Secrets to SMB at Scale with HubSpot CEO Yamini Rangan and SaaStr CEO Jason Lemkin

I wanted to. There's so much stuff I want to talk about, but before we get here, I wanted to use you and we were chatting this before we started about a pulse check because there is just so much craziness happening on Twitter. Sometimes there's doom and gloom. I think unemployment's at like 2%. I look. And everyone in SaaS and Cloud is still growing at epic rates. HubSpot is coming up on $2 billion in ARR. Growing at. @ an incredible rate. So what's going on here? I want to grab a few quotes here and then maybe we could do a deeper dive. Clearly on the left you said, and this is what you said just a couple weeks ago on the earnings, deals are taking longer to close. But on the right, HubSpot's emerging as a platform of choice in these uncertain times. So what are you really seeing on the ground across 100, and something thousand customers? What are you really seeing?

I mean, look, Jason, these are fairly business as not usual times, right? There are years where it's business as usual and there are years when it's business not as usual. And I would say 20, 20, 20, 21 and 22 are three years that will go down in history as nothing that is usual or normal, right? So part of our job is to kind of make sense of what is happening within the market. We went through massive digital acceleration and we all benefited from it and our customers benefited by thriving in a digital first world. And then we entered this year not knowing it was going to be rocky, but then we got into high inflation rates, an invasion that is happening in one part of the world. A massive social unrest and just like market volatility across every key metric. And so all of that leaves our customers in a place where they're being very thoughtful in terms of where they spend their budget, right? When you are uncertain, the first thing that you do is to look at what are you spending? Do you have a clear path to getting value for the spend and are you able to do more with less? You come down to some of these fundamental questions. And so that's what is happening and that's why you can explain both of these comments, right? If you go back to what's our customer thinking? They're first saying, do I have a clear path to value and can I do more with less? So they're taking longer. And then on the flip side, they're like, okay, if I want to consolidate my tech stack to the key applications, the key platforms that drive value, it's going to come to A handful of those platforms. And therefore we do think that we are becoming much more strategic for our small and medium business customers.

So let's step back for a minute. In the true enterprise, we went on this binge on digital transformation last year. In the true enterprise, CIO budgets expanded, but SMBs did the same thing. SMBs don't usually have a massive CIO team or IT team. How did they think about digital expansion last year? What did that mean for an SMB?

Absolutely. I mean, look, there are a couple of counterintuitive things that have happened within the SMB space over the last year. So put ourselves back in March 2020. I don't want to. It gives me deep.

I'll go to May. March is still a little traumatic, but.

I know, I hear you, I'm with you and I say March 2020, I get like a chill. But what happened at that point is that Everybody wrote off SMBs. The first thing coming out of March was SMBs are going to get like wiped out.

Yeah.

Are just going to completely disappear. Businesses are going to fold, bankruptcy is going to increase. Things are going to disappear. That is not what happened in 2020. What actually happened is SMB said, okay, we're going to be very thoughtful, we're going to pivot very hard and we are going to find new ways to thrive. And the way we will do that is by going digital, right?

Yes.

That is not what was expected sitting in March. And so in May, which I agree with you, much better time than March. But in May, what happened is that small medium businesses said, I am pivoting hard to being digital first. Even if they didn't know how to get on a website, even if they didn't know how to get on email marketing or having these different channels to digitally connect with customers, they found a way and that has kind of led to this transformation. What happened in 2021 is something different, which is the same SMBs who said, okay, I don't know how to get onto digital. Now I'm getting onto digital. They went on a frenzied pace of adding point solutions. You will be surprised. The average number of business applications that a small medium business has is 248. Right. 248 solutions. So we went on this frenzied pace of buying up point solutions and that is what happened last year. Why? Because we had to keep up with growth. We had to keep up with the digital acceleration. We had to keep up with our customers that were now trying to connect with us on, you know, Social, on Twitter, on LinkedIn, on, you know, email, on your website, like they. So that's what happened. Now what is happening right now is we cannot keep up that pace. Now it's got to come back to the strategic few that are going to drive value for the SMB. Because every SMB leader, you know, sole owner is saying, how can I do more with less? And so I think if you track where SMBs are now, it is, how can I do more with less? How can I eliminate some of these point solutions so I can be much more efficient with my capital? And how can I continue to maintain that contact with our customers? So even during uncertain times, we can get very profitable growth. Right, Right. So I think that's what is kind of happening.

And do you think these. And I've seen the Octa date and others, but I haven't seen this 248 per S&P. It's really interesting. Do you have insights? Do you think that that was an explosion? Do you think it will stay constant? Do you think that, are we, if we're selling to SMBs, are we competing for one out of 250 slots? Do you have a sense of how that will look going forward?

