The Secrets to Scaling with HubSpot's Founders Dharmesh Shah and Brian Halligan and SaaStr's CEO

Trust is at an all-time low. People don't trust sellers and marketers. They trust their friends. What we try to do is match the way we market to the way modern humans behave and shop and buy.

With inbound marketing, we had a very strong point of view. It wasn't about the product, it wasn't about the software, it was about this entire movement. This is not a fad, this is the future.

HubSpot's product organization is on fire these days. Crafting a CRM product in-house with love from the ground up.

The best time to work on culture is time t 0.

Trying to build a company that our kids would be proud of. I have a great co-founder and a great team. We laugh a ton.

So much work left to be done. Feels like we're in early innings.

Our mission is we want to enable millions of companies to grow better. There's so much more work to do.

All right, how's everybody doing? Having fun? Have we heard enough about venture capital? Is it time to talk about building a business again today? All right.

Oh, nice crowd.

Well, thanks. We have a treat. We have not only two of my favorite founders, we have them together, and we have a product. How many of you guys use HubSpot? Raise a show of hands. Oh, that's pretty good, right?

Thank you, thank you.

Yeah, how many of you like truly rely on HubSpot as like the core of your business? Yeah. So pretty cool. Pretty cool. So a lot has changed at HubSpot over the years. I want to talk about it, but I wanted to— since this is sort of our 10th anniversary, this is a little niche, but this was our very first blog post on the left. And before anyone went public, this was 2012, a long time ago, right? In SaaS. And Inc. used to publish everyone's revenue, remember?

We went public in 2012.

No, no, this was before you went public and everyone would lie. Everyone would say, you know, we're doing so great. And I, and I wrote up all the, all the ones that were there and a lot of the top ones actually declined and didn't make it. And there was HubSpot. So this is probably wrong, but back then it said $28.5 billion in GAAP revenue. Now that might be wrong and it's disclosed, but that's 10 years ago for SaaS. And then fast forward today, we're at $1.7 billion run rate last quarter. Yeah, close enough for, for founders. I mean, that's, That is the power of compounding revenue, isn't it? I mean, that is— that's crazy to think what 10 years of hard work does, right? It's epic, isn't it? And we'll talk more about it. And actually, HubSpot has accelerated after $1 billion in revenue, which is pretty— if you think about where we were, it's pretty crazy. So it's fun for me. I actually knew less about HubSpot than I should have back then, but I called it out as someone that was clearly going to break out. But I knew the website grader and all that stuff. I just didn't know how it all fit together in my head. So it's just been fun that HubSpot A little bit has been part of the journey since, since our first, first blog post. So I think we need to— I want to, I want to spend maybe 10 or 15% of our time talking about co-founder stuff. It's pretty rare to get co-founders. You're still together. You haven't gotten divorced or broken up yet, right? And then I want to dig into some really interesting things that have changed at HubSpot that I think help you. And then we'll have a little bit of time. We'll at least do 3 or 4 questions. So So hold, hold a few. But on this one, just this journey accelerating after a billion. But to each of you, what's one of these phase changes that's just so visceral to you? Like, what's, what's an interesting story or what was the most visceral change that we can see on this journey?

One is just shifting from being a kind of marketing apps company and going from product n equals 1 to product kind of n equals 2. That's a dimensional change in complexity of the business. Everything gets kind of not linearly harder, but exponentially harder. So that was a big shift.

I would just say like our mindset from the beginning is, well, this is this guy Peter Thiel. Yes.

Smart. Yeah.

I don't like— I don't like his politics, but he has a really smart thing he said in his book. He says you have to be right about something that everyone thinks you're wrong about for a long period of time. And We kind of take that to heart and we've always sort of, if everyone's zigging, we'll zag.

Yeah.

So in the early days of HubSpot, everyone wanted us to go to the enterprise. We're saying, no, no, no, we're going to SMB. And we have a long story about why we did that. And then 6, 7 years later, we said, we're going to want to move from a marketing app to a CRM suite. Everyone said, big blue's in the way. You're never going to pull it off. They're unassailable. We're like, we can do it. We know we can do it. So we sort of, again, zagging, everyone's zigging. These days everyone's like, oh, you want to build a big CRM company? The playbook is very simple. You just start acquiring businesses and you cobble together this mess of the CRM, Oracle, etc. Lots of companies have done that. We don't have to name names. And we said, nope, we're going to craft together this beautiful application and build it in-house, kind of like the way Apple would do it. So I think one thing that's worked for us along the way is we've had a healthy disrespect for conventional wisdom.

Was— now HubSpot could mean a lot of things. Actually, I don't know what it means. Was this always the vision to be some sort of SMB business suite? What was this initial vision on— I actually don't know— on day zero?

Yeah, the only reason— well, not the only— I mean, the primary reason we started the company is both of us had a passion for SMB. This is when we were both grad school students, when we first kind of met as classmates. And partly the reason is we had both done enterprise software before in our prior lives. As it turns out, enterprise software sucks as a life. You've got these extended sales cycles. It takes you so long to figure out product-market fit because You don't get as many data points back. Um, the other end of the spectrum, you could do consumer applications, consumer companies, and those tend to be very kind of, uh, bimodal outcomes. Either you could come up with something great, it's the next Facebook and it's billion plus dollars, and, or it's nothing because you, you know, the advertising side is business. You just don't know if you're gonna break it through. The beauty of SMB is that you have the kind of old-fashionedness of enterprise, which is you can charge money for software, but you have the scale of consumer where there's millions of them out there to be served. And we were just excited about— and we thought it was an underserved market that, you know, everybody ends up getting pulled up into the enterprise. And we felt that if we could kind of have the courage of our conviction and stay in SMB, that that would be— that would work itself out. That was one of the founding theses of HubSpot.

We had a slide, we had a really good slide in our deck. There's a New Yorker cartoon and there's a dog typing on the internet and there's a dog looking over his shoulder very carefully. And the dog typing in the internet says, You know, the great thing about the internet is nobody knows you're a dog. And I love that slide. And it's kind of true. Like, you can't tell how big a company is on the internet through their website and whatnot. And so we thought the internet disproportionately benefited small businesses, startups relative to large businesses and scaleups. And that was our, that was our thesis. And everybody thought we were wrong. It was the hardest chapters in HubSpot were raising all our funding rounds because nobody, everybody wanted to go to the enterprise.

