Bootstrapping to €600k MRR and getting killed by Shopify: Checkout X
leteyski.comI’m surprised at all the comments focusing on the negative here.
I found the story inspiring: they bootstrapped a business, grew revenue, hired some people, and grew revenue further.
The founder created value and captured some of that value. The fact that the business can no longer acquire new customers is sad, but it’s only a small part of the story.
The founder’s 6 year journey is probably more interesting than what most people did at work over the past 6 years.
Yeah, the story isn't one of those "THIS IS SO UNFAAAAAAIR" things. It's just a description of what happened.
Depending on the costs, 600,000 euros a month is pretty good even if it doesn't last forever.
> If I sound bitter - I’m not. I like Shopify. I own Shopify stock. I believe they’re completely dominating the e-commerce platform space and none of their current competitors stand a chance of catching up. I know they did what’s best for their business and this is the end I expected.
I don’t understand how Shopify can maintain market dominance as just a middleman value extractor. Probably why they’re forcing their app. I deleted my account and haven’t used Shopify since they wouldn’t let me get my order tracking any way besides the app. As someone who worked adjacent to logistics it was just the hardest hard “no” of all time for me. Money moves to easily now days to build a monopoly on e-commerce.
Value extractor? I'm a non tech guy so I have a different perspective. I started a side business selling online. I have no idea where I would even start on my own, between setting up a website and handling payments etc. Shopify allowed me to literally stand up an ecommerce platform in an afternoon, and soon enough I was accepting $6k per month. The cost was something like $39/month, which was phenomenal value for money.
If you don't mind my asking, what do you sell with your side venture that let you reach those numbers fairly soon?
Metal and plastics for engineering and machining hobbyists. It's an unfulfilled market here in New Zealand.
I completely see the value in using something like Shopify. Collecting money from customers online in a safe, trustworthy manner, that is fully in compliance with multiple countries laws, to include charging the proper taxes and duties would take more time than developing the product you’re actually trying to sell.
Always wonder why Shopify is needed. In my case a lot of banks provide consistent APIs or buttons for payments. Numerous providers that aggregate those APIs, but no one forcing You. No need to pay middleman
Most require programming skills (and then you are the one that need to make it secure) or use a CMS plugin (WordPress) and then you are back where Shopify fish for customers.
I use to run our businesses webshop with my own code but having less time to keep up on it I gave up and switched to OSS CMS instead. Not Shopify though as they take (at least back when I checked) a huge chunk of money for the service. I can't remember the amount but it was something like 3%? For a medium business that's enough to hire developers to create your own! Now I use a payment provider (bank) instead and it costs nothing except the payment processor fee I already had to pay.
Similar to how Alibaba did with Taobao and TMall in China and Southeast Asia? Aggregators do offer values.
> Depending on the costs, 600,000 euros a month is pretty good even if it doesn't last forever.
What? 600k euro per MONTH is like you can retire forever in one year. That would be 7mm euro. More than like what most people make during their entire life.
But of course they probably made that in revenue, not profit. Still, I bet they are in a pretty good spot to create a new product, company, etc and with a nice cash reserve if they want to retire.
Btw, according to the article they still keep their old customers, so not like the service has being completely shut down. It's just that they can't take new customers, so at some point they should have pretty low revenue, but maybe they still have a fair amount per month like 100~200k with a super reduced team.
If anything, it's quite a success story.
Same here, it was a great story.
I'm not a business expert or an entrepreneur, but I've been around this industry long enough to know: Unless your intention is to flip your startup into an acquisition, I would recommend against plays like this.
Specifically, tying yourself up to a closed ecosystem by building what amounts to a (albeit very nice and powerful) super-feature.
I am saying this because I work for a large-ish company where someone did this to a section of our product that was also mediocre. One of our co-founders reached out to the company and actually offered to buy them for, what I felt, was an insanely high amount for what they were building. They rejected the offer so we threw some devs and an awesome designer at the problem, made something just as good, and then shut them out. They ultimately shut down.
It can work the other way around too. Early in my career I was working for a company that provided value added services in the telecommunications space. We grew quite large, working with household name brands in Northern Europe. However everything we did went through a single third party provider - we didn't communicate directly with telecommunications companies.
This provider did an ok job, however at the volumes we were processing it meant we were paying them a pretty handsome sum - which the owners (we were privately held without any outside investment) wanted to reduce to increase their profit margin. We made an offer to buy this provider, but they knew how much we were depending on them, and made a counter offer much higher, which we refused.
We started building out our own platform to connect directly to the telecommunications companies, which if you've ever worked in this space, you will know it's no easy task. Although there are standards, each company does things slightly differently, so each integration is effectively from scratch. To make it even harder, the process of migrating phone numbers etc is effectively turn it off in one place and turn it on in the new place, there is no gradual switch over. After the failed negotiations our provider did not want to cooperate with this (any more than they legally had to) and they gave us a hard deadline after which they would turn off all our services. Any major issues during this migration could take weeks to resolve, and would surely result in large customers leaving which could be the end of our company.
But in the end we did it. The migration over to our platform worked without any major issues, and we were even able to build in extra features that our provider didn't have.
And the icing on the cake: a year or so later we bought that provider. As we were their biggest customer - by a long way - they lost a big chunk of business. What we paid for them was much lower than the original offer we made.
These revenge stories may sound nice but the sad thing is that people are so petty to begin with.