I mean, look, everything comes in cycles. You know, within business there is a period of, you know, explosion of point solutions, there's a period of consolidation of point solutions, there's a period where everything is bundled and there's a period where everything is unbundled. Mean, if you go back, you know, and start looking at the different S curves, we've gone through those cycles. So I think we've just gone through the cycle of explosion and massive point solution adoption. Now we have to go through a period of connected solutions. Right. We cannot just have. I'm not saying point solutions are all bad. I think you're not going to go from 248 to 2. That's not possible. But I think you're going to have to think about how are you going to connect some of these solutions, how are you going to get the value out of them and what is absolutely need to have versus what is nice to have.

Yeah, and there was, you know, there was in. That's so interesting you made this comment, I think maybe at the last call or before that, over its history, HubSpot's gone from a nice to have to a need to have or some version of that. What is what I would have thought, you know, having been doing this for a while, HubSpot was always a must have. And. But did you mean that because it became multi product or a hub or what does that mean? Because that's so such an important concept these days, I think.

Yeah. I mean look, when we started and you followed us for a very long time, we started as a marketing automation company.

Yep.

And the biggest transformation, probably one of the, the best strategic move that Brian and Dharmesh could have done is just take us from that marketing automation company to a CRM platform company. And you know, I think like one of the questions I get is hey, you are big in marketing. You know, marketing budgets are getting cut. You know what's going to happen as you look at like 2023. And I think my. The two responses, one is that we're no longer a marketing automation company. We've gone on the journey and you have amazing stats about us. We've gone on that multi hub path and we are much more of a CRM platform. Which means from marketing to sales to service to your operations analysts, we are powering a lot of the front office for small medium businesses. I think the second part of the equation is exactly what we've just been talking about, Jason, which is SMBs. Ten years ago they may have had a couple of things that they were depending on, but really it was not as much of a digital first, you know, way of communicating with customers. In the last couple of years SMBs have become much more digital first in how connect with customers. Which means marketing automation, sales automation, services automation are all core to how scaling companies run.

Yeah. One follow up on that. Just because I get confused because you do have this such wide view, cutting marketing budgets for next year. Is that really true? Clearly we see if we look at what's happening with Facebook and on the social media, obviously advertising budgets in some cases are getting slashed, but our economy is still doing reasonably well. Right. We still have to grow our customer base, we have to market to them, we have to track them. Like is that are we really cutting marketing budgets or are we overreacting to the cut of nice to have tools? What's really happening out there?

I mean it's really a good question. I think I've spoken to more customers in the last few months than the last couple of years and that's because a lot more of CEOs, CFOs and CMOs are getting engaged in the process and in the final decision making. So that is definitely a shift that we're seeing as I talk to them. Here's what is top of mind. It's not that marketing budget is getting cut, it is the impact of marketing needs to be exceptionally clear. Which means any spend that you have that is directly connected to driving revenue and growth is in. But any spend that you have which has kind of a squishy connection to driving revenue and growth. And we know those, right? You know, those are not getting prioritized. So the priority is what can drive growth, what can get better alignment between marketing and sales and what can help us drive growth in a period of uncertainty. Those are the kinds of projects and initiatives that are getting funded across marketing themselves.

And that's a couple of just interesting things you said. I mean you're selling to the high end of SMBs, right? I remember Brian said it's the M in SMB. Our deal size is very low, five figures on average. But HubSpot's now needing to sell. And we see this across everyone initially. But you're selling to more stakeholders, more CFO and CEO conversations than like Q1 of this year. You've had to evolve the stakeholders you sell as well, even at your price point.

Absolutely. And so just to be clear, I completely agree with Brian. It's. We're talking to more M portion of the SMB. The market that we are focused on is our companies with 1 to 2000 employees. Right. That is the market that we're focused on. Now a 10 person company, very different from a thousand person company. A 10 person company still cares about value, still cares about doing more with less, but they're okay going onto our website, trying our product and using a credit card and buying online. But a thousand person company now has way more executives involved in the decision making process. Right. The thousand person company now has sometimes the board involved, definitely this CEO or the CFO involved in terms of the final decision making. And that's again because we're entering a period where every dollar counts and impact of every dollar makes a difference. And so I think absolutely that has been a big shift, probably even in the second part of this year. We started seeing it in June and I think it's gotten much more intense as we've gone through the last couple of quarters.

So you've, I mean you've materially changed your playbook to sell to more stakeholders as the year's gone on.

Absolutely. I mean last year our conversations with customers where how do we get you to be digital first and how can we help all of the digitization that's happening within the front office right now? It is, how can we help you do more with less? How can we give you clear business impact? The shortest time to implement and the shortest time and path to value so that you can continue to grow. Right. So the conversations are different, the stakeholders are different, and the compelling reasons to make change is also very different.