Yeah.

And when we were thought wrong for a very long time, every board meeting, every— like, it's like, okay, so we get it that you're starting an SMB, but surely you have a path to the enterprise. I'm like, no, we're doing SMB. Year goes by, 5 years go by, 10 years go by, one of the IPO roads. But we must have a path. I'm like, I know, but where's— like, no, we're not.

I hate when they call you surely.

Like, I know. Yeah.

Do you think—

nicely played, Brian.

And I do want to talk about what the vision was on day zero versus today. But this The more I thought about this SMB stuff, and I had some of that DNA too, but I changed my mind quickly to survive. Sure. But do you think it's just, it really is people's DNA? That it's that passion? Is that what kept, I mean, we'll talk in a minute about, as you said in a tweet, HubSpot at a low 5-figure price point's really a bigger SMB, or an M of the SMB.

Yeah, we're really the M in SMB.

But when the board was pushing you back in the day, Was it more cultural? Was it more just we don't want to do it as human beings because we don't have passion?

I think two things. We did— we did think that the internet disproportionately benefited the small relative to large, particularly on the marketing side. We also saw the business model evolving where you can actually scale a small business software company. You know, there are two tricks to it. You need to keep your CAC low, which is a hard thing to do, and you can't do that with like major advertising budgets. You need some sort of viral marketing, freemium motion, product-led growth. You need to really get good at keeping CAC low and then you're going to churn out customers. So your customer, your customer dollar retention, you're going to have a divot to fill and you need a second product or a second axis to your pricing so your best customers can fill that divot and you grow through it. And the metrics on HubSpot, like if you look at HubSpot back maybe in 2012 when you wrote that article, like our customer dollar retention was probably 70% and our upsell was maybe 5%. So we were 75% total. And now that 70% has gone to plus or minus 90%. And so the customers are much happier. They're staying around longer or whatnot. And then the upsell is more like 20% and so it's 110%. And so over time, our business model got much stronger and our product got much stronger and really helped us scale.

Yeah, I didn't— I did hit that later, but I didn't. It's interesting. So if when we wrote this you were in $20, $30 million something revenue, you still had crummy SMB numbers. What today we would call them shitty SMB numbers. No, no VC, no matter how they just, just made $5 billion on Figma, would fund an SMB company at $25 million ARR with 75%. Yet we know why it is like the smallest do churn every month. They go out of business, they change and upsells hard. How did you— what's your advice on that? Because I challenge folks to at least have a path to 100. It's like a path to profitability. Like, you also, I think, almost need a path to 100 so that you don't plateau.

The mechanics are not hard. It's exactly the component pieces. You have to make the product better, right? Yeah. Invest in customer success, so more people are getting adoption. Maniacally focus on that churn rate, the customer dollar churn. And then you have to either have seed expansion, or more products to sell, or tier expansion. Like, otherwise, the math just doesn't work. There's just no way to kind of get there from here.

But did you feel like you were anything less than fully succeeding when you had that sort of suboptimal interaction?

I really kept that up at night. The whole time where we had high churn and, you know, sub-100%, we're like, and this is— we're having a pretty good run, but this is not going to be the thing.

What was the board saying? Were they saying this is great, the 75% revenue?

I'll tell you something. I'll tell you something about the early funny days about HubSpot. We had a wonderful woman on our board named Gail Goodman that was the CEO of a company called Constant Contact. You don't hear much.

Yeah, well, Ben Chestnut talked a lot about it.

Yeah, of course. But back in the day, they were a big deal in the Salesforce ecosystem for SMB and their unit economics were— I can't remember, but you basically put a dollar in and you get $3 out. That was the LTV to CAC ratio. And ours were like 1 and 2.5. So we're like, well, we were in spitting distance of a real public company. Little did we know that the economics of that business were going to fall apart. And we didn't find that out actually until we did our round with Sequoia. And there's a There's a partner there named Pat Grady, and he really dug into the way we're measuring this. And we kept talking and bragging about Constant Contact. He's like, you're measuring against the wrong company. You need to start thinking about— and he started showing us benchmarks relative to companies like Google, like LinkedIn. And it's more like 5 to 1, 10 to 1. You need to get there. And we got quite serious about improving those numbers after that, after, after getting beat up by Pat Grady pretty good.

Yeah, we'll talk about multi-product, but that's a good— that's— I think that's a fun learning for me, how far you went before you improved that KPI, right?

Forever.

Forever. Forever.

Like, it would be 12 years.

And it was not from, like, lack of focus. It was just so hard to move those numbers. It was forever hard.

There's one— HubSpot's lived many lives, and we've gone through many transformations and pivots within HubSpot, but one of them was HubSpot initially was obsessed with the relationship between our company and a prospect and converting that prospect to a customer. And we got really good at it and kept our CAC low. We could really sell. Mark Roberge was our head of sales, had him on stage many times, and at some point we just woke up and just like started asking customers why they bought. And largely the reason they bought was word of mouth. And so we switched our focus to the relationship between HubSpot spot and a customer and turning that customer into a delighted customer with word of mouth. And you can see that change in our P&L. We started moving money from sales and marketing into product. We started hiring heavily in engineering and products and in design and got quite, quite serious about just— we're in the customer delight business, not in the customer acquisition business. And that was a massive shift for us. So sort of we flipped it overnight on it.

And when was that roughly? If you had— you can guess.

If I had to guess, it's pre-IPO.

Yeah.

Now you think that's early?

Yeah. Well, yeah, I don't remember.

About a year.

$40, $50 million era or earlier?

Earlier than that, because it took us a while to get to $40 to $50. That was like a year before the IPO. I think a year and a half is when we got to $50.

Well, in any event, what's interesting is you decided word of mouth. You wanted to incent word of mouth.

Yeah.

And, and Instead of putting that into other types of marketing or even customer success, you intentionally put it into product, poured it into product, poured it in.