But at the same time, if you are bootstrapped, profitable and can iterate fast, building on top of an existing platform is a fantastic way to get customers. You have a captive audience, you can understand the market easily, and can launch products fast since the tech stack is already well defined.
Not every business has to be sold for $100M or be around forever. A well-run bootstrapped startup like the OP’s can make you millions if it survives just 3-4 years.
Yeah, seriously -- everyone in this thread seems to be talking about this like a story of failure, and I... don't really get that?
There aren't a lot of hard numbers in the post, but it sounds like Checkout X grossed in the high 7-figure to low 8-figure range, in ~four years, while paying (not very many) Eastern European salaries. The founder alone probably came away with a few million dollars!
Exactly, and people are forgetting what's the alternative? Doing absolutely nothing, twiddling your thumbs because you CAN'T find another good market opportunity and earning less?
This guy clearly made several million euros. That’s a massive win.
Sure founding a billion euro company is better, but if you don’t have a billion euro idea then starting a million euro company is worthwhile.
> Specifically, tying yourself up to a closed ecosystem by building what amounts to a (albeit very nice and powerful) super-feature.
Couldn't agree more. It goes something like this :
"What do you offer ?"
"Feature X on top of Y"
"What stops Y from doing it themselves ?"
Either A "Well it's not worth it" (then why do you do it), or B "Well, they haven't so far ..." in which case you have an end date already, you just don't know it yet and it's in the hands of Y.
As you said, planning to be aquired is probably the best move, second one being to plan your independence (imgur to reddit like), because otherwise your company has no real future.
Usually it's "C. Because they don't care." It's when you start walking away with millions that they could have had, had they cared, that they will suddenly care.
> otherwise your company has no real future
That's not necessarily as bad as it sounds, though.
If the future where your company can exist is long enough for you to learn some valuable things and make decent money, it's obviously worth it.
The guy made millions of dollars. I'd say it was very worthwhile for him.
I feel fairly confident your "insanely high amount" wasn't as high as you feel it was.
For a product built by 2 people it was enough for both of them to retire (albeit humbly) or seed a more ambitious company.
Anyway, their best move was to take the money. They gambled that, even after noticing their work and our customer's feedback, we wouldn't turn around make our product better. They lost that bet.
That sounds about where I was thinking. You have to imagine that you're not paying as much for the product as a sign on bonus for the talent that has demonstrated the ability to improve the value of your product quite a bit over the four years of being locked in.
Enough money to retire on sounds even more like an "insanely high amount" when I think of it as a sign-on bonus.
I assume that means that the offer is the company purchased for just under 2 million dollars. Maybe a bit more, maybe some seed investors take a small percentage. Let's assume each founder takes almost a million dollars. I would understanding feeling weird paying almost 2 million for something that I can get done with 6 man-months. That is a lot of money! Enough to retire humbly or seed their next start up. But it's also something they will only get (or only get most of) over a 4-year vesting period.
So it's a 250k/year boost. That's again a lot. But that difference might also be what they can make at Google instead of a startup salary-wise.
But think about who they are hiring. People who have proven they can find new places to add value.
I'm making up numbers. But the point is that if you think about selling the next four years of your life (and not just the time spent on the company already), it is certainly reasonable and might be a good outcome. But it also might be worth turning down.
But maybe my guesses are totally off. Maybe he meant "retire humbly but continue to live in SF" instead of "take your money and retire to a ranch somewhere"
If it was much higher than what they ultimately spent on reproducing the product, then yes, "insanely high amount" might actually be an appropriate assessment.
Considering the "for what they were building." I assume that was the poster's thinking. On the other hand, there is value in acquihiring people who can see a need in your product you overlook and want to make it better. Sure, that feature was cheaper, but that's not all you buy.
Better than 0 I guess
Hacker News is a funny place. Few days ago I pointed out something similar - that first thing investors look at is how easily someone can eat your lunch? and got heavily downvoted.
These ideas are only bootstrappable, because nobody is going to put their money into it, apart from founders having a dream, but everyone else seeing that competitor can wipe them by just assigning a team to build that extra feature in their product.
Don't get me wrong - it doesn't mean you shouldn't do it. If you don't care much about money and value experience more, that is an extremely exciting journey to take oneself through and also sometimes dreams come true!
I had the same thought. There is a a lot of value to be created with moves like this, but it is risky and does not have a long shelf life. Not necessarily a bad business play, but should be expected to be a short-lived one either way.
It's called "platform risk". It can reduce risk to find customers or be the ultimate risk by killing your product (intentionally or unintentionally)
Sure, that's the conventional wisdom, but it seems sort of out of context here. This guy gambled and won, bootstrapping a €600k MRR business which is still printing money to this day (Shopify killed the growth, not the business). This guys already made more money than the majority of European developers do in their entire career. I fail to see the downside.
Agreed
Apollo fell into this bucket as well (with Reddit).
Never understood why more didn’t realize that.
Apollo had a successful app for years that would never have existed without reddit. It's unfortunate it didn't last forever, but it's not like their efforts were wasted.
How I feel about this depends on what exactly you mean by "shut them out".
What your describe is monopolistic behavior to a T
How so? Shopify has many competitors and is clearly not a monopoly.
Well, I can relate as I just got an email that Shopify changed their partner TOS today because of me.
They had demanded that I add a negative keyword "Shopify" to all of my Google ads.
I declined, because - it wasn't in our partnership agreement and I in fact DID want clients who used Shopify to find my business. (I am in the e-commerce space selling a product that works for many marketplaces including Shopify).
