Prospectus Summary
PROSPECTUS SUMMARY This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A subordinate voting shares. You should read this entire prospectus carefully, especially the “Risk Factors” section of this prospectus and our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. In this prospectus, references to our “solutions” means the combination of products and services that we offer to merchants, and references to “our merchants” as of a particular date means the total number of unique shops that are paying for a subscription to our platform. Unless otherwise indicated, all references in this prospectus to “Shopify,” “we,” “our,” “us” or similar terms refer to Shopify Inc. and its consolidated subsidiaries.Overview
Shopify provides a leading cloud-based commerce platform designed for small and medium-sized businesses. Merchants use our software to run their business across all of their sales channels, including web, tablet and mobile storefronts, social media storefronts, and brick-and-mortar and pop-up shops. While we started Shopify to help merchants design, set up and manage their online stores, we have expanded far beyond that. Whether a merchant is starting their business online or offline, we provide a platform for merchants to create an omni-channel experience that helps showcase the merchant’s brand and grow its business. The Shopify platform provides merchants with a single view of their business and customers across all of their sales channels and enables them to manage products and inventory, process orders and payments, build customer relationships and leverage analytics and reporting. Merchants can also use Shopify Mobile, our iPhone and Android application, to manage their business on the go.
Technology and the internet are transforming commerce. Consumers now expect to be able to transact anywhere, anytime on any device and the experience needs to be simple, seamless and secure. Consumers quickly become accustomed to the standards set by the largest and most innovative merchants and expect a comparable experience with all merchants, even those that have only been in business for one day. Without the latest technology, it is difficult for merchants to meet the rising demands of consumers.
We built our platform from the ground up to address the growing challenges facing merchants, with the aim of making previously complex tasks simple. The Shopify platform has been engineered to enterprise-level standards and functionality while being designed for simplicity and ease-of-use. Our platform provides merchants with an intuitive user experience that requires no up-front training to implement and use, enabling merchants to set up their shops in less than 15 minutes. We help our merchants own their brand and make the consumer experience memorable.
We believe the Shopify platform is mission critical for all of our merchants and they depend on us for the latest technology. Our platform is able to manage large spikes in traffic that accompany events such as new product releases, holiday shopping seasons and flash sales, and has been benchmarked to process at least 10,000 requests per second. We are constantly innovating and enhancing our platform. Our continuously deployed, multi-tenant architecture ensures that all of our merchants are always using the latest technology.
A rich ecosystem of app developers, theme designers and other partners has evolved around the Shopify platform. The platform’s functionality is highly extensible and can be expanded through our application program interface, or API, and the over 900 apps available in the Shopify App Store. This ecosystem helps drive the growth of our merchant base, which in turn further accelerates growth of the ecosystem.
Our mission is to make commerce better for everyone and we believe we can help merchants of nearly all sizes and retail verticals realize their potential. While our platform can scale to meet the needs of large merchants, we focus on selling to small and medium-sized businesses, or SMBs. As of March 31, 2015, we had 162,261 merchants from approximately 150 countries using our platform, representing growth of 68.2% in the number of merchants using our platform relative to March 31, 2014. In 2014, our platform processed Gross Merchandise Volume, or GMV, of $3.8 billion, representing an increase of 132.9% from the year ended December 31, 2013. In the three months ended March 31, 2015, our platform processed GMV of $1.3 billion, representing an increase of 107.8% from the three months ended March 31, 2014.
Our business has experienced rapid growth. Our total revenue increased from $23.7 million in 2012, to $50.3 million in 2013 and to $105.0 million in 2014, representing year-over-year increases of 111.9% and 109.0%, respectively. In addition, our total revenue for the three months ended March 31, 2015 was $37.3 million, an increase of 98.5% from the three months ended March 31, 2014. We had net losses of $1.2 million in 2012, $4.8 million in 2013, $22.3 million in 2014, $6.4 million in the three months ended March 31, 2014 and $4.5 million in the three months ended March 31, 2015.
Industry Overview and Market Opportunity
Consumers now dictate how, when and where to interact with merchants and their expectations continue to rise. A disappointing experience may lead to the permanent loss of customers and damage to the merchant’s reputation on social media. The challenges facing merchants include:
Selling Across Different Channels. Consumers expect to be able to transact through multiple sales channels without losing functionality or experience, making it increasingly important that a merchant has a single view of its business and customers.
Making Transacting Simple, Seamless and Secure. Consumers expect every interaction to be quick, problem-free, intuitive and secure.
Keeping up with the Latest Technology and Innovating. Consumers expect an experience on par with that provided by the most innovative retailers.
Building and Growing their Brand. In a world where consumers have more choices than ever before, a merchant’s brand is increasingly important.
Scaling their Business. As a merchant’s business grows, it must be able to handle increased traffic and ensure availability 24 hours a day, seven days a week.
Managing their Business Anytime, Anywhere. To keep pace with consumer demands, merchants need to be able to manage their business on the go using their mobile devices.
Traditionally, merchants have been forced to address their commerce needs through one of two means:
Complex Software Built for Enterprise Merchants. Software built for the largest merchants is not designed for SMBs. It is expensive and complex, requires significant technical knowledge and training to install and maintain, and typically takes a long time to deploy.
