

Profitable & Proud: Shopify - xal
http://37signals.com/svn/posts/2378-profitable-proud-shopify

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adamhowell
Not to be a stickler, but the series plainly says "'Profitable and proud' is a
Signal vs. Noise series that profiles companies that have $1MM+ in revenues,
didn’t take VC, and are profitable..."

And here, in just the second post of the series, a company states "taking this
investment from John H. Phillips was probably the best decision we ever made.
Apart from allowing us to meet payroll for the first year..."

That's not exactly "didn't take VC".

~~~
jasonfried
This update was just posted to our blog:

This was originally posted as part of our “Profitable & Proud” series but
commenters rightly pointed out that Shopify’s angel investor broke the “no
funding” rule that is part of the series. We’ll leave the interview up but
we’re removing it from the P&P series. We’re sorry about confusing our readers
and Shopify (we are the ones who originally approached them about
participating). Thanks to all who pointed out the error and stay tuned for
another P&P profile that does fit the bill.

~~~
sajid
This is an odd decision. The Shopify story seems to be consistent with both
the letter and spirit of the P&P series.

It's consistent with the literal interpretation of the rules because they
state "didn't take VC" and not "didn't take funding".

*See my earlier post in this thread to see why I think it's also consistent with the spirit of the P&P series.

~~~
dhh
The key is that we want companies for this series that are bootstrapped.
Companies that didn't take outside funding to run operations, but either put
in their own money or didn't go full-time until they were profitable.

Shopify is still a great story and we're leaving it up. It just didn't fit the
narrow criteria of the category we created.

~~~
asdflkj
The fact that you couldn't easily tell whether the company fits your criteria
shows that your criteria are pretty much meaningless. Is there a reason for
all this, besides to glorify your own company, which fits the criteria?
"Ideology" is the word that comes to mind. You create arbitrary divisions, and
then drum up emotions to make it seem like people on the other side of the
imaginary fence are different and unworthy.

~~~
tuxychandru
Beyond ideology, this series can help entrepreneurs in regions where VCs are
highly conservative and bootstrapping is the only way you can even take risky
business decisions.

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gr366
Their Unicorn system for paying out bonuses is a great idea: Revenue sharing
across the entire staff, but distributed based upon input from the staff.

~~~
petercooper
It seems like a great _idea_ and if it works in practice, great. It's the sort
of idea that could cause bad feelings to fester with the wrong group of people
though. [Warning: gross generalizations ahead..] Think what happens when
grumpy-but-reliable "server guy" doesn't ever get any bonuses because people
don't understand what he does while "pretty girl on reception who buys candy
bars for everyone on Thursday" does OK, etc.

~~~
run4yourlives
This would be less of an issue with a smaller team like Shopify. As you get
bigger you're right, it starts to become a popularity contest. At < 30
employees though, everyone knows who is making real contributions.

~~~
xal
I'll let you know soon. We are over 30 people already ( 2 people started since
the interview ).

The point of the system is that for a bonus system to work well the people who
give the bonuses need to know about the individual people's contributions.
From the company perspective, people who are very helpful to other employees
are very valuable and Unicorn rewards this. People who finish big and hard
projects are obviously valuable to the entire company and Unicorn rewards
this. People who may be solid but are grumpy and don't like to show off their
accomplishments... well... If they leave over unicorn and end up being
replaced with people who do the things that are rewarded by the system then
I'm happy with this outcome.

So far it's been a huge surprise to see where the money goes in Unicorn and
I'm thrilled with it.

~~~
petercooper
_People who may be solid but are grumpy and don't like to show off their
accomplishments... well... If they leave over unicorn and end up being
replaced with people who do the things that are rewarded by the system then
I'm happy with this outcome._

Do you prefer less-talented, extroverted employees over more-talented,
introverted ones?

~~~
xal
Being a (hopefully) talented introvert myself I definitely don't optimize for
that :-)

I don't think it's fair to see our system so black and white. First of all,
i'm sure it has problems. Probably many. However, bonus systems all have
problems. The traditional top down, performance review style bonus system
definitely works best for the extroverts. From what i've seen of unicorn, the
people who are most rewarded are the quiet but helpful kinds.