Just got an email today about a partnership TOS change. Now I need to put a negative keyword in any Google ad campaign they deem it necessary, despite like I said, Shopify users being great product fits for me.
I am just a little dude. What power do I have? Not really anything, the biggies get to tell me what to do. I either follow the rules of the game or get banned from the platform. Rather frustrating to say the least.
So you have to exclude the word Shopify, or just not use it?
Like if you bid on the phrase "Checkout Software" and people searching for "Shopify Checkout Software" were reaching you that would be against the TOS? You'd have to tell Google to suppress your ad from reaching people in that way?
Or you're just not allowed to bid on the word "Shopify" if you're a partner or whatever?
The latter seems inappropriate but at least arguable to some extent.
But the former, where you're actually required to suppress the results, seems anti-competitive to the point of being actionable, and is certainly not an ethical business practice.
Curious which one it is.
EXCLUDE Shopify. I did not bid on Shopify. I bid on "e-commerce sales"
Shopify is insisting, and in the new terms mandating, I add a "Negative search term" of Shopify to my bid for "e-commerce sales" So it would be + "e-commerce sales" - "Shopify"
> But the former, where you're actually required to suppress the results, seems anti-competitive to the point of being actionable, and is certainly not an ethical business practice.
That's fine to say, but is a small fry like me to actually do?
The actual wording in the memo is
> In order to promote a fair ecosystem and maintain competitiveness, partners may need to include ‘Shopify’ as a negative keyword in advertising campaigns that utilize pay-per-click keywords or are promoted through a search engine.
I mean I do totally understand why someone would choose not to try to battle a big tech company, for sure.
But it strikes me at first glance as obviously anti-competitive, and reaching out or filing a complaint with the FTC and its international equivalents would be one starting point.
The FTC has been paying attention these days, you might actually get something moving.
He will get something moving alright: Shopify will nix his partner agreement in a heartbeat and it will never ever be re-instated.
These things are next to impossible to win for the smaller party unless you have all the time in the world and extremely deep pockets.
It seems unlikely to me that simply contacting a federal regulator (while not actually breaking the TOS) would result in that kind of retaliation.
Presumably Shopify has at least one person in their general counsel’s office that’s not a complete fucking moron.
Can you hire a few friends of yours to write a blog post and advertise instead of you? Blog-spam is a thing, now I know why.
Thanks Shopify.
This has been the case for years. You weren’t allowed to bid on any search terms related to Shopify on Google Ads. Lots of Partners did though.
You did not read my post.
I did not bid on Shopify. I bid on "e-commerce sales"
Shopify is insisting, and in the new terms mandating, I add a "Negative search term" of Shopify to my bid for "e-commerce sales"
Go look up negative search terms if you aren't familiar.
You didn’t specify but I assume you are only required to add [shopify] (exact match) as a negative KW, which is very different from shopify (broad match).
It doesn’t say.
Pretty scummy practice. Not only does it drive out competition/innovation, it effectively reduces the cost of Shopify’s ad buy.
Yah it increases my ad cost and decreases their ad cost. Partners eh?
Atlassian has this policy for 3rd-party developers too. It feels pretty reasonable, to be honest. Developers still get to advertise against phrases relevant to their niche (and I have to imagine the keyword “shopify” would be a poor performer anyway unless you’re building a shopify competitor).
I’m advertising on the word ecommerce. Which is literally what I do. You have a negative keyword on Jira?
An interesting take. The only bit I strongly disagree with is this:
> One advice we got was to file an antitrust case against Shopify in a European Court.
> Theoretically, we could’ve argued that Shopify uses anti-competitive practices to get rid of their checkout competition. Similar to what Spotify & Epic Games did against Apple.
> While that might’ve been a viable option, honestly, I don’t have the balls to pick a legal fight with a multi-billion corporation.
> On top of that, I believe that crying to the regulator is a bitch move. After everything, I still believe that Shopify built their platform and they should be able to do whatever they want with it.
I have no insight into how the EU's competition laws would or would not apply here, but that's literally the regulator's job, and it's certainly not a "bitch move" to hold companies accountable for anticompetitive behavior (if that's what's happening).
Yeah seriously. Sounds like he drank the capitalism kool-aid.
Hello everyone, I'm the founder of Checkout X and the original post creator - so flattered to see all the engagement here. Thanks for the kind words and the criticism, I totally respect everyone's opinion on the topic. I intentionally waited a couple of years before I wrote the post as I just wanted to share the story of Checkout X for people to see it - without any agenda. Checkout X is a closed page for me and I'm looking forward towards the future.
Some updates from me: - I built another Shopify app ( Vanga AI ) that got acquired this year - I've summarised my thoughts on the current Shopify ecosystem in another blog post: Why I'm leaving the Shopify apps business ( https://www.leteyski.com/why-i-m-leaving-the-shopify-apps-bu... ) - I've summarised some of the business lessons I've accumulated into a Startup assessment framework called: The Dead Horse Framework ( https://www.leteyski.com/the-dead-horse-framework )
I'm curious about your use of affiliates and how they worked out - definitely would like to get some guidance there. But it's not for a SaaS app, so not sure how much guidance you can provide.
Also - I really like your graphics in your blog post. How do you go about generating them?
My 2 cents here: It's not always too bad or weak to assume some platform risk to make some business.
Just always keep in mind that, it's not forever and that you should preserve some of that piggybacked money for less risky endeavors. I think business that are mounted over a giant, whilst prone to be killed anytime, can be used for a quick buck[0] as part of a larger plan. In this case, the author was aware of that, but more fore-thinking would have helped.
