Here’s why Shopify just nabbed a $100 million funding round

Ten years ago, creating a well-done and highly scalable e-commerce site required tens (if not hundreds) of thousands of dollars, while today it takes less than $100 a month. 

So what happened?

Quite simply, new turnkey business commerce site platforms like Shopify, BigCommerce and Magento were created to fill an obvious and gaping hole in the market. These platforms succeeded by meeting the needs of small online business entrepreneurs who were too big for Yahoo, eBay or Craiglist, who wanted their own site to centralize their online commerce, but didn’t have money to spend to build one from the ground up.

Of course, some would argue that you don’t need Shopify or Magento, that building atop a blog platform like WordPress to create an online business would be just fine, thank you.

Maybe, but anyone who’s run an online commerce business using WordPress knows it can take a lot of custom code work, usually necessitates a fair amount of plugins, and almost certainly requires paying an equally expensive managed WordPress provider to get the necessary scalability needed provided your business actually takes off.  

And while all this can be done affordably, it doesn’t erase the fact that these blog platforms are still not commerce-native, despite the best efforts of companies like WooCommerce and others trying to make WordPress more commerce friendly.

All that makes a big difference and is, in the end, probably why Shopify just got a massive $100 million round.

Does Shopify face threats?  Sure. Some day Amazon or eBay might create a similar solution. Some day they might acquire one of Shopify’s competitors (or Shopify themselves, unless they get too big). And maybe even Automattic, the company behind WordPress.com, will follow Squarespace’s lead and realize the lost opportunity and create its own turnkey website commerce platform.

But even if all of the above does happen, the market opportunity here is massive. Barring a catastrophe or huge corporate blunder, I expect to see fairly strong growth from Shopify going forward and wouldn’t at all be surprised by an IPO by late 2014 or in early 2015.

The only question left for me is whether Shopify will price its offering in dollars or in bitcoins.

(Disclosure: Automattic is backed by True, a venture capital firm that is an investor in the parent company of GigaOM. Om Malik, founder of GigaOM, is also a venture partner at True.)

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