On Launching a Second Product with Dharmesh Shah, CTO / Co-Founder HubSpot

If we don't like it, we will, we will, we will throw it out. We'll do it hyper informal.

No worries. No worries.

But let's do this. So if folks do listen to this, I want to welcome Dharmesh Shah, co-founder of HubSpot, to this hyper informal SaaS discussion on expanding your product line. It's an interesting topic that I don't know, how early did you start to think about this at HubSpot, like just expanding your products?

Um, it's probably about, I'll say, 4 or 5 years in. Um, the kind of weird thing about HubSpot is when we started, we went against the kind of conventional advice. The conventional advice, which is actually very good advice, is kind of find your one thing, go deep on that one thing, and do it really, really well. From day one, or time t equals zero of HubSpot, we were very broad. So we had everything at the top of the funnel. We had social media and analytics and blogging and landing pages and forms.

It did seem like a suite to me as an outsider in the early days. It did feel like—

Yeah, that's exactly— yeah, it was a marketing suite. So our need to kind of do a product expansion wasn't particularly high. And so, yeah, a few years in, it's— this is one of the kind of lessons learned on product expansion, having thought back on it now. And I think entrepreneurs, myself included, make this mistake all the time in terms of like, what's the motivation? Lots of people will do it. It's like, oh, we're gonna add the second product, we're gonna do this thing. Next thing. And there's multiple reasons or motivations you can have. One is, oh, well, we need to grow revenue. It's like this, we just need to drive growth. And that's in my mind not a particularly good reason, I think, because it's very kind of very you-focused, right? It's like, that's not the market's problem. You're not solving something that customers are asking for, the market needs. You're saying, well, I have a need to grow my revenue, and therefore I'm going to do this other thing. Lots of people do it, but I just don't think that's a particularly good one. A second reason is your customers are asking for it. They're like, I know you do X for me and that's awesome, but I'd love it if you also did Y, which is kind of related. So that's, that's a pretty good reason, a better reason. And the third reason, this is kind of the bucket, and we fall into the second and third bucket, is around is it a natural part of the story? Like if you kind of think ahead, it's like, okay, well, is this really actually your destiny that you were supposed to do this? And now you may have just recognized it now. And that's the way we were when we went from kind of marketing to sales. Sales and CRM software. Our customers were asking for it, right? They're like, oh, like, you know, we want something. It's like, yeah, but there are great CRM products that are out there with, you know, great companies behind them.

Well-proven products.

Why should we be the ones? Yeah. Really good products with, you know, very strong dominant positions. So even from a strategic perspective, we asked ourselves, you know, we're having pretty good success in marketing. Why would we kind of branch out into this thing that we're not known for at all? And the kind of answer we came to is that in order to be the company we wanted to be, and build out this kind of front office platform, the CRM platform for, for kind of marketing, like this growth platform, it would have to be the whole thing. We wouldn't be able to continue down the path and achieve our ambitions without kind of controlling that. So the very— I'll call it a little bit of an Applesque thing, that in order to kind of really drive the user experience the way you want it to, you have to kind of control the boundaries and control the edges. You can't say, oh, we're gonna partner with this person over here, we're gonna do this, we're gonna try and control as much as we can. And that's the kind of original genesis of HubSpot. The reason we had such a broad marketing suite is not because there weren't great products in every category. It's because the user experience of trying to pull all those things together was just too hard for most SMBs. So that was—

anyway, but now let me, let me, let me just push on that a little bit because there's, um, there's some term— you can tell me what it is, I'm going to make it up— I'm going to call it a whiteboard synergy. You're sitting around with the, with the, with the senior team at HubSpot and you're making up synergies, and an obvious one on the whiteboard is sales and marketing. They sit next to each other, it's a continual funnel. From, you know, your blog in the early days of HubSpot to a closed deal. But sometimes those whiteboard synergies don't exist in the real world, right? Sometimes even in an SMB or more a mid-market, sales and marketing are different silos, they're different departments, they're different, they're working differently together. So how did you guys learn about that, that overlap is real, right, and not just a whiteboard synergy?

