Steven Arsenault

Over the weekend, Tobi, the founder and CEO of Shopify, discussed the major reason investors passed on Shopify in the early days : market size. I remember that financing round, & I remember having the same concern, & making the same mistake. Living in the valley & driving on 101, the billboards & logo-adorned headquarters of successful companies provide a daily infusion of all the mistakes in I’ve made in guessing how a company or a market might evolve. Years later, I listened as Bill Gurley shared his thoughts about market size. He asked himself a question : whether the startup was increasing, decreasing, or maintaining the market size? (I can’t seem to find the link - but I have it in my notes!) I added that question to my diligence list when meeting startups. Now much later, having seen many companies create categories or reinvigorate aging ones, the question I ask myself has evolved. It’s not as the market size large enough? Instead, it the question is : do we believe this company can create the market? Market size is the output of all the players marketing, selling, building. Their efforts alter, distort, & juice the supply/demand curves of macroeconomics. It’s not a given - not an output or a steady-state CAGR. Often it’s the startups that engender the demand, change the market dynamics, & make markets massive by taking risks with products. When done right, these founders create category-defining businesses like Shopify (now worth $90b)!

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The VC/DNVB honeymoon is over. 🥀 Here's why: both sides have realized that DTC brands aren’t really tech companies. Recently, the "DTC darlings" have taken a hit: Bonobos was resold for $75M after Walmart bought it for $300M 📉 Unilever parted ways with Dollar Shave Club seven years after buying it for $1 billion 💸 And that's just the start—other brands like Casper, Outdoor Voices, and Smile Direct Club have faced similar fates. These brands thrived during the early 2010s VC boom. 🚀 Since 2006, venture capital investments skyrocketed from $30 billion to over $340 billion in 2021. With limited SaaS options to invest in, VCs turned to startups with similar growth potential. DTC brands fit the bill perfectly, wooing investors with three key points: 1️⃣ Tech-savvy teams: In the early 2010s, selling online required a strong dev team, and competition for talent was fierce. 2️⃣ Cutting out the middlemen: Facebook and Google allowed these brands to reach customers directly at a low cost, bypassing traditional distribution channels. 3️⃣ Attractive business models: Gross margins were high, similar to software, and recurring revenue from subscriptions offered an impressive LTV/CAC ratio thanks to low distribution costs via Facebook. But several changes exposed flaws in this model: 1️⃣ E-commerce tech became accessible to everyone through platforms like Shopify and Klaviyo, removing the unique advantage of in-house tech. 2️⃣ Facebook and Google increased ad costs, replacing one middleman with another. Then, iOS 14 made targeted advertising even harder. 3️⃣ Post-COVID, e-commerce growth slowed, and to sustain their growth, vertical SaaS platforms raised their prices. 4️⃣ Rising raw material costs squeezed margins further. 📈 5️⃣ VCs realized that big companies like Unilever and P&G (potential buyers) didn’t care about LTV/CAC ratios since multiple sales channels (including retail) complicated these metrics. This undermined the growth acceleration strategy VCs had envisioned. In the end, e-commerce is more about logistics, product, and marketing than pure tech. 📦🛍️📢 All this makes it a less appealing investment for venture capitalists.

