Dharmesh Shah CTO of HubSpot - From Day 0 to IPO: What Went to Plan, What Most Certainly Didn't

All right, welcome back, guys. I think I'm just going to help on this session, but we have a treat. We have someone that. How many Twitter followers do you have?

271,000. Not that I look obsessively or anything. I just happen to.

Okay, 71,000. All right. And quite a few others on social media. So we have someone that probably 98% of you know virtually or socially in some sense. Dharmesh Shah, founder and CTO of HubSpot. So let's welcome him and thank him for coming, which is great.

Thanks, everyone.

And I think we're just going to learn a handful of lessons from nothing to IPO and beyond from a friend of all of ours. And I'll try and tease out anything interesting from the conversation that we don't get to.

Thanks for having me, Jason. This is awesome. My favorite audience, other than my own conference, of course, but my favorite audience ever. We're going to mix it up a little bit. It feels a little bit like being on late night, essentially. I'm going to go do my skit, then I'm going to sit down, and if I do well enough and Jason invites me back, we're going to do that. So I'm going to run through this. I call this Lessons from the Unlikely Story of HubSpot. And I'll explain in terms of why the story was unlikely. I'm Dharmesh. That's the hashtag, in case you have not figured that out. And you like the Twitter thing for the video people, by the way, my slides are much better looking than I am, so if you just want to drift the camera up there, that would probably be better. I'm gonna skip by kind of my life story and how I grew up as a small child in India and how the dusty streets influenced my take on unit economics and SaaS subscription models. And we're gonna fast forward to HubSpot, which is my claim to undeserved fame. Most of you, I'm assuming, at least, have heard of HubSpot. Otherwise we are not doing our jobs. Being in the marketing space, HubSpot's had a recently successful run. We had a notable funding round in October of 2014. That's the gratuitous ring of the bell photo that must be included because that's just the way those things go. And this is the only other gratuitous slide in the deck. So this is the revenue growth for HubSpot leading up to the IPO. The thing that's noteworthy here is the 3/4 that we've been public since then. The top line growth has grown over 55% year on year for all three quarters since we've been out. So it's been doing well. We haven't reported fourth quarter yet because the earnings call is tomorrow. So don't try and read into my body language or anything and get me in trouble. You'll find out tomorrow. Safe harbor. I may make forward looking statements. The actual results may vary. So. All right, so my goal here is hopefully to share something useful or maybe a couple things that are useful that will increase your odds of what I think of as like breakthrough success, which is what HubSpot's trying to achieve that we so like. Things we've learned along the way that we think have kind of influenced our trajectory and hopefully increased our odds of having breakthrough success someday as well. So a couple of quick notes of warning. One is this is lots of folks that have kind of been through the startup cycle. You have this kind of extrapolation from like a single data point problem, which is, okay, we have this story, this is what we did. Wasn't that awesome? You should follow it. And it's a myth that unicorns, just because they were successful, that everything they did was smart and everything they say since having become unicorns is right and true and applicable to all people, it's just simply not true. Unicorns don't crap out universally applicable advice. So all that aside, so going back to when HubSpot kind of first started, I met this guy, Brian Halligan, who is the founder and CEO of HubSpot. We met in grad school at MIT and there was kind of one problem with Brian and the problem is that he was in business school working towards an mba. Now some of you may be like, well, why is that a problem? It's like lots of people get MBAs. And it's because the conventional wisdom in the startup world was and still is. I'll explain by way of this formula. So let's assume the probability of success for a SaaS company is roughly 1%. And that formula is true given some definition of success. Right. So work with me here. It's okay. And that probability is impacted sometimes negatively and sometimes exponentially by certain things. One of those things supposedly is the number of MBAs on the early team. So the math going through my head is like, okay, well we're just getting started and here we've got this MBA that's joining a two person co founding team. It's the holy crap, we just dropped our odds by 50% and then it occurred to me a few minutes after that thought that actually I was in business school too, thereby taking the odds down another 50%. And so if that weren't enough, you know, we have the founder, CEO, founder, cto, me, mba, hire the VP of