Tobias Lutke, the billionaire founder of Shopify, says the key to building a 'fantastic relationship' with investors was being totally upfront about what he did not know

  • Tobi Lütke, the billionaire CEO of e-commerce platformShopify, said on an episode ofNPR’s “How I Built This with Guy Raz” that setting expectations upfront helped him build strong relationships with the venture capitalists who supported his company.
  • Lütke toldNPR that two of Shopify’s investors were so in tune with the company’s performance “that they basically saved me from having to do a fundraising round.”
  • The e-commerce platform’s success has made Lütke a billionaire: He has a net worth of $3.2 billion, according toForbes.
  • Visit Business Insider’s homepage for more stories.

Before e-commerce giant Shopifywent public in February 2015, CEO and cofounder Tobi Lütke had to answer to the venture capitalists and angel investors who supported the company. The key to doing this successfully, as Lütke said on an August episode of NPR’s “How I Built This with Guy Raz,” is outlining your expectations for the relationship at the start.

“I’ve always had a fantastic relationship with all the people who invested in the company, partly because I told them straight off the bat, saying, ‘I’m not going to pretend to know things I don’t know and I really hope you’re going to help me in this journey,'” Lütkesaid on the episode. “I think our relationship has always been, we were always on the same side of the table trying to build this thing.”

Lütke told NPR that Shopify’s investors were so in tune with the company’s performance “that they basically saved me from having to do a fundraising round.”

“Ten months after the Series A, Jeremy and Trevor from Bessemer came to me and said, ‘You are still massively constrained by money, how about instead of you spending a bunch of months of fundraising, we’ll just quadruple the evaluation of the company and put much more money into this because you can grow this way faster,'” Lütke toldRaz.

Lütke founded the e-commerce platform in 2004 after trying to launch his own small online business selling snowboards, according toForbes. Fifteen years later, the company’s $42.3 billion market cap makes it worth more thanTwitter,Snap,Square, andLyft,Forbes reported. Kylie Cosmetics and Allbirds bothlaunched their online retail businesses using Shopify.

Read more:The billionaire CEO of Uniqlo — and the richest person in Japan — says a woman would be the best person to take over his job

Interpersonal issues — including those between founders and investors — are the leading cause of startup death, Yeshiva University Sy Syms School of Business dean Noam Wasserman previously toldBusiness Insider’s Shana Lebowitz and Sherin Shibu. Wasserman has studied 6,000 startups and 16,000 founders since the year 2000. He now advises founders and investors to set their expectations for their professional relationship early on, especially when it comes to tough issues — like how to divide equity — that often get pushed to the backburner.

For Lütke, Shopify’s success has already paid off:Forbes currently puts his net worth at $2.8 billion.

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