And that's what you have to do, right?

So the product spent 50% of— did you double product spend?

We went— we did the exact opposite thing of what you're supposed to do.

Yeah.

And I think companies are a reflection of their CEOs. And I'm CEO and I'm a sales guy and I'm very excited about sales. And we had a hockey stick and want to keep that hockey stick going. And so we invested a lot early in sales and marketing. and the product just wasn't there. And it took about 10 years in before the product got really legit and we were proud of it. Whereas most companies really start, they don't hire the first salespeople for a while and they invest in R&D. We had our, our math was backwards.

But yeah, I remember the meeting we had when we had that kind of epiphany that we need to shift from being like a sales marketing focus to kind of product and customer focused. And it was at a founders dinner, which is usually multi-hours involving multiple couple bottles of wine, and we made the decision then at that dinner. That's like, oh, you know, we can't just keep going down the path we're going. We're not going to achieve the ambition. We're not going to get HubSpot to where we want it to be. Both in agreement. Awesome. So let's decide we're going to be a product company. Awesome. We've decided we're going to be a product company. It's like, the team's not going to believe us. Like, what? Like, how is that going to change behavior? And, and so, and to Brian's credit, he's like, okay, well, the way to change behavior is to change the P&L that says we're not going to spend a dollar on sales and marketing hires. Until we can get the product to a certain level of subjective quality.

Subjective? You didn't have a—

It was the two of us. We knew it. Yeah, it wasn't great.

We started obsessing over NPS.

Yeah.

Okay.

That was your version.

Then we did an acquisition to kind of help to get the product and the team kind of revamped, spent a bunch on designers.

But you thought it was 10— It's interesting. You thought it was 10 years until the product was great.

We were really proud of it.

Really proud of it.

Yeah.

Yeah.

We also did another exact opposite thing of everyone tells you. Focus on a little tiny thing and get great at it and then spread. We focused on like a very wide— it's like huge surface area and we absolutely sucked at all of it. And then over time we just got better and better and better and better. Took about 10 years before. Okay, but you're—

what was the wedge in there besides the other stuff? What was the 10x feature?

There wasn't. It was the all-in-one. It was the fact that we had—

it was really because that, that's That's rare that an all-in-one really is.

There was no killer app. Everything that we had in our product existed. There were better products with great companies behind them. The value that we brought was the fact that we made it simple for these SMBs to actually get into the internet, get in the game, because those products existed for a long time. But then, you know, 95% of SMBs didn't have a website, weren't doing anything meaningful in terms of marketing and sales. That was the thing we were on to.

So it sounds like you had, like, you know, at the end companies are either sales-led or sort of product-led at some level. Occasionally there's quirky other ones, marketing or design, like Mailchimp or Figma, which I don't— but did you argue? Did the CTO argue that there was not enough resources in engineering? Were you frustrated with your co-founder?

Well, I wouldn't call it frustration because we both made a deliberate decision in the early, early years of HubSpot that says, okay, we're building business software, okay? We're not putting someone on Mars inventing a new energy source. So let's stipulate that if we happen to stumble into an actual market, that we will be able to build the product to kind of serve that market. So the risk we were trying to mitigate in the early years is the only way to figure out if there's a market or not is to try and sell into that market and see if people will pay you money and if they will stay, right? So that's the thing. The challenge was— so that was a very deliberate, intentional decision. But then you sort of get addicted to that curve, right? Going month and month and quarter, it's like, oh, that looks really pretty. It's really fun to show that at a board meeting. So we didn't get frustrated with each other, but we— I think we had like a joint epiphany that says, okay, well, this can't continue. Like, it's been a good run, but we can't do this. There was no argument. It was like, yeah, let's do this.

But HubSpot has shifted completely from— it was a sales company for a long time, known around the Boston area as a sales company, known in San Francisco. It's a product company now, very much a product DNA. That's the center of gravity. That's the power center in the company totally shifted over the last—

I think it's a harder, harder change than, than I mean, and maybe in some ways it took 10 years, right?

We went the opposite way. We went the opposite way. You should go—

you probably went the opposite way of an SMB-focused company. I think many enterprise folks, yeah, the Marc Benioffs of the world literally can walk in and sell, not in the beginning because it was SMB, ironically, but later sell, come in and say for $20 million, I'll solve your problem, Brian. Yeah, I got— and that's powerful, right?

Yeah.

But I don't know many SMBs that can brute force it through sales. It's a tough path.

Let me tell you a story about Ben Chestnut.

Okay.

I'm a giant Ben Chestnut fan, and I went to visit him down in Atlanta one day, and we had an argument. And I'm not an argumentative fellow. And I said, we're in the SMB business, but we're more M than S. So we sell to startups and scaleups. He said, you're full of shit. There's no M. M is like That's the valley of death. There's S and there's enterprise. I'm not right about much, but I think I was right about this one. There's an M. And a lot of you are in the software business and thinking about your persona and target market. There's a huge, huge market in the M. And the M, think of it like 10 employees to 2,000 employees. They have money. They have pain. The small business products don't solve it. The enterprise companies don't solve it. Too expensive, too hard to put in. And so we want to build an anchor company in there. And there's lots of room for all of you to come into the water in that M. M is the— yeah, M is— M is the new black.

Yeah. Most of you are likely Ms, right? You're mid-sized companies. You've kind of gotten through some of those early, early years. You've got some revenue coming in. You're real businesses. You're real sustainable businesses. And so there's a lot of you out there, a lot of— a lot of Ms.

I'm pro.

I think the thing is that there was always the VC-ism that Ms the death, right? The ACV is too low, the cost of sales is too high, but the truth is most M's expand a little bit. They go a little bit into the E, or a little bit into the S, right? And I don't know where HubSpot is. It seems like there's not, I don't know if one person solo shops that are running on Mailchimp are running HubSpot, right?

I can tell you exactly what it is.

What's that?

You have 3 segments, 2 to 20.

2 to 20, and what percent's that?

I might forget. 20 to 200.

Yes.

And then 200 to 2000.

Yes.