A couple things. One is, we didn't know this at the time, but we actually had what some of our customers were calling a CRM. It's like, why would we need that? We already have one. When we went and surveyed them, and the reason is because any marketing product is going to have some database of contacts, like a list management system or a contact management system in the product.

For sure, every bot is a marketer's CRM, right?

And that's what it was.

You wouldn't get it if you're not a marketer. This is your database, uh, this is your database, right? This is human beings that you interact with, right? But it's not sales' database.

It's not, right? This is— that's exactly— and you would connect to the CRM, the sales database, and say, okay, well, those those two need to talk to each other. So that was kind of observation number one. Observation number two was that even at that time, I think this is roughly still true today, 20% of HubSpot's customers, these are paying customers, were using Salesforce as their CRM. Makes sense, they're the market leader. Another 20% were using some other CRM. Also makes sense, like, okay, there's a mishmash of lots of other CRMs.

Well, that's interesting. 50/50. 50/50. 50 on Salesforce, 50 on all other CRMs.

Well, exactly. And in terms of if you just count companies using CRMs, the other 60% were not using what would be designated an actual CRM. They're using Google Spreadsheets or something else. They just didn't do it. And so then we kind of double-clicked on that. It's like, well, you know, these are real companies, they're paying us money, right? And, uh, it's like, okay, well, where are these leads going that you're using HubSpot to generate through your blog and through social media? And a lot of times it was spreadsheets, a lot of times it was just the HubSpot database that's like, okay, well, we didn't need it. It's like, we just put it in HubSpot and that's where we use it from and we do what we need to do. And so, so the problem we set out to solve, it's like, okay, well, everybody should have a centrally managed database, a CRM database that's across the organization. And it's, it's just wrong for 60% of our customers not to have that. And so we asked ourselves the question, what is it that's keeping them from doing that? Like, why have they not? It's not like the software category is not mature. CRM has been around for decades. And the answers, uh, you know, that we got back, it's like, oh well, you know, A, this is good enough. That's the kind of constant spreadsheet kind of problem. It's like, oh, spreadsheets are good enough. Uh, number 2 is CRM is painful in terms of implementation, kind of getting it actually going. At least they perceived it as painful. And to some degree, price. And so when we launched our CRM, we're like, okay, well if we're going to solve the market problem, the customer problem, we want to make it easier, as easy as we possibly know how, so the fear of implementation is not high. Oh, and by the way, we'll make it free, right? And that'll take the pricing away. So, and the idea here is to, like, really say, OK, if we took away the obstacles, the barriers, what would adoption look like? And then we'll worry about what the long-term implications are in terms of monetization, other things, kind of at a future date, which is—

Well, that's fun. Let's talk about free for a minute, right? Obviously HubSpot Sales and CRM has expanded very enterprise. It has very rich editions that are paid and all that. I remember when the early sales product launched, it was truly free. I don't even know if there was a paid edition back in the day. Um, and I was skeptical. I wasn't skeptical as I'm a super fan, right? But I was skeptical that because CRM is so core, that free wouldn't incent enough behavior, that I don't care. I mean, I don't— I get that Salesforce itself can be expensive. But a low-end CRM is not an expensive product. So when does that work, and did it work because of that white space, because you weren't trying to replace another CRM, but it let people experiment that they might not experiment? But when— because when free works and when it doesn't is— it seems more obvious from the outside than the inside.

Yeah, it's a great point. So on the list of— I'll call it a mistake because I think it was one, and there's debate within HubSpot, but When we did HubSpot, we don't think we did it right, because I think the point you're bringing out is exactly— and we're kind of still fighting this particular perception issue to this day, right? Which is, oh well, because it's free, it can't be a real CRM. I'm not looking for like a free toy CRM. I'm a 200-person manufacturing company and I want something real.

These are my tools, right?