Cool. Well, let me talk about these last couple things in the slide. Then we can transition to some of the secret sauce for HubSpot. But since you publicly disclosed it, it's really just the unknown secret sauce. But this one on the bottom left, it's interesting because HubSpot, you know, relative to its life, came to free and freemium later in its life cycle. Right. But now in this market, we've moved high value features like marketing automation that we talked about down to starter and early stage with free CRM and cms. So you're going freer as a reaction to the current macro effects. Is that working?

Absolutely. Look, I will tell you that this is one of the things that we did at the beginning of the pandemic as well.

Yes. Everyone did this in March 2020. Right. To help out customers in stress. Right.

And we did this at the beginning and it worked. At the beginning of the pandemic, we cut the prices of starter and we moved a number of high value features down into the freemium tier because we wanted, first of all, customers who are looking to survive and thrive and get digital. We wanted to be able to reach them fast. I think the same thing has continued. Now it is digital is here to stay and not every SMB out there has been on that journey. And therefore we want to continue to provide the most value for our customers that are getting started. And so I think we'll talk a lot more about this as we go into the not so secret sauce spot. But I think this has been a play for us for multiple years now and it's continuing to work.

And how do you, you know, when you have these conversations internally, putting more features into free. I know you have a great management team, but there's always some tension with sales. For sure. Right. Of wanting to use it, you know, I hate this term, but wanting to use a choke, wanting to standardize the additions, wanting to push people up because they have a number to hit. Sometimes there's tension with success. How do you like AB test this? How do you get the data to know that putting more into free is. Is a good investment? How do you know? Or do you just have to go with your gut? How do you get the data?

I think you have to trust data. Right. And it's exactly that. A B testing. The one thing I will say is in our segmentation, so if you take that 1 to 2000 segment that we just talked about, Jason, the 1 to 10 for us is very much a product led motion. Right? We want the widest possible distribution and the most seamless way to get companies started on digital, and that's all through product. And that actually gives us the ability to do a lot more AB testing than if everything were in the hands of sales. And so then you look at the 20 to 200 segment, we call it mid market, that's all sales and the 200 to 2000 segment, which is we call corporate and that's all sales. But we do have a segment of the market which is product led and that gives us the ability to test. And the first principle is how do we solve for the customer and what are the sets of features, what's top of mind for customers and what are the sets of features that will help them get on the right path to getting value out of their digital investments? And so I think that's how we think about it from a first principles perspective.

How do you just see, this one's always interesting to me at a CEO level when you have this 1 to 10, this PLG segment, which is Long Tail, they're HubSpot champions. They love you, they watch you online. But the direct revenue isn't huge in the early days, right? How do you allocate team resources? How do you get mind Share Feature story points Marketing like, how do you. How do you figure out how much of the HubSpot budget that Long Tail gets?

It comes with starting with a clear strategy. Right. You know, you can't get to resource allocation without having clarity on what you're doing and why you're doing. For us, our freemium motion and starter is exceptionally important to the strategic mission that we are in. Our mission is to help millions of organizations. And if you don't have wide enough distribution to get millions of organizations to try your CRM, then you're not going to get there. So I think it starts with clarity of what's your mission is to get millions of organizations to grow. Therefore, what do you need? You need the widest possible distribution and therefore how do you allocate resources? You gotta make sure that you know it is part of the strategic objectives. We have six strategic objectives in the company. This has consistently been one of the top five or six objectives for the last five years. And so because by the time you get to the budget, you're asking what's my strategic objective and how do I make sure that we're making enough Progress in the strategic objective. So you got it. My, my point of view is get clear on strategy, really understand why you're doing certain things and why that is important for the long term of your company and then allocate resources. Then you avoid a lot of the. You know, I don't have resource here and I don't have this because you got to be able to have clarity in terms of the strategic bets that you're making.

Yeah. And so that's a good learning for me. I think it's hard to have more than five or six priorities. Right. Or goals. But this was one of yours, right?

Yeah, absolutely.

That's how it got resourced at the end of the day is at one of the top. It didn't fall below that. That, that, that line.

That's right.

All right, so let's tie that to some of the secret sauce. Again. If HubSpot one of the. I, I write it up on Saster. But one of the great. At least for now, as, as we're crossing again a stunning 2 billion ARR. HubSpot does an amazing job in its investor session, actually sharing a lot of metrics and insights that others don't because you're not required to do this. Right. It's educating the audience. So. So I steal these secret, secret lessons, but they're all public. But I want to make sure we can get through these because they're so interesting. But the first one, because you tied on this today and this is the opposite of what I see with so many SaaS, companies that are getting, that are getting less free, that are more contact me more driving you through sales. Even for the small you have today. 60% try a free product first. So what is this? What does this really mean?

