"I think there's probably another year or so window (for mobile development firms) to grow organically," said Tariq Zaid, a co-founder of S3.
"You can parallel (the situation to) 2000, when people were paying lots of money for website development because there was no technology to do it. You can think of mobile in the same way."
An acquisition exit was always in mind for the three-year-old S3. The company was founded by three Carleton University students, quickly growing to 21 employees, with revenues increasing by 600 per cent in the past year alone.
Rob Woodbridge, founder of Untethered Mobile and Ottawa's monthly Mobile Mondays event, applauded Shopify's boldness in purchasing a company of S3's size, which he said is an uncommon move among medium-sized tech firms in Canada.
"It's not a cautious approach. Buying a 20-person team is not dipping your toe in."
With 15 per cent of its revenue coming from mobile, Shopify views mobile enhancement as the next logical step for its e-commerce platform, which saw 220-per-cent growth in online business done by stores in 2011 to $275 million. Major clients include the Beastie Boys and Angry Birds.
The company briefly considered going in-house, but the expense and time involved - not to mention the fact it would be competing with S3, just two blocks away - convinced the firm to purchase the expertise instead.
"A company shouldn't outsource making products," added Shopify founder Tobi Lütke. Since it was a core competency the firm was looking to build, "it just seemed too risky."
It was a better fit financially to buy the expertise rather than build it, added Bruce Firestone, a serial entrepreneur who regularly works with young startups through his incubator, Exploriem. Several of S3's employees got their start there, he said.
"It would've taken Shopify some time - probably measured in years - to accrue and train a mobile group that even after two or three years would be comparable to (Select Start)," he said.
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 of Select Start 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 S3's employees made the switch over to Shopify, except for a couple that had no logical fit, Mr. Zaid said. Past clients of the firm included Gazaro and The Ottawa Hospital.
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.
"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.
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 also picked up the 5,000-square-foot building next door where the Capital Music Hall used to be housed.
Its employee head count now surpasses 100.
ALL IN THE FAMILY
For a time, Tariq Zaid and the rest of the S3 team shared office space at its Rideau Street location with Gazaro - run by Mr. Zaid's brother, Sam.
Gazaro provides price intelligence for retailers, resellers and manufacturers and was named an OBJ Startup to Watch in 2010. It is just one of several companies Sam Zaid created.
He also helped build Apption, a local tech firm focused on service-oriented architecture and artificial intelligence frameworks, which ranked on the Profit Hot 50 List in both 2008 and 2009.
More recently, Sam Zaid founded San Francisco-based Getaround, a mobile and web service that matches car owners looking to rent out their vehicles with people needing a ride.