Also, if unicorn helps to get people into the habit of sharing their
accomplishments with their friends and coworkers then I think that's worth it
all by itself. You have to share your accomplishments. Everyone loves to work
with people who do great stuff. But if those people don't tell you about the
great stuff they do then you cannot know about it and you cannot partake.

~~~
catch23
Any chance of sharing some screen shots or code on how one actually awards
accomplishments? Is it like a badge system where there are a set number of
achievements, or is it something like a "free form" achievement where one
states how it can be solved and a way for the system to know when it has been
solved? Is it something like: "Fix bug #30 and get $10"? Or is it something
like: "Solve 20 bugs in one week and get $10?"

I'm just thinking of doing something similar for my own little shop too...

~~~
xal
I described it below. I think your approach would vastly overcomplicate a
system like this. It's essentially a freeform money transfer system. You click
on a person, you enter an amount and we have a ledger system that moves the
money from your bonus budget into someone else's bonus receivables.

Originally we thought we will have to protect against bonus trading but
instead we simply trust our employees as we should. If two people start
trading bonuses then this may be a fireable offense.

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maukdaddy
_sigh_ These types of companies sound like amazing places to work.

At the same time, it is somewhat depressing because they don't seem to hire
non-programmers. I'd love to work in an environment like this, but do any of
these awesome companies hire 30-year old MBA grads who are technical but don't
program?!

~~~
carbocation
What does it mean to be technical, but not to program?

~~~
maukdaddy
Personally, it means that I have programmed in a prior life, understand web
programming (rails, javascript, et al), can talk intelligently about
technologies, but don't want to actually program for a living.

EDIT: Another important point - understanding the business implications of
technologies. A lot of people understand the business side, or understand the
technical side, but few really understand how they fit together, and how their
relationship truly impacts a company.

~~~
carbocation
Thank you; great answer.

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ntulip
"We use Ruby on Rails, we are in the ecommerce space, and we are profitable.
That seems to make us a Perfect 10 in the VC world."

\-- When did Ruby on Rails become a driving factor for a VC?

~~~
xal
Almost from day one. This has probably changed now but don't forget, Shopify
is one of the biggest Ruby on Rails sites on the web and I've been part of the
Rails Core team since it's inception (until recently).

Rails stood for something new, it was a paradigm shift of sorts. That's what
every VC in the world looks for.

The VCs who correctly predict which technologies fuel innovations always do
very well. See Peter Fenton of Benchmark to illustrate the point at hand.

~~~
cake
Do you mean the spotify.com frontpage or the content loaded in the Spotify app
?

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subpixel
It's worth noting that Shopify totally reevaluated their model and changed not
only their prices, but what they charge their customers for, well after
launching and becoming quite popular.

I think the how and why of that decision and process would be really
interesting to HN readers trying to put a price on their own product(s).

~~~
xal
Oh boy. Changing our business model was one of the worst days of my life. I
recently relived that day when I saw the ZenDesk thing unfold. Luckily we had
grandfathered all our customers when we did the big switch. The problem was
that our old system was setup so that Shopify was very cheap for people who
weren't successful and became quickly expensive for people who actually sold a
lot of product. Everyone who expected to setup a 1M revenue store ( e.g.
everyone ) picked up a calculator and realized that.

Once we changed to more of a subscription model for our pricing we ended up
getting a lot more customers who build successful businesses. Even though in
reality our product became somewhat more expensive overall.

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alanh
Humorous to see a HN front page article bash Yahoo Stores. (IIRC, PG’s well-
known essay on why he loves Lisp talks a lot about building what would become
Yahoo Stores.)

~~~
xal
Yahoo stores was a great product for as long as Paul worked on it.

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ssn
One of the reasons for Shopify's initial popularity was their plan that only
charged a transaction fee. No setup or monthly fees. They quickly abandoned
that and now all programs have a monthly fee.

