Tobi Lutke explains what the VCs who passed on Shopify got wrong Tobi recounts pitching Shopify to VCs on Sand Hill Road a few years after founding Shopify. Investors passed because they thought the addressable market was too small. At the time, there were about 40,000-50,000 online stores, and even if Shopify captured 50% of the market, that still wouldn’t be a venture-scale business. When Tobi ran into the VC partner a few years ago, the partner asked Tobi what he missed (Shopify is valued at almost $100 billion today). Tobi explained: “You were actually correct, but what you didn’t realize was that Shopify was the solution to the very problem you identified. The reason there was only 40,000 online stores was because it was hard, expensive, and everyone who tried ran into all these brick walls of complexity, which Shopify, one after another, smoothed over and made simple to do.” Tobi believes this is a common mistake: “What a lot of free-market thinkers don’t understand is that between the demand and eventual supply lies friction. And I actually think that friction is probably the most potent force for shaping the planet that people just generally do not acknowledge… That was my theory when I turned my snowboard store into Shopify: there was a lot more people like me except there was too much friction which we needed to solve. And Shopify has proven out that every time we make the process simpler, there’s more consumption. At this point, we have a million merchants on Shopify, which is a mind-blowing number. So friction is a major component, and it’s something that software is uniquely good at reducing.” Video source: @danmartell (2019)

I’m joining @saranormous, @prnvrdy and the team at @conviction! The past two years have been the best. I’ve enjoyed the freedom to travel with my family and (assistant) coach my son’s Little League teams, all while continuing to try to help some of the founders and companies I’ve worked with over the past decade. These two years have confirmed that I love hanging out with my family … and it’s really fun to spend time with amazing, ambitious, impatient entrepreneurs. We are living through the most exciting technological change of our lifetime (of anyone’s lifetime?). We are on the cusp of having an infinite supply of intelligence. We can literally just convert electricity into intelligence. It’s hard to sit that one out. I have known Sarah Guo for years. She’s one of the smartest, hardest-working, most connected and admired investors out there. Founders love her. Over the past two years, she and the team at Conviction have built one of the most exciting new firms in years. In just two years they have partnered with @harvey_ai, @MistralAI, @SierraPlatform, @cognition_labs, @HeyGen_Official, @cartesia_ai and more. That’s pretty good. In a short period, Sarah and Pranav have emerged as the partners of choice for AI-native companies. Even more impressive than the track record is the ethos, ambition and culture of the firm (. At Conviction, we are building a small, hands-on team that deeply understands the technological revolution that is underway, that can serve as a connector between the builders at the center of it and that has the patience, independence and conviction to take an extremely long-term perspective. And it’s fun to be back at a startup! There are cardboard boxes everywhere and a random humanoid robot hanging out in the kitchen. The most fun I’ve had in my working career was the early, fast-scaling days at Facebook – it’s fun to be back. I have been fortunate to work with some amazing teams and founders over the past decade (thank you!). Luckily I’ll continue to work with a few – @getcaptionsapp, @clay_gtm, @NotionHQ, @Rippling, @Statsig – for the rest, please don’t be a stranger. I am grateful to Sarah, Pranav, Christy, Niki and Vivian for welcoming me in and trusting me to be part of the team. And lastly and most importantly, I am so grateful to my wife and my kids who have hung out with me for the past two years and have been supportive of this new journey.

There's been debate around @clay_gtm's moat and defensibility since its $1.25b valuation announcement last week. Here's my take:

Canadian-founded Clay (@clay_gtm) achieves unicorn status with $57.5-million raise. #CDNtech