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I was listening to this episode of Lenny Rachitsky's Podcast (https://apple.co/3YIIyDI) when the guest, Archie Abrams, referenced Shopify's 100-year perspective. I love this, which is a large part of why Shopify has succeeded. Shopify's 100-year perspective got me thinking about what if more of us had a 100-year perspective? How might we live our lives and conduct our businesses differently if we played a longer game? Would we take more risks, invest in longer-term value, be less stressed about next week, and more? The pushback would be that most people don't live to be 100 (the life expectancy worldwide in 2022 was 72 years), and most organizations don't make it a few years, let alone a century. But even if it is unlikely that you or an organization you lead will be around for 100 years, what's the harm in conducting yourself like you and it will be? The answer, I believe, is there isn't any. Having a long-term perspective, longer than what most people or organizations would think of as long-term, only has upside. It gets us out of reactionary, impulsive thinking and action. FOMO becomes irrelevant. Fads and trends fade into the background and get chased by others as you stay focused on building something long-lasting. A 100-year perspective would change a lot of our societal, political, and economic planning, policy, and discord, too. We're all driven by KPIs, OKRs, and other metrics that define our short-term success or failure. Make no mistake: You have to succeed in the short term to have a chance at a 100-year run, but there is probably a lot of opportunity for most of us to reverse our perspective from being short-term driven to long-term, which would benefit us and our organizations. Since they are outliers, we marvel at centurions' longevity and secrets to living a long life. Organizations celebrate anniversaries and longevity with parties, commemorative items, and honorary logos. We're turning 30 in 2025 at Transform Labs and will indeed celebrate the milestone. Still, we're still far from a finish line when you think about it compared to 100 or another 100. In many respects, we're just getting started and building on a legacy that will continue for another 70+ years. We all have an opportunity to live and lead with a 100-year perspective. If we or our organizations don't make it that long, so be it, but what if we do or can facilitate it?

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A lot of Canadian founders are getting robbed. Yup, you read that right. If you’re a founder that: 1️⃣ Generates revenue in USD 2️⃣ Or, has raised USD funds and if you’re operating in Canada, chances are you need to convert some of those USD funds to CAD to pay your operating expenses or if you’re lucky, maybe you have a cash balance that you want to put away in a GIC for some nice interest. Founders: how are you currently converting your currency? I love our Canadian banks, don’t get me wrong, but they take a massive bite out of your profits when it comes to foreign exchange. DO NOT TRADE CURRENCY WITH YOUR BANKS. Sorry to all my bankers reading this! I know so many founders who learned this lesson the hard way and hopefully this post will save a few of you from making that mistake. Moral of the story? Go find yourself an awesome FX trader. Of course, happy to introduce you to ours (no benefit to us, I just want to help our start-up ecosystem in Canada WIN!)

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We are raising $250,000 to fuel the growth of our retail automation startup Afiari Inc. to onboard at least 10,000 paying businesses over the next 18 - 24 months. Firstly, what is Afiari and what are we building? Afiari is enabling retail (physical) businesses to sell online and automate operations from purchasing to point-of-sale. Our long-term goal is to be able to connect data points from points of sale back to manufacturing and this we will do by first, creating a path for digitization by providing the tools that will help retail businesses manage not just their inventory but also purchasing processes, supplier management, receiving invoice payments automatically, and of course selling their products via our marketplace. It’s an ecosystem and we are ready to push the boundaries of the market. So why should you invest in us?  The first is that, we don’t die! We have been in the space for the past three years, learning, experimenting, pivoting, and repivoting. We have also built out the solution that we are beginning to see adoption for, we now want to grow massively while generating real-time revenue from across our products. Today, we have 8 paying businesses and 22 businesses onboarded in total. Our strategy is to get enough businesses to use our solution as ERP for their businesses while we gradually derive the potential of online sales via our marketplace by driving demand to these vetted businesses. The final reason to invest is that we know that this is incredibly hard and that is what gets us excited. We don’t just want to build for the sake of it, we always work from the ground up and attack the problems from the root. It is a more difficult approach but it is also incredibly rewarding. So, if this makes sense to you, then let’s have a chat about it. I am available to meet in person or virtually depending on your location. Reach out to me via DM, email at [email protected], or call +2347062029656