These are my customers. You're the head of marketing, you're the head of sales, you're looking for it. It's like, so, you know, we thought that that was going to be like one of the defining criteria of what made this thing popular and Honestly, it has helped, don't get me wrong, and there's a class of customers where it's easy to try and the free price point removes a barrier, but it's also been kind of a headwind in terms of just perception. And this is the thing that we're in the midst of trying to work through right now. There's two issues with the kind of product line expansion. One is you become a victim of your own success to a degree, right? So we have been for years the marketing software company, created a new category called inbound marketing, had an event around it, had bunch of content around it. Like, millions of people knew us as a really, really good marketing software company. And so then when you kind of expand, it's like, oh yeah, we are that still, but we're expanding and now we're a CRM platform. It's one thing to say it, it's another thing— so we're 5+ years in the launch of HubSpot CRM, and to this day when we do unaided surveys and we talk to people, it's like, oh, what do you think HubSpot is? A troubling number of times the answer still comes back as, oh, a marketing software company, you guys are awesome. And so, so that's been an issue. And then on top of that is this, oh well, because it's free, it's not really robust enough and it doesn't do the things, or I'm not going to bet my career on something that's free. And so we're working through both of those issues. One is what I would call like a classic positioning exercise, like, OK, well, let's just tell the world that HubSpot's a CRM platform because it is. And let's— and make it clearer that this is a freemium offering that says, yes, we have a free version of the product, but there is an enterprise-class CRM that's as good as— that would be in the top 5 in this category, and it's real. So it's, um, yeah, but the thing I've learned though is that like changing market perception is non-trivial, right? Uh, despite we have lots of reach, lots of smart people, and lots of good things to say, but, uh, brands are powerful, but they lock you in too, don't they?

They do, yeah, they're both right. And how, um, and one thing I've, I should have learned this earlier, but I've only recently learned, is when you have a large installed base, you have to be very thoughtful how often you market to them and upsell them. You have, we can count, but let's say HubSpot has 5 core products now, right? Um, you can't market 5 products every hour to every customer in your installed base, or it fails, right? What have you, have you thought about that either strategically or tactically? How How much is, is too hard? How much is too soft in terms of exposing your base to other offerings?

Yeah, so the one thing we try, and there's trade-offs to this as well, so one of the things we're doing to better position ourselves as a CRM platform is that's the thing that we're actually trying to sell. Often, so someone will come in, like their immediate burning need is, oh, we need a marketing automation thing. The VP of marketing woke up on a Monday morning, it's not like we need to solve this particular problem, some discrete part of the broader problem. Um, and of course we will sell them that, and we have products and they're unbundled, right? So you don't have to buy the whole thing. Uh, but the actual pitch for HubSpot is we are a CRM platform. It does marketing, sales, service, and content management all integrated, and it works together because it was built from the ground up for SMBs. It's got all these kind of value. And here's the— but so we want to do is paint the picture of the broader thing, and there's trade-offs, right? Because you're kind of veering away from the— like, if you're the sales rep, the sales rep is like, yeah, but they're asking for marketing automation. Any time that I waste trying to paint the broad CRM platform picture is taking away, you know, minutes I could spend getting them on this deal and getting this deal done. And so we have to kind of, to some degree, retrain the sales team, retrain ourselves to say, um, the only way people are going to believe this is, A, it has to be true, uh, which we think it is now from a product perspective. It is a full CRM platform. But we have to position ourselves, and there are trade-offs, there's sacrifices that will be made in terms of near-term sales. Maybe a few deals won't close as a result of us being perceived as a CRM platform, but that's the— yeah.

And you know, that is an interesting— it is an interesting challenge that we all go through. So it's that you're having the same sales team sell all products, but both products, in this case sales and marketing, right? That's always— there's a lot of folks, Salesforce will tell you that's the kiss of death, right? If you talk to anyone at Salesforce, it's like day one, you need a dedicated force that understands that product, but then they don't understand the customers.

Well, so here's the thing, right? It's tough, and this goes to the product expansion story as well, right? So one of the decisions we had to make once we decided that we needed to have a CRM product and have a product in that particular category, yeah, we could have went down the classic playbook and said, oh well, there are CRM companies out there, let's just acquire one. We don't— we can't spend the other 5 years of our lives building out a CRM, right? That's, uh, yeah. and we uncharacteristically didn't do that and haven't done that. M&A has not been a big part of the HubSpot playbook.

Well, you're bigger now.

