The Portfolio Growth Model: Optimize for Churn
Lower the barrier to entry and accept high churn; a few power-law winners make the whole cohort pay off.
- Difficulty
- Moderate
- Time to result
- ~ongoing to results
- Steps
- 3
- Confidence
- 94%
Instead of maximizing retention like a typical SaaS, Shopify lowers barriers so as many people as possible attempt entrepreneurship, accepting that most will fail. Because revenue is tied to merchant GMV (not just a flat subscription), the rare merchants who become huge generate enough value to make the entire cohort profitable, exactly like angel investing or a venture fund vintage.
Origin
Archie Abrams explaining Shopify's counterintuitive stance on churn, explicitly analogizing it to angel investing where a few winners carry the portfolio.
Core principles
- 01Most new businesses fail; fighting that is the wrong goal
- 02Cohort value is power-law-driven, not evenly distributed
- 03A usage/GMV-based monetization model lets revenue grow with the winners
- 04The metric is total cohort GMV over years, not per-merchant retention
How to run it
- 1
Check that your monetization scales with customer success
Confirm revenue grows as your best customers grow (usage, GMV, or take-rate based) rather than being capped at a flat subscription.
Pro tip If you only earn a fixed $29/mo, the portfolio model breaks; the upside must be uncapped.
Watch out This model does NOT fit pure flat-fee SaaS where every churned user is pure loss.
- 2
Lower the barriers to getting started
Make it as easy and cheap as possible for people to try, maximizing the number of attempts entering the top of the funnel.
Pro tip Reducing early monetary friction can causally increase a customer's odds of succeeding.
- 3
Measure total cohort value over years, not retention
Track how much total GMV/gross-profit a given time-period cohort produces over the next 3-5 years in aggregate, not on a per-merchant basis.
Pro tip Onboarding is still the biggest lever for retention even though retention isn't the goal.
In the wild
Abrams: most merchants in a cohort will start, many first attempts fail, but the merchants who succeed (the 'Alberts of the world, figs') make the entire cohort profitable for Shopify because payments revenue scales with their GMV.
→ Shopify can rationally lower entry barriers and tolerate high churn.
Common mistakes
Applying it to flat-subscription businesses
Without uncapped, success-linked monetization, tolerating churn just destroys value.
Trying to save every failing account
Effort spent retaining low-commitment users is often wasted; the model bets on the outliers.
Is it for you?
Best for
Platforms and marketplaces whose revenue scales with customer success and who can acquire cheaply at scale
Not ideal for
Flat-fee SaaS with high CAC where every retained account matters equally
From the transcript
“can we lower the barriers to getting started and get as many people in the door trying their hand at entrepreneurship”
“the folks who do go on to be successful will kind of make that entire cohort of merchants who started something that makes Shopify as…”
“you think of the the other parallel is you know an Angel Investing right most of Angel Investments are not going to work out but…”
From the episode
Breaking the rules of growth: Why Shopify bans KPIs, optimizes for churn, prioritizes intuition, and builds toward a 100-year vision
Archie Abrams (VP Product, Head of Growth at Shopify)