For instance, I leverage Telegram bots to make some business, but I'm ready for such an scenario where Telegram, decides:
- To make its API paid.
- To copy the features of my bots into product features.
See what happened with Reddit's API. WordPress purchased WooCommerce and it became a happy story, but it could have gone wrong and become a horror story where the purchase could have not happened, and WordPress gone into destroy mode.
I tread lightly.
--
[0]: Do not conflate "quick" with "easy" in this context. The faster, the harder it is.
When you expand on something core to another company's platform, that is sometimes referred to as "picking up pennies in front of a bulldozer."
600k per month in a country where the average salary is reportedly about $8k per year (Georgia) isn't terrible, especially for such a small team. Getting in about 75 local yearly wages of recurring revenue per month is definitely worth the risk!
Agree 100%. People here are missing the forest for the trees. The creator made way more doing this than he could being employed at even the highest levels in tech, and pulled in huge income with way shorter time frame and less risk than taking VC money and having to exit via acquisition or IPO.
Sure, they got steamrolled in the end, but it’s an absolute win by any metric.
Slight correction, the article seems to indicate they are based in Bulgaria and their employees are remote from several other countries (including Georgia, but also e.g. the UK).
Not that it takes away from your point, it still sounds like a great success to me.
Yes, but some times you have time to pick up enough pennies to buy the huge mansion that you see on their photos.
Sure. $600k/month sounds like some fantastic pennies.
Yeah, OP probably made $5-10M. I know founders with $100M exits that made less than that thanks to equity dilution.
As others have pointed out, that phrase means something else.
What they were doing here is usually referred to as sharecropping, because you're building your business on someone else's land/platform. The real owner can kick you out at any time, and you have no recourse.
http://weblog.raganwald.com/2004/11/sharecropping-in-orchard...
It shouldn't be referred to that way. That term has a specific meaning. The profit has to be quite small compared to huge losses when you get run over.
When the profit pays back the initial investment quickly, and the risk is that you have negligible losses but stop making more money, that's not a bulldozer.
In this case it's more like picking up thousand dollar bills then simply stepping off the road.
This is a very expected outcome if you are creating your business around improving a larger business' product.
You are effectively doing the product/market fit for them, for free. Once they see that your solution works, they will just knock it off, or ban you altogether.
It used to be seen by companies as bad PR/karma a couple of decades ago, but not anymore.
> You are effectively doing the product/market fit for them, for free
If $600k/mo is what you consider free, I'd absolutely love to do some free work for you!
On HN, it is either your product is crap or a room-temperature-superconductor-like.
There is nothing in between. 600k per month? Is that enough to live in SF?
Edit: I forgot the moat. Without moat, it doesn't matter if you make a trillion dollar a month, your product would still be crap.
> You are effectively doing the product/market fit for them, for free. Once they see that your solution works, they will just knock it off, or ban you altogether.
Or buy you. https://9to5mac.com/2023/07/01/apple-shortcuts-workflow-mana...
In this case, the TFA notes that Shopify offered the ISV a path forward and Mr. Leteyski chose "go to war" (Option B). He killed the business, not Shopify. He may chalk that up as a "win", but I'd bet his customers and employees don't.
> Shopify offered the ISV a path forward ...
It sounded more like the "path forward" was to wait 2 years for the new Shopify APIs to come out.
That's not even slightly a credible in-good-faith option. :(
> It sounded more like the "path forward" was to wait 2 years for the new Shopify APIs to come out.
So they waited two years and couldn't sign up any new customers during that time. How is that better?
From the article, it sounds like if they didn't choose the option they did, then they would have had to either close their business or largely cease it:
That's the "Option A" in the list:"He told me in plain words they don’t want us to continue operating and that they’re locking our API key for new installs as we speak."
"downscale" there is a bit confusing, as it's unclear if that really means to comply with the "don't continue operating" desire from the Shopify people. I'm guessing it does, and that they'd look for other business ventures instead, thus not a complete cessation of the business.Option A - Stop what we’re doing, downscale the business and wait for the new APIs.So, it seems (to me) like they chose the right option. 2 further years of operating income and growth, though they didn't manage to figure out a working, alternative, income strategy before things went sideways at the end of the 2 years. :/
It's remarkable when stories like this reach the top of Hacker News, but then people still do not understand why one might want to build an application on a "Can't Be Evil" platform like a crypto network.
Scalability/costs/complexity aside — this is why Ethereum and similar decentralized computers are attractive.
They should build a hypothetical business with unproven revenue instead of the one with $600k MRR and growing?
> "Can't Be Evil" platform like a crypto network
lol. Come over here and stand on this crypto rug for me.
How exactly would using a crypto network help with this story of the author creating a Shopify app?
I can't think of one single profitable business built on crypto apart from exchanges.
How would a crypto network help here?
Crypto almost always could have solved anything.
I hope this is sarcasm? Pretend Shell or Ford switched to crypto only. How much do you think they would sell?
The fact that we aren't sure it is a sarcasm is hilarious.
Can't upvote this high enough.
A lot of bootstrappers start of this way. Hell even I started out this way.
But the golden rule is, you need to move away while the sun is shining. Reinvest profits elsewhere and start a business which doesn't depend on anybody else.
The current crop of people building on Open AI should also pay heed.