Yeah, so HubSpot's give or take $13 billion market cap.

Yeah, $750 market cap at IPO, it's a little scarier.

That's true, that's true.

But yes, you didn't buy, you built instead of bought, which is an interesting topic too, right? Because it takes a while.

Yeah, but it ties back to that, that, um, so the reason, you know, it was a very kind of deliberate thing, and we've talked about it, is that, you know, the number one thing we're solving for is that ease of use. That's the thing that HubSpot was founded on, to make it easy for SMBs. We didn't think we would be able to continue to make it easy or keep it easy if we just did a bunch of acquisitions— first CRM and then service or whatever things we wanted to get into. We're like, okay, we're going to have to make the sacrifice to build this and continue to build this kind of in-house so we have that user experience cohesion. Which we think SMBs value. Now, in the Fortune 1000 market, that's not that big a deal. Usability, yeah, people like it. It's not a huge deal because they have armies of consultants that can do implementations. They have the budget, they have pain tolerance, which an SMB just does not have, right? They just don't have the resources to be able to kind of deal with hard-to-use software products. So we think it was just— we were solving for our market. Not to say there's anything wrong with the kind of grow by acquisition path. That's certainly a tried and true path, but it just wasn't for us.

You know, just for fun, a small point. I want to stay at the higher point, but you know that question of if I buy a company, I'm inheriting their code base, their debt, they're doing it differently, it's a different approach. Like, boy, I get that, right? I always thought M&A was the scariest thing in the world, right? Yeah, you can buy revenue, you can buy customers, but then, oh my God, you've got 100,000 lines of code that no one in your company even knows how they work. It's like, it's a nightmare. So that's true, that's— it has to be true. Right. On the other hand, the fun thing is if you're HubSpot— HubSpot was founded when again?

2006.

So if I, if I'm building a new HubSpot product today, it's a brand new code base too. I may, I may have a little more fluency at the API level, but really you're not going to use the same tech stack. You're not. It's going to be— you're going to pick best of breed everything today, aren't you?

Uh, actually no.

So one of the things that you'll force the team to, to use the same stack is —2006.

I think one of the things that— I'm CTO, so I have a biased opinion here, but one of the things that makes HubSpot what it is, is we have this underlying set of software services called HubSpot Framework, and we call the individual pieces our primary colors, right? And so it's like, oh, well, we have automation built, we have reporting, we have security, and all those are shared service across the entire product line. So when we launched our sales product and then our service product, we had already been in the automation space for a long time, but automation for us is a feature built on this core service called automation. So whether you're marketing automation or your sales automation, your ticketing automation inside the service product, it's all the same automation. And so when we launch new products, I'll say 80-85%, if we do it correctly, is based on that core code base and getting reuse out of things we already have around reporting, around security, around just even email. So it's real, the efficiencies there are real, they're worth building off the old code base, right? Could have pulled off what it did if it had not been for that. Um, yeah, so just—

okay, just two other questions I want to— that I just think are so interesting on this topic, and maybe we can do one last strategic one. Anything else you want to hit? Um, one thing that, that a lot of us that, that sell either enterprise or sell directly to SMBs miss is the channel, right? And the channel is so important to HubSpot, right? I don't know what it is today, but it's traditionally been 40 to 50% of the revenue is through the channel. How does that work with multiple products? Is there resistance to selling a second product? Because look, I'm good at deploying HubSpot Yeah, I go in, I sell HubSpot for $10K, I pocket $20K. Don't give me— I don't want to sell diet cherry caffeine-free cola, just let me sell. Yeah, yeah. So is this channel nuanced?

