VCs passed on Shopify because the market was tiny — only 40,000–50,000 online stores existed, so even 50% market share wasn't venture-scale. They were right about the size, but wrong about why: the market was small *because* building an online store was hard, and Shopify was the thing that would unlock it.

"What a lot of free-market thinkers don't understand is that between the demand and eventual supply lies friction. And I actually think that friction is probably the most potent force for shaping the planet that people just generally do not acknowledge."

Tobi's founding theory: "There was a lot more people like me except there was too much friction which we needed to solve." He had lived the pain running his own snowboard store, and assumed many others were silently blocked by the same walls.

Every time Shopify made the process simpler, consumption went up. A million merchants later, the pattern held: small markets are often friction-bound markets, and removing friction expands them rather than splitting them.

Software is uniquely good at reducing friction — which is why software businesses can manufacture their own TAM rather than inherit one. Sizing the current market misses this entirely.