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How do you launch a SaaS auto-tech startup and sell it for an 8-figure valuation, in 5 years without raising capital? Start with the end in mind. SaaS valuations typically run between 4x and 6x, the current run rate. To achieve an 8 figure exit the math looks like this: 4xMutliple: $10M÷4=$2.5M ARR 6xMultiple: $10M÷6=$1.67 ARR It's been my experience auto tech SaaS companies can grow 50% to 100% annually. Let's be conservative: Year 1: $300k ARR and $25K MRR Year 2: $500K ARR and $42K MRR Year 3: $865K ARR and $72K MRR Year 4: $1.47 ARR and $123K MRR Year 5: $2.5 ARR and $208K MRR Assuming your SaaS is low churn and your average deal is $2,500 monthly. You only need 10 dealers in year one to get to $300K ARR and the founders can handle sales themselves. I found pricing below $2,500 makes selling to dealers harder. Being the lowest cost is bad business and dealers are skeptical you can help. To achieve $2,500 you need to deliver 10x the value. Meaning if you can prove you help dealers earn/save $25,000 monthly your $2,500 is a steal. This is why I preach sell value, not price. As you grow, you'll add new products and upsell, making revenue attainment easier. To accelerate growth you can build enterprise solutions and sell to multi-rooftop groups. This is the only model viable because of industry consolidation. But also harder because you'll need multiple DMS and CRM integrations. You can't build a tool that doesn't integrate or only works stand-alone. That's the last thing dealer groups need. As you can see, you don't need huge dealer counts and with a solid plan in year one, these targets are attainable. If you're thinking of building a SaaS or have one and want a GTM review, DM me.

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Not every startup needs a million-dollar venture capital injection to get off the ground. Bootstrapping, the art of self-funding your business, allows you to retain full control while fostering a resourceful and scrappy culture. But bootstrapping doesn't mean going it alone. Here are some alternative fundraising methods to consider for your self-funded startup journey: 📌 Customer Funding: Pre-Sales: Validate your concept and generate early revenue by offering pre-orders or subscriptions for your product or service. This method builds excitement and gets your target audience invested in your success. 📌 Crowdfunding: Platforms like Kickstarter and Indiegogo allow you to raise capital from a large pool of interested individuals. Be prepared to offer compelling rewards for your backers. 📌 Creative Financing: Grants: Research government grants or competitions relevant to your industry. Winning a grant can provide valuable funds and validation. Revenue-Based Financing: This alternative to venture capital offers funding in exchange for a share of your future revenue, rather than equity in your company. Sweat Equity: Barter and Collaborations: Partner with complementary businesses to trade services or resources. This can help you access expertise or tools you might not otherwise afford. Freelancing or Consulting: Founders can leverage their existing skills to generate income that directly supports the startup. Remember: Focus on Profitability: Every decision should be driven by generating revenue and achieving profitability as soon as possible. Be Resourceful: Embrace free and low-cost solutions whenever possible. Utilize free online tools, co-working spaces, and virtual assistants. Build Your Community: Network with other bootstrapped founders and industry experts. Share knowledge, resources, and potential customer leads. Bootstrapping isn't easy, but it can be incredibly rewarding. By thinking creatively and leveraging alternative fundraising methods, you can turn your startup dream into a self-made success story What other methods can help according to you? #canada #startups #fundraising

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It feels good when one of your startups (as an investor) get an exit via an acquisition. It is now official that Fonolo has been acquired by Verint. #investor #exit #canada #startup

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🦉 Catching up with Tomasz Tunguz's newsletter where he shared this interview from Startup Archive, where Dan Martell talks to Tobias Lütke CEO Shopify.  Tobias talks about pitching #Shopify in the early days, and the road blocks he came across, including how investors passed as they thought his market was too small 😲. Shopify is now worth $90B! If you haven't seen it, go and watch it and also read Tomasz’s thoughts on how to think about pitching market size too. https://lnkd.in/eehdzBAu Very interesting stuff and useful insight for startups in the pitching arena. 💪 https://lnkd.in/enMAT9JW

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Dilution is not neutral and shouldn't be viewed as such. It's either positive or negative, good or bad. In the world of VC-backed companies, dilution is such a normalized part of the journey that it is often passively accepted. This often leads to the negative form of dilution such as capital raised for: → inefficient sales and marketing spend → R&D supporting technology searching for a market → layers of unnecessary organizational overhead → supporting broken business models → vanity valuations → etc... However, dilution has a positive and accretive expression as well such as capital raised for: → scaling efficient go-to-market efforts → product and channel expansion with clear ROI → deleveraging and strengthening the balance sheet → accelerating market share gains for a sound business model → transformative investments (e.g. M&A, R&D, capex) → etc... Therefore, dilution should neither be passively accepted nor should it be categorically prohibited. It shouldn't be viewed as always positive or always negative because it can be either. The purpose and quality of the use of capital is what ultimately defines the merit of any dilution. For this reason, capital allocation is one of the most essential responsibilities and capabilities of a CEO. Effective capital allocation leads to dilution being positive. Ineffective capital allocation leads to dilution being negative. It's usually that linear.

