5 More Interesting Learnings From HubSpot at $2.5 Billion in ARR

Hey, Saster. There are. There's probably no SaaS company that we have covered more on Saster than HubSpot. A bunch of reasons. First of all, the founders were kind enough to join us at many of our early Saster annuals, which created some iconic content. But more importantly, HubSpot is of all the SaaS leaders that are mega successes. And HubSpot's at over two and a half billion in air, are now trading at over 30 billion or almost 30 billion. They're a lot like us. They're a lot like us in two ways. One, most of us actually use HubSpot. We've surveyed the entire Saster audience and the majority, at least, of Saster annual attendees and CEOs. Their companies run on HubSpot. The majority, it's not Salesforce anymore. So that's one reason, because we know HubSpot. There are other apps out there that we can talk about. We can talk about Palantir, we can talk about ServiceNow Epic companies, but many of us don't actually know what they do. But HubSpot, since we use it, we know what it does. And secondly, in terms of use cases, it's a lot like us. HubSpot does sales, marketing, workflow, content support. Most of us, HubSpot's doing at least a little of what we're doing one way or the other. So it's a very tangible company that we can learn from and we've covered a lot. But interestingly, they had an analyst day where they present extra data to the public markets. And I thought there were some great, interesting learnings from there. I actually highlighted eight that I thought we should go over that I think would be super helpful to folks. Number one, that it hadn't seen before. 75% of HubSpot's customers are onboarded by partners. And that's super interesting if you've worked in the enterprise, if you sold in the enterprise, you've seen the massive impact of consulting firms and onboarding for firms. Folks like Accenture often make twice as much off deploying Salesforce or Workday than the vendors make themselves. It's a lot of work. When I was at Adobe as a vp, I think it took almost five years to fully deploy Salesforce across a company of that size. But we don't always think of SMBs as needing all this onboarding help. We often think of SMB products as grab and go, but it doesn't really work that way. A massive amount of Shopify's revenue comes from agencies in the channel over 40%, I think. And at HubSpot, not only does a massive amount of their revenue come from its partners, but 75% of customers are onboarded by partners. 75%. So if you're trying to do it all yourself or you're trying to make all of your product magically self onboarding, go for it, it's great. That is the dream. But realize even at mid sized SMBs, 75% of HubSpot's customers are onboarded by a large network of partners. Okay, two, this was data I knew, but I hadn't seen it broken out in a while. Its sales hub, its CRM is now growing almost twice as fast as Marketing Hub. Marketing Hub, the classic hub spot is very mature. Now I'm not sure it's exact ARR because I don't think it's broken out anymore, but let's assume it's a billion plus or minus in ar, plus or minus between friends, it's only growing 13%. It's only growing 30%. That's pretty mature folks And a lot of folks in Today's world in B2B2B are growing at those rates. But luckily all its other hubs are growing faster. Its sales hub, which is approaching a billion in revenue is growing 24%. That is top tier rate in today's world. Service hub 28%, content hub 30% and operations hub 57%. But since sales Hub is so big, if it has not passed marketing Hub yet, it will at that growth rate because it's growing almost twice as fast and it is very healthy. It is growing at outlier rate. So if you're selling into the sales community and you're discouraged, if you've had a rough couple of years, be honest. Is it the market or is it you? Because HubSpot is having some headwinds out there. They're honest. It is harder at HubSpot than it was in 2021. But HubSpot CRM is still growing 24% as it approaches a billion in ARR. If you're smaller than that, you should be growing faster in sales number three. And this is something I knew but it was great to see it broken out. How important is being multi product at HubSpot today with five core products and more coming more newer products. Today 71% of HubSpot customers buy two products and half by three or more. So it's not to say if you're smaller than HubSpot, if you're below two and a half billion in revenue, that you should be there today. But it's something to think about how important this has become as a platform play. The majority of HubSpot customers buy two and a half by three or more of these products. 4 and this one is super interesting because I have this discussion at so many board meetings with so many founders as they begin to scale as they cross 10, 20, 30 million in revenue is what should we do with our smaller customers? Should we let them go? Should we abandon them? Should we cut them off? And HubSpot interestingly has gone the other way. They have gone more enterprise and we'll talk about that next. They, their ACVs have gone up. Their three plus customer, three plus hub three plus product customers pay over $40,000 a year. That's a lot when the average is 10K. That's a lot for a mid sized SMB. But about a year and a half ago or so the team under Yamini rebooted their commitment to their starter edition to the starter edition to harvest their future, to bet in the future by charging less at the very bottom of the market. And both have worked. Going up market has worked especially by going multi product but also going down market has worked and this is super interesting. 47% of HubSpot's customer base now starts with its starter edition, its cheap low end edition versus 28% in 2019. So almost half of HubSpot's even if it's gone off market, almost half of its customers start with an even cheaper addition. It is investment in your long tail is investment in going long. It is investment of calmly migrating them up market and not just abandoning the small customers, which I see too much. I see too many VCs and board meetings say oh go all enterprise. We talked to too many CMOs. We have hundreds of partners at Saster. We talk to a lot of CMOs that are compressing their budgets and they're like we're going all enterprise and that's great but don't forget about your smaller customers. They grow into big ones. And HubSpot doubled down, tripled down here and it's worked. They, those acorns grow big. And again even as ACVs have gone up, now 47% of HubSpot's customers start with these starter editions. And related to that, the flip side is they grow these kids, these little, these Little Acorns grow 36k deals, 3k and app 36k deals, which is a lot for HubSpot because the average again is around 10k. That's now 28% of its base. So HubSpot has not gone enterprise overnight. It has not gone massively enterprise. But those bigger deals for them and for them a 3k MRR or 36k AR deal is a bigger deal. That's now 28% of the base but not the majority. They are still solidly SMB even as they go up market. Shopify has seen something similar. Shopify as it comes up on 10 billion AR has again