20VC Building Shopify From $5m To IPO, Why The Future Of Retail Is Not Online vs Offline & Why Law School Is Like Finishing School For Entrepreneurs with Harley Finkelstein, COO @ Shopify



In this episode of 20 Minutes VC, host Harry Stebbings interviews Harley Finkelstein, COO of Shopify, an e-commerce platform that has empowered a generation to embrace entrepreneurship. Harley shares his journey from a Shopify merchant to a pivotal executive, driving the company's growth from $5 million to over $600 million in revenue. He discusses the evolution of retail from transactional to experiential, the importance of omni-commerce, and the shift in brand perception through direct consumer engagement. Additionally, Harley reflects on the significance of Shopify's IPO and the company's focus on being a trusted public entity by consistently delivering on promises. He emphasizes the value of management skills and looks forward to shaping the future of commerce while personally striving to be an exemplary manager.

Summary Notes

Introduction to the Podcast and Guest

  • Harry Stebbings hosts the 20 Minutes VC and Founders Friday.
  • Uses guest's company, Shopify, to build his first business and pay for college.
  • Harley Finkelstein, COO at Shopify, is the guest.
  • Shopify is an ecommerce platform that has enabled many to become entrepreneurs.
  • Harley joined Shopify when it had $5 million in revenue; it now targets over $600 million.
  • Shopify has over 400,000 merchants and raised over $120 million in VC funding.
  • Shopify went public in May 2015 with a valuation over $1 billion.
  • Special thanks to Iden at Felicis for introducing Harley to the show.

"I'm thrilled to welcome Harley Finkelstein to the show's day. Now, Harley is the COO at Shopify, the ecommerce platform that's allowed a generation of people to become entrepreneurs and business owners."

This quote introduces Harley Finkelstein, COO of Shopify, and underscores the impact of Shopify on entrepreneurship.

Sponsorship Acknowledgment

  • Harry acknowledges Eight, a sleep innovation company with the eight smart mattress.
  • Eight's mattress provides sleep quality tracking and uses data from over 10,000 people.
  • Harry also mentions FullContact, a contact management solution that helps organize and engage with contacts.

"Eight is a sleep innovation company with their latest product, the eight smart mattress... And if you use the promo code 20 vc, you'll get a whopping 20% discount."

Harry promotes Eight's smart mattress and offers a discount code, highlighting the product's features and benefits for productivity and health.

"With full contact. They provide the ability to organize your contacts, gain rich insights into them, and therefore build deep relationships."

Harry discusses the advantages of using FullContact for managing and engaging with contacts, emphasizing its value in relationship building.

Harley Finkelstein's Entrepreneurial Journey

  • Harley has been an entrepreneur since age 13, starting with a DJ company.
  • Created a t-shirt business during undergrad at McGill University.
  • Decided entrepreneurship would be his life's work.
  • Attended law school in Ottawa due to a mentor's advice on its benefits for entrepreneurs.
  • Law school taught Harley to write well, be articulate, and extract relevant information from large volumes of text.

"I've been an entrepreneur for most of my life. I became an entrepreneur when I was 13 years old... And that obviously was a little bit of a gimmick."

Harley shares his early start in entrepreneurship and his mindset towards building businesses.

"It teaches you how to write really well, which of course is really important when you're running a company. It teaches you how to be articulate and teaches you how to read 4000 pages. But select the one line that's most relevant."

Harley explains the valuable skills he gained from law school that are applicable to entrepreneurship.

Transition from Shopify Merchant to Executive

  • Harley moved to Ottawa for law school and needed a virtual business model.
  • Joined the Young Entrepreneurs Club (YEC) and met Toby, who later founded Shopify.
  • Toby created software to sell snowboards online but realized the software had more potential.
  • Harley became one of the first Shopify merchants while completing his degrees.
  • Disliked working at a law firm after graduation, contrasting with the meritocracy of entrepreneurship.

"When I moved to Ottawa, I didn't really have any friends or family here... But I did hear about a group of people that started hanging out at this local coffee shop every Friday night."

Harley describes his introduction to the entrepreneurial community in Ottawa and meeting Toby, which eventually led to his involvement with Shopify.

"I ended up signing up for Shopify as one of their first customers... And I became an early merchant on Shopify's and spent the next couple of years finishing a law degree in an MBA while selling t shirts online."

Harley shares his experience as an early adopter of Shopify and how he balanced his education with entrepreneurship.

Law Firm Culture and Entrepreneurship

  • Law firms often value legacy, connections, and status, which contrasts with the entrepreneurial spirit.
  • Harley Finkelstein felt disconnected from the law firm culture and was drawn to the entrepreneurial aspect of Shopify.
  • He reached out to Toby Lütke (Shopify CEO) to offer help in building the business side of Shopify.
  • Harley became the first non-programmer at Shopify and played a versatile role in the company's growth.