And we grade ourselves, you know, what's our grade in each of those things? And, you know, the 20 to 200, I give us an A. The 2 to 20, I give us a B. The 200 to 2000, I give us a B. And we talk about internally our focus is bimodal. So we're trying to improve our motion and our product for that 200 to 2000. And we're trying to improve our motion and the ease of use on the 2 to 20. So we're kind of focusing on both ends of that.

Do you think— and I get that, right? But—

and by the way, the 2 to 20 is interesting because we don't make a tremendous amount of money on 2-person companies, but it's hard to become a 20-person company before you're a 2-person company. Like, on your way to 20 or 200, you're 2. And we won't have to rip and replace something out. We want you to start with HubSpot and grow with HubSpot.

Yeah, let's talk about that second. Do you— I— do you really think you can do both equally as well, though? I mean, I know you want to because we're passionate about it, but the motions are so different. Like, just the features. Yeah, the features from 2 to 2, even though we love them all, our children, can you really prioritize them equally?

And this is a long-running debate up until we made the decision. And even now, because it's another zig, right? Like, everyone you ever talk to says you got to pick one. You're not going to be able to straddle the fence and do both, you know, reasonably well. You're going to compromise both. And there are really good, strong arguments in that favor. The counterargument for us was, okay, well, we have a lot of leads coming in. That's part of it. But it's like, oh, well, the investment we make on our upper market, $200,000-$2,000 segment, we have these features that we add that we can kind of subsidize. We're making money. And then over time, our MO is we pull those down to lower tiers all the way down to the free tier. And so it benefits the fact that we're in the kind of upmarket market.

Yes.

Benefits our lower-end customers because they get access to a set of features over time that they wouldn't have gotten access to. It helps that we're in the kind of free and starter tier on the lower end, because what happens is we are forced by constraint to make the product easy. Because if it were not easy, if it were purely upmarket, yes, we wouldn't be able to support it. We wouldn't just— it has to. And so both modes kind of benefit each other. It makes us relatively rare because very few people try to do it that way. And yes, it is hard, and we're constantly balancing when we have what we think of as the HubSpot Spotlight. It's like, "OK, yeah, we're doing both, but in any given period of time, we're really gonna focus on the velocity on this market right now and try to fix that go-to-market motion. OK, that's doing pretty well, let's shift it, and let's now for the next 6, 9, 12 months kind of focus on that upmarket, make that go-to-market better, make sure our product marketing's working." It's not a perfect science, but it's worked for us so far.

Do enough of— I should know this, but I don't— do enough of the 2 to 20 graduate to make the investment worth it on its own? Or do they stay 2 to 20?

Oh, there's a lot of movement.

There's enough.

A lot.

I know there's a lot of movement in the middle up, but not always from the bottom. Is there?

Is it?

Even as a— if it were a standalone business, it would still be a reasonable business. We're not just doing it for lead gen for the upmarket. It's like, oh, the only reason we're doing all this free starter stuff is because it feeds the upper tiers. It's a legitimate business on its own, just a different, different set of physics.

But yeah, well, it's funny, I was recently— I was, I was sort of researching Zendesk where it is today because it's such a change. Right? And all their motions in 1 million plus deals. Yeah, right. That's where all the growth is at their scale. But on our own, just for ourselves, I was researching helpdesk. What are they like today?

Yep.

And it's the only one of scale that still has a small version. All the other ones like Drift who came out of here, they're wonderful. Intercom, they don't have it. They don't have that starter edition. And Zendesk kept it, which is super interesting. 1 million, right? So must work for them.

Yep.

But it's not easy, right? It's not easy to keep it. I don't know if you've studied them as a comp for going multi-stage, right? But it's interesting.

We did something interesting during COVID COVID was like a massive shock to all of us. The first week of COVID we had a starter edition. It was kind of expensive. And then we said you could now buy it, maybe $250, $300, can't remember. But we said we're going to lower the price if you buy the whole whole suite— sales, marketing, service, content management system, ops— and you run your whole company on it, it's $50 a month. And the supply and demand curve behaved in a different way than we thought. Like, there was a massive influx of customers through that, and that's dramatically improved our business. The upsell rate's been really good on that. It's pretty low-touch motion. That was actually a really oddly great thing that came out of COVID from us, is that—

oh, you ran an experiment of lowering your price point at the bottom of the starter bundle, and it worked.

The starter bundle. So the entire— so, you know, we're trying to make a platform sale. Don't just pick pieces of the HubSpot platform, and that worked.

It worked incredibly well.

Was that in that window where we thought the economy would collapse? Yes. Everyone needed economic relief for about 4 and a half weeks.

Yeah, exactly. Everyone ran something, right? Yeah, everyone ran something. You or Swoosh or—

All right, that deserves its own analysis and blog post of how that experiment worked. So, all right, I want to talk some more. We might jump around, but I do want to, since I have you together, I want to talk a little bit about the relationship, so I don't want to let it go. Um, what was like your toughest time as co-founders?

It's gonna sound cliché to say we haven't really had any like tough, like super—

never had a terrible— never wanted to pull each other's hair out, or every week? Uh, no, or one?

Rarely.

So rarely.

And I think part of it, and this is what I'm— one thing I would advise for those, uh, that are kind of earlier stage, uh, one thing we did that I think helped a lot is like the week before we actually officially founded the company, we went through this kind of series of really hard questions that we kind of asked each other. It's like, okay, so what do we want out of this? What if next year someone comes offering $50 million, $100 million to acquire the company? What do we do? What if one of us becomes disenchanted with the company, just doesn't really, is not that excited? What if one of us is just not putting in the hours because they've got, you know, they have to make side income for whatever reason? Like, so all those hard questions, we kind of talked through them talk through upfront, right? And so one of the big decisions was around, like, the reason we're starting HubSpot is, like, we both had a bit of a chip on our shoulders. Like, we've had singles and doubles, we've done some good things in our lives, but like, this is our last stand, this is our last time up at bat. And so a bunch of things flow from that, right? So a thousand arguments that could have been had about should we raise capital, should we do this— they weren't even discussions we had to have because we've already decided that we're swinging for the fences. And anytime there's a fork in the road, we're going to go for the more ambitious, higher beta People don't do that.

