After 30 years in the technology field, Shopify CFO Russ Jones knows plenty about growth and change.
As a business-unit manager for seven years in the 1990s at Newbridge Networks (later acquired by Alcatel), Jones saw the company’s annual revenue balloon from around $100 million to almost $2 billion. His next post, his first as a CFO, was at Watchfire, which was selling a $500 link-checking product. “Two years later, we were selling million-dollar website management solutions to the likes of Fidelity and JC Penney,” he says of the company, which was subsequently bought by IBM.
Then, following six years as founder and head of an interim CFO services firm, in 2007 Jones took over as finance chief at Xambala. It was a small chip company that, by the time he left it in early 2011, had morphed into a provider of high-frequency-trading technology. “I don’t think a lot of people can put that on their résumés,” he notes.
Such experiences made Jones a good fit for overseeing growth and change at Shopify, which provides cloud-based software allowing small and medium-sized businesses to design and manage sales across multiple channels: web, mobile, social media, and brick-and-mortar locations. Since he joined the Ottawa, Ontario-based company in March 2011, its employee count has swelled from 50 to more than 1,000. The finance team, which initially consisted of Jones and a part-time accountant, now numbers 14 full-timers.
Shopify went public in both Canada and the United States on May 20 of this year, pricing its IPO at $17 a share after previously proposing ranges of $12 to $14 and $14 to $16. The company’s first public earnings filing, for the third quarter, portrays eye-opening sales growth, up 93% (to $52.8 million) from last year’s July-September period. For the year through nine months, revenue surged to $135.1 million, almost double the $69.8 million registered through the first three quarters of 2014.
The company’s operating loss for its first three quarters fell from $17.1 million to $11.2 million, and Jones predicts that Shopify will break even by the end of 2017.
Man of Many Hats
For Jones, the demands posed by the growth and change have been many and varied. Scaling the employee base may have been the biggest challenge so far. Until recently, he says, he acted more like a COO than a CFO, overseeing not only the finance team but also human resources, legal, and payments. HR and legal recently broke off into dedicated teams, “but for a long time all of the general and administrative teams reported in to me and I had a hand in building each one,” he says.
His view of his finance team is as a service organization. “When I hire people, I look for someone who is willing to help, rather than just police stuff,” Jones says. “It’s about their potential for growth. Part of that is mentoring from me, which is something I really enjoy and take very seriously.”
Managing the company’s constant need for additional space has been another key focus area. It has moved its Ottawa headquarters three times during Jones’ tenure and also opened offices in Toronto, Montreal, and Waterloo.
Some of Shopify’s growth has been enabled through acquisitions, including those of Select Start Studios in 2012 and Jet Cooper in 2013, with Jones handling negotiations and working with an outside law firm on legal aspects of the deals, as a general counsel had not yet been installed. Jones also led the company through its Series B and Series C funding rounds in 2011 and 2013, respectively.
Many IPO-minded companies don’t hire the CFO who will take them public until a year or two before the offering. Jones, though, sees his hiring four years out as a clear advantage. “Being more senior than the role required and willing to role up my sleeves to get the basics in place has set up the company up well to handle more growth and operate as a publicly traded company,” he says.
For example, early on Jones changed Shopify’s reporting to U.S. GAAP and U.S. dollars. “I always take the view that right from the start you want to build something as if it were going to go public,” he says. “If something else happens along the way, fine. But you’ve put the right people and processes in place.”
He also developed a scalable way to reconcile credit card invoicing “all the way through to cash into the bank,” he says. “When I started at the company, any differences were deemed to be ‘revenue leakage.’ ” And when Shopify decided to enable its merchants to process credit cards, he led the effort to navigate through the numerous legal and regulatory obstacles
All that said, handling the IPO process was probably the biggest challenge Jones has faced in the job, since he hadn’t previously worked on one. “I had done a lot of financings, so in part I went in approaching this as just another big financing,” Jones says. “But I also approached it as a learning experience. Anytime I had an opportunity, whether at [KPMG’s] IPO boot camp, or as we were hiring our audit committee chair, or interviewing people for our legal and banking groups, I tried to learn a lot.”
He adds that he finds the CFO community is “quite willing to take what they’ve learned and pay it forward,” so he built good relations with some CFOs of companies that had recently gone public, “which was invaluable.”
With the IPO well in his rear-view mirror, Jones is spending lots of time on investor relations and meeting with analysts. Shopify’s CEO, Tobias Lutke, was well engaged in the company’s pre-IPO road show, Jones says, but is inherently more focused on product development. “It’s been a good expansion of my skill set,” he says. “I’d say I’m right in between an introvert and an extrovert, so being out there has been a stretch for me, although I’m certainly getting more comfortable with it.”
The company’s vision is that breakneck growth will continue. Shopify currently powers sales for more than 200,000 businesses in about 150 countries. At the half-year mark, at the end of June, it had signed up some 13,000 new ones in just the few weeks since the IPO.
To stimulate even more sales, Shopify recently rolled out a mobile-phone app, called Sello, that lets new entrepreneurs sell through social networks. Those who want to then start selling more formally can set up a full Shopify-powered store at subscription prices starting at $29 a month.
One of Shopify’s newest challenges is expanding its market to large enterprises. In 2014 it launched Shopify Plus, a version of its software designed for high-volume sales. Big-name companies that are using the software for one or more sales channels or products include Budweiser, Nabisco, Procter & Gamble, and Tesla.
“The platform has that kind of scalability,” Jones says. “The history of software is that you’re on Platform 1 for a period of time, then move to Platform 2, then to Platform 3. Shopify is designed so that you never have to change the platform.”
Meanwhile, one notable aspect of his job is related to the fact that, as with many technology startups, most of the company’s managers are on the youngish side — in their 30s, while Jones, 56, was brought in partly to provide some “adult” supervision to the team. “I get to work every day with people who are pretty much my kids’ age, which is kind of interesting,” he says.