The author set up a business in what they knew was a gray area. 6 months later the ToS were updated to explicitly ban what they were doing, and they got an email that pretty clearly implied that they would need to make major changes but wouldn't be shut down right away, but the author chose to interpret silence as authorization to keep scaling. About 8 months later Shopify's COO told them explicitly that Shopify didn't want them to keep operating, and the author used a technical detail of the way they phrased the ToS to justify continuing to scale.
At that point I lost all sympathy for the author. The COO of the company you've built your product on told you that they don't want you to keep running your business. At that point they shouldn't have to keep playing whack-a-mole with loopholes in the ToS, and the fact that they did does not speak well of the author or their company.
The author very clearly doesn't want your sympathy:
> I was never so naive to believe that they’ll just let me go around forever, piggyback on their platform and reap most of the benefits. Even though what we were doing was not forbidden - it was clear that Shopify would disapprove of it.
They made their money while they could. They are disappointed they couldn't keep going, but it doesn't seem like they feel "entitled" to continue.
I'm not sure why did you lost all the sympathy. If company decided to kill your business, thats ok, because company in its rights to do so. But why thats mean that you should not feel sympathy to killed business?
Google is in its rights to kill Google Reader or ad-blockers, Mozilla in its rights to kill complex 3rd party extensions, Nintendo in its rights to kill any emulation but does it mean that we should be happy to oblige?
> The COO of the company you've built your product on told you that they don't want you to keep running your business.
That doesn't sound like a reasonable request. It's not like the COO is paying them anything to stop running their business. Can you imagine if Microsoft shutdown, because IBM asked them nicely to stop their business back in the 80s?
When you've built your business on helping your customers use Shopify's product without your customer having to pay Shopify for it... it's a pretty reasonable request to knock it off.
Is the author looking for sympathy? I didn't get that from the article, just a post mortem of the company and what happened.
> Shopify also dedicated some of their employees to pretend to be desperate Checkout X customers and beg our support to let them in. Not sure if I should be proud or annoyed by such pitiful actions.
Man that's something. Kinda flattering that they're so desperate for reasons to cut you off, they start to try to fabricate them.
I work at Shopify. This was inevitable. Shopify is Checkout. Checkout hijacks like this are taken extremely seriously because it diverts GMV and provides an inconsistent buyer experience that Shopify doesn't control. I'm honestly surprised the company didn't take stronger action here.
hey, i just made an account to reply to you here. i think you hit the nail on the head. which leads to an extremely frustrating experience for our company, because shopify for some reason decided to block access to markets if you are not using shopify payments. i live in a place where it is basically a necessity to offer a multi currency shopping experience, and our locally preferred payment methods are not supported by shopify payments. i have asked so many people at shopify over the years, but no one can tell me what to do. i don't mind paying my 2% to shopify, but i do mind if something so simple "just does not work". can you tell me why i cannot use markets, multi-currency with a third party payment processor in the native check out? i get that shopify wants to funnel people over to their psp, but in our edge case it just does not provide what we need. sorry for the rant, i am really frustrated because no one has been able to give me answers to my questions, not even a "we want to make sure we get our share and in your case that leads to a bad experience, sorry"
Taking stronger action would alienate the affected Shopify customers and create bad press for them. Their selected level of action is just sufficient to keep everyone happy except the one person that is their competitor. Presumably, then, they deemed it “insufficiently profitable” to shut the existing customers down.
Wow that is a crazy next level user acquisition story. Acquisition using source code as marketing, never heard that before. Great to read from a true self-made entrepreneur.
I can relate to the feeling of everything working against you and having to do some insanely contrived stuff to get around all the hurdles though I never faced such constraints as the author.
Entrepreneurship in the tech sector these days feels like a full circus show; you need to clown around a bit in front of investors to raise funding, when that fails, you need to ride a unicycle over crocodile infested waters, then jump through some flaming hoops, then tame a few hungry lions... Then after all this, one of the lions goes nuts and you get devoured anyway.
>... locked us out of Upsell X and we couldn’t support it anymore. Even further - they kept charging merchants for Upsell X - but we never received those payouts.
Putting all the other things aside, but this struck me. How is that legal? That sounds like outright theft to me.
I was contacted by a non-technical team with a concept about a new shopify based startup. I thought I can just build it in a couple of months then let them operate it.
I spent a month on it just researching through the mess that is the Shopify API. It was a pain. I got the mockup working but it looked like this is risky. Tried all channels and got nothing. Eventually someone answered and it seems that everything I built won't work. We would need to jump through hoops to be Shopify compatible and I decided it would strip the startup of its value.
Decided to declare the month of work I did as a loss and bail. Still traumatized from the whole mobile development pain of Apple and Google...
> However, Shopify killed it - just because merchants were choosing our solution over theirs.
I don't see whats so suprising here.
Isn't this Shopify clearly engaging in theft?
... they locked us out of Upsell X and we couldn’t support it anymore. Even further
- they kept charging merchants for Upsell X - but we never received those payouts.Yeah, they should have an open-and-shut case against Shopify here, no?
Probably some manager in Shopify saw an opportunity to siphon off some funds, and figured they could hide behind lawyers.
As a layman very much not-lawyer, the term "unjust enrichment" is springing to mind. Wonder if that's what this would be considered as?
I'm impressed a single individual got to 600K MRR by himself. Only a few people can say that they've done that. Who knows when shopify would've taken their checkout experience seriously were it not for this guy. you can have interesting experience, build temporary things, be proud of it, and move on to the next thing.
