Profitable & Proud: Shopify
37signals.com
37signals.com
And here, in just the second post of the series, a company states "taking this investment from John H. Phillips was probably the best decision we ever made. Apart from allowing us to meet payroll for the first year..."
That's not exactly "didn't take VC".
Another way of looking at it: Shopify only has common shares. There has not been any Series A or preferred share of any kind.
I don't get how they can claim to be a bootstrapped company when they did indeed take angel investment. I would love for someone to shed some insight.
This one shouldn't have been posted as part of this series. We definitely want to keep this series clean and clear with no ambiguity.
In this case, the investor received common stock. Which means he hopes to generate a return on his investment from his share of the profits.
This is in keeping with 37signals' focus on profitable companies, as opposed to startups which are built to flip.
"It took us 4 years from the incorporation of our Snowboard business to hit profitability. We had 13 employees at the time."
Most "bootstrapped" companies rely on outside money, that money just happens to come from the founder's savings.
37signals, having evolved from a consultancy, is a more classically bootstrapped company.
However, in practice, the lines are often fuzzy with companies using a number of instruments to fuel growth.
This was originally posted as part of our “Profitable & Proud” series but commenters rightly pointed out that Shopify’s angel investor broke the “no funding” rule that is part of the series. We’ll leave the interview up but we’re removing it from the P&P series. We’re sorry about confusing our readers and Shopify (we are the ones who originally approached them about participating). Thanks to all who pointed out the error and stay tuned for another P&P profile that does fit the bill.
It's consistent with the literal interpretation of the rules because they state "didn't take VC" and not "didn't take funding".
*See my earlier post in this thread to see why I think it's also consistent with the spirit of the P&P series.
Shopify is still a great story and we're leaving it up. It just didn't fit the narrow criteria of the category we created.
I'm curious about the mechanics of such a system, if you've set up rules saying "a bonus is paid out when 51% of the votes agree" (assuming that someone nominates someone for an award and an amount and the rest of the employees vote to approve it or not).
Or is it just that everyone gets 1/Nth of the pie allocated to themselves and can dole out any slice of that 1/N however they like?
* twice a month we determine how much money goes into the system based on how well we are doing
* Money is split evenly amongst all employees and contractors who have been with us for more then 3 months.
* This money can be arbitrarily spend as a bonus on any other colleagues. You can't spend it on yourself and you can't simply take it. It has to be spend on others.
* Once a quarter the bonuses are paid out through payroll.
* As you can see in the screenshot, everyone can show their accomplishments. This looks a lot like http://dribbble.com/ . This serves as inspiration if someone doesn't know who deserves a bonus. Once an accomplishment is posted it will also be cross posted into our company Campfire.
By the way, we love the Tony's Tim program. We hired 2 people directly from there. You should track our careers page and apply for some coop positions when they come up :-)
There's certainly a lot of gossip and speculation, but at 30 people there's enough division that it's not automatically obvious that any given person is doing something worthwhile.
Rewards encourage behaviour that earns them.
In a very small startup, you're not going to be able to fake it - but by the time the company's at 30ish people, it's not so clear cut. Who's the most valuable developer in my employer? I'm not on the dev team, so I don't know. They all seem to be doing great work, but I don't know the details.
Do we credit the sales guy for landing this big contract, or the operations guys that made sure their trial system worked, or the devs who wrote their custom integration?
If you're not involved in that project, it's going to be hard to judge whose contributions deserve what share of the reward.
Basically, it's a neat reward system, but I don't think it scales very well at all.
How would that apply to HR, accounting, or legal? Not usually the most loved members of any company and they're routinely involved in bureaucratic compliancy tasks that are more necessary than appreciated.
The point of the system is that for a bonus system to work well the people who give the bonuses need to know about the individual people's contributions. From the company perspective, people who are very helpful to other employees are very valuable and Unicorn rewards this. People who finish big and hard projects are obviously valuable to the entire company and Unicorn rewards this. People who may be solid but are grumpy and don't like to show off their accomplishments... well... If they leave over unicorn and end up being replaced with people who do the things that are rewarded by the system then I'm happy with this outcome.
So far it's been a huge surprise to see where the money goes in Unicorn and I'm thrilled with it.
Do you prefer less-talented, extroverted employees over more-talented, introverted ones?
I don't think it's fair to see our system so black and white. First of all, i'm sure it has problems. Probably many. However, bonus systems all have problems. The traditional top down, performance review style bonus system definitely works best for the extroverts. From what i've seen of unicorn, the people who are most rewarded are the quiet but helpful kinds.
Also, if unicorn helps to get people into the habit of sharing their accomplishments with their friends and coworkers then I think that's worth it all by itself. You have to share your accomplishments. Everyone loves to work with people who do great stuff. But if those people don't tell you about the great stuff they do then you cannot know about it and you cannot partake.
I'm just thinking of doing something similar for my own little shop too...
Originally we thought we will have to protect against bonus trading but instead we simply trust our employees as we should. If two people start trading bonuses then this may be a fireable offense.
At the same time, it is somewhat depressing because they don't seem to hire non-programmers. I'd love to work in an environment like this, but do any of these awesome companies hire 30-year old MBA grads who are technical but don't program?!
Also: congrats. Your business model is great, execution even better, and you provide an amazing environment/culture for your employees!
EDIT: Another important point - understanding the business implications of technologies. A lot of people understand the business side, or understand the technical side, but few really understand how they fit together, and how their relationship truly impacts a company.
-- When did Ruby on Rails become a driving factor for a VC?
Rails stood for something new, it was a paradigm shift of sorts. That's what every VC in the world looks for.
The VCs who correctly predict which technologies fuel innovations always do very well. See Peter Fenton of Benchmark to illustrate the point at hand.
I think the how and why of that decision and process would be really interesting to HN readers trying to put a price on their own product(s).
Once we changed to more of a subscription model for our pricing we ended up getting a lot more customers who build successful businesses. Even though in reality our product became somewhat more expensive overall.