Shopify has grown so quickly, it’s tough to even comprehend.  From A $1.6B run rate a year ago to $3.2B today.  Wow.

Zoom is the most obvious “Covid Beneficiary”, but Shopify, in many ways, isn’t far behind:

Ok, the issues marching to $4b in ARR are a bit removed from what most founders experience.  But, there are still many interesting things we can learn from Shopify, especially since it sells to so many SMBs, has been late to go upmarket, and combines a payments/fintech element with pure SaaS.

So what can we all learn from Shopify?

1.  Moving from a 14-day to a 90-day free trial really, really worked.  So are you sure your trial needs to be so short?  When Covid hit, Shopify took care of its customers, extending many free trials from the customary 14 days to 90 days.  What happened?  Only good things.  MRR took off:

There are several great lessons here.  First, make it easier on your customers, not harder.  That almost always pays off.  Sales might want a shorter and tighter “gate” for free to convert to paid.  But maybe don’t do that if it isn’t best for the customers.

Making the free trial even more free worked for Shopify. It works for Zoom and Slack, too.  It can work for you.

2. Subscriptions can fuel payments and merchant revenueBill.com is seeing something similar.  As more and more SaaS apps add a payments element, that payments element can really scale over time. It’s now bigger than Shopify’s SaaS revenue, by far:

3.  You don’t have to leave your SMBs behind as you go upmarket.  You can be both SMB and at least somewhat enterprise at the same time, without leaving your SMBs behind.  We also saw this with Zendesk here.  Both Shopify and Zendesk have added rich enterprise offerings over time, but despite the larger ACVs of bigger customers, SMBs have kept up as a percent of revenue.

So you don’t necessarily have to leave your SMBs behind as you add enterprise offerings.  Many will tell you that you sort of have to, to scale.  You don’t have to in many cases.

It’s also important to note that Shopify and Zendesk, while they do serve many large enterprises, aren’t traditional enterprise software.  They aren’t as feature-rich as typical $500k-$1m+ ACV products.  So that’s part of the trade-off here.  But they’ve made it work, since their SMBs have continued to scale to $1B in ARR and beyond.

4.  Referrals and agencies can really work as channels with SMBs.  We’ve seen this with Hubspot as well.  37,400 agencies and web design shops referred a customer to Shopify in the last 12 months.

What are you doing to really incent agencies, designers, third parties, partners, etc. to promote your app?  Are you doing enough?  Do you have a team here?  Do you have anyone at all that is 100% dedicated for them to work with?

5. Be patient with your ecosytem and partners.  You can almost always monetize them more later than you can now.  A mistake I see so many SaaS start-ups make is arguing too much over revenue sharing with partners in the early days, and/or trying to “overmonetize” their budding ecosystems.  My advice is almost always just this: wait.  Err on the side of undercharging or not charging your partners in the early days.  Zendesk still doesn’t charge most of its partners anything.  Later, you can charge more.  Once you’ve won the market.  What matters most is your ARR later, and dominating the market today.

We can see this clearly with Shopify, which waited all the way until 2020 to really monetize its partner base heavily.  And the payoff was big.  20% of their 2020 revenue, up from just 8% in 2018:


Want more?  We did a great deep dive with Loren Padelford SVP of Shopify Plus / Shopify here:

 

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