He didn't get to 600K MRR by himself:
" The highest headcount we had a at a particular time was 16 people - all remote "
First hire came at "around 100 customers". So that was probably EUR10k/MRR given the average monthly revenue per store.
Still very impressive!
"Crying to the regulator is a bitch move"
I both understand the sentiment, but also how else are we going to stop 5 companies form running the world, and the rest of us eating grass?
I really enjoyed the article, but this one sentence also rubbed me the wrong way. Comes across as very immature & petulant IMHO
But still: congrats! Seems like a fun ride, a lot accomplished, money earned, and if I understood correctly they still have their current customers, just no new customers. So they are still getting that MRR. Maybe raise prices since the customers have no other options :-).
In this thread: lots of people who have never started a business giving advice to a guy who was making 600k/mo about why his business was dumb. Hacker News at its best.
Theyre lucky they let this last as long as they did. Lots of other teams and products built on top of someone elses ecosystem havent been as lucky.
I think the term we use for this is being “Sherlocked” back from when Apple copied Sherlock and turned it into spotlight. Anyway theyre joining the ranks of famously successful short lived products. Glad they made bank in the meantime.
And the quicksilver app (command+spacebar).
Their mistake was that they built something hard that was literally a clone of Shopify. It made it hard for anyone else to want to compete with, but it was exceedingly easy for Shopify to compete with. Most Shopify apps build features that Shopify doesn’t have, and therefore the App Store revenue share model makes more sense for Shopify.
You had a great run, but I think it is unfair to say that Shopify “saw what you were doing” and “hijacked” your business. Obviously a small team can move faster and Shopify could easily have internal development plans for the same solution for a long time. Kudos for the €600k MRR and your execution.
If Shopify "hijacked" it by making a better product it would be more okay. When they however outright just ban competition, that's anti-consumer behavior and should be stopped.
No, in the part "April 2020 - Shopify hijacks Upsell X" they are requesting him to "not distribute mass solutions via private apps to Shopify merchants in order to bypass checkout". Shopify had their own checkout from the beginning and the whole purpose of his application was to bypass the existing solution. I assume there were Bulgarian payment providers connected to Shopify in 2017, but according to himself these payment providers wouldn't accept their business idea to run a pharmacy as an e-commerce. Therefore, he made a workaround.
Hey, better be killed by Shopify then murdered by Meta/Microsoft/X with "Checkout X"
But yeah, should've gotten the MRR high and then shop it around and take a nice buyout. Some PM noticed, shopify noticed the MRR and decided they can implement it and take it for a ride.
The only logical move would've been to setup a Shopify competitor and making a new platform
I'm not familiar with Shopify but this was my first thought on what he should have been doing with the money. Even if he didn't actually achieve it, if he had made substantial headway in that direction then Shopify would have been well advised to buy him out rather then kill him and risk a major new competitor.
Still it sounds like a heroic tale and I this this guy is going to end up landing on his feet.
Don't build your house in another man's land.
It's been said elsewhere, but they were scrappy, nimble and never lost sight of their position.
I'd say it's a _huge win.
people giving their advice but never even made $1 MRR from their own products. this is an amazing write up, lots of lessons to learn from this.
Best business lesson I've ever learned: never build your business on top of someone else's business.
How many times are we going to hear the same old story warning of platform risk? It happened with Twitter, Reddit, Facebook, Stripe, and so many others. If you want to control your company, don't build off someone else's infrastructure, make your own, even if it's harder to do so.
This reads like a success story, I'm not sure your advice hits the target.
How does it read like a success story? The bottom half of the article is all about how Shopify pulled the rug out from under them by giving them 3 days to tell their users about "breaking ToS", locking them out of their app, and ultimately seizing their account.
The 600k monthly recurrent revenue makes it look like a very successful story
Launching a product in a walled garden, getting around 10 million recurrent revenue with a small team and almost no other fees, then stopping after a few years looks to me like a dream come true. Almost better than not having the pull rugged. Once you have that much money it's time and a stress-free life that I would seek.
The article reads a bit weird to me because there's a lot of complaining about Shopify including in the title, yet they also mention that they knew this would be the outcome from the beginning.
> While that might’ve been a viable option, honestly, I don’t have the balls to pick a legal fight with a multi-billion corporation. On top of that, I believe that crying to the regulator is a bitch move.
Everything was so composed and professional until they got to that part. Whattttttttt?
The key to long term success in Shopify ecosystem is to focus on a niche market. For example, a scheduling tool for merchants. If you build something that almost every merchant will use, it will be eventually added to Shopify's core offerings.
Takes years until he loses 80% of clients, people are so lazy switchig even if it saves money
Correct, although eventually most stores using the product will die out.
This is actually one of the biggest reasons for app churn on Shopify - stores going out of business :-)
"honestly, I don’t have the balls to pick a legal fight with a multi-billion corporation. On top of that, I believe that crying to the regulator is a bitch move."
So somewhere between balls-less and a bitch. Mmkay.
What is the value of using something like Shopify if you don’t even use the checkout and gateway included? You also need to code your own theme AFAIK
Can you still get around not using Shopify for their checkout with your own payment provider?
Never mind, read further and seems you can't.
Aside: Why isn't there a payment protocol standard that's implemented in browsers?
There's the Payment Request API[1] which in theory allows you to use a single JS interface to declare a payment intent and your providers (so far only Apple Pay, Samsung Pay, and Google Pay are compatible). Though it is a single way of declaring your payment for multiple providers, you still need to subscribe to each provider individually and implement each specific post-authorization logic.