They don't do that enough. Right. And you were aligned on all those points, including the 50 billion.

Otherwise we wouldn't have started the company if we had not been aligned on those things. It's like it's— yeah, life is short.

Similar points in our career. Yeah. Philosophically well aligned. We both liked SMB. We were at the time Web 2.0 was a huge thing and we wanted to do something Web 2.0.

We should both tell them about our decision-making heuristic, the OK. Yeah.

First of all, you want to know how I met Dharmesh? OK. So we both went to business school together. And it was the night before class started. And there's an event at the Marriott Hotel in Kendall Square in Cambridge. And I was on my second Sam Adams, as one would do. And a beautiful woman walked up to me. And she starts asking me a a lot of questions, like kind of like rapid-fire almost, like not a dialogue, more Q&A. And I thought, man, these Sloan people are strange. And she very quickly abandoned me. And I came to find out later, Dharmesh's strategy at a cocktail party, he's a little introverted, is he goes in the corner and he stands behind the tree. And he sends his wife out to interview people. True story. That was the interview.

That's a good spouse.

That's a great spouse.

Here's the scout— you want the scouting report?

Yeah.

You'll never like him.

Oh, the sales guy? The sales guy over there, you won't like him?

You'll never like him. That guy, don't even bother. He likes the Red Sox. Sales guy, don't even— we didn't meet. She's like, we didn't even meet.

The only time in 30 years he's been wrong in a scouting report, for the record.

That's a gift, Dharmesh.

What's that?

That's a gift to have a scout.

It is.

I highly recommend it, by the way.

So that counts as meeting or that doesn't count as meeting?

I guess we didn't meet, so no, it doesn't count. Yeah.

Cool.

I forgot what your question was.

Oh, well, no, actually, I learned a lot from it. I wrote this post years ago, not talking about me, about a founder commitment test. Where I said have— and I said my forcing function for the test is do 8-year vesting.

Yeah.

With no cliff. And the hard discussion has to happen if you say, I don't care if it took us 2 years to get here, starting today we're gonna have a cliff in a year. So if either of us quit, we leave with nothing.

Yep.

And then 8 years after that, and I said if you do this, it will force you to talk about exit, what if we get tired, because the one that doesn't want to go long, which is not a bad thing, will not sign up for the— I think it's a good idea.

We didn't do it.

I thought of it back then. Yeah, we would have done like the 8, 10-year vesting.

Yeah, that's a really good idea.

Consideration.

It screens it out. We don't do it. But, but it's interesting to me that you guys got— you did this test for real. I never heard of anyone that did it.

Now, one of the—

and it works. One of the things together, right?

One of the things that really worked, it was Dharmesh's idea, was he, he, he said we need to figure out how to make decisions and disagree. 'Cause you're gonna disagree. And so the way it works is actually quite simple. If we both agree on a given topic, of course we do it. If one of us feels really strongly and is willing to lay on the tracks on a topic, and the other person's like, "Eh, I kinda disagree with you, but you feel strongly," we go with the lay on the track person. If we both are strong on it, and the opposite ends of an argument, and both of us relying on the tracks, we argue, we argue, we argue, we argue, we argue, but I get to break that tie. How many times do you think I've broken that tie?

I'm gonna bet one.

Like one or two. Like never.

Never?

Yeah, it's so rare. Yeah.

And I think one of the important points on that heuristic is that it's not the person whose kind of area it falls under. So even if it were a product thing or a tech thing or whatever, Brian feels strongly and I don't, he still wins. And if it's a sales-related business thing, even sales comp or whatever, marketing, whatever it is, even though that's not my kind of area of expertise, and I feel strongly and he doesn't, then my way goes, right? So it's less about kind of jurisdiction and who owns what, and it's more about who feels more strongly.

Do you—

a niche question, the first one, and then I want to go on with this. This idea of a front person, which we don't talk a lot about in SaaS or business software, but who is the public face of the company, and it's got to be the CEO at some level, right? But I think one interesting thing about HubSpot is how well-known and beloved— I'm just being objective, don't take it as a compliment— well-known and beloved Dharmesh has become. I think for a long time, right? For a long time, not just Twitter followers, but, but putting in the reps and the work to give back. Did you guys think about that as an asset to manage it? Did you talk about— did you talk about who would cover what surface area? Like, who Who would, or is it just all organic?

Just kind of did it.

All organic, yeah.

Just kind of did it, yeah.

The beauty of social media is it's built for antisocial people like me, right?

A little bit, yeah, a little bit, right? If it works, it really helps, right?

The one thing we did early on is we create a lot of content like you, and back then we wrote blog articles, and we'd each write 2 blog articles a week, and we'd try to see how many leads we could get per blog article. So we had this kind of friendly competition where we're rooting for each other because we want a lot of leads, but we wanted to see who could get more. And back then, the way to get a lot of leads, get on the front page of Digg. Of Digg.

Or Reddit.

Oh, Digg. Oh, now we're dating ourselves. I forgot about— I forgot Digg even existed.

Reddit. Yeah, yeah.

Uh, so who was better at it? Dharmesh could hack it, or?

We were both pretty good. I think Dharmesh was better at it.

I think we were roughly equally matched.

Yeah, I think Dharmesh was pretty good.

But the content was probably different, right? The content was probably different.

Yeah. But, uh, we didn't— we've never talked about who's the frontman. I don't feel like we have one front person.

Yes.

And now we have a new CEO, and so we have a third person involved. Yeah.

So actually, it's interesting that the— in the early days, we know a bit about HubSpot and SEO and website grading content, but blog posting, to be very specific, it worked for you to really get— I mean, I know about all the stuff, but the two of you in the early days, right, each of you writing blog posts, yes, multiple times a week, got the company off the ground.

How many visitors to our blog do you think we get a month?

I know it's, I know it's many millions now, right?

It's 10 million a month.

10 million a month, just the blog.

You know, 30 million across all the web properties that we have.

The SEO is like crazy, isn't it? I still don't understand it.

