John Phillips and Shopify - the biggest angel score in Canadian history

Meet Canada's newest billionaire.

John Phillips, a former corporate lawyer and wireless company executive gained more than $1 billion in 2019. He owes this gain to being an early and steadfast backer of Shopify. The company had precarious early years and was initially supported by co-founder Tobi Lütke's father-in-law. In 2007, Toronto-based angel investor John Phillips heard about the company through a friend. He was impressed by the product and even more by Lütke. He invested $250,000 at a $3 million valuation. He bought more shares subsequently, building a position of about 5 million shares. Shopify's current market cap is $60 billion. In 2019 alone, shares surged 175%. Remarkably, John Phillips has kept the bulk of his position, still holding 4 million shares as of 2019. At Shopify’s year-end close of C$516, the holdings are valued at more than $2 billion.

After a 20 year career as a corporate lawyer at Blakes, John Phillips worked as an executive for Clearnet from 1994 onwards. Clearnet was sold to Telus for $6.6 billion in 2000, so that may explain the beginnings of his wealth. He had been an active angel investor prior to investing in Shopify and played a pivotal role in its development, as detailed in a prescient 2014 Report on Business article that named Tobi Lütke CEO of the Year. Phillips used a simple checklist to make his investment decision: great management team, great product and market validation in the form of sales. He is the one who convinced Tobi to take on the CEO role, when a co-founder left the company. He also got Tobi to hire more diverse staff and to focus more on big-picture strategy.

While as a guru of capital allocation, I repudiate angel investing in the strongest possible terms, I have to say that I am impressed with the guts it took to hold a position from a $3m valuation all the way to the three comma club. Bessemer Venture Partners (the Series A backer) owned more than 20 million shares at one point, but as of 2016 no longer owned any (or had distributed the shares to its limited partners). OMERS owned 4 million shares, but seems to no longer be in the picture. In all, six VCs were involved, they all appear to be mostly gone. That’s a typical pattern, VC investors are eager to cash in their jackpot in order to buy more lottery tickets.

John Phillips is still a director of Shopify. He holds multi-voting shares, just under half of Tobi's position and essentially represents the balance of power in terms of votes. He has also invested in fintech FundThrough. His other holdings and directorships are obscure to me. The Shopify shares are held through a corporate vehicle called Klister Credit Corp. owned 50/50 with his wife, Dr. Catherine Phillips. So both are billionaires (before taxes). Needless to say, Shopify's stock will continue to fluctuate, I accept no liability for jinxing anything.

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