CPA Ontario

A Northern Unicorn Continues to Soar

Chartered Professional Accountant Russ Jones is leading Ottawa-based Shopify to new heights

Once considered a mythical creature, the rare and elusive Northern Unicorn has established a home in our nation’s capital, as Shopify Inc. continues to post impressive growth numbers. The Ottawa-based provider of e-commerce platforms officially claimed “unicorn” status (a term bestowed upon tech startups valued at more than a billion dollars) when it went public in May 2015, but the company has continued to build on its momentum.

One year after posting one of the top tech IPOs of 2015 (and the third most successful Canadian tech IPO of all time), Shopify has recorded revenue growth of 95 per cent over the past year, with Q1 revenue of $72.7-million and the signing of a number of high-profile clients, including Jones Soda, Nescafé, the Golf Channel, and celebrities Ellen DeGeneres and Kanye West, who are using Shopify’s e-commerce platform to sell their product lines. The success of the company has even spawned takeover rumours by a number of tech giants.

The Shopify Model

Shopify’s business model consists of two elements. First, the subscription solution portion, which is the predictable, recurring SaaS part of the revenue, also includes the sale of applications, themes and domains. There is also a success-based component that Shopify calls Merchant Solution, which includes payments, transaction fees, partner referrals and the sale of point-of-sale hardware.

The company’s chief financial officer, Chartered Professional Accountant Russ Jones, says Shopify’s platform allows merchants to sell anywhere — whether online, through sources like Facebook or Pinterest, or through traditional bricks and mortar locations or pop-up shops.

Jones explains that there are two parts to the multi-channel platform. First, there is the front end, representing the various sale channels that a merchant can use to sell their products. For most merchants, this is the creative and fun part, as they determine how to present themselves to customers. Second, Shopify has a single back end, the operational part of its platform, which includes inventory management, payments and shipping.

“This part can be the glass ceiling for how big and quickly a merchant can grow their business,” says Jones, who says that, without a strong, integrated back office, a merchant would otherwise have to spend their time reconciling items like orders to payments, to cash in the bank.

The company has a young and dynamic workforce that is very innovative in attracting merchants. Much time and effort is spent on recruiting the best candidates for the role and ensuring they are well-trained. Even people who are hired to work in areas such as accounting or administration initially spend time in customer support to help them better understand both the product and the merchant, says Jones.

“We also have a team of coaches that are assigned to help develop leadership at Shopify. So we have a workforce that we invest heavily in, [in] terms of their development as the next leaders for the company.” The company has been rapidly adding staff to new offices in Waterloo, Toronto and Montreal, and is well-known for its collaborative workplaces.

Russ Rings the Bell

Jones is the latest in a long line of tech sector CPAs with startup success. He worked for Mitel, Newbridge, and Watchfire, where he was the company’s first CFO. Just prior to joining Shopify, he spent three years in San Jose as CFO at Xambala, a high frequency trading company, and CFO at software firm BDNA.

He joined Shopify in 2011, the same year the company changed its name to match its product. The company was founded in 2004 as Jaded Pixel Technologies by Tobias Lütke (who remains CEO) and Scott Lake, who left in 2008. Jones was a key figure on the company’s road show to meet with potential investors and played a leading role in Shopify’s mammoth IPO. “I don’t feel we could have executed the IPO any better,” he says, “and having the honour of ringing the bell for the opening trade is definitely a career highlight.”

Jones believes Shopify’s success ought to encourage more Canadian tech companies to take the IPO leap, noting that conditions for tech companies have been improving recently, as evidenced by two other notable IPOs in the Ottawa market: Halogen Software and Kenaxis.

“I think there are a lot of great companies getting to the right stage now where this is an opportunity for them to take their company to the next level. Canada has a lot of great technologies … having a few of us go out now will help pave the way.”

Takeover Rumours

“This year is an investment year,” said Jones in a May investor call, following the release of the company’s Q1 figures; indeed, the company recently reported a higher than expected operating loss. As of May, however, Canada’s Northern Unicorn has surpassed 275,000 merchants worldwide recording total sales of $17-billion, in just 10 years since the launch of its platform.

Its continued success has prompted rumours of takeover interest from the likes of Google, which is seeking to expand its cloud computing platform, as well as Facebook, Amazon and eBay.

“Shopify is built for the long term,” says Jones. “We really try to educate people in terms of how to start a business, how to be successful. Our motivation here is that, as clients succeed, Shopify succeeds.”


— D&A