The Exchanges

Q Okay. And did I get it right? I mean, is it, is it one percent of GMV typically, or is it a percent of GMV model?

A It's not a percent of GMV. So fulfillment works on usually you've got like a fixed handling fee that's, you know, we have like a retail rate that we charge our customers and the wholesale rate that we're going to pay to the warehouse partners. So it's, and it's reflective of, you know, standard things in the industry, like how many orders are in and how many items are in an order. Um, it doesn't get into GMV and it's, it's more of a, You know, we, we set those rates based on tiers for how large the customer is. So you might have, you know, a customer that's shipping a hundred packages a month is going to pay one set of rates where a customer that's shipping, you know, 50,000 packages a month will pay a different set of rates.

AI assessment note: “It's not a percent of GMV. So fulfillment works on usually”

Q If you look at though, and if you look at a true average across the 400, is it really, are they all spending, you know, on average 40,050 thousand a month through you?

A No, those are the, those are the cherry customers. I'd say if you look at true, true average is something like, you know, two or 3000 dollars a month. Um, and that's because you do have a long tail and there's a little bit, we used to have much lower minimums. Like back in the day, we were trying to get the business off the ground and we didn't understand how much support went into some of those small accounts. And so all those people, we grandfathered them and we didn't kick anybody off the platform, even as we raised minimums and really changed our, our profile. Uh, there's a ton of folks who are grandfathered in and, you know, we consider them a part of our, our success and a part of our story. We don't want to, you know, you see other companies who are like, oh, we don't do that anymore. And they just cut everything off. And we're not quite that mercenary about it. We, we see the value that they gave us in building the company and we want to, you know, they got in under the water.

AI assessment note: “No, those are the, those are the cherry customers. I'd say if you look”

Q Yep. So, so are you really looking for the strategic folks that have a lot of experience in warehousing and in shipping and delivery?

A Not on that side as much. I'm looking for the people who do have e-commerce backgrounds because they, they can speak the language and make the introductions to our customers. Um, and more than anything else, it's just the trajectory that we're setting ourselves on. You know, we want to be able to grow at, you know, two or three X per year and have that and have investors that want to be a part of that and not put us on this, you know, billion dollar valuation or bust path. It's important for us to have the company secure through this process. It's just not, it's not fair to our employees and our customers to take those other kinds of risks.

AI assessment note: “Not on that side as much. I'm looking for the people who do have e-commerce backgrounds”

Q How did you guys have the tough conversation? Because a lot of the top tribe, you know, they're having these negotiations right now. How did you guys decide when you were launching a business how to split equity?

A So in the beginning, the very first conversation, um, was my partner, Sean Hurley, um, came to me with an opportunity. He, he was working for Modest Mouse, the indie rock band at the time. And, and he was able to say, he's like, Hey, I've got this opportunity to run this web store. If you want to do it with me, we could partner. And like, and we both felt like that was 50, 50. Like there was no, there was no discussion about it. Um, and then once we were, we were running that, we're running this web store for Modest Mouse, which we still do. Um, but we realized there wasn't quite a company to build around it. And that's when we figured out that there was a company to build around. You know, shipping for e-commerce. Uh, and we brought in our third co-founder, Mark Dixon, and, you know, that conversation has been tricky at times, and his equity has actually changed over time because he came in kind of early, and then you're like, well, wait a minute, he's been around for all these years, and he doesn't, his equity doesn't really warrant that, and it's really difficult because you can say, well, no, that's what we agreed on, but then part of me, it's like, well, but the situation is different. You know, we didn't know then what we know now, and so, so his equity has changed, and I've, it's been a long process of Feeling good about that.

AI assessment note: “we both felt like that was 50, 50. Like there was no discussion”

Q What are you hiring for that? You know, is going to drive top line revenue.

A So we're, we're hiring for sales. We've never had a formal sales process. Everything we've done, I mean, we've got, we're in, you know, in the Shopify app store, we get a lot of referrals from existing customers, but we've never gone out and, you know, hit the pavement and had a hit list and, you know, really defined the funnel. And so that's what we're going through right now. And so we're hiring for sales. We're hiring for, um, you know, engineering because we know that new customers bring new requirements. And as a company, we've been successful because, um, We build what our customers want to see. You know, we're listening very closely and trying to behave as agile and as nimble as possible to, you know, when we get an email 10 times, we say, okay, this is what, this is the customer problem.

AI assessment note: “we're hiring for sales... We're hiring for, um, you know, engineering”

Q Yeah, that's great. That's exciting. Now, why did you sell?

A So we had, we started the company to sell it in the very beginning. It was this thing. I was running a company called VG kids. That's actually still doing very, very well. And it had, it was so close to me and so much heart in the business. And it was just something I built with my friends for my friends. And I was getting a little bit older trying to raise a family. And I was like, you know, Money in life. And as, as bad as that felt to be sort of money motivated, I was like, I got to start one. I got to do it for the money. Um, financial win here. 2007 was the very beginning.

AI assessment note: “we started the company to sell it in the very beginning”

Q Well, you weren't, you probably weren't profitable, right? You probably had no EBITDA.

A Well, so we had to, we had to do something about that. So we went through a phase where we were like, okay, we're going to prove that this thing, you know, can deliver EBITDA. And that's obviously, that's, that's very different, uh, than the way, you know, people think about startups. So it wasn't cutting. It was just the matter of stopping the, you know, kind of aggressive growth that we'd been on and then letting the growth catch up and deliver so that we could, you know, hit those new, those new layers. And there's a little bit of tuning on the platform. You know, we've been subsidizing things like packaging materials for years and, you know, didn't want it to slow growth down. And so you, you fix those things. Um, we had always made sure we were sort of within arm's distance of profitability. And so it was just a matter of Buckling down and tuning the company a little bit.

AI assessment note: “we're going to prove that this thing, you know, can deliver EBITDA.”

Q Interesting. Do you see power laws in your customer base? So does your, like your top customer, how much do they send annually through you?

A Yeah, it's, I don't want to break it down exactly, but there's something like the eighty-twenty rule where the people who can drive volume really drive volume. Um, when we've had to, we've had to back off from some of the smaller customers a little bit. There's an inversion where the less volume you have, the harder customer you are. There, there's something about, um, I don't want to get too diminutive about it, but there's something where small customers are sometimes small for a reason. And it's because they're, maybe they're not e-commerce pros, maybe they're better at something else. And so they tend to have more support, more, more handholding to the process and just becomes literally expensive for us to support it. And then you bring somebody else who's, you know, maybe shipping 50,000 orders a month. There's a lot more ability on their side.

AI assessment note: “I don't want to break it down exactly, but there's something like the eighty-twenty rule”