"The law firm culture was very much about legacy. No matter how long you've been there, who you knew, who your parents were, what golf club you went to. And it was the antithesis of everything that I loved about entrepreneurship."

This quote highlights the stark difference between the traditional, hierarchical culture of law firms and the dynamic, merit-based world of entrepreneurship that Harley Finkelstein appreciates.

Consistent Revenue Growth at Shopify

  • Shopify's revenue growth is seen as deliberate and consistent, not just a result of luck.
  • The company prioritizes being a product-first company, where great products lead to revenue.
  • Shopify's focus on empathy for entrepreneurs and their needs has contributed to its success.
  • The timing of Shopify's growth coincided with a cultural shift towards entrepreneurship and side hustles.
  • Shopify's product is designed to be accessible and scalable for businesses of all sizes.

"We believe product comes first and having a great product revenue follows after that."

This quote encapsulates Shopify's philosophy that by focusing on creating a superior product tailored to the needs of entrepreneurs, financial success will naturally follow.

Strategic Decisions and Game Changers

  • Shopify is known for enabling e-commerce, but strategic decisions have expanded its offerings.
  • In 2013-2014, Shopify anticipated the future of retail as a blend of online and offline experiences.
  • The company developed products like Shopify Point of Sale and Shopify Mobile to cater to omnicommerce.
  • Shopify's unique strategy was to provide a unified platform rather than a collection of disparate tools.
  • The bet on omnicommerce has positioned Shopify as a leader in the retail space.

"We felt very passionately that the future retail is likely retail everywhere."

This quote reveals Shopify's foresight in recognizing the importance of a seamless retail experience across various platforms and channels, which has been a key factor in their growth.

The Future of Physical Retail

  • Physical retail is undergoing significant changes, driven by trends like direct-to-consumer models.
  • Retail spaces are transitioning from being purely transactional to offering consumer experiences.
  • Shopify supports this transition by enabling brands to have an online presence and in-person experiences.

"I think physical retail is probably going through its largest shift, and part of it is that there's a couple of big macro trends happening here."

This quote acknowledges the transformative period that physical retail is experiencing, with Shopify positioned to support retailers through this evolution by offering tools that facilitate both online and offline consumer engagement.

Direct to Consumer Model

  • The direct to consumer (D2C) model provides real-time answers from the product creators.
  • Consumers prefer D2C for a better experience and often lower prices.
  • Manufacturers benefit from the D2C model by retaining more profit.
  • The internet has diminished the value-add of traditional retail distribution.

"I, and I think many others are now, a lot of us prefer to go direct to consumer because I get a better experience of the consumer."

This quote emphasizes the consumer preference for a direct relationship with the product creators for a better overall experience.

"Boosted board can now make more money because whatever I pay goes directly to them."

Here, the speaker highlights how manufacturers can increase their profit margins by selling directly to consumers without third-party retailers.

Evolution of Brick and Mortar Retail

  • Physical retail must add value beyond mere distribution due to the internet commoditizing distribution.
  • Retailers can add value by providing unique in-store experiences.
  • Even when purchases are completed online, a good physical retail experience can influence consumer decisions.
  • Retail stores must adapt to serve as more than just a point of sale.

"Brick and mortar retailers need to find another way to add value in the chain from the manufacturer to the consumer and if they provide a great in store experience."

This quote suggests that physical retailers must innovate and provide exceptional in-store experiences to remain relevant in the D2C era.

"It's commoditized now, and the Internet did that."

The speaker is indicating that the internet has made distribution a commodity, diminishing the unique value once provided by physical retail stores.

Brand Perception and Evolution

  • Brand perception varies but generally represents what people think about when they hear a brand name.
  • Shopify's brand is associated with entrepreneurship and facilitating business creation.
  • Celebrities like Drake and Kanye have leveraged their brands to create high-quality product lines.
  • The internet allows anyone to create a brand and engage with their audience in new ways.
  • Understanding audience needs can lead to the creation of valuable products.

"Brand is what people think about when they hear the word, for me, at least."

The speaker defines brand as the thoughts and associations that come to mind when a brand name is mentioned.

"Drake has created a brand of clothing that I think rivals any major clothing brands."

This quote illustrates how individuals can leverage their personal brand to create products that compete with established companies.

Shopify's IPO Decision and Experience

  • Shopify had big ambitions and felt ready as a company to go public.
  • The goal was to build a long-term, independent company.
  • Shopify aimed to become a trusted public company through consistency and transparency.
  • The IPO process was a learning experience with great mentors and advisors.
  • The roadshow was a highlight, allowing Shopify to share its story with investors worldwide.

"We want to build a 100 year company. And at some point, being a publicly traded business, it makes it easier to be a long term company."

The speaker explains that going public was part of Shopify's strategy to establish itself as a long-term, sustainable business.

