Shopify, one of Ottawa's most active tech companies, has acquired fellow ByWard Market firm Select Start Studios.
© Submitted photo
Shopify founder Tobi Lütke
The takeover is expected to accelerate Shopify's mobile acumen as Select Start specializes in mobile, including services in design, development, and publishing.
The search for an acquisition target took Shopify outside of Ottawa, but it decided to take over Select Start due to compatibilities in the company's culture with Shopify as well as its expertise, said Tobi Lütke, Shopify's founder and CEO.
The companies first got to know each other when Shopify was considering making an app with Select Start, he added. Further, a lot of developers at each firm had friendships with the other.
"We got to know each other really well through this process, but there were lots of friendships going on between the people here and there," he added.
With 15 per cent of Shopify's business coming from mobile – a large proportion more than last year – the company was looking for ways to make the experience more friendly for customers using phones and tablets.
Shopify decided to purchase the expertise rather than trying to develop it in house; Mr. Lütke joked that his new colleagues probably spent their time in the shower thinking about mobile experiences, while Shopify employees thought more about the broader e-commerce market.
"It didn't make sense to outsource it, so rather than trying to build it internally and compete against us for mobile talent, they bought us," said Tariq Zaid, the co-founder of Select Start.
"We were able to come to a deal that was good for everybody."
Select Start has undergone explosive growth since it was founded in 2009. It recently reported 600 per cent revenue growth in the past year as it grew from three employees to a high of 21.
What the firms will do next is still under wraps, but Mr. Lütke said the technology they come up with will "more than offset the purchase price," which was undisclosed.
All three co-founders will take on new roles at Shopify. Mr. Zaid will be director of strategic initiatives, Adam McNamara will be director of mobile products, and Joshua Tessier will be director of mobile development.
Most of Select Start's 21 employees will make the switch over to Shopify, except for a couple that had no logical fit in the new firm, Mr. Zaid said. Past clients of the firm included Gazaro and The Ottawa Hospital.
Employees from Select Start will move from their current Rideau Street location to Shopify's office, which is a couple of blocks north near York and Cumberland streets.
The takeover comes just weeks after at least one key investor in Shopify expressed an interest in moving towards mobile.
"Over the next few years, mobile-initiated or consummated transactions will be a huge part of what we do, not only from a store administration standpoint, but also making sure that items display the right way," said Amish Jani, founder of FirstMark Capital, which participated in Shopify's two venture capital rounds, in a December OBJ interview published in January.
"Search and discovery needs to happen in a more targeted manner. So yes, we see mobile to be a big area of activity."
Shopify was extremely active in 2011, picking up new real estate, funding and business.
Business done by stores using Shopify's online store platform that year increased by 220 per cent year-over-year in 2011, to $275 million. Its major clients include Angry Birds and the Beastie Boys.
In October, Shopify rang up its second round of funding, scoring $15 million from Bessemer Venture Partners, FirstMark Capital, Felicis Ventures, and Georgian Partners.
The firm moved to a new 12,000-square-foot space and in addition, picked up the 5,000-square-foot building next door where the Capital Music Hall used to be housed.
Employee numbers now stand at over 100.