Shopify - Bessemmer Venture Partners

Target: Shopify

Investor: Bessemer Venture Partners

Date: 2010

Source: Link




Valuation: $20M pre-money

Investment Amount: $7M


Shopify sells a simple SaaS solution that enables a business to quickly setup and run an online retail store. Shopify's core features included customizable storefronts, product organization and editing, basic inventory management, payments, and order tracking. Merchants can integrate additional features through third-parties on Shopify's app store.

Bessemer Venture Partners invested $7M in Shopify in 2010. At the time, Canada had not originated any large software exits and Shopify's current shareholders thought a $50m exit was their most optimistic outcome. In addition, many investors were skeptical that SMB software businesses could generate venture returns. Five years later, Shopify went public with a valuation of $1.27B.


Alex Ferrara's commentary on his investment for Shopify makes the memo a fun read. Shopify was Ferrara's first lead investment as a partner at BVP which added to the anxiety of investing in a Canadian software startup that was penetrating an unknown market with difficult customers. Ferrara's anxieties show how hard it can be to invest in a unproven market or team, even when the fundamentals of the business are positive.

Shopify's rapid growth and user-friendly product design were key components of winning BVP over. In addition, Shopify's ability to attract over 50 third-party apps to a barely-trafficked app store demonstrated that Shopify could evolve into a differentiated platform business that could service many different kinds of online businesses.

SWOT Analysis


  • Profitable
  • Shopify's product was (and still is) extremely user friendly while also providing the customization required for more sophisticated merchants
  • Growth: users had grown +81% in the previous year (mostly organic) and MRR grew +151% Y/Y
  • Tobi Lutke (CEO and founder) had shown good product instincts and was capable of recruiting top local talent


  • SMBs have a high churn rate, especially during the first three months
  • Tobi lacks experience as a first-time founder


  • Marketing: Shopify had only one marketer
  • International expansion and product localization
  • Expanding the applications available in the Shopify App Store


  • At the time it was unclear if the SMB market was large enough to generate venture returns
  • Low barriers to entry

Key Takeaways

Investment Memo Tips & Tricks