[1] https://developer.mozilla.org/docs/Web/API/Payment_Request_A...
Because the browser manufacturers have their own centralized payment protocols (Google Pay, Apple Pay) that they would prefer you use so that they can surveil your habits and get a cut of the fees.
Apple Pay is definitely integrated into Safari.
"I built my business on top of someone else's product without any gurantee whatsoever of being able to continue in the future, and when it became valuable for them to stop me they did".
Doesn't matter if you're a twitter client, a facebook app, a shopify app, a reddit client or whatever, either what you offer is negligible, or you did their research for them and now they can take over.
It's not even like they were making some cool thing that just happened to only run on AWS or something. It's more like:
"We improved an important but comparatively small core feature of a huge, complex service built, owned, run, maintained, and constantly improved by one company. They probably had our whole business on a Trello card in their long-term project board from the moment we started. Then, out of nowhere, they just implemented it themselves!"
Business is hard, and I don't have the hubris to assume I can do any better than them, but that's why I don't try. I really feel for the folks that put their time, effort, and creativity into making something useful for people that didn't pan out... but this just seems really shortsighted.
It can still be a great business strategy, as long as you're aware of exactly the points you outlined. You just can't run a normal startup strategy of subsidized growth, instead you have to rush through the product lifecycle towards cash cow status and make hay while the sun is shining. Once $bigcorp kills your business by implementing their backlog you pivot to something else, with the advantage of already having a huge database of people willing to pay extra for such features.
It's rarely the case that there's only room for one player in a given market. Market segmentation is a real thing, for good reasons. If $BIGCO pivots to producing a product similar to yours, that doesn't have to mean "the end". I'd suggest everybody read The Discipline of Market Leaders for more on how to choose among different strategies and position yourself vis-a-vis competitors.
Of course the problem of fundamentally building on someone else's platform remains. This is why it's a good idea to start at least thinking about how to move your business onto another platform, from day zero. Of course there's a balance between investing time and money in building abstraction layers and evaluating other platforms and doing these different things, versus spending that time and money on immediate growth. But if one invests literally 0 in this situation, they can hardly expect much sympathy if the underlying platform gets yanked out from underneath them and kills their business.
I wouldn’t call it a “great” business strategy if your shelf life is limited.
We have a finite amount of life energy to put into our businesses and I’d prefer to give it to something that can generate an annuity.
I mean, the fact that this guy was making $7.2MM a year in revenue from his software seems relevant.
Quantity has a quality all its own.
Financial technology has you covered: spend your finite life energy providing the feature until the bigco implements it themselves, then buy an annuity with the profits you made in the meantime.
Almost all businesses have a limited shelf life and/or a business cycle of growth and decline. The scale is just different.
Does Exxon stop drilling for oil just because it won’t be possible someday?
Heh, deep company backlogs are a great place to mine for startup ideas.
>> "...but this just seems really shortsighted."
This guy made literally (tens of?) millions of dollars in revenue from his software. Sure the gravy train stopped, but man I hope to be shortsighted like that someday.
> This guy made literally (tens of?) millions of dollars in revenue from his software
While living in Bulgaria
And so what? That's still a lot. Who's making that mind of money there? He even started investing in smaller businesses.
I think you’re misunderstanding.
That’s a staggering amount of money in this context.
After reading the article, I think the turning point was when Terms of Service were unilaterally changed to forbid selling his service to new customers. If he'd been permitted to keep selling to new customers, he'd have been able to continue.
Would a good analogy would be Apple banning other web browsers on iPhone, because they are an important part of the iPhone experience?
His conclusion was that this was a limited time opportunity, which he profited from and it has come to an end.
Apple bans other browser engines because can they run arbitrary code, which is not allowed per the store rules. They are fine with other browsers on top of WebKit.
Banning other browsers with extra steps.
They could just said that they do it for the safety of children and some would believe it.
> Then, out of nowhere, they just implemented it themselves!
If I'm understanding the timeline and details, it isn't that Shopify came out with a better solution which lost them customers. Shopify banned them from adding any new customers and at some point later Shopify delivered something that replicated some of their features.
Building apps for other platforms, be they Shoppify or the App Store, always comes with the risk of getting booted off or Sherlocked.
You can pray that the platform's customers will be upset if your product gets killed ("Shoppify broke our checkout screen" is not exactly bringing in new users) but in the end you need an exit strategy as a company.
In this case, I do think legal action would've succeeded, but it would probably be a long, expensive, painful lawsuit, that's probably too much for this company to bear. You're also not guaranteed that the judge will make the losing party pay for your defence even if you do win, so it could easily be quite a Pyrrhic victory.
With the new DMA coming into effect soon, I think businesses like these will stand a much better chance. The restrictions put onto gatekeepers by the EU can introduce significant risks to platforms being scummy to smaller developers.
One question in my mind is - how does TSMC structure their "platform" such that not-sherlocking-customers is incentivized into their business model?
They don't have to. Building a semiconductor fab is such an enormous investment and requires so much specific knowledge that it's not an attractive option, orders of magnitude harder than copying some software.
A similar question would be how Airbus prevents airlines from building their own airplanes.
As I understand it from my time at AMD, TSMC provides what is essentially an SDK for specifying how to use their process for a given node. Clients translate (compile) their higher level specifications into this framework for fabrication, and own responsibility for characterizing (testing) the resulting silicon.