marketing, mba, VP of sales, mba, VP of customer, mba, VP of Engineering, mba. And now the odds of any semblance of survival, let alone success, are like vanishingly small at this point. And by the way, they're all mit, as it turns out, the weird little coincidence there, all with a network. And it's like, okay, what could possibly go wrong, right? We've got a bunch of MBAs trying to build a SaaS business here. And the reason I kind of put this out there, no knock on MBAs, obviously I have one, is that I think one of the mistakes we make in SaaS sometimes is because SaaS has the word software in it and software is tech, we automatically assume that everything is like, all about the product, Product, product, product, product, product. Like, find a great product designer, get the product right. And the thing we've learned is that, yes, a great product is essential, but there are so many other things that contribute because it's a large, kind of very complex machine in the SaaS business and everything impacts it, right? So it's not just about getting the product team right. It's about getting analytical people across the entire organization. So that's the other thing that dropped our odds of success was the fact that we were focused on small business on the SMB market. And everyone we talked to, literally everyone I'm paraphrasing, said this is a very bad idea. Do not like, no. And the reason is like, no one hardly ever has succeeded in building a big business in SMB. It's just really, it's slightly like it's impossible because here's the deal. You're trying to acquire customers and it's expensive to reach SMBs, because I don't know why, it just is. And then when you get them, they churn at a higher rate. And so it's like, it's like the math just doesn't work. You can't make the economics work. But that's exactly what we did. And we did raise capital along the way. So people, and my guess is that our early investors humored us and said, yeah, they say SMB now, but event like, they're not stupid. They're going to figure out that enterprise is the actual way to go and it'll be okay. That was, I think, the thought in their head they underestimated our stupidity. As it turns out, we're now nine and a half years in and we are still unequivocally SMB working out okay so far, by the way, it's been fine. Another piece of very, very good startup advice that I've given myself a hundred times is the do one thing exceptionally well, narrow in, narrow the focus, and do that one thing better than anybody else and that increases your odds of success. And we did the exact opposite of that. We were like, we are going to build all the things, all the things a marketer needs in the modern world. We are going to do all of those things. And so one would question, as you would ask yourself like self, why are we doing this crazy thing of building out? Like, you know, we're gonna do search tools and a content management system and social media, like all of it right on the top of the funnel. And our motivation was very simple, which is when we talk to customers, which I encourage you to do, that's a good idea, talk to customers and potential customers. The thing they kept coming back with was their problem was not a dearth of tools, right? It's not like these were great tools by great companies. The issue the SMBs had was like, well, I'm a 20 person consulting company, I don't know how to take WordPress and hook it up to Google Analytics and then this, I just can't do that. And so that's why we did it. We wanted to solve the problem customers actually had, despite the fact that it was actually crazy. And contrary to our own advice to ourselves for many years now, one of the byproducts of this kind of all in one strategy is the product tends to suck. It's because you have very few engineers trying to build out this very wide, 9 inch wide, 2 inches deep thing. And HubSpot's product in the early years sucked because that was it. And so on a scale of 1 to 10, I'd give it a 7 if you kind of round up from 6.3. And it got better, it got much better over time. But one of the early decisions we made, which was I think very fundamental to HubSpot, was that when Brian and I started the business, our kind of thesis in our head was, okay, we're building a SaaS company. I've built commercial software products before. Let's stipulate that if we happen to have stumbled into a real market, we will be able to build the software. If we end up going down and crashing burning flames. And this doesn't Work it not because we couldn't build the application. We weren't inventing new video codecs or driverless cars or anything like that. It was relatively simple business SaaS app. It was big, but it wasn't particularly hard. And so we said it's like, okay, well if this doesn't work, which we need to figure out really soon, if it's not going to work, it'll be because there's no market that will be the primary cause of failure. And we'd rather know that now. So then everything was in the early years were kind of oriented around that thesis, which is we need to mitigate market risk and not product risk. We'll assume we'll build the product if the market's there. And the only way we kind of knew to test the market is like, oh well market means transactions occur. A transaction is when someone pays someone else money. We're from the east coast, we're old fashioned that way, right? And so like, okay, how do we actually establish the fact that people are willing to pay money? Ask them to pay you money. That's like the best possible way to test it. So the product, even its sucky form and I'll say generously late alpha, we started asking people to pay, right? And one of the challenges with that, like one of the requisites in order to start charging money is you have to come up with a price. It's one of those little details like you have to know what it is you're charging. And at the time we had to make the pricing decision, we didn't have the six MBAs yet. It was just me and Brian in a house plant trying to decide because, okay, both of us are going to start selling this thing. And I'm going to give you the answer here. And the answer is three minutes. And I'm going to tell you the entirety of the conversation. Pretty much, Brian, we're going to go start selling this thing. Yep, we're going to start selling this thing. We need a price. Yep, we need a price. What do you think we should charge? I don't know. What do you think we should charge? What do you think about $250? Done. That was the extent of our rigorous analysis on pricing. And the price we came up with was $250 a month. Now the astute amongst you will recognize that it is not a starting at $250 a month. It was $250 a month. You could have been a Fortune 500 company, which we got some of those in the early days. And we made it physically impossible for you to pay us a penny more than $250 a month. This is what. Anyway, so we rationalized it. Oh, well, this is actually good because we're getting this data and we're going to charge monthly. We didn't do any annual contracts. And it worked because it was so simple, right? Like, it's even like we could sell. Oh, it's $250 a month. It's month to month. If you hate it, you can quit, you can cancel. That's why the kind of month to month model, we had that for years, by the way. And because one of the things we were looking for is once again, we were looking for evidence or data we wanted. It's like, okay, number one, can we sell this thing at any price? 250 seems like a reasonable number. Ended up being low, but reasonable number. And after we sell them, will they stay despite the product sucking? That's what we're trying to establish. Hence the month to month. It's like, okay, well then we can see, like, are people canceling or not? And the funny thing is, the same thing that I think worked for us in the early years almost killed us because this price stayed that way for some of our early years. Right? And for you folks, it's like, well, that's obvious. You guys are idiots. How could you do that? We were idiots. We did that. And so over time we changed it. We did the basic pro and enterprise. So we went from. No, we'll go from 250 to $500 a month. Awesome. Pro version, double the revenue, right? Awesome. But not a penny more than 500. Right? It's like, we were slow. We were slow. Okay, now the thing we were selling, this is we were selling this thing called inbound marketing. And this is not HubSpot sales pitch. So I'm not going to tell you about inbound marketing. What I am going to tell you is that what we were selling is this kind of new approach to marketing. It was a kind of philosophical, transformative change. Which brings me to sales and marketing. There are two kinds of things in the world. One are simple things that people understand. If you have a tool that's an existing category, other people already have it. Some of the potential customers already use something else. You can put a website up and a credit card form up. And it's like, oh, I have this tool, it does this thing. In this category, you might be using another tool. Ours is better. Try it out for 30 days and if you like it Pay and you can get customers without ever having carbon based life forms interact with each other. You can actually do that. That's possible. As it turns out, on the other end of the spectrum, when what you are selling is almost a religion change, that says, oh, by the way, everything you thought you knew about marketing is kind of wrong. And you change it and do this the other way. Which is what we were pitching. That's what would be called a transformative sale. As it turns out, no number of brilliant blog articles from me or my co founder were going to be enough to like put up on the web. And someone says, oh yeah, these guys are right. Inbound marketing, that's the way to go. Here's my money. That doesn't happen. Right, because we're asking for this massive change in their mindset. And so that required people. So we built out a marketing and inbound inside sales machine over the years. I gotta take a deep breath. Are you doing okay here, Jason?

Yeah, I'm very entertained. Okay, so keep going. Yeah.

By the way, if you're wondering why I talk so fast, it's not because there's a beer waiting over there as soon as I, like make it back to back there, it's because I talk this fast. This is me. All right, let's get by this. This one's subtle, but on the list of things. So when we started HubSpot, we had this inbound marketing thing and it's like, okay, well, the category, like we called inbound marketing, but there was no category that we neatly fit into. Like, it could have been marketing automation, but this wasn't marketing automation. So we made this weird, very impactful decision. We didn't know how impactful it was going to be at the time that we made it. It's like, okay, we're going to create an entirely new category and we're going to create a movement. This is going to be a thing. This should be a thing. And now, years later, millions of dollars later, so we wrote a book, have a blog that gets 2 million visits, have an event that's had 14,000 people last year. It's this big thing. So we have all this push that we've put behind this new category called inbound marketing. Now, the question I get asked all the time, and even if you don't ask me, I'm going to tell you anyway. Should I create my own category? Should I do what HubSpot did? The answer is it worked out for us pretty well. And even to this day at HubSpot, we still have the debate internally was that a good thing to do because the odds of actually pulling it off are relatively low. And it's like, okay, well, couldn't we have found something else? I'm on the side of we did a good thing, but there are good counter examples as to why you might not want to do it. It's super expensive, and it doesn't always work, so it's easy to do. The first filter, you should ask yourself before you go off and do something like create your own category is you have to force yourself to say, if we were to pick an existing category, what's the closest one? And how bad is it? How different are we from the things that already exist? And I'm going to give you two secret weapons. I'm going to actually probably just talk about one of them in the interest of time, in terms of good things that we did that worked. So one of the things we launched is this free tool called WebsiteGrader. I hacked it myself in the first six months of HubSpot. I'll give you intense what it is. You put your website in, like acmewidgets.com and it would go do this analysis and give you a score from 0 to 100 on how good you were at marketing based on evidence from your website. Was this SEO right? Did you get the tags right? How much traffic were you getting? What's your social media presence? And it gave you a relative score, a percentile score that says, oh, you get an 87. That means you are better than 87% of the other websites we've graded. Now, what was interesting about that is that basically this was freemium without the downside. One of the challenges you have in freemium is like, okay, I'm gonna take my solution, which is X, and I carve out a small portion of it and give it away for free. That's the kind of classic freemium model. And then I'm going to sell the premium version. Lots of startups forget the meme part, but let's assume you got that right. So it's like, okay, well, I'm gonna give away a small piece, and then in hopes that they buy the larger thing. One of the big challenges with freemium is, like, you have to decide what that small piece is. There are issues around, well, do people devalue the big thing because some portion of it's available for free and you get bucketed into something else? What we did is say, okay, well, instead of giving a part of the solution away, why don't we create a tool that surfaces the problem that they have and that increases the likelihood that they'll buy the full solution. It has worked brilliantly for us. And I don't know it's universally applicable, but a bunch of you should think about that. It's like, is there some adjacent tool that you can build that helps your customers recognize that they need you? Or something along those lines? Okay, I'm not gonna talk about this because it's secret weapon number two. I'm gonna talk about retention. Talk about retention. I'm gonna skip to this one, which is actually the key one, because we all know retention is important. I'm gonna tell you the mistake we made, and I think most SaaS companies make as they're going through this generation of SaaS companies is way better than we were. Right. You guys are much more thoughtful around the metrics that you track, and knowing that churn and retention is important. But here's the mistake. The mistake is you assume by looking at your kind of cancellations, it's like, okay, well, people are not canceling. That means they must be happy with the product. Well, it does not mean that they are happy with the product. It just means for any number of reasons, one of which could be they're happy with the product, but it could be they're too lazy to cancel. They didn't even know they were paying you, essentially. Which happens, by the way, shockingly so, any number of things. So what you have to do. What we did at HubSpot, I'll give you the very short version of it, in the first three odd years we built in the first year is this thing called the Customer Happiness Index. It was a model that we developed internally that looked at all the data available to us. Product usage, which sales reps sold it, what day of the week they bought, on which customer service. Like everything we could possibly have about the customer, all in one database. And we did regression analysis. And the idea behind the Customer Happiness Index was for it to be a predictive model that says, knowing everything we know, how likely is this customer to still be a customer next month? Right. In fact, not only did we. And we tweaked the model as you would expect, being a bunch of MIT folks, and we made the model relatively accurate so we could know. It's like, okay, Mr. Smith, we had a team that does this. Now, Mr. Smith, I know you. You don't know this, but you're going to cancel in 4.2 months. Is there anything we can do to kind of help you? By the way? Like, here we Have. It's all included in the product price anyway. Why don't you use this and this can help you with that. One of the most brilliant things that we did. So the idea here is don't wait until after they cancel to analyze the data. A lot of the data you need, you already have. And cancellation is a post facto kind of indicator of unhappiness. Try to catch it earlier so you can do something about it.

How do you find that pre churn? I don't want to interrupt, but that's a profound. So you're really talking about pre churn. Right. And one way is an NPS and surveys. But any insights on how you.

Yeah, so we've done npc.

Really get to this data.

Yeah, yeah. So this data basically is. So we're big. Believe we do NPS surveys. We haven't had massive amounts of success in terms of finding correlations between NPS in the short run. Right. It's like, okay, well, people will say something, but then the next month they'll cancel a second. Yes. Yeah. So what we like is we like behavioral data. We don't ask people what they think. We watch what they do. Okay. Like if, you know, they may say they're happy, but you haven't logged into the product in three weeks, you can't be like, happy, happy. Right. Like, that's the problem. Or you think you're happy, but you have the sales rep that was notorious for having a higher turn rate than average. There's something not quite right. So we had all these factors that went in and the early part of the customer happiness index. The model is very complicated because we threw everything, every piece of data we could find and get our hands readily on behavioral data, demographic data, all of it in one standard database. And over time, the thing we discovered was it really came down to like four things that were the actual predictors of whether they were canceled or not. And so now we've reduced it down to like, those are the things. And we'll rerun it probably maybe every.

Year or something you can find at your scale. Because this is what I think is hard, is unhappy engaged customers. Because it's easy. It's quite easy. And we have all the vendors here where you can track lack of usage.

Right.

That's work, right?

Yep.

The really hard ones to find are the prisoners. I hate your product, but it's core to my business. And so you don't see it in usage. And then bamboo, they move to a competitor in one day. So have you been able to find.

That, yeah, so we tweaked some of that out. So the way we do that is so one of the issues with. And we have as you all should have, like the kind of customer success teams, right. They're onboarding and their job is to make a customer successful and help them use the features of the product. One of the things that does though, it sometimes distorts the data. So when they're using something, well, are they using it because they were intrinsically like okay, they saw some benefit or is it because we kind of banged on their head until they started doing the thing right, like writing a blog article or doing. So you have to somehow separate the things. The data that's kind of pure to some degree versus the thing that was not forced. But like that we kind of tainted the data as a result of our own kind of intrusion. With good intent, no doubt. But yeah, so it's. This is. Yeah, this is great conversation for beers afterwards for those that are curious about it.

So keep going.

All right, so I'm going to three sides left now.

Oh, take time.

So I'm going to posit three theories. Theory number one is it's possible possible that not all MBAs are going to predom your startup to failure. Crazy thought, but could be true. Theory number two, that it actually takes more for the breakthrough success, which is the thing we hope to aspire. You all are aspiring to requires something more than just technology. Can't be just features or whatever. You have to have a philosophy. Maybe not on the product or the market, but on culture, on distribution. Something has to be different and you have to have a point of view that you can pitch outside of just features and even benefits. That's not enough. It's like, oh, this is what's wrong with the world. This is how we see the future. Here's what we're doing about it. Because it's really, really hard to break through the noise just selling technology essentially. As much as being an engineering guy, I would love for that to be the case. I would love to say, oh, I wrote this software and I put two servers on AWS and put a credit card form up and the money just kept flowing in.

Right.

It just doesn't turn out that way, much to my chagrin. And the last one, this is a feel good. My expectation is that over 100 of you will build like the $100 million ARR SaaS businesses right now because you guys are getting so much smarter than we were. Like you will skip a bunch of the mistakes that we made. And it's a good time, present market conditions notwithstanding. Thanks for your time. So I'll be around.

Awesome.

All right.

Thanks for adding a little serious levity to the day. It was a lot of fun.

Thank you.

It's good. I don't want to break it up with my typical intense questions.

Oh, ask me intense questions.

But I do have some. So I wrote this piece in TechCrunch in the 12 months box was in its quiet period saying Box will get to a billion in revenue. Before we know it, people made fun of it. But as box crossed 150 and 200 and 300, is there any chance they won't get to a billion? I mean, of course, right? They're gonna get there, they'll make it there. Right. So I know you can't talk about forward looking statements, but I want to tease it out a bit. HubSpot will unquestionably get to a billion in revenue. The question is how long will it take?

Right.

And we don't have to talk about the quarter, but it would be difficult for HubSpot given an infinite amount of time at whatever we're doing. 200 and something. I should know the rough number. It's gonna get there. Right? So talking some of the things you teased about not selling to SMBs, simplistic sort of medium, low end pricing. What are the learnings going to a billion? Right. And why the heck can HubSpot even do a billion dollars? Right. Because you talked about a hundred. But that's a lot of people. Right. So what have you learned in these contra obvious things that will scale to a billion?

Yeah, well, one is, and this is the obvious one that investors know and we as a startup community know, but I don't know that we know it.

Yeah.

Which is a lot is defined by the market you're going after. Right. So if we were going after some vertical trying to sell a $250 a month product that only had 8,000 possible companies to sell into, there is no way the TAM was large enough in the addressable markets, big enough to do that. So that's one thing. And the other one, I think it comes down to what we call at HubSpot, we call like machine building. Okay. So, and the way we think about the machine is that, okay, we have this machine, this is the LTD to CAC kind of thing. It's like, okay, we put a dollar into this machine that we've built and X number of dollars comes out over a Y period of time. Right. It's the classic ltv to CAC thing. And so the thing we work on is like, okay, everything we do has to do one of two things. Either has to shorten the length of time that it's gonna take us to get the elt, whatever it's gonna be, increase the overall return. So we might like when we were starting in our formative years, that number was like 2.5 or 3. The LTV to CAC. Right. And it's like, okay, we're gonna keep driving that up. Well, what do we do? It's like, oh, we could work on acquisition costs, which we did. That was not the issue. And that is usually not the issue for most SaaS companies at this stage. Right. The issue usually is like, okay, maybe your CAC is 20% higher, but the upside on LTV is where the real leverage is. Right. So the question we ask ourselves is here's how much money we make on a per customer basis right now, here's how long they stay. How do we make both of those numbers go up and we back solve. So we have a number in mind in terms of when we're going to get to a billion dollars in revenue and it's less than eternity. You know, it's going to be less. I think we've actually told investors that we're targeting 2020.

2020.

Yeah.

And what was back is the accelerant that will get you there. Is it just that? And I'm sure there's a lot of answers to this. There are many are, yes. But is it that SMBs are running more and more of their business on the web, so they need to manage more inbound marketing? And is that bigger than ever or is it more subtle or complex than that?

No, that's a lot of it. So the thing that's happened is as HubSpot has grown, the car goes into new gears. There's a time that's like, okay, well, we're doing all this work trying to increase retention rate and we move it by like half a point despite putting the entire company against that one goal. Right. Like, ah, it's hard to move. And then something happens, like some nonlinear shift happens. We don't know what causes it. We had one of those about a year, year and a half ago where like all the numbers start looking better. And I think one of them is that before HubSpot was like, okay, we have to tell you why inbound marketing is like a good thing. Right. Not to drop everything else that you're doing, but why this is a good thing. And now it's like they already get that part. It's like, okay, I know I'm gonna need to do inbound marketing. Which thing am I gonna pick? Am I gonna pick HubSpot or one of its competitors? Essentially, how am I gonna accomplish it? So there's less of the why should I do this? And more like, how do I get that done?

I got it.

So it reduces the friction and the acquisition time and all that stuff.

So let's tease. Just so related to your point about segmentation and SMBs, I don't think that when you guys started it or even today, I doubt you're dogmatic about anything. Right. You just wanted to build a winter product that you believed in and of great market.

We are red letter capitalists in the positive sense of the term. We're very analytical, very.

So how did you. And answer the question. Twist the question around any way you want. But how do you resist the temptation to go up market? Because I'm sure. Do you disclose what your biggest customer is? Who pays the most?

We've disclosed it. I don't happen to know what.

Rough is tough, right?

Our average is about $800 a month.

That I know. But what's a biggie? What's a biggie?

Not that big. Like maybe 10 times that. But not like huge.

That's 100k a year.

Yeah.

So how do you resist the temptation? Let's go do more. 100k a year.

Okay.

I'll give you the same unit input, right. For the output.

And I'll give you the short version of my answer. The short version is a bunch of good things happen when you drift up into the enterprise. And it's very easy. And everybody does it for a reason. There's kind of reverse gravity because it's always easier to kind of move upstream.

Reverse gravity.

If you can reverse gravity, you just get pulled up, right? Listen to your customers, you get more money. Everything makes sense. But there are downsides to moving to the enterprise, the biggest of which is the enterprise, because everybody drifts. There is so much more competitive. Yeah. So much. Like an order of magnitude more competitive. You have Salesforce there, you have Oracle there, you've got Marketo. Everybody's up there.

Everyone's there.

In the SMB space, there are very few people that are crazy enough to do what we did and stay there. And so we have roughly unfettered green, ocean blue, ocean access to millions of companies that we can just grow. And that's worked out well for us. So it's like if that starts to not become True. It's like, oh, well, from a competitive perspective, it's not that big of a deal. And then we think we could do this and it's not gonna complicate the product too much. And we've got this way that we're gonna meander through. We're not dogmatically against enterprise. We like to think we're good entrepreneurs. And it's been nine and a half years and we don't see any evidence of that changing anytime soon as to what? All of a sudden SMBs are gonna decide they don't need to do marketing.

But it's interesting thinking through that. I don't wanna challenge you for HubSpot, but let's think about other companies. I'm thinking through it and I haven't done the survey or the quant side. I actually think as it gets more enterprise, there's often fewer competitors because the investment in business process change and workflows gets so complicated that who the hell is going to build Salesforce again? There'll be a paradigm change, but no one is going to ever build Salesforce again. No one's going to build these things. So what's the general learning for founders? And maybe this could be our last question, but we can tease it out. What happens a lot of founders is you get a pie. You get small, medium and large customers. And sometimes large is not large, but it's segmented by three. And when you see three different categories, how do you know where to invest your time when you have customers in each segment?

Yep. So I'll tell you what we did. Right? So we actually have those three. We have what we think was like very small business customers, like less than 10 employees. Right.

Very small.

Very small. We have the mid market, which is our actual focus. And we have larger like enterprise. Y kind of. We call them enterprise. They're not really full. But the decision we made is like, okay, well, we don't want to sell to the enterprise, but. But that doesn't mean that we won't take that money. So the reason that we kind of avoid the enterprise is we don't want that distorting the product roadmap. That's like number one reason. Yes, but if someone and we have this all the time now is like x Fortune 500 company bought HubSpot and we don't make. But it's a department within X company that behaves a lot like a mid market and they're making their own independent decision. There's no corporate governance Y thing that says, oh, we will choose X and they behave just like all of our other customers. They're not asking us for eight levels of security and all these enterprise Y features. And that to us is just fine. Like, as long as we can maintain the purity around where our focus is. Same thing with the small business, like very small business customers.

Got it.

We don't build a product for them. We don't build a sales machinery around them. We don't build marketing around them. But we will take the money.

Yeah. So in other words, if we looked at your pie chart, I should know this data. I should have said it. But your M category, you're putting all the effort in the M. It's your medium. It could be someone else's small, but it's your medium. Some smalls that are more sophisticated can take advantage of that and some silos can. But M's the largest. So put all the energy behind that wood. Put all of it into the part of the pie chart that's the biggest piece is really the Zen answer.

All of it? Not so much. The pie chart's the biggest. It's the all factors in. It's the highest EV accretive to EV over the long term. Like, this is the thing we think we can do. Well, we're separated accretive or most revenue? Most accretive. Where do we have the most advantage long term? It's not just like, will we make this quarter or this year? We're not worried. We're worried about. We're not that worried about quarter after quarter, year after year. The thing we ask ourselves, is this more likely to make us the company we want to be someday? Right. And is that pattern we're willing to take short term dominate? Yeah. And right now it's working so well.

All right, we can go for another hour. But Dharmesh, thank you very much. This was terrific. Yeah.