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Canada's Brain Drain is undeniable! 🌍 Why are ambitious Canadian startup founders flocking to the US? 𝗟𝗲𝘀𝘀 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 The US economy is 12.5x larger but its VC industry is 30x larger. In 2023, US VC deals were $150-200 billion while Canada was ~$6 billion. 𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗙𝗿𝗶𝗲𝗻𝗱𝗹𝘆 𝗖𝘂𝗹𝘁𝘂𝗿𝗲 In the US, speed and risk-taking reign supreme. It's a dynamic environment where ideas rapidly transform into reality, unlike the more cautious pace in Canada. 𝗕𝗶𝗴𝗴𝗲𝗿 𝗠𝗮𝗿𝗸𝗲𝘁 With an economy 12.5x the size of Canada’s, the US offers unprecedented reach and potential for growth. 𝗛𝗶𝗴𝗵𝗲𝗿 𝗧𝗮𝘅𝗲𝘀 Although not the main factor, higher taxes in Canada add to the challenges. Recent hikes in capital gains taxes have not helped. For Canada to thrive in the innovation economy, it's time to tackle these hurdles head-on. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _  Excerpt from a discussion I had with Mark Nashman. Link to the full video in the comments. #startups #venturecapital #investing #Canada #culture

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The latest generation of Sanctuary AI’s Phoenix, boasting human behavioral data capture technology known as Carbon. This advancement provides unparalleled training data quality, enabling significant improvements in robot performance and capabilities: - Enhanced uptime ensures robots are available for training and data capture, improving efficiency. - Accelerated build and commissioning speed enables quicker deployment of units. - Reduced bill of materials lowers manufacturing costs. - Substantial hardware improvements, including increased range of motion and durability in wrists, hands, and elbows. - Miniaturized hydraulics reduce weight, power consumption, and complexity while exceeding safety standards. - Improved visual acuity and tactile sensing enhance data fidelity for AI control system training. - Automation of new tasks now takes less than 24 hours, a major advancement in task automation speed and autonomous system capability. #robot #robots #humanoidrobots #ai #robotics

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Why did Shopify's shares drop 13%? 📉 It's not Shopify's fault. Their valuation skyrocketed during the pandemic, when EVERYONE was buying things online. There was a huge focus on ecommerce at that time. And we didn't really know when things would go back to normal... hence Shopify's value being unrealistically high. But consumer behaviour has shifted since lockdowns ended and there's been less of an emphasis on ecommerce. Which is why many people weren't surprised when Shopify released GREAT quarterly earnings... yet their share price dropped. A lot of my clients and contacts asked me about this. They figure "Maria does everything from checkout flows to payment processing, she'll know why Shopify's stock dipped." So I put a YT video together. I pulled this screenshot from it. It explains the stock dip, but also answers this question: Which businesses should use Shopify as their primary ecom platform? Give it a watch and let me know of any questions. I'm a DM away.

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Good discussion on investing in AI. A good VC needs to be a historian.

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Many founders think finding investors is a challenge. But here’s the truth: the best investors are actively looking for deals—including yours. They’re not hiding; they want to find great opportunities. Whether you're in Canada or the US, there are tons of resources that show you who’s investing in your sector. It’s all about reaching out, starting those conversations, and building the right relationships. You’d be amazed at how well buying someone a coffee can propel your business forward. Looking for guidance on finding investors? Drop a comment or DM me—I’m here to help you scale.

