What an incredible read — Investment memo from back in 2010!
Prepared by the Bessemer Venture Partners team seeking a $5M primary (+$2M secondary at a 25% discount) investment in Shopify at a pre-money valuation of $25M.
The Contrarian Bet
They made this bet when very few VCs would have backed a software business targeting SMBs. This document explains the rationale behind their decision that led to this amazingly impactful investment!
The Transformation (2010 → 2020)
Since then, Shopify has gone from:
| 2010 | 2020 | |
|---|---|---|
| Merchants | 10K | 1M+ |
| GMV | $132M | $61B+ |
| Global reach | Limited | 175 countries |
| Jobs supported | - | 2.1M full-time |
What Made This Investment Work
Bessemer saw what others missed:
- SMB software TAM expansion — Most VCs thought SMBs couldn't afford or wouldn't adopt SaaS. Bessemer bet on democratization of commerce infrastructure.
- Platform potential — Early recognition that Shopify wasn't just a storefront builder, but commerce operating system.
- Founder-market fit — Tobi Lütke as technical founder who built the product for himself first.
- Network effects emerging — Developer ecosystem and app marketplace creating switching costs.
The Forward-Looking Question
This was written 10 years back. What would be the next 10-year investment thesis for Shopify?
My take:
- Payments + Fintech expansion — Shop Pay, Capital, Banking becoming 30%+ of revenue
- Logistics infrastructure — Fulfillment network creating Amazon-level delivery speed
- B2B commerce — Wholesale, supplier networks, cross-border B2B payments
- Offline-online convergence — POS + retail unification driving omnichannel
- International expansion — LatAm, Asia, Africa — replicating North America playbook globally
The 2010 thesis was "democratize commerce for SMBs." The 2020-2030 thesis might be "build the full-stack commerce operating system that competes with Amazon, not just as a marketplace, but as infrastructure."
Lessons for Investors
What this memo teaches:
- Conviction in contrarian bets — When consensus says "SMBs won't pay," dig deeper
- Founder DNA matters — Technical founders with product vision compound differently
- Platform > Product — Developer ecosystems create 10x moats vs. standalone products
- TAM expansion — The market in 2010 wasn't the market in 2020. Great companies create their TAM.