Here's the weird thing, though. The beauty of blogging and content in general is it's kind of creative and accumulative over time. So there are articles I have written 15 and a half years ago, back in the first year of HubSpot. It's still on the internet, still drives Gets visitors, gets leads, that I wrote 15 years ago. That was a one-time investment.

The new one is our podcast. That's 9 million downloads a month. That's worked really well.

It's like there's— it works for you, and for advertising, or for folks that want to get customers, people listen to this stuff. People don't get it because you don't get the same analytics, right? You can't get it, but my God, to get— 9 million per— even 10,000 people in your industry to listen to your pitch, like, people don't know it, it's a gift, right? It's a gift.

The other value that outside of just kind of in terms of content creation, blogging as well, but is that it forces you to think about your business, like, or whatever position or point of view you have about your industry, you have to write it down twice a week, and you get— the internet's really great at telling you you're an idiot about whatever, right? And so that's a great way to kind of litmus test or pressure test your ideas as you're moving in this. So when we were writing about inbound marketing, it was new. We made the thing up. And it was nice to kind of get the feedback from the industry. Oh, people are nodding their heads. They're agreeing with this stuff as we get on stages or through online blogs.

I'll tell you one thing about Dharmesh that people don't know.

OK, that'd be good. I didn't have the embarrassing question here, but it would be fun to get that one. What do we not know?

This isn't embarra— well, it's not really embarrassing. Dharmesh is one of those people, and I think he's right about this, that he leans into his strengths and he completely ignores his weaknesses. And if he puts his mind on a strength, he gets really, really good at it. In the early days of HubSpot, he put his mind to SEO, became one of the foremost experts in SEO. These days he's put his mind into like, we have this conference Inbound, it's kind of like this, we just had it last week. I think he's the best public speaker, like keynote speaker, in all of tech. Like, he has nailed it.

He's our top 5 all time.

Yeah, he's amazing. And he's really good. But if it's not in his wheelhouse, or he's not interested in doing it, and you ask him to do it, like, Dharmesh, can you pick this chair up? Or this pillow? Dharmesh, would you mind picking this pillow up? This is—

ugh, it's too hard.

I can't. That's a damn thing. I just can't. I can't do it. I can't do it. He's just— but if he wants to do it, he can pick this whole building up over his head.

I'm a big believer in that idea, by the way, is don't spend as many calories mitigating your weaknesses. Focus on the things you're very good at and get great at them. That's where you kind of stand out and kind of rise above the noise. It's—

yeah. It's worked really well for you.

I want to hit this, but I know it's a bit of a non sequitur, but you talked about inbound last week. Yeah, it was great.

Thank you.

You had— you spoke to Obama, is that right?

I interviewed Obama.

You interviewed— what's— you said you had a secret story to tell us. Okay. I need to— I want to know.

Have you guys heard of Barack Obama? Okay.

We do have a pretty diverse international crowd here. There's a small chance.

Okay. So one of the things about it—

was he a tough get? Or these days, how busy is he these days? These days before we get to it.

He's hanging around Martha's Vineyard.

He's got time.

I don't know. I don't know.

Doing a little angel investing with William and whoever.

Anyway, so I got to interview him, which was— it was a real honor for me to interview him. And I was very excited about it. Super nervous, by the way. And he's a very thoughtful, very smart guy. And that was very apparent during his speech. But just when we were backstage here, Jason M. Lemkin and I, And there wasn't like a lot of coordination, but there's a lot of coordination inbound. And there's a stage manager that describes where you go on the stage and sort of organizes it and makes sure the video goes on time, you sit in the right seat, the coffee's there, and all this stuff. And they're— at our conference, they're OCD about it. So President Obama and I are backstage, and the woman's there. She's very nice. And she says, "OK, President Obama, Brian's going to go out first. He's going to sit on the seat in the right, and you're going to sit in the seat in the left. And when the event is over, Brian's going to leave on the right, and you're just going to follow him off. And Obama's like, oh wait, wait a second. So do I go? No, no, Brian goes first. He's like, do I sit in the seat on the left? No, no, you're in the seat in the right, and Brian's in the seat in the left. I got it. And so I'm talking to Obama about basketball or something. He's like, Wait, wait, wait, wait, wait, wait, wait, wait. Am I on the left? I'm on the seat on the left. He's on the right. She's like, no, no, no, no, no. You just follow Brian. It's going to be fine. He's like, OK. It was like a Seinfeld episode back there.

He might have been playing with you a little bit. He might have seen the one on Beans and Cars with Coffee.

I have it. He was not playing with you.

No.

And then so we do the whole thing and it's very simple. When it's over, he gets a giant standing ovation, which was lovely. And it's very simple. He's supposed to follow me off to the right. He's like, lost. He's like, "Wanna go?" He's one of the smartest guys I've ever met. And he was just perplexed.

And by the way, we had Secret Service there, right? This is Barack Obama.

Absolutely perplexed about the seating arrangement.

In all fairness to the former president, that's why we actually don't do that anymore. We used to do it. We used to tell people what order to go in and it was too stressful. Dharmesh, you're on the chair on the right, right? And now I just like, this is faster, okay? Like, it's gonna be great. We're founders, we know, we can figure out how to sit in a chair.

You should have Obama next year, he'll love it. Yeah, okay, we can try.

So I get it, but we've learned. Okay, we're having a lot of fun, so I don't want to get too serious, but crazy stuff changed it. And you won't remember, but you were so kind, you did like, during peak lockdown, you did our podcast or something, we did a video, it was great, and we talked about the partner channel and this stuff, and I asked you how it was going, and you had like your lumberjack shirt on, and you're like, it's great, and I'm kind of like, I don't want to do this forever, but man, it's pretty good to get a break after all these years, I'm going snowmobiling. And maybe it was just, maybe it was a month, but I felt like it was 3 days later, my jaw drops.

Oh, I forgot.

My jaw drops in the there was like this accident, and I don't know, somehow I know, I just knew it was rough, right? Just maybe it was the way the communications was, right? Because it was sparse. You know when you get that sparse? You know it's not good when it's sparse, right? It's, when it's minor, it's already done, so they give you all the details. So, how did you get over this? What are the learnings? And like, and to me, I feel like a black swan event happens every once in a while, doesn't it? And then you do this for 20— you've been how long? How old, SubSpot? 16 years?