Is it? Yeah, let's talk about this. And by the way, just for the record, I have no issues with, uh, kind of tactical, let's get into the weeds, uh, questions. That's— yeah, we can talk about that. Well, this is a really good one, right? Because, uh, one thing you know and I have learned over the years is that even retraining an internal sales team to sell a new product and actually do it is non-trivial, right? Hard enough. Hard enough. And incentives to say, okay, I want you to spend some time on this new product that we have to sell. It's like, yeah, but it's so much easier to sell the thing I know that people are buying and asking for. So to answer your question, yes, that was a non-trivial and still work in progress. And it was particularly exacerbated, right? It's not just a— because most of our channel partners in the early years of product were aligned around that product. So they were marketing agencies, they were SEO firms, they were web design companies and things like that. And then they learned HubSpot and kind of implemented HubSpot to help customers use HubSpot, and that was their thing. And now we're going to sales and CRM. Well, it turns out that's a whole other kind of company, right? Like, these are sales implementation firms, they're ops-driven, they're like sales strategy and sales training kind of things. And so we had to kind of build out a new set, and we did have some that were successful with our kind of marketing channel kind of migrate over and expand their offering, and they saw it as an opportunity for growth. But then we also had to build out a new set of companies that were kind of more sales-oriented. But yeah, yeah, it is an interesting one.

Okay, one, just two other things I want to hit, and then we can chat about anything, clean up stuff that you have in mind. One thing that I've thought a lot about maybe for the last year, and I think it's accelerated since COVID is suites versus best of breed. And folks that have been around a little bit while, like you and me, suites was an anathema as an idea. This is an Oracle concept of like, we're going to jam every product in Why would I want a suite, right? I'm getting— this is the web, this is the open web. Why can't I pick the best of breeds? And yet trust matters, and security matters, and brand matters. And if HubSpot is the best marketing solution for me, and HubSpot sales is pretty good— like, I'm just saying it's not great for others, but it's just pretty good— that might be worth it for me, right? I don't have the headspace, I don't have enough IT team, I don't want to deal with the security issues, the deployment issues, the data governance issues. And so I feel like suites— and Salesforce maybe saw this early, right? Salesforce is a suite. It is not a Salesforce or CRM company. And so what do you think, is it— as brands rise and as all the leading cloud companies are crossing a billion, right, which is the last stop I want to hit, are we kind of in revenge of the suite, but it's a suite 2.0? It's a trusted suite. It's a— it's— I have a thousand SaaS apps now and it's too many. I don't want 1,001, right? Let me just buy it from HubSpot because I don't want 1,001.

Yeah, so, and this is, I think, um, I think we are going to see a return of the suite. And there, and there's two kind of flavors of suite, right? There's a suite where you have individual products, um, that talk reasonably well together but they're quite distinct products, right? And then you have, let's say you look at Google Suite just as a consumer product, it feels cohesive, right? So when you do a collaboration within Google Slides, it's the same collaboration that you do within Google Docs, right? It's like the commenting system, how you @mention somebody, it all kind of works the same. And it feels the same. Microsoft Office, the kind of original suite in my mind, it was similar. So I think we are moving in that direction. And it's partly just raw resistance to complexity. As you kind of noted, it's like, oh, people don't want 1,000 different applications, not for their core. Yes, they'll do things that, you know, it's like, for this particular concrete discrete use case for my industry, I'm going to bring this in, but I'm going to plug it into my core backbone, whatever it happens to be, whether it's Salesforce or HubSpot or whatever it is. So I think that's a common thing. But the other thing I think people lose sight of is just the, the cognitive load of non-suite approaches. Like, okay, well, if I'm a user of a CRM suite, let's say, if I use individual products and they may be awesome, but I still have to learn those individual products and what their quirks are and how automation works in this one versus that one, how the reporting works and this one versus that one. And so most customers, in my mind, especially an SMB, would sacrifice some best-of-breedness, so to speak, for the convenience of having a single support phone number to call, a single UI that you have to learn, less training, less training, yeah. And just, it just makes life easier, and you will trade off that convenience for, for best of breed, I think.

Yeah, I think people underestimate We underestimated how powerful brands were back in the day, right, that these brands would last. And we, we all are customer-centric, but we underestimated the power of trust. If I trust HubSpot and I need to add a product and I love them, and I have to love my rep, I have to love everyone in the stack, right? Every person. I can't have a product I love but a person I don't love. That breaks the relationship. But if it's everything, that's my first call for my next app, isn't it?