doubled down on enterprise on its Shopify plus it's big brands and it's worked, it's gone gangbusters. But the small shops, the small portions of Shopify have grown just as fast. So even as Shopify drives more and more enterprise, it's not actually much more than 30% of their revenue, about the same number at HubSpot. Interestingly, because the SMBs are so stubborn. So we sometimes we think folks have been in SaaS a long time. I've. We have this view that you have to go up market over time, that you'll, that there aren't enough SMBs, that you'll exhaust them or that the NRR is higher in the enterprise, which it is, which it generally is. So more and more of your revenue will be Enterprise. But HubSpot and Shopify both challenge that. They say if you want to go really big and you want to have hundreds and thousands or even millions of customers, you might need to do both. You might need to both go more enterprise and invest more in your smaller customers because they both can scale almost infinitely. A little bit non intuitive again and not what I hear a lot of VCs and others talk about. And three more quick points. What's interesting is there's a lot of discussion today that the per seat model is dead, that things should either be utility priced or AI priced or value priced or. And a lot of this is changing. AI is changing a lot of ways. Everyone from Salesforce and others price, whether it's an add on or whether it's results based. Can AI magically resolve a ticket, magically resolve an interaction? Then let's charge you a dollar or two dollars for that interaction when a human being might cost 10. And there's a lot of logic to that and CIOs and others are to some extent are paying for that. They are paying this model but HubSpot slow it down. The real key to our success into getting into 30k deals, 50k deals and others is just plain selling more seats. That's the key to their expansion and 50 to 60% of their growth is just more seats, plain old more seats. So experiment with all things, learn these things. Frankly, copy the competition. Don't. My advice to folks 95 times out of 100 is don't reinvent the wheel on pricing, even if it seems funky. Copy OpenAI, copy Stripe, copy HubSpot, copy the leaders in the space who have trained buyers how to buy. It may not. If you innovate too much on pricing, you generally just add friction to pricing. But super interesting that HubSpot is tripling down on seats and at just plain old adding seats is its key to growth. So HubSpot is not NTC. And the last point point seven and it's a summary of the others is that and it's or actually rather the penultimate point. Three plus product customers at HubSpot, three plus products, folks that buy three or more products, marketing, sales, content or whatever it is, they're worth almost three times more. Three plus, they call them hubs. But three plus product customers are worth on average $44,000 versus 16,000 for folks that buy less than three and about 10k on average overall. So if you can get folks to keep buying more products, you HubSpot grows them from 10k to 16k to 44k a year. That may sound obvious, but it's not always that obvious. Sometimes it when you sell more products, customers don't necessarily want to pay more. They view them as features. They view them as part of their core. There's resistance. They view them as price increases or your additional products are not valuable enough. You cannot capture as much value with your next product as your initial one. But HubSpot has worked hard here and if you buy three products, customers pay basically three times as much, 2.7 times as much. So earn it, earn it. And it's also a reminder that to make a multi product strategy work, your next products really need to be bigger than your first otherwise they won't make a material contribution. As we talked about, a CRM is passing marketing. HubSpot is becoming more a CRM, a sales company than a marketing company. It had to fuel this growth at almost 3 billion in revenue and now they've done that across really five products because as you buy three or more, the revenue almost triples. So make sure when you're going multi product and I think we all this will be the last point that we get to next. I think we all need to think about this earlier. Yes, multi product is a distraction. Yes, it's complicated. Yes, it's even harder when they all have to be AI enhanced enabled today. But the markets are demanding it and the markets are demanding even more and more and you have to layer multi product at the right time or growth will eventually stall. In many cases, not all, but in many cases. But do it right and make sure each of your products has an even bigger market opportunity than the prior 1. What HubSpot did, that's what fuels growth. And the Last1 is HubSpot kind of summarized for its analysts when it went multi product and I'll share it, but I actually, I think this is the one thing where I think let's not learn Too much as SaaS executives and founders because we're not all. HubSpot went multi product at 100 million an ARR. That's when it launched CRM. I had remembered exactly when it was 100 million. And look, we don't all need to go multi product earlier so early when I interviewed Andrew Bialecki who's CEO of Klaviyo, which is essentially shop HubSpot for the Shopify ecosystem. They're at a billion in revenue growing 30 some odd percent and they're basically I, it's probably not fair to call them multi product but they're single product but they're single industry. They're, they're almost entirely folks focused on E commerce and Shopify. Yes, they have messaging and email and they are, they have a suite of messaging and communication products. But maybe in some ways we, we might not call that true multi product. They're not selling into radically different industries or radically different buyer like HubSpot did when it jumped to CRM. So sure Klaviyo will get to a billion in AR with maybe not being true multi product. Canva has gotten to two and a half billion arguably with a suite of products but maybe all, maybe many of them features rather than off the core products. So I guess it can vary. But I find most of us these days need to start getting more serious about multi product before we're at 20, 30, 40, 50 million ARR at least because there's the world is so dynamic, it's so competitive and the customers expect so much. So HubSpot did it at 100 million. They added serum 100 million. But maybe the HubSpot of today might have had to do it around 50. That's my learning from them anyhow. Great deep dive reminders that as you go up market don't abandon your base necessarily. I see it way too often make your next products as bigger or at least as big as your current one to make the math work. It does for HubSpot and remember, partners matter. You can't do it all alone. Have a channel strategy like HubSpot and Shopify and others do and have help onboarding. Because way too many founders and first timers are selling all direct. And that's great. That's how we get going. Founder led sales, get it off. But half the world or more in many cases is selling, implementing, onboarding indirect. And HubSpot's one of them. Learn from them.