Yep.

There's going to be like a couple of them, aren't there?

I guess.

This is the only black one.

This is the last one of these for me.

Yeah, last one. Uh, crazy.

It was crazy. I remember— I don't remember talking to you from Vermont. I can just tell you the story. I was snowmobiling.

Yeah.

And missed a turn and went off a small— I would just call it small cliff and was going very, very fast, going through the air, smashed into a tree and then smashed into the ground. Yeah. And I'm there on the side of a mountain. It's 4:30 in the afternoon. It's getting dark. It's freezing. No one knew where I was. And I was pretty sure I was going to die that day on the side of the mountain.

You're alone for hours and hours in the dark.

I was alone there for a while. And I remembered about a half hour in that I had my iPhone. And And I never bring my iPhone because in Vermont there's no signal anywhere in Vermont. And so I pull the iPhone out, I had just enough, and I called these 3 numbers I had never dialed in a row. 911. That's the killer app, by the way. You wanna know the killer app? 911 is the killer app. And the woman was lovely, and then she called the local fire station. There's 2 local fire stations. They're all volunteer, so they're all at home. And then they call them at home and they get their snowmobiles and they come find me and it's dark and they like patch me up and they drag me out and then they helicopter me to Dartmouth University Hospital and save my life. But it was, it was actually just sitting in the snowbank where I was like, I love my job, been a great 15 years, but Yamini, who works for me, who, she's fantastic, is probably better suited to be CEO, getting a little tired, you know, when this is over she's gonna take—

That was in your mind in the helicopter? In the evacuation, that it was her time?

Yeah, it's like, if I'm going to live through this, yeah, what do I want my life to look like on the other side? And I want to work in things that can have as big an impact as possible. So, you know, to be determined. I'll let people know later what I'm going to do next, but I got big plans for my next chapter.

Ah, and where were you at, Dharmesh, when you heard this news? Is it just crazy?

I was at home and it was crazy when I heard it. And like, you know, life lesson for me is don't get on snowmobiles.

That's—

but yeah, it's just pretty sure that was going to happen anyway.

Yeah, that's true. It's the whole movement thing. The reason it was sparse was I just— no one knew. It was COVID, so no one could like visit me. I couldn't talk on the phone. No one came in the hospital. And so no one knew how bad it was. Way worse than I think people thought.

I knew.

Yeah.

And so Yamini was obviously, I mean, I forget, she's been here many times. She was CCO at Dropbox before you hired her and somewhere really great before that, right?

Workday.

Was she a potential CEO candidate already in the back of your mind or not? And did she know she was a CEO candidate? She did not know. You were doing your job as founders, right?

Well, a couple weeks before the accident, we had a board meeting and we had that, okay, Brian gets hit by a bus was the term, who takes over?

Yeah, you gotta have that conversation.

You do. I said, well, yeah, Dharmesh and I were both like, we think Yamini should take over. And the board was like, yes, great. And then I get hit by a bus, but I get run over, hit by a tree. And so break glass, Yamini took over. And then she did a fabulous job while I was healing. And then when I was done healing, I said, you know, I'm not coming back. Would like you to be—

You own it.

I'd like you to be CEO. She said, I don't want to do it. She was like, I'll be COO, or you would do co-CEO. I don't want to do it. I was like, you get two choices. I can go find some schmuck from the outside or you're doing it. She thought about it for a while. She's like, all right, I'll do it. And she's been awesome.

She's been awesome.

She's clearly been awesome.

She's a great CEO. Really.

So as executive chair now, what does that mean for your work week? Like, are you still— you're 100% on HubSpot, but more working on the future and vision, or how does that— how does that fit today?

It comes and goes. Like, we had inbound last week, busy getting confused with Barack Obama. And we had a board meeting this week. Yeah, busy. We're at SaaStr. So fired up to be here with my hero Jason M. Lemkin. So comes and goes. Busier some weeks than others.

What did she— I mean, the company has clearly thrived under Yamini, right? And we could almost do a whole— I mean, she's not here. She's been here before. But what are a couple of things that she did better when she took the the reins? Like, what did she level up with her experience? Because she had a lot of experience you guys don't have, right?

Yep. It was sort of before she took over that she did some— when that— when COVID hit, she, she had just joined HubSpot, by the way. And then bam, COVID hit.

Oh yeah.

And she kind of took the reins and she was the one that made the decision on that pricing, dropping that Starter Suite down, which turned out to be a brilliant decision.

She had the DNA too, right? From, from Dropbox a little bit.

The other thing she decided was We have— we get about half our business through partners. And she said, these partners are going to really be sucking wind. They're going to have to lay everybody off. Let's advance them their commissions for a year and give them some leeway, which turned out to be brilliant. They didn't lay anyone off. We bought so much goodwill with our partners.

I love you.

That they love.

Yeah.

And then after that, like, the social issues sort of rocked the country. And that's— and that was brought inside the walls of every company. And she was just a great sounding board through all that stuff, the election stuff that happened, and then the accident, how well she handled that. She's very good in a crisis, very calm, very professional, and she's whip smart and a really good leader. I'm a big fan of female leaders. Like, half of HubSpot's leadership team, more than half are female, and more than half of the board is females. And she's got it. She's really, really good.

When do you think she— I mean, it's a parallel universe— when do you think she would have CEO if it weren't for this craziness? What, 2 more years out or something? How—

probably a year.

Traditional process.

Yeah, yeah, yeah, yeah.

Crazy. Well, I'm glad you're back.

Me too.

I mean, I've never, never asked before, but I mean, when I saw it, I just— oh man, it just, it just hurt, right? I mean, uh, oh goodness gracious. So I think we hit this. I know we've got a couple minutes. I want to hit— I want to just maybe just hit a couple things. Um, Maybe some tactical stuff about HubSpot that's interesting for the audience. This slide, so I pulled— last year Aaron Levy came and I pulled some slides from his Analyst Day, like right after, he's like, "Oh, Jason, I gotta do it again." So forgive me. You guys said it was all right, but if you really wanna learn about a great company, not every public company shares much, but HubSpot's great. And I shared some on SaaS, so you'll see more, but you can really learn about this business. The Analyst Day was last week, right? I don't have time to go over it, but anyone that's even has an ACV or motion like them, go read this because it's a gift. But I want to hit maybe one or two, but this one is so interesting, but I don't know what it means, but it's so interesting. 11% market growth, so this is the overall surface area of your customers, 35% revenue, so this means you're gaining share, right?