So. So let's talk about the not so secret sauce. And this is probably the first of the not so secret sauce behind HubSpot's growth. It. It may not be this clear, but HubSpot, you know, for maybe the first eight to nine years of our growth was just a single or two motions, which is like sales, direct sales and partner sales. Those were the two channels of distribution. At some point in 2016-17, Brian Dharmesh made this really counterintuitive bet that they were going to go from a sales led motion to a product led motion. Most companies don't do that. And in fact, as you mentioned, I came from Dropbox, where we went from product led motion to sales led motion. We took multiple steps backwards to go to a free product. And you can ask the Question. Why did you do that?

It's radical.

It's radical and counterintuitive that you would take a few steps backward. And here's why. You have got to. If you're in SaaS today, you have got to get the widest possible distribution. Think about it as like your front door. And if you have a super narrow front door and you can only get like a single file of people walking through the front door, it's not useful for your growth. What you need is the broadest possible front door where you can get the most number of people. And that has been almost like a first principle for us to think about distribution. And therefore, what do you do you have like a free product. We started with free CRM and in fact this year we added free cms. So want to get like a website up and running, you know, you want to do it in like half hour. Here's the free cms. Why? Because people want the website even before they want a CRM. Right. So it actually even more opens up the front door. We have free blogs. Why? Because we have 30 million visitors to our website reading our content. That's a big front door. So we think about, you know, free. And the role of free is having the widest possible distribution front door for people to walk in. And then our job is to add value, is to make, you know, them see what we can help them with in terms of growth and then be able to, you know, if they recognize the value, convert them into paid users. And so I think that's the strategy we have right now. One million weekly active users of our CRM. Right. And that is powerful. And that is what leads to the 60% of customers trying the free product and then buying a paid product.

Got it. And it's going. But in this chart it's gone up, right? It's gone up the percentage, right?

Yep. Exactly. Exactly.

Is that just by promoting it, is it even more of the top five strategy? Because this, there's still like the, the fact that I'm colorblind. But I think the red, the red bar is going up is even more. Is just as counterintuitive as going from sales led to product led. Right. To go freer. Right?

Absolutely. I mean, you're reading the colors, right? It is going up. So why is that going up? Because of the number of features that we keep bringing down to free and level of kind of acquisition engine that we drive. Right. So I think you make the free product really valuable. Not free for the sake of free, but you make the free Product really valuable and you help customers try it and then it drives the conversion. So I think that's how we think.

About it philosophically, just to kind of tie all these learnings and even going back to Dropbox and others, have you learned to err on the side of including more in free rather than.

That's a good question for us. I think that would be the case. And it does two things. It actually helps us to widen that distribution front door I just talked about. It also forces our product organization to keep adding innovation at the top. Right. You think about this. We have three tiers of products, Starter, pro and enterprise. Now a lot of times I have been in other places where you take a product and you kind of like you take a feature, it's high value and then you move it to the next upper tier for monetization.

That's the classic pattern, right?

That's the classic pattern. We kind of do the opposite because we want our product organization to keep adding innovation at the top. Right. That's like one. The other thing is it also forces us to maintain that consumer like ease of use because if you keep moving things to the bottom and you keep opening up the funnel at the bottom, it's all product led and it's all like, you know, consumer like ease of use. And when you do that then all customers benefit, all customers benefit from easy to use, you know, CRM software. Right.

So yeah, that is the, that is as often as discussed, I think it's still under discussed that if you get nothing else out of free, you make the product easier to use. It has to be right. You can't cheat. You, you can't cheat with an onboarding team or a CS team or an enablement team. Right. And so as a founder I think you should give up free at the, you should try to never give it up no matter what the team wants because your product always gets clunky when you do.

That's absolutely right. Like you hit that golden nugget there. That's the, you know, every single time you think about why am I investing in free and what am I going to get out of free, it actually forces you to remain true to having easy to use and consumer grade products.

Yes. Okay, so this next one multi product and I think a few years back this was something we were all still trying to learn. Now we get it right because now there's so many leaders that are past 500 million, a billion in revenue. And so this is an interesting chart. There's a lot going on here. But what does this mean? 50% of new upmarket customers land with two or more hubs that customers so quickly use, use multi product from, from the get go. And if that's so, how do you get them to do that?

Yeah, I mean, look, I think taking a bigger picture, we started talking about the not so secret sauce. The first one is wide distribution. The second one is very broad markets and, and total addressable markets. Right. That's what you really are focused on. One of probably the most strategic bets that Brian and Dharmesh made was to again go from marketing automation to CRM. And that bet led us to going with marketing hub, followed by sales hub, followed by service hub, followed by CMS and operations. So we now have, you know, five major hubs and then a whole platform. Right. That's exceptionally important if you think about, you know, you're a founder and you're kind of, you know, thinking about where your market opportunity is. Certainly get your first one but always be thinking about what are the second act, third act, fourth act to be able to follow and that, you know, having a broader view of the total addressable market is important for us. This metric is really important. It is how are we doing and becoming the platform of choice for scaling companies. Not just the marketing automation product for scaling companies, but how are we doing and helping our customers grow with multiple products. That's the strategic objective that we are going after, which means this metric of multi hub is important. Are you starting with just marketing hub? Are you starting with marketing hub and sales hub? Are you starting with marketing sales service hub? And so we think about it as if we need to be a strategic platform for scaling companies, then we got to get them on the journey of adopting more. But more than that, it comes back to what are we trying to solve for our customers. Our customers are, you know, struggling with two choices today. Either they take a whole set of point solutions, stitch it together, try to get a sense of where customers are in their journey. Between 10 marketing solutions and 20 sales solutions and so on, they have that choice. It's very difficult, it's cumbersome. Or they have the choice of going to an enterprise grade product and they know this is not what I need. Like there's, I don't have the time for it, but they think, okay, I need this enterprise grade product and I'm going to, you know, try and make it work for my business. Those are the two, you know, kind of paths that they look at and then we are made for this market. So for us it is no you don't need to stitch together, you know, 20 things because we are taking the time to craft marketing sales service into one seamless data structure, one seamless user interface that is easy for you to buy, easy for you to use, and easy for you to adopt. And that is the value proposition that we provide for customers. We're solving a very important problem for our customers and therefore it shows up in multiproduct stats. It's never the we want to drive the stat and we're doing this. It's this is what we want to solve for our customers. And therefore it shows up in a number somewhere.

Yeah. A couple so many things jump out at me at this and we'll talk about in our, in our last slide, the different revenue contributions of the different product lines. But now that I see this, for new customers, sales hub is bigger than marketing and two hubs is bigger than marketing. Right. How, how did you reposition for real HubSpot as CRM? Right. This happened at some point. I don't know when it happened. But how do you change. It's. How do you change the way folks think about a vendor as a default behavior? How did you communicate this? Because obviously it's been wildly effective, but how did you do it?

Slowly, carefully? I mean, Jason, you've been just a constant observer, learner of how this type of motion happens. It's a very slow motion. But let me tell you the couple of things that we did. We have a very, very broad front door in terms of blog content, in terms of academy content. We actually have what we call hundreds of professors within our academy that teach courses on marketing, that teach courses on sales. And I think if you go out and search on inside sales, product marketing, acquisition marketing, you do any course, almost any search on some front office topic. I think HubSpot will come up in the first five links that you get. And that is the way that you begin to gain credibility with the marketeers, with the salespeople, with the operations experts out there in the world. We want to give value to them and we're giving value through content, through courses, through community. We are providing that to them and that helps us be seen as a credible source. I think most of the time when customers, I talk to customers and they would have purchased like sales hub or marketing Hub. And I asked them, so how do you get to know HubSpot? And they'll be like, oh, three years ago I read this blog and I go to your website to learn about anything in product marketing or anything in acquisition marketing, anything in inside sales. So I think like for us it started with the strategy of providing value so that we can gain credibility with the marketeers and the sales teams. The second thing that we did is we have a HubSpot for startup program. So when you get started we just want you to think about us as the solution that can just help you get started and begin to scale. And you know we have had many unicorns as part of that, right? Like we, we have helped companies get started but more important as they continue to scale and become unicorn, we are there scaling for them. And so just having early entre points with you know, startups so that they think about us at the first point when they want a website, when they want the first CRM, they think about us and then they can continue. And so we've seeded the market and again we've gained credibility and then over a period of time I think our product used to be in a place where it was an exceptionally good fit for a 20 person company. We've added a ton of power that has made it exceptionally powerful while still keeping the ease of use that our customers love us for. And so product innovation, keeping the pace of the product innovation going has been, you know, part of how we've been able to get there.

Yeah, one related one on this and I want to move on the next one but maybe it's a non point but when you're building a platform that can do so many things, how do you communicate coopetition? And what I mean is yes, it's great if I use HubSpot for sales, marketing, CMS service, everything now e commerce, payments, but you also want to support customers that for whatever reason, right or wrong, use adjacent inventors. How do you get the team to give customers the best advice? Like I don't think it's simple, right? Because it's, it's, it's, it's complicated to communicate the realistic pros and cons of, of, of a platform versus adding point solutions. Right?

Yeah, absolutely. And look, I think for us we had a customer panel. We do customer panels every month. One of the first meetings of the month yesterday we had a customer panel and Jason, one of our customers said we asked the question of hey, why'd you pick us? We're always curious why'd you pick us? And this customer said to us, and this is like our management team like listening on the call and said we did an rfp. We actually talked to multiple folks before making the beta. Everybody was trying to sell us their solution. And you and your Sales team tried to help us solve our problem.

Yep.

And that's the fundamental difference. Right. You know, we're not there to sell our solution and sell all of the products. And you only talk about like HubSpot. We, we start with what's the problem that you're trying to solve? And we'll be the first one to say, oh, this one I think go with marketing hub or this one go with all. And so we start and we get our team to really get curious about the customer's business and the problems that we are trying to solve. I think that's part a how we approach and we're here for the long game. You know, we're not here to, you know, sell something today and disappear. We want to have a long standing relationship with our customers. The second thing is actually walking the walk on integrations. We have 1200 integrations with possibly the longest tail of vendors within that stack. We're not saying, hey, we're the only choice. We're saying, okay, if we can help you solve the problems and we can do it in a very connected manner and help you see where your customer is in your journey, great. If not, we totally understand that you need to bring the data from your other systems. And so we actually have a robust ecosystem. We've invested in integrations and we have like 1200 integrations which are kind of like the long tail integrations, which means we're putting our word where our mouth is. Right. We are actually investing to help our customers solve the integration problem if they choose to do it that way.

Just one niche question, but it's so interesting for folks that might, that are listening or might watch this later. Do you have data and you may not for that ecosystem, what percent of each HubSpot dollar? How much more goes into partners? Do you know, in the old salesforce days we got a lot of data, but is it one to one? Do they spend another 30% on partners? Do you have a sense on partners.

That are from a software perspective?

Well, probably both are interesting. Right. There's enablement partners. Right. And then there's software partners.

So, you know, we actually have an IDC paper and I can share it with you. So you can like let the team know after. It doesn't quite talk about the software ecosystem on top, but for every dollar that a customer spends on HubSpot, there is six additional dollars spent in the ecosystem. And that is from.

I see, all in everything is six additional dollars. Right.

Additional software. There is implementation, there is customization, there's just more Work. Right. So I think we are becoming a fairly big ecosystem player. So for every every dollar customer spends there's like more five to $6 that is spent additionally within the ecosystem.

Got it. That's it. Do you know just to get people excited to build on HubSpot that aren't already. Do you know what can you make a hundred million dollars as an ISV or whatever term we use on the HubSpot ecosystem today? Are we there today? Are we trending there? Like no.

I mean I don't have the data so I can't tell you whether we are there today or not. I think our first focus is to get our solution partner ecosystem. These are the partners that help our customers onboard, help our customers implement, migrate and get value out of HubSpot. Our first focus is to help them thrive. Right. And I think you know, we're then on the path to getting robust software ecosystem of partners to build. We have a marketplace that's you know, pretty robust. And then I'd have to go and check if there, there are businesses that are completely built on HubSpot. Where are.

I'm just seeing more and more startups. It's like a switch.

Yes.

Where I'll talk to them or hear from them or get a deck where their HubSpot first is their platform. Right. And it just takes a certain amount of scale. Right. For your for that to happen. Right. But it's interesting to me when I saw this happen over the last 12 months, I saw more and more. First is like we're doing this HubSpot first and it's a. If you could ride that wave as a partner. Right. It's one of the greatest tailwinds there is, isn't it? Because HubSpot's growing 30 something percent a year organically.

Absolutely. I think you're right on that.

All right, this one and maybe we've hit some of this but just because you've got a background in customer on so many different sides. What's your learning on this? HubSpot went from I didn't even know this until I think Dharmesh and Brian said it's Saturday from like 85% NRR all the way up into like 30 or 40 million. Right. I was, I was shocked, I didn't know that to 100% which was the big retain it all and now well above this. 109, 110. What's your all of your learnings from this? What's your perspective on how to drive this?

So before my current role as CEO, I was the chief customer officer.

I guess this was your top KPI maybe, right?

This is literally, I was going to say this is my top KPI. I've thought about this KPI in my career for a long time and even before HubSpot, right? To me, net revenue retention is the single north star metric for SaaS company. Even beyond revenue growth. I don't actually care about revenue growth, I care about net revenue retention. And it's, you know, because of what it represents for a SaaS company, it means that you are retaining your customers because the underlying metric is, you know, retention, customer dollar retention, right? And you are continuing to drive value so that your customers expand what they're buying from you, that's the upsell and then you protect yourself from downsell, right? So net retention is, are you keeping your customers, are you protecting from down sells and are you continuing to add value such that they'll buy more from you and get more value from you? So from a metrics perspective, it doesn't get any more North Star than net revenue retention. And what do you need for this? You first of all need to make sure that any customer that comes to HubSpot, they are onboarded, right? They begin to engage with our solutions and they get value, right? And it's not a value where you get to 12 months and you're having a renewal conversation and you're like, hey, did you get value? It's kind of consistently tracking what are the onboarding metrics, what are the engagement metrics and how much is the product usage. And we track all of that. And so over a period of time with the investments that we have made from a product perspective, we've been able to show that value for customers so that they retain better. And then the second part of the equation is what we just talked about with multi hubs, right? When you retain, then are you going to get more value from the second additional hub or the third additional hub? And we hope that by building crafted solutions that are powerful at the same time, easy to use. Our customers that start with one hub then see the value of another hub or another hub and when you do that, then your upgrades actually increase and so the revenue retention improves. Right? So it really again, while it's a North Star metric, you have to really pay attention to what are you doing in the business to drive that North Star metric. Are you building valuable products? Are you making sure that customers get value out of the products and then are you continuing to help them grow? And that's the focus for how you drive nrr.

So do you think just this is like a meta question and especially when you're a public company being driving to more and more profitability, it's hard. But the extra dollar. Do you put it in sales or customer success? Then.

You put it in product.

Well, maybe that's the answer. You put it in product.

Yes, that's. That's the way I think about it. You put it in product.

I think that's a good answer actually. Okay, I know we'll run out of time soon. I wanted to at least touch on one or two things before we do. This slide is just so interesting. I think anyone watching, reading, listening to this on our, you know, 100,000 people listen to our podcast. But these are some things that are key beyond multiproduct and others to HubSpot success going global solutions partners. And we hit this a little bit on new versus expansion. Maybe just quickly this solutions partner thing. If people don't study HubSpot or some others. This is just, it's non intuitively so important in some SMBs. Right? Is your partners. It's 43% of your revenue when this was made. Right. It may even be higher today. So what's going on with these partners, these implementation partners and how do you enable them and how does this work?

It's so important and it's, you know, if you talk about again the not so secret sauce, we talk about distribution, we talk about Big Tam. The next is how do you build a moat? How do you build a moat? And you cannot build a moat by just having direct sales. You really have to have a thriving partner ecosystem. And for us, you know, we started very early with the partner ecosystem. They originally started as marketing agencies and over a period of time we have brought them along the journey from going from marketing agencies to now full CRM implementers. Right. That's the thing.

And they're the same folks. They've made that journey, they've made that switch.

Too many of them have. I mean, surprisingly, I'd say the best ones that we have within our ecosystem are the ones that started with us as a marketing agency, saw where we were taking the company, the product and have enrolled in that journey and have come with us. And I'm really happy with that. Right. I think that's a key if you think about partner ecosystem. You just have to have very clear message in terms of your strategy. So a couple of years ago we went and said our strategy is to sell and service with partners. And we were clear about it. We gave the Stat that for every dollar that a customer spends, there is six additional dollars within the ecosystem. So you want to build a business, this is the time for you to kind of engage with us. So get the strategy right. And there are a lot of things learnings in terms of avoiding conflict and making sure that the right incentives are in place for the direct sales team and the partner sales team to be on the same page. At the end of the day, you know, we're here to serve the customer. The more we can collaborate with our partners and the direct sales team and the partner sales team like works very closely together, the better our customers get value from HubSpot. And so I think we've gone to that. In addition to that, you got to have a ton of enablement, you got to treat partners, they get to hear about big feature launches way before they're enabled and they come along the journey with us. And so it's become a really key part of our overall distribution strategy. So we have product led motion, we have sales led motion, we have partner led motion.

Yeah, people missed this third one. And if you had to guess what percent of your solution partners basically only sell or deploy HubSpot. Oh, majority, majority. That's the moat that people don't get, right, is these partners don't have the energy even if they want to pick one great solution and then they got to learn it, right. They got to get good at it, they got to deploy. They don't want three vendor, three competing solutions, do they? So if you can own this, it is a bigger moat than you realize. Right, That's a good one. Okay, so the last one on this one, maybe if there's any insights on the left, just, you know, the Internet, the browser works everywhere on Earth, right. I think even in the space station in Antarctica, although it's slow. And I always encourage people to follow the international growth. Any, any particular insights here in general or over your career? Because this is, I know this has varied a little bit, but whatever it exactly is today, it's like half international, half North America, US like for years.

Yes, absolutely. So here is a counterintuitive, you know, first principle for thinking about expansion. Yes, HubSpot, we have customers in over 130 countries, but the counterintuitive bet is focused on less than 10. And I've kind of done this every time I think about this like, you know, you don't want to think about, you know, geographical expansion as more it is less is better in terms of geographical expansion. So one of the things that we Said is that for us, we will focus on seven to eight key markets. And when we say focus on seven to keep eight markets, it's language, it's localization, it's thinking about local folks in country in that entity, supporting the local currency, having local presence. Right. That type of focus needs to be there for some core markets. And how do we pick those core markets? We look at tam, a total addressable market. We look at the existing install base. You said it right. If there's a browser, there's customer somewhere there. But we look at the existing install base, we look at the net growth in ARR within that market and we look at our ability to serve that market with the right language skills and the localization. So we look at these four factors and you can have a list of 120 countries, but pretty quickly you'll get to 80% of your revenue comes from less than 10 countries. And almost every SaaS company that I've been in. So focus on that. Make sure that you are with the investments you make in English or broad languages. Serve all of your customers, but make sure that you're focused. And so for us it has been do less, but do it effectively when it comes to geographical expansion.

Got it. And so you have like eight or ten core offices, GMs or however they're set up today. That's about the right number.

Yeah. Core countries that we are really focused on. And those core countries where you're focused on, we put a lot of effort in terms of product, in terms of marketing, in terms of sales. Right. And everything else. We serve primarily with English. Right.

Yeah. It's a super helpful insight. Okay. I know we're almost over or close to over. I just wanted to close on. We could spend half an hour on this slide. Cause it's so interesting about what's going on at HubSpot. That sales hub is, is a half billion dollars in run rate growing as fast as anything. Right. It could be. This could be a 5 or $10 billion company on its own. Right. I mean, if it's integrated, Right. Service hub, you've got $100 million business growing 50%. Right. That's a unicorn. Or right there. We talked about multi product, but what's not obvious here, what are you thinking about at the CEO level? And how to stitch together really five material product lines today. Right. Even if ops Hub is 35 million, that's a lot. Right. If you squint into the future, I.

Mean, Ops Hub got started a year ago, so.

Yeah, that's crazy. That's 35 million in one year.

Yes. We launched Ops Hub in 2021.

Got it. The customers wanted it.

Absolutely, absolutely. But here's the thing though. While you point out that there is potential for multi billion dollar businesses and we are very excited about that, the fundamental thing here is what are we solving for our customers? Customers today, they have this crisis of disconnection. There are too many systems, their people are spread in too many different places. And their customer journey and the information about their customer is across so many things that it's hard for our customers to connect with their end customers. That's the problem that we are solving. And if we are very clear about that, we want to help our customers connect with their customers better through multiple channels, through multiple silos within the organization, through whether they are remote company or a hybrid company, or in office company, through different ways in which they're connecting to customers. That's the problem we're solving. Therefore it makes sense to have connected applications and connected platform that, that helps our customers. So I think like yes, we are excited about the potential, but more importantly, we're excited about what we can help our customers solve in a very, very disconnected world right now.

Yeah. And then maybe one last question. I might ask it inelegantly, but one of the big headaches with lots of vendors is just the work to onboard them, to talk to them, to talk to a rep, to have, to do a demo, to have to pay it, go through procurement, put it on your credit card. Are there any, is there any secret sauce? And how you make it even easier for folks to expand adoption by making it, by taking the maximum amount of friction here when I'm already invested in HubSpot.

Yeah. I mean this is the thing, Jason, if you have like secrets for that, let me know because we are constantly thinking about how you reduce the friction. Our value proposition is easy to buy, easy to use and easy to love. Right. Like that's our value proposition. And so every feedback that we get from our customer on a friction point in that process, we go back and like try to solve that friction point. And so I think you have to be very, very focused on making that customer journey in adopting your product. Whether it's landing and expanding and, or landing and expanding and adding additional products. You got to make every one of those touch points easier. This is where product led helps. This is where, you know, trying and buying like obviously helps. This is where making sure that every handoff is valuable. You know, between sales and onboarding. Onboarding and customer success. Customer success. And contract management. Every one of those, you know, should be like a valuable connection to our customers. And that's. But that's a. That's something that we work towards every single day. And we learn how to get better every single day.

Yeah. Not that I have any amazing insights, but one thing that I think folks on the B2D side have gotten good at in terms of evangelists that we haven't gotten as good on the B2B side is gurus. Is gurus. Right. Every API company has gurus. And their only job, they don't. I don't know what their KPIs are, but their job is to make. To increase API adoption. And we don't do that enough. On the B2B. A guru who just. Their only job for a leading vendor is every 60 days. Not to be customer success, not to have a qbr, but just be. It's. It's. It's Linda, it's Jason, it's. It's Amelia. I'm your guru and I'm just going to give you tips. Tips to do. Costs money for people, but I would love it if more B2B people. Copy this from P2D. Had more evangelists and gurus.

I like that. More evangelists and gurus.

And. Yeah, this was amazing. I know. We went the whole time. You were very generous. I don't know how much time you had scheduled, but we took every minute of your extremely busy schedule. But this was great. Thank you for giving us the secret playbook to scale and we will look forward to our next great event with HubSpot. It's so great to have had such a great relationship with so many of the leaders there. And congrats on the great run. It's incredible.

Absolutely. Thank you so much for having. And for being a supporter. And good luck to everybody who is listening. We know we can get through this business cycle like everything else. Thanks a lot. See you.

Thank you.