Yeah, it is. And so, and this is going to sound a little bit kind of clichéd, but I'm going to say it anyway because it happens to be true, and we talk about this in the halls of HubSpot. When people buy HubSpot, they're buying the philosophy and culture of HubSpot, of which the products are a byproduct, right? It's like you buy into our way of building product, our way of doing business, our way of treating our employees. It's all of it. It's like once you've bought into that philosophy, it's like— and Apple has its own set of things, but like there are people including me that all things being equal will just buy the Apple product, whatever it happens to be. I've bought into that ecosystem. I've been into that, you know, bought into that philosophy. And we think HubSpot is similar for our customers. It's like, okay, yes, individual products do this. I'm checking boxes and making sure the features are there, but they fundamentally just buy into the idea of HubSpot, the philosophy of HubSpot. Yep.

All right, one last question. Let's go way up high strategic, but I've been thinking about this a little bit now. Now there's so many of the SaaS companies that we know that are up passed or approaching a billion in ARR, right? It's crazy, isn't it? Looking back, like, did we know all of them? I know everyone, like clockwork, whether they're crossing it, coming close, they're all, they're all there, right? And we could, we could talk about why, but a different question. Now we can look at the ones that were iconic but are growing more slowly today, right? I'm not going to point out anybody, but we can think of some of the great apps that are— and I see that they all have one product. Yep. Not all, but really they do. And if you look at— and the flip side, you look at the Twilios that went broad aggressively, you look at the Vivas that just added one other product, Vault, but Vault got bigger than their CRM too. There's either 2 or 20, but the ones that blew through it, as HubSpot is doing— and so if you guys thought about that as a management team, do you need multiple products to hit $10 billion in ARR? Is it— does everyone have to do this? And what's the right time and sequence? Because I think we We're starting to all feel that, I mean, cloud is so big, but there's still only so many people on planet Earth. Yeah, that's true.

So I think, so I'll answer your question. I think most companies, when you get to a certain scale, you will need a second product, a second act, so to speak. There are some that can get away without it, but most of those exist in the consumer space. In B2B particularly, usually you will need to kind of expand your product portfolio. And there's a couple of, kind of laws of physics that kind of drive that. It's not market saturation. It's not because you've already sold your product to all possible people that could buy it. What it ends up being is in order to kind of drive your go-to-market and be able to kind of drive retention rates above 100%, you're going to need something new to sell beyond what you already have into your existing install base. So you need a combination of, yes, we're gonna get new customers, we're gonna grow the overall customer base. That's obviously what every company is trying to do. But you also need to say, okay, well, Once I have that trusted relationship, once I am the vendor of choice for this particular customer, if I had a new product, that is so much easier to sell than trying to get 1,000, 10,000 new customers. And so I think the successful companies find out a good balance across those two things. We want to continue to invest in the current products. We're not going to treat them as cash cows. We're going to grow mindshare and market share. But then we're going to say, OK, we want to grow share of wallet from every individual customer. By expanding the product portfolio. What else can we solve for these customers that already love us? And that's what helps you kind of get to the kind of billion-dollar and beyond mark. I think it's one of the things I think companies need to kind of figure out as they scale.

Yeah, the ones now that we have so many public, the one, the ones I worry about where even if the numbers are great, where the net retention is sort of equal to the growth rate. Wow, you have 150% net revenue. We wish we had that with SMEs, don't we? The 150. Yeah, absolutely. But if the company is also growing 50% annually, There's some risk underlying. I mean, where's that revenue coming from? It's all— it's all— you've got— it's challenging to— you've got to add another product or seek out more customers, and it gets— scale starts to hit you a little bit.