Yes.

And so what's, how did you triple your share? I guess not literally triple, but what do I, how at scale are you continuing to take share? What does this mean?

So part of it is focusing on like customer counter, as some might say, you know, the number of logos. What, what is happening if you were trying to write market share as a function?

Yes.

The thing that makes market share easier to grow is your market share. So as your market share grows, more people are out there that can talk about you and it's easier to expand market share than starting from a dead stop, which is not counterintuitive at all. Right. That's intuitive. But This is the other thing where, you know, market share as we measure it is around the TAM and how much we have. But then the number of customers having that starter tier and being in that bimodal business once again, so we can add 5,000, 6,000, 7,000 customers a quarter, right? Which we would never be able to do if we were purely kind of upmarket. And although we like to measure revenue and that's how analysts measure revenue, the reality is word of mouth is not a function of how much revenue you're making from a customer. Word of mouth is a is based on how many people love your product that are out there in the world. And it's much easier to do that and get that mindshare versus— and so lots of companies focus on like share of wallet. Oh, this company makes— and especially in enterprise, like, oh, here's their budget. We want to get as much of that budget as we possibly can. And we like to upsell and things like that too. But we are also very, very focused on just expanding that pool of customers for a couple of reasons. One is it's worked out for us. But every customer you add, you're— I think we miscalculate LTV. Most businesses do because—

complicated.

It is complicated. But the one thing we miss is that LTV, as it's currently measured, is based on our current churn rate and current market dynamics. Here's what a customer is worth that we sold right now. But if you've been out for a little while and you're like, oh, maybe we might add another product and here's where the trend line is, what's the actual lifetime value, right? So if it's like, okay, if we're trying to project that the customer is going to be here for 7, 10 years, well, which they will, they're not going to pay exactly the same price they're doing, right? That's not the trend. We know that it's more than that, right? Something. And anyway, so growing my mindshare and market share counts. It helps on the word of mouth, especially in this day and age. If you're trying to rise above the noise, it's a— we're big believers in word of mouth. Market share and mindshare helps. That's the— it's just deliberate investment.

Let me just hit one or two and then we'll break.

I'll tell you, I think the secret's Sauce is.

Yes. What's the secret sauce?

We built our last point.

We built our marketing app. We have, let's say, a workflow engine in there. We had reporting in there. And then we decided we're going to build a CRM suite, Salesforce, da da da. We started building the sales app. We built, started building our own workflow engine, our own reporting, everything. And then one day we woke up. It's like, why don't we put those all down below the stack and have a set of, we call them primary colors. That we can paint from data, reporting, workflows, there's a handful of these. And then each application, we take these pieces and we paint the application because they share these things. That makes the application just fit together so nicely, so much easier to use, so much easier to unwrap. And it's just unique relative to the landscape of these cobbled-together monstrosities that the competitors sell. That's the secret.

Maybe one last question. Just on this. I would love to talk more about the suite and all the features. Well, maybe we'll do it out the next time. Did you— I see HubSpot today as being the dominant SMB CRM, okay? And but I didn't think it would happen, not because I didn't think it could be built, but it's a different— it's a slightly different persona. It is adjacent. There were good app— I mean, Dharmesh and I actually— he may not remember— we met the first time when they were thinking CRM, and I'd invested invested in a company that was doing a lot of it. And it's okay that the market's crowded, but I thought the different persona would make it— that it would be successful, but I didn't think it would be dominant 8 years later the way it is, right? And did you know? Did you know you could win in a different buyer? Were you convinced you could, or did it creep up on you as the years went on?

It was— well, we start—

yeah, we hope, we hope.

But I mean, this goes to when you're trying to decide whether you add a second product, and you go from n 1 to n 2+. You sort of have to know why you're doing it. There's a couple of reasons you do it, right? One is, it's a natural adjacency. It's a fit. The market expects us to do this over time. It could be defensive. It's like, if we don't do this, we're not going to own. So that was partly ours, was both offensive and defensive. Like, oh, we're the marketing software business. If we don't have a CRM, over the long fullness of time, this is going to be a problem.

I see. I understand.

And so this is, as you're experimenting with new product ideas, One lesson we've learned is that there are things that you do as experiments, but most experiments become self-fulfilling prophecies. You're trying stuff out, may or may not work. But the opposite of that is if you decide— like, we decided we were going to do CRM. It was not an experiment. We're like, I don't care if it takes us 3 years or 5 years or 7 years or eternity. Yes, we're going to make this work. And so that, like, then the universe kind of aligns in your interest, like all the best people people in the company want to go work on that project because they know it's an important thing that we're trying to get done. And you kind of try to line everything you've got behind that one thing that you know you have to do.

And that helped.

Of course, it might not have worked.

Yes, it was different persona, but, uh, but did you know it would perform this well?

CRM, we, we, it worked out exactly the way we drew it on the whiteboard, which rarely happens. Rarely happens. But in a way, by the way, it worked out exactly the way we had hoped.

It's a little bit easier than marketing software.

We feel like we're really early, like our market share, it's like 4%. It's so early.

Yeah, in the Gartner or whatever world, but I think it's pretty darn good in your core buyer. And now it's just interesting to me because the last couple years with SaaS, we've talked so much about folks have they got multi-product, right? And the number one learning from everybody is the easiest path is when it's the same buyer, right? The same use case. And yes, and I don't think it's exactly— it's adjacent, it's, it's your buddy, but it's not. And so it's, it's a non-intuitive intuitive. I don't think it's obvious that it would work, right? It's not obvious.

It's a different buyer.

All right, let's thank, let's thank Brian and Dharmesh. This was great.

Thank you very much.

I'm going to follow Brian.

Okay.