This separation of responsibilities presents TSMC with a difficult reverse engineering challenge if they were interested in violating their NDA.
I don't think that TSMC is really in a position to Sherlock their customers:
- Buyers of leading edge fab services have patented features in their chip designs which TSMC would violate by simple cloning.
- If TSMC wanted to profitably manufacture something like "a modern GPU, but avoiding existing patents" they'd have to expand massively beyond their current core competency of fabrication. They'd need experienced chip designers, software engineers for developing drivers and APIs, retail partners... it's a much different business.
The key thing that makes "Sherlocking" easy is that it's just imitating third party software with first party software, from a first party that is already good at making software.
> "but in the end you need an exit strategy as a company."
Simple. Reach out to the platform and ask to be acquired. You might not get top dollar, but it beats having the plug pulled. While he acknowledges he didn't expect the gravy to be pouring forever, he also didn't have an exit mapped. Exit is one of those things that is in the text book definition of what is an entrepreneur.
Did you read the article? The author understands this. They addressed it directly:
> I was never so naive to believe that they’ll just let me go around forever, piggyback on their platform and reap most of the benefits. Even though what we were doing was not forbidden - it was clear that Shopify would disapprove of it.
It's worse than that—within 6 months of them starting to operate Shopify updated the ToS to make it clear that the app they already knew was a grey area was actually formally banned. They received an email that said they wouldn't be shut down right away, which the author took to mean "carry on!" Then Shopify's COO called them personally to tell them to knock it off, and they used a technicality in the phrasing of the ToS to keep operating.
Shopify shouldn't have to play whack-a-mole with these guys—they made their stance very very clear and the author willfully ignored it. This isn't just a case of platform dependence, it's a case of deliberately ignoring the platform's repeated warnings that you aren't authorized to be running your business.
Why should Shopify be allowed to decide what two other businesses (merchant and OP) willingly do just because they own the platform?
No, they shouldn't have to play whack-a-mole, I'd argue they shouldn't be allowed to.
What OP did was bypass Shopify entirely for the checkout part of the process, thereby taking away Shopify's revenue for OP's customers. That's not software freedom, that's theft.
Any two businesses are welcome to transact with each other, as long as they're not using resources that belong to a third party who doesn't want to be involved in the transaction.
It's not theft. Calm your horses.
And if shopify actually didn't want to be involved they would just fire those customers.
Agreed. At that point, he should have turned around and offer to be bought out by Shopify. Instead, he was greedy and figured running it into the ground was the only way out. Maybe that was true. Maybe not.
Aren't authorised? You seem to be way to accepting of authority for my liking.
We should be rooting for the small guys like this who shake monopolies out of their complacency.
I'm perfectly happy for someone to shake up a monopoly. I'm not okay with people acting entitled to do so on top of someone else's platform when that someone else has made it clear they're not welcome.
Absolutely this. If you’ve built something profitable on someone else’s land, get big and cash out as fast as you can. It’s unsustainable, you’re just doing an arbitrage play while it lasts. Do well fast so you optimize for more dice rolls in the future.
The author seems well aware of that though.
Reinforcing the idea to help avoid future heartbreak and broken dreams for people here. If you’re equipped with the knowledge upfront, you won’t be as unhappy later. Expectations minus reality equals happiness.
They’re still millions of dollars richer. It’s hard to be entitled about it because of the reasons outlined, but this was a great if ephemeral business.
From the article:
"I always saw Checkout X as a limited-time-window opportunity and honestly I couldn’t see a future different to what happened to us."
You're even understating the case for this particular issue. I own a Shopify store, and one thing that I found out early on is that Shopify does not want you to mess with checkout. It is far and away the most limited piece of their application in terms of customization, and their help articles made it clear that it could not be changed. This app is built on top of a platform and doing something that the platform did not intend for you to be able to do.
I don't begrudge OP making some money on this product, but I'm definitely not sympathetic to this outcome.
Didn’t really seem like OP was asking for sympathy. Didn’t take outside money, fully bootstrapped, took his money and went home.
Good for him.
If everyone involved can pivot easily enough, I'm sure it was probably a useful exercise in figuring out how to alleviate subpar product design, and getting a software project off the ground.
"I decided to misrepresent what the article said and respond to some strawman to make myself seem smart."
I agree with you.
I feel like this applies to iOS apps too
Can you keep going on this? Is it a slippery slope fallacy to lump in app store, handset, cloud, web browser, instruction set architecture? Only half teasing - seems like there should be a measure of platforms. Like the Gini coefficient, except for platforms instead of countries.
"After everything, I still believe that Shopify built their platform and they should be able to do whatever they want with it."
He acknowledges this in the post.
I feel like many niche AI startups that use ChatGPT / X as their foundation might learn this the hard way.
Kudos for the author to write this article. Really learned so much from it.
The comments are generally impressed at the “600k monthly revenue” and while I am too, is that “our business was grossing 600k/month” or “the sites we supported were grossing 600k/month through our checkout”? These are … very different.
Maybe sell it to Musk? Rumor is loves everything with X in it.
You made some bank. Be happy. Find the next opportunity to do the same.
I own Shopify stock
ah the old private app switcheroo
> Our affiliate program was simple. You bring a customer and we pay you 15-25% of the revenue we make from that customer. Forever.
there is a very thin line between a pyramid/ponzi scheme and a generous affiliate program.
The most important factor is how much it costs to join.
For checkout x it's a negligible amount and there's a free trial.
It's just a generous affiliate program.