Cobbled Together Patchwork. Whether a merchant is starting from scratch or building on top of legacy solutions, the process of piecing together a patchwork of disparate technologies is time consuming, complicated and costly. The result is a system that, by its nature, lacks full integration between the applications provided by the various vendors and may only be as good as its weakest component.
We believe we can help merchants of nearly all sizes and retail verticals realize their potential. While our platform can scale to meet the needs of large merchants, we focus on selling to SMBs. We have merchants in approximately 150 countries, including merchants in our key geographies: the United States, Canada, the United Kingdom, Western Europe, Australia and New Zealand. According to AMI Partners, in 2014, there were approximately 10 million merchants with less than 500 employees operating in our key geographies, and approximately 46 million such merchants worldwide. As of March 31, 2015, we had 162,261 merchants and our annualized revenue per merchant based on the three months ended March 31, 2015 was approximately $1,000.
We believe that our market will expand as we continue to inspire entrepreneurs to start new businesses and provide the technology that enables them to do so. In addition, we expect our average revenue per merchant to continue to increase as our merchants grow and we further expand our offerings.
Our Solution
An Omni-Channel Commerce Platform. The Shopify platform enables merchants to sell their products across different sales channels, including web, tablet and mobile storefronts, social media storefronts, and brick-and-mortar and pop-up shops. Our platform provides merchants with a single view of their business, combining and synchronizing all their customer, inventory, order, product, payment and other data that originate in different sales channels.
A Simplified Merchant Experience. The Shopify platform provides merchants with an intuitive user experience that requires no up-front training to implement and use. Merchants can set up their shop in less than 15 minutes. By integrating multiple channels into a single platform, we are also able to remove the complexities inherent in separate systems.
The Latest Technologies, Seamlessly Integrated. The Shopify platform is designed to integrate the latest technologies that a merchant needs to sell products and operate an omni-channel retail business from any device. Our high-availability, continuously deployed, multi-tenant architecture ensures that all of our merchants are able to operate with the latest features and the newest innovations without any need to patch or upgrade their software.
A Platform Designed to Launch and Grow Brands. Merchants can launch and build their brand on the Shopify platform without any intermediaries or middlemen. Their brand is always at the forefront of the experience, and we help our merchants make that experience memorable to consumers.
A Platform for Merchant Success. Our goals are aligned with those of our merchants and we designed the Shopify platform to support their growth. We offer advanced features and resources to help our merchants sell more products and be more successful.
Enterprise-Level Security, Scalability and Reliability. The Shopify platform offers security, scalability and reliability that is normally only available to businesses with enterprise-level budgets, while at the same time being easy to use and affordable for smaller businesses.
An Open Platform with a Thriving Ecosystem. A rich ecosystem of app developers, theme designers and other partners has evolved around the Shopify platform. The Shopify platform’s functionality is highly extensible and can be expanded using our API and apps from the Shopify App Store to offer additional sales channels, bolster features in an existing sales channel and integrate with third-party systems.
Growth Strategy
Grow our Base of Merchants. We believe that we have a significant opportunity to increase the size of our current merchant base. We intend to continue to strategically invest in marketing programs that enhance the awareness of our brand and solutions among businesses at different stages of their lifecycle, from entrepreneurs just starting a business to well-established businesses.
Grow our Merchants’ Revenue. Our goals are closely aligned with the goals of our merchants. The more a merchant sells on our platform, the more revenue we generate as they upgrade their plans, add additional sales channels, process more transactions and use additional solutions. We intend to continue helping our merchants be successful by improving and expanding our platform and providing additional solutions and resources.
Continuous Innovation and Expansion of our Platform. We intend to continue to build more sales channels and additional functionality to further differentiate our platform.
Continue to Grow and Develop our Ecosystem. We intend to grow our ecosystem of app developers, theme designers and other partners to bolster the functionality of our platform.
Continue to Expand our Partner Programs. We intend to strengthen our existing relationships with referral partners and resellers and create new ones with the goal of expanding our overall merchant base.
Continue to Build for the Long-term. We have a culture of iteration and testing new ideas with a focus on maximizing long-term value. As we continue to build for the future, we may consider focused international expansion, strategic partnerships, new solutions and selective acquisitions.
Risk Factors
Our business is subject to a number of risks and uncertainties, as more fully described under “Risk Factors” in this prospectus. These risks could materially and adversely impact our business, financial condition, results of operations and future prospects, which could cause the trading price of our Class A subordinate voting shares to decline and could result in a loss of your investment. Some of these risks include:
As a result of these risks and other risks described under “Risk Factors,” there is no guarantee that we will experience growth or profitability in the future.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:
The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have not elected to avail ourselves of the exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards. This election is irrevocable.
We will remain an emerging growth company until the earliest of:
We have availed ourselves in this prospectus of the reduced reporting requirements described above with respect to selected financial data. As a result, the information that we are providing to you may be less comprehensive than what you might receive from other public companies. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Corporate Information
We were incorporated under the Canada Business Corporations Act, or CBCA, on September 28, 2004. Prior to the closing of this offering, we will file articles of amendment to amend and redesignate our authorized and issued share capital. See “Description of Share Capital.”
Our principal and registered office is located at 150 Elgin Street, 8th Floor, Ottawa, Ontario, Canada K2P 1L4, and our telephone number is (613) 241-2828. Our website address is www.shopify.com. Information contained on, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference.