Best Ottawa Business Award Winners: CEO of the Year

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Tom Pechloff
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The Best Ottawa Business Awards are coming to the newly-renamed Shaw Centre Nov. 20. In the days leading up to the awards ceremony, OBJ  will feature some of the recipients.

Today, we feature the CEO of the Year Award winner.

Shopify CEO Tobias Lütke

Tobias Lütke shifts uncomfortably in his chair.

“You are the second person to point that out to me,” says the CEO of Shopify during a recent interview with OBJ.

His response is to a very simple question: Do you own a tux?

“I didn’t know it was a black-tie event,” he says, referring to the upcoming Best Ottawa Business Awards, where he will be honoured as CEO of the Year. “I was going to show up like this.”

Mr. Lütke is sporting a newsboy cap, a collared black shirt and well-worn jeans, far from the ubiquitous power suit worn by the typical CEO.

But Mr. Lütke is far from the typical CEO, and the e-commerce juggernaut he has built and continues to run is far from a typical company.

In the past 12 months, Shopify closed a $100-million venture capital deal, reached the 100,000-customer mark and moved into its brand-new six-floor headquarters in Performance Court at 150 Elgin St.

Not bad for a company that even Mr. Lütke concedes has been a happy accident.

The native of Germany was on a Canadian snowboarding vacation in Whistler when he met his future wife, who is from Ottawa.

That meeting initially blossomed into a long-distance relationship. The couple then spent a short time together in Germany before settling in Canada’s capital in 2002.

After the move, Mr. Lütke kept his job as a programmer for Siemens, working remotely, but eventually both sides decided it was time to part ways.

“We sort of agreed that maybe that was a bit of a stretch – time zones and everything,” he says. “That was OK too. It was interesting work, but I got a bit burned out.”

So he turned to what brought him to Canada in the first place, starting up an online snowboard store. When he couldn’t find a platform he liked to sell his product, the programmer in him re-emerged and he built his own.

Creating Shopify, he says, was never the goal.

“If someone would have built Shopify like a month before, I would have found it and used it and that would have been the end of it,” he says. “There was no need to build a company if someone would have created something like this. But no one did, so someone had to. So it might as well be us, right?”

The “us” was Mr. Lütke and Scott Lake, partners in the snowboard venture, as well as Daniel Weinand, who came on board for the transition to Shopify.

That transition, Mr. Lütke says, never had the eureka moment during which they realized they had stumbled on to something much larger than selling snowboards. But it didn’t take long before e-mails came in asking Mr. Lütke if he would ever consider licensing the software he had developed.

Over time, he decided that if he modified the software, he could go from running one online store to perhaps operating as many as 10.

“I wasn’t thinking hundreds of thousands,” he says.

In the beginning, Mr. Lake was Shopify’s CEO, while Mr. Lütke served as chief technology officer. That all changed in 2008, when Mr. Lake left to pursue other interests.

Mr. Lütke says that at the time, he considered hiring another chief executive so he could continue concentrating on his area of expertise, taking care of the technology side of the operations.

“I have no background in business. I knew the bare fundamentals of it, but I really felt very much out of my depth. Initially, I didn’t want to be CEO,” he says.

Being out of his depth, however, played into one of Mr. Lütke’s greatest passions.

“I’m a very committed learner,” he says. “I love learning. That’s just what I do. I love information, I love new skills and so on.”

An early investor in the company convinced Mr. Lütke he was, in fact, the right man for the job. So the learning began, accelerated by trips to Silicon Valley, where venture capitalists would ask him questions he couldn’t answer, partly because he didn’t know the answers, but also because he wasn’t even familiar with the terminology the investors used.

“So I wrote down those terms and then went back to my hotel room and went on Wikipedia to look it up and entered my database and see what the answers would have been … Through this process, I felt like I got an MBA in a month. It was amazing,” says Mr. Lütke, who dropped out of high school at 16 because, he says, school was very good at getting in the way of all the things he wanted to learn.

Another learning tool was a group of like-minded individuals who called themselves the Young Entrepreneurs Club. Its members included Aydin Mirzaee, who was launching Fluidware at the time, and Luc Levesque from TravelPod. They would meet regularly at a coffee shop in the Glebe.

It wasn’t long before a young Montreal T-shirt entrepreneur who had come to Ottawa to attend law school got wind of the group. That is how Harley Finkelstein, who would become Shopify’s chief platform officer, met Mr. Lütke for the first time.

Mr. Finkelstein says his first encounter with Mr. Lütke was “mind-blowing.”

“Here’s a guy who was so frustrated, he decided, ‘No. I’m not going to accept mediocrity. I’m not going to accept a mediocre product. I’m actually going to go ahead and build my own piece of software to sell my snowboards and I’m going to do that and I’m going to do that better.’ Talk about ambition,” he says.

Mr. Lütke says that while Shopify still wasn’t exactly profitable and he wasn’t paying himself a salary when he took over as CEO, the “bleeding stopped” at the company around that time. Things were improving, but he still struggled with the transition to the top job.

“I needed to learn how to derive satisfaction from other people kind of doing the things we needed to do instead of me going to do it, and actually it wasn’t so smooth,” he says. “I very often went and just did it myself. It wasn’t easy, but luckily, I have very patient people around me and they cut me a lot of slack.”

Part of the process was realizing that at the end of the day, he was still a builder. As a programmer he built software, but as a CEO, he was now building a company and developing people along the way.

Mr. Lütke is always quick to share credit for Shopify’s meteoric rise with the team around him.

“The best thing about Shopify’s success so far has been this incredible journey of personal growth that so many people have experienced, including me. So many people have taken it way, way, way further here at Shopify then they would have imagined that. I love that.”

While Mr. Lütke prefers to deflect praise to his co-workers, Mr. Finkelstein is quick to dish it right back, calling Mr. Lütke the smartest man he has ever met. Mr. Finkelstein says Mr. Lütke’s leadership style has propelled the company to where it is today.

“As an individual, as an executive here, the reason I will work for Tobi the rest of my life, if he’ll have me, (is) he constantly pushes me to be better. There is no such thing as resting on our laurels around here,” Mr. Finkelstein says.

He chuckles when recounting a story from about a year ago.

“He came into my office and said, ‘Look, I think we should target larger stores and I think you should do it, and now go and do it,’ and frankly I knew nothing about enterprise commerce. I knew nothing about long sales cycles. I had to build a sales team around this thing from scratch.”

Twelve months later, Shopify Plus’s list of customers includes the likes of Gatorade, Budweiser and Google.

“We all kind of knew that had to happen,” says Mr. Finkelstein, “but it was his wherewithal, his focus to say, ‘No. Let’s go do this right now. You’re going to go do it and here’s what the destination looks like. You figure out what the journey should be.’”

Mr. Finkelstein says Mr. Lütke leads by example by pushing himself. For example, he began working with an executive coach a couple of years ago.

“Not only did he start seeing a coach, he started talking about the fact he was getting this great value from coaching,” Mr. Finkelstein says. “Most CEOs wouldn’t admit that they need help and he’s constantly telling us how he’s getting help and how he’s getting additional support and he’s telling us about the efficacy of him having an executive coach.”

Today, every executive at the firm has a coach, and Shopify employs five full-time people in the position.

Mr. Finkelstein calls Mr. Lütke a visionary, but says that doesn’t necessarily mean he makes a lot of long-term plans. Mr. Lütke agrees.

“We feel that we are ... building a company in a world which is changing so quickly, it is much more important for people to react very quickly to outside changes,” he says, adding that stubbornly sticking to a predetermined strategy often makes it difficult to adapt to new challenges.

Dealing with constant changes in the marketplace, he says, is “absolutely 100 per cent” his biggest challenge in running Shopify.

“We can’t be like the software I found 10 years ago which were built towards outdated assumptions – even in 2004, which was before things actually started changing quickly,” he says.

As for the future, Mr. Lütke, 34, says he still hopes to be running Shopify 20 years from now.

“If you navigate this right, I think it’s going to be a blast, this whole thing. I think we’re going to have lots of fun,” he says.

Mr. Finkelstein agrees, saying Mr. Lütke is doing his life’s work at Shopify.

That life also includes wife Fiona, two young sons and a third child on the way in December.

Mr. Finkelstein says the inspiration he draws from his CEO doesn’t stop in the boardroom.

“Tobi and I live right by each other. We carpool every day together to and from work. Tobi gets home every single night to have dinner with his two sons and his wife … I think that is something to be admired,” he says. “You can be an incredible entrepreneur and an incredible father and incredible husband. The two are not mutually exclusive.”

The learning continues beyond the workplace as well, says Mr. Finkelstein, noting not many people start learning the guitar at 32 like Mr. Lütke did.

And how is he two years later?

“Pretty damn good,” according to Mr. Finkelstein. “Not only does he know how to play the guitar, but he knows about guitar theory, he knows the history of the guitar, he knows where they were made, the wood that was used. He knows about new technology with different amplifiers and different pedals. The amount of information that he is constantly consuming is just amazing.

“He’ll probably kill me for saying this, but one day we can all go see him perform in concert.”

Wearing jeans, no doubt.

 

 

SHOPIFY’S GROWTH

Total Online Stores

2009: 6,656

2010: 11,323

2011: 18,200

2012: 41,910

2013: 81,939

2014: 120,000-plus

 

 

GMV

2009: $59M

2010: $124M

2011: $275M

2012: $742M

2013: $1.68B

2014: Nearly $3B

Organizations: Siemens, Wikipedia, Young Entrepreneurs Club Gatorade Budweiser Google Online Stores

Geographic location: Ottawa, Germany, Canada Whistler Scott Lake Silicon Valley

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