"Trust is built on consistency and doing what we say time and time again."

Here, the speaker outlines the importance of consistency and reliability in building trust as a public company.

Learning from the IPO Process

  • Shopify had to educate investors about their business model during the IPO process.
  • They created a mini-documentary to explain Shopify's operations and mission.
  • The process revealed the importance of clearly communicating the company's value proposition to investors.

"I think we took for granted people's understanding of our business, and so we really had to spend a lot of time."

This quote acknowledges the need for clear communication about the company's business model to investors who may not be familiar with it.

Storytelling of Shopify's Journey

  • Shopify created a documentary to tell their story, recognizing that not everyone understood their business model.
  • There was confusion around Shopify's identity and function, especially around the time of their IPO.
  • Being located in Canada, outside the Silicon Valley bubble, necessitated clear communication of their narrative.
  • They sought to learn from the IPO process and collaborated with knowledgeable individuals.

"We actually created a real documentary to tell the story of Shopify." "We are marketplace. How do we function?" "It was important that we told the story really well, so we tried to do that."

These quotes emphasize the importance of storytelling in business and how Shopify used a documentary to clarify their purpose and operations to a broader audience, especially during a pivotal moment like an IPO.

Building a Tech Business in Canada

  • Shopify's experience building a business in Canada has been positive.
  • The location of a tech company is becoming less important; access to talent is key.
  • Shopify benefits from a loyal workforce in Canada, with employees engaged in long-term commitments.

"I don't think it matters where you're based." "People come to Shopify to do their life's work, and they stay here for a very long time."

Harley Finkelstein highlights the geographic flexibility of modern tech companies and the value of a dedicated and stable workforce, which they have found in Canada.

Harley Finkelstein's Book Recommendations

  • Not a big fan of business books due to their repetitive nature.
  • Recommends "High Output Management" by Andy Grove for its timeless insights.
  • Currently reading "The Talent Code" by Daniel Coyle to continue learning.

"I'm not a massive fan of all business books." "High Output Management to me is sort of in a category of its own."

Harley shares his preference for books that offer unique and lasting business wisdom, highlighting "High Output Management" as a standout resource.

Leadership and Management Challenges

  • Recognizing personal strengths and weaknesses has been Harley's biggest challenge.
  • Transitioned from a generalist role to focusing on areas where he could excel.
  • Differentiates between leadership and management, working hard to improve his management skills.

"Figuring out what I'm good at and what I'm not good at." "Management is something that is really, really tough."

The quote reflects Harley's journey of self-awareness and professional development, particularly in the realm of management, which he views as a challenging but important skill to master.

Favorite Blogs and Newsletters

  • Medium is a preferred platform due to its variety of content.
  • "Wait But Why" is a favored blog for its in-depth and well-researched posts.

"I think what's amazing about medium is that I'm able to sort of peruse all different types of categories." "I find that just so compelling."

Harley expresses his appreciation for Medium's diverse content and singles out "Wait But Why" for its compelling writing and thorough research.

Harley Finkelstein's Favorite Shopify Stores

  • Enjoys Boosted Boards and Goldie Blox for personal reasons and their innovative products.
  • Takes pride in the variety of stores on Shopify, from small lifestyle businesses to multimillion-dollar enterprises.
  • Loves discovering Shopify-powered stores and experiences in everyday life.

"We have about 400,000 stores on our platform." "I love when that happens. I love when I have a great online experience, even a great in store experience, and I see it's Shopify point of sale, or I see it's an online store powered by Shopify."

Harley shares his enthusiasm for the range of businesses on Shopify and the joy of encountering Shopify's impact in real-world shopping experiences.

The Future of Shopify and Personal Goals

  • Shopify aims to shape the future of commerce by enabling entrepreneurs to reach customers across various channels.
  • Harley is focused on becoming an exceptional manager for his team.
  • Excited about the ongoing growth and potential of Shopify.

"We're just going to continue to think about the future of retail and future of commerce and build for that." "I'm trying to become the best manager that the people that work with me have ever had."

These quotes outline Shopify's strategic vision for adapting to evolving commerce channels and Harley's personal commitment to managerial excellence.

Conclusion and Acknowledgements

  • Harry Stebbings expresses enjoyment of the interview, possibly due to a shared law school background.
  • Thanks are given to idin at Felicis for facilitating the interview.
  • Harry promotes following Harley on Twitter and himself on Snapchat.
  • Harry endorses the Eight smart mattress and Full Contact contact management solutions.

"Thanks Harry, appreciate having me on." "It's been so much fun. So thank you so much for joining me." "And again, a big thank you to idin at Felicis for making the introduction, without which this episode would not have been possible."

The conclusion wraps up the interview with expressions of gratitude and mutual appreciation, along with a nod to the individuals and companies that made the podcast episode possible.

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