Shopify: The E-commerce On-Ramp - [Business Breakdowns, EP. 01]

**Patrick O'Shaughnessy** (0:00)
Today, I'm excited to share with you all the first episode of a new show called Business Breakdowns. For the first time, we've launched this show in a new podcast feed, which is linked in the episode notes. So before moving on, make sure to hit that link and subscribe to the new breakdowns feed.
On the breakdowns feed, we've already released our first three episodes on Shopify, Chipotle and Alibaba. Soon we'll be releasing episodes on Costco, Visa, Twilio and many more. Over time, we plan to release episodes on every interesting business in the world with a variety of guests and hosts. I'll be doing some breakdowns too because it's one of my favorite ways to learn about a new company or industry. We're sharing this kickoff episode on Shopify with you here in our made podcast feed to make sure no one misses it. Shopify is so chock full of valuable lessons for all investors and entrepreneurs that we felt it was the perfect way to launch this new chapter of our mission to capture and share all the world's best knowledge on business and investing. So now, subscribe to the new feed and then enjoy our breakdown of Shopify. Business Breakdowns is sponsored by Tegas. We created Business Breakdowns to uncover the lessons and frameworks behind every business and that's what makes Tegas our perfect launch partner.
Much of the foundational prep for these episodes gets started with research powered by Tegas. With Tegas, you can learn about any public or private company directly from former execs, customers and industry experts, all of whom are in a position to offer unique insights into a company's growth, its customer value and its competition. What makes Tegas different is that you don't have to lead your own expert calls. It offers instant access to the world's largest collection of investor led call transcripts on companies like Coinbase, Hinge Health and Farfetch. All you have to do is log in and you'll get instant access.
Still want to do your own expert calls? Tegas also allows you access to experts for $300 a call, not the $1,000 or more that others charge. I can personally say that some of the most thoughtful investors in the world use Tegas and talk about it often.
If you're ready to go deeper on any company and you appreciate the value of primary research, head to tegas.co/breakdowns for a free trial. That's tegas.co/breakdowns.

**SPEAKER_2** (2:09)
This is Business Breakdowns.
Business Breakdowns is a series of conversations with investors and operators diving deep into a single business. For each business, we explore its history, its business model, its competitive advantages and what makes it tick.
We believe every business has lessons and secrets that investors and operators can learn from. And we are here to bring them to you. To find more episodes of Breakdowns, check out joincolossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts and podcast guests may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

**Patrick O'Shaughnessy** (2:54)
Today, we will be diving into Shopify. Shopify was founded in 2004 by Tobi Lütke and Scott Lake around their original problem of why it's so hard to build an online business when they struggled to open an online snowboard equipment store. Today, Shopify's goal is to make commerce better for everyone and it's used by more than 2 million merchants to run their online businesses. And it's essentially an on-ramp for people looking to sell online.
To help us break down Shopify, I'm joined by co-host, Zack Fuss and our guest, Alex Danco, who works on the money team at Shopify. To really understand Shopify, you have to understand its different business units, core merchant services, ecosystem and the new shop platform and the role they each play in making commerce easier and better for merchants. We begin this breakdown by covering each of those business units and how they compare to Apple's business lines.
We then dive deep into how Shopify makes money through the first and second derivative of their merchant success and how Shopify thinks about friction in e-commerce. We close with an incredible analogy of Shopify and StarCraft and the tools that Shopify has built into the still nascent world of e-commerce. I hope you enjoy this breakdown of Shopify.
So Alex, when I've had Tobi on the show before a lot of our conversation was around the philosophy of product. It was very clear from that conversation that Shopify fundamentally was a product first company and that his genius, I think he may be a genius in a couple of categories, but one of the categories in which he's a genius is in product maintaining an incredibly high quality bar, as he put it, which really has influenced my thinking ever since. Because of that angle, I think a great place to begin our breakdown of Shopify is there with product. I think it's a complicated product to explain and understand there are multiple parts to it. And so to begin as a means to understand the business, we'd love if you could first explain to us the nature of Shopify's product.