Yeah. On that note, one of the things that we've talked about a lot at HubSpot is that when we think about, you know, acquiring new customers, and the economics of SaaS are much better understood today than they were, you know, let's say 10 years ago, and we have the notion of lifetime value versus CAC, And lifetime value the way companies measure it, and which is the right way to measure, it's like, okay, well, what's, you know, take the churn rate and the monthly subscription rate, whatever it happens to be, and you kind of do the quick math. But if you look at the kind of option value of future customers based on your past history, once you have some history, it's like, okay, well, HubSpot has launched some products right now. So when we acquire the next 10,000, next 25,000 customers, yes, there is a lifetime value under the assumption that the products we have 5 years from now will be the product that we have today. But there is a non-zero value for those customers beyond the LTV around what other things that we don't exist yet in the product portfolio that we will be able to sell them once we have them as customers. And I think that makes the math more interesting in terms of how much you're willing to spend to acquire customers. You don't want to go too crazy, but there is that option value of a future option value of kind of your product portfolio. And the nice thing about it is then you can use that to say, oh, we have, you know, HubSpot has 75,000-odd customers now. When we think about product expansion, we can kind of sort of do the math. It's like, here's what we think the uptake rate will be, and we can use that to fund it. It's like, okay, well, this is an adjacent market, feels awfully straightforward. We can reuse a bunch of our code base that's on top of the HubSpot framework using our primary colors. Let's, uh, let's do this. That's the—

it's a good reminder. We can— maybe we'll wrap up on this one, which is, yeah, we know, we know metrics so much better today, but they're complicated, these metrics, right? And lifetime value, you can't explain it to Wall Street this way, they'll be confused, but lifetime value is so much longer than we thought, right? And you will develop new products if you go, like, just like we grow our TAMs, right? Our TAMs are all bigger than when we start. Part of that is our lifetime value is bigger than we ever imagined, right? If you have happy customers, if you nurture them, if you water them and take care of them, you have HubSpot customers on their second decade, they'll come up on their third decade as customers. It's almost an infinity calculation. I need your help as CTO to do the math because it breaks my head in the spreadsheet what some of these customers could be worth, right? Totally. I'm gonna have to—

I'm gonna regret actually saying this stuff. I'm gonna tell you my diabolical secret in terms of SaaS long-term growth. And that— so we've been talking about lifetime value, and we, you know, we've talked about, oh, here's the kind of first-order approximation of lifetime value is the MRR and the churn rate. Second order is predicted future value based on product expansion. Another one that no one really talks about is because systematically it's not tracked yet, and this is I'm obsessed with this, is around not lifetime of the company and how long that company is a customer, the lifetime value of that individual. Because one thing we know for sure is that people change jobs and change careers. They do. Every single week at HubSpot, we will have a customer sign up that was a future user of HubSpot at a different company. All the time, right? Happens tens and hundreds of times. And I think one of the things that will make for successful SaaS companies in the future, this is what we're working on, is this kind of connected ecosystem. Like, we should know not just which companies have bought from us, which people have bought from us, and track their career trajectory over the entirety of them being in the industry. And we want to get them from the time they graduate through things like HubSpot Academy. Like, we will help you build your career. And it's one of the things we— phrases we use internally within HubSpot is we don't build software, we actually build careers. Like, deep down inside the soul of HubSpot, that's what we're actually doing. And yes, We'll give you the tools you need, but even before that, most people, when they kinda come into the HubSpot fray, they do it through HubSpot Academy and through our blog. It's like we're trying to teach you how to get into this industry and it's changing really fast, it's a great place to be. So that's what I'm obsessed with, how do we better connect the ecosystem of this kinda loyal fan base and user base that we have and we've built over the years, that's millions of people strong.

Yeah, in the early days of SaaStr, I wasn't thoughtful, but we wrote this early post on second order revenue and I tried to calculate that back in the day. That champion change was like a +50% back when I tried to do some rough math, and it's probably much more today because they're on their fourth job, right? And maybe, maybe the last thing we can break is when you— if you want happy customers, you want your app to be the first one they deploy at their next job. I'm going in, my neck's on the line, I have a new marketing job, and what am I— you know this thing, I'm going to deploy HubSpot. You want that. If you have that feeling, if you have that connection, totally infinity.

It's where we want to get to is we actually— we want to get, you know, take it a half step further, which is when that person is interviewing for a head of sales, head of marketing, whatever job at the next place, I want them to make it a requirement that I will not join a company unless they have HubSpot or willing to put HubSpot in. That's the level of loyalty we're looking for.

It can be done. All right, Dharmesh, this was great. Thank you, thank you so much.

Thanks for having me.

Yeah, all right, hold on.