the Sand Hill Road Journey | 3 | 4 | 1 | 1 | Toby details traveling to Sand Hill Road by bicycle to find a CEO replacement, learning VC metrics like CAC on the fly, before the 2008 crash froze term sheets. | |
| Mid-Show Break and Preview of Shopify's Turnaround | 2 | 3 | 1 | 1 | Toby explains how the 2008 financial crisis counterintuitively accelerated Shopify adoption as newly laid-off workers launched businesses, alongside the crushing weight of CEO responsibilities. | |
| Venture Funding, Fast Scaling, and Going Public | 4 | 3 | 2 | 4 | Guy pushes Toby on his contradiction between claiming he knew Shopify would explode while simultaneously experiencing panic. Toby clarifies the distinction between business trajectory and operational bottlenecks. | |
| Leveling the Playing Field and Reflections on Success | 3 | 3 | 2 | 2 | Toby reflects on leveling the playing field for small entrepreneurs and attributes 90% of his outcome to luck. Guy playfully presses him on his secret sock store name, which Toby refuses to disclose. | |
| How You Built That: The Unbuckle Me Story | 2 | 2 | 0 | 0 | Segment features Barb Heilman and Rebecca Davidson discussing their invention Unbuckle Me in a warm, narrative segment with Guy Raz. |
Statements from this episode (25)
Raz: Kylie Cosmetics reaches billion-dollar valuation with seven full-time employees
“A billion-dollar company employs just seven full-time people.”
Raz: Shopify powers more than 800,000 e-commerce companies worldwide
“It is now used by more than 800,000 ecommerce companies around the world.”
Raz: Shopify processed over $40 billion in customer sales in 2018
“Last year alone, Shopify processed more than forty billion dollars in sales for its customers.”
Raz: Shopify's market cap is nearly equal to GM and Ford
“The company went public in 2015, and Shopify's market cap is now just below General Motors and Ford.”
Tobias Lütke grew up with dyslexia and clear-cut ADHD symptoms
“I got diagnosed with all sorts of learning disabilities, and it was very hard for me to perform well in the tests and so on. And I don't think I ended up getting a full diagnosis of it, but now it was a pretty clear-cut way of ADHD. ADHD. I grew up dyslexic so…”
Lütke: Siemens' corporate culture was exceptionally mistrustful of its employees
“Like working for Siemens has been probably one of the most important things I've ever done in my life because it kind of taught me what I don't want. It was, In so many ways, a strange company culture in the way that it felt exceptionally mistrusting of everyo…”
Lütke: Entrepreneurship inevitably drags everyone around the founder into the journey
“Even if you make the choice yourself to embark in entrepreneurship, kind of everyone around you is coming onto the trip. There's a lot of people who end up mattering a lot”
Lütke: In 2004, no software made building an online store easy
“There's no software that would make this easy, and especially the credit card part.”
Lütke: Snow Devil launched with 20,000 CAD each from co-founders
“Yeah we both put money into the company. I think we both took 20,000 Canadian dollars and put, that's the capital we had.”
Lütke: Making your first sale is what defines an entrepreneur
“I think that's what makes you an entrepreneur. Like the first time you sell something, or first time someone hires you for when the phone rings or something like this. Because until then, you're just someone who builds something, which is already great.”
Lütke: Snow Devil acquired customers on 20-cent Google AdWords bids
“Google AdWords was a new product. Both days it turns out that the minimum bid for an ad for click is 20 cents, and we paid minimum bid for almost every search, which ended up converting on a 500 dollar snowboard.”
Lütke: Merchants emailed asking to license Snow Devil's custom e-commerce code
“And so increasingly, I got people sending me emails and asking me if I would license Snowdevil to them because they wanted to start something similar.”
Lütke: 'Shopify' was created by combining 'Shop' and 'Simplify'
“It was Scott's idea. It was we talked about what we wanted it, and putting Shop and Simplify together was pretty straightforward, and then we went to I think on GoDaddy and registered with .com.”
Lütke: Shopify's Early Percentage Fee Failed Because Big Sellers Rejected It
“And the model was, I think we charged like three and a half or 3.75% per, per sale. It was a complete failure of a business model because basically everyone who didn't expect to have sales thought it was amazing, and people who expected to sell a lot would, th…”
Lütke: Angel Investor John Phillips Saved Shopify With $400K in 2007
“We luckily met an angel investor who ended up putting, I think, 400,000 dollars around 2007, and that saved us as an individual by the name of John Phillips.”
Tobias Lütke originally intended to build only a twenty-person company
“My intention was to build a twenty-people company. That's what I wanted to do.”
Lütke: Early 2008 VC term sheets required moving Shopify to Silicon Valley
“But all the offers were always conditional on moving your company to Silicon Valley.”
Lütke: VCs pulled Shopify term sheets during the 2008 crash
“So basically I got this around this time notice that term sheets will no longer be honored because everyone needs to tighten bells and so on.”
Lütke: Shopify became cash flow neutral for the first time in 2009
“Basically in two fours and nine, the company now hit first time sort of cash flow neutral.”
Lütke: Shopify met early payroll with loans from family and father-in-law
“Like, up to this point, it was really just money from John Phillips, from my family, and then for the last year, from my father-in-law, who gave me money for, to meet payroll.”
Lütke: Good non-Amazon e-commerce experiences were powered by Shopify
“If you bought something online, and it wasn't on Amazon, and you liked the experience, it was Shopify.”
Lütke: Selling company shares creates a ticking clock to IPO or sale
“I took the investments knowing that I'm going to be raising the clock to either go public or get sold. That was the duality of outcome. And by the way, this is true for every person who sells shares in their company. Just most people don't realize that that's …”
Lütke: A Shopify merchant makes their first sale every 52 seconds
“Every 52 seconds, someone has that experience of getting a first sale.”