Insiders discuss how the deal came together and reveal the ensuing celebrations
It was no secret at the start of the year that Shopify wanted to improve its mobile offerings.
© Joël Côté-Cright
Shopify co-founder Tobi Lütke, left, and Select Start Studios co-founder Tariq Zaid.
What caught some people off guard, however, is how quickly the local e-commerce platform provider boosted its capabilities with the acquisition of Ottawa-based Select Start Studios, which was officially announced on Feb. 2.
While financial terms were not revealed, a quick survey of disclosed merger and acquisition activity in Ottawa suggests this is likely one of the largest deals of the year, and one that involves two of the city’s most dynamic local firms.
The co-founders of the companies, Shopify's Tobi Lütke and Select Start Studios' Tariq Zaid, sat down with OBJ to discuss how the deal came together.
Lütke: We talked (to Select Start) for the first time on Black Friday last year. It became apparent that we weren’t doing a good job of transitioning from a web application company to doing the same high-quality work for mobile phones.
Zaid: When Shopify made the offer, my first reaction was to go home and think about it for a while. It was a discussion that (co-founders) Josh (Tessier), Adam (McNamara) and I had – whether or not we were ready to let go of Select Start. Once we decided to go for it, the acquisition happened relatively quickly. We asked our staff not to talk about it, but that didn’t happen.
Lütke: It was the worst-kept secret.
Zaid: By the end of January, we were all walking into Shopify for our first day of work. The weather was really bad and gloomy. Everybody brought their work laptops and we all scurried over.
Lütke: It seemed a bit too much like a school excursion. Select Start’s office was at 185 Rideau St., which was our old office and just down the street. After the acquisition, I have to confess, I felt like I was pretty late to that party. I think a lot of people predicted (the deal) even before I thought about it. The companies are fairly similar.
Zaid: We actually tried to model our culture after Shopify. Everybody from Select Start just blended super well. There wasn’t much transition time.
Lütke: The three people who ran Select Start, all three of you are now directors in the company, running some of the largest parts of Shopify. In a sense, it’s almost been a kind of reverse takeover.
Zaid: It definitely feels like we’ve added a lot of value already.
Lütke:This is really one of those situations where one plus one equals three. It’s the way tech acquisitions should be, instead of just a large company eating a small company. As soon as we find something else like this, we will do more acquisitions. Likely next year, but I’m not sure what it would look like.
Zaid: It will definitely be fun to be on the other side of it this time.
SIDEBAR: THE HARDEST PART
While integration of the two companies was relatively easy, the merger came with one big challenge, said Select Start Studios co-founder Tariq Zaid.
When Select Start was purchased, it had a fair deal of prior commitments. Both parties decided it would be best to honour those contracts, which meant that part of the team was still working on Select Start projects for about six months.
“Some employees got to transition right away and got to start doing really cool product development for Shopify, but others were still working on the agency side of the business,” Mr. Zaid said. “That was the hardest part.”
HOW THEY CELEBRATED:
The Select Start co-founders took their team to Mont-Tremblant and rented two chalets after signing the deal.
Executives from Select Start and Shopify also went for dinner at Play in the ByWard Market to celebrate the deal’s closing.
The first Friday after the two companies came together, they had a “block party.” Shopify had yet to acquire the 5,000-square-foot former Capital Music Hall and didn’t have space to fit everyone in one location, so the four corners of the office became mini-parties.
“It was pretty clear that a bunch of the Select Start guys got overly excited with all the free beer,” Select Start co-founder Tariq Zaid said.
“This company encourages hard partying,” said Shopify founder Tobi Lütke. “So it was perfectly alright.”
MOBILE TRANSACTIONS AT SHOPIFY:
7%: Black Friday 2011
10%: At the time of the acquisition of Select Start in February
50%: Projection for Christmas 2013
SELECT START PROFILE:
A local mobile app development agency founded by Tariq Zaid, Adam McNamara and Joshua Tessier in 2009
Reported 600 per cent revenue growth from 2009 to 2011
Grew from three employees to 21 in two years
Past clients included Gazaro and The Ottawa Hospital