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Shopify will be a $1T biz by 2034. 7 reasons why: 1) eCom Is Huge + Shopify Won 2) The Comps are all wrong 3) Shopify Plus (And Ent) is still a 👶 4) Shopify JUST Entered Retail 5) Shopify’s Lock-in: The App Ecosystem 6) Stock price analysis: 15x ARR on Trillions in payments. 7) Shopify at $1T: My hopes and aspirations Let’s go lonngggggg. 1) eCom Is Huge + Shopify Won eCom is a $6.3T market, but only 15% of where US consumers spend $$. If you’re SMB - Mid Market Shop is the de facto. eCom still has so much more market to capture. 2) The Comps are all wrong. Amazon & Salesforce aren’t the right comps. NCR is. Shopify is the payment processor for eCom. How valuable will they be when they’re processing Trillions in payments? 3) Shopify Plus (And Ent) is still a 👶 It feels like Plus + Ent are big because we talk about it too much. But 1.5% of Shopify brands (30k) are on Plus. Maybe 20 actually qualify as Ent brands. The upmarket feature march is still early innings. 4) Shopify JUST Entered Retail Shopify POS is cool, but isn’t ready to support 1k national doors. US Retail spend is 5x eCom. When Shop is taking 2.9% + $0.29 on Retail purchases… That’s a mountain of cash. 5) Shopify’s Lock-in: The App Ecosystem Apps make Shop stickier for brands. Apps are meant to retain more brands by providing more functionality. But brands also migrate to Shop because they want App functionality. There’s so much value in the platform flywheel. 6) 15x on Payments ARR. Shopify currently trades at 15x Rev. As Shop attracts more Large Brands + Retail GMV Payments explodes. SaaS ARR locks in payments Rev. Shop is a $100B processing processing $248B GMV. If GMV hits $2.5T, that’s a $1T valuation. 7) Shopify at $1T: My hopes and aspirations Go read the newsletter at this point. This is where I got full tin hat. It’s well worth it. My newsletter subs got this content 1 week ago. If you want to be first and have the insights before everyone else. Subscribe now. #shopify

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When you're scaling a DTC brand from $5m to $30m, don't try to optimize for lowest cost of capital when you raise debt financing... The lenders out there who can offer the lowest cost of capital usually can't offer the capital flexibility and deal terms that you need as you scale. Low cost of capital lenders don't love DTC. It scares them because there is little to no A/R and inventory is a riskier collateral base. As such, they'll either offer you way too little capital availability or their offer will come with hefty protective provisions that feel punitive. Non-bank lenders tend to be the best fit for a DTC-heavy brand that is scaling profitability beyond $5m in annual sales. Traditional bank lenders, which offer lower cost of capital, tend to become a better option after you hit $30m+ in annual sales. Obviously, there are always exceptions to this rule, but the advice I'm offering here turns out to be true most of the time in my experience. __ Want more tips like this? Consider reposting or giving me Jon Blair a follow.

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Is it the fear of #accountability or the fear of being #cancelled that has corporations falling into the category of #greenhushing? Corporations should not and can not conflate the two...and stakeholders should not and can not use a corporations disclosure as a signal to launch an attack. The collective goal of corporations and their stakeholders should be to solve the problems they have influenced or have influence over - #climatechange, #water abundance, #food security, #social #equity and shared #prosperity. This is done by challenging one another with respect and positive intent. If you are a corporation that is not disclosing your goals, targets, ambitions and performance for fear of being "#cancelled", we understand...but remind you that authentic actions built of positive intent, while they may not be bullet proof, is your best defence - and the greatest opportunity to capture the #alpha from addressing your #sustainability challenges. And if you are a corporation failing to disclose because you do not want to be held accountable...well, the risk of not disclosing has historically proven to be more destructive. If you are a stakeholder that has found yourself focused on issue spotting rather than issue solving, recall that greenhushed corporations provide ever more limited data that restricts your means of productive engagement....and isn't that the goal? Productive engagement...? Someone must have written a great song about this in the 60's... #decarbonization #gigacorn #gigacornhunter

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