Y Combinator Startup Podcast - #125 - Brian Halligan and Kevin Hale

Episode Date: May 8, 2019

Brian Halligan is the CEO and cofounder of HubSpot. HubSpot builds software for marketing, sales, and customer service. You can try it out at HubSpot.com.Kevin Hale is a Partner at YC and cofounder of Wufoo.Brian is on Twitter @bhalligan and Kevin is @ilikevests.The YC podcast is hosted by Craig Cannon.Y Combinator invests a small amount of money ($150k) in a large number of startups (recently 200), twice a year.  Learn more about YC and apply for funding here: https://www.ycombinator.com/apply/***Topics00:00 - Intro00:27 - Brian's an introvert that likes to work from home. He also runs a public company. How does he do both?2:12 - How does he manage his calendar as an introvert?4:12 - How Brian met his cofounder Dharmesh6:12 - The first project they worked on together7:27 - What was their unique insight when starting HubSpot?8:52 - Pricing in the early days9:27 - How would he have priced HubSpot differently knowing what he knows now?10:27 - HubSpot's first customer12:27 - Important early features14:47 - At what point did they shift entirely away from consulting?15:32 - Providing advice as content vs in the product16:27 - SEO is underrated17:12 - Trends in B2B and marketing21:57 - Inbound marketing and audience building advice26:52 - How did Brian know that his cofounder was right for him?28:12 - The internet disproportionately benefiting small businesses over big ones29:12 - Keeping your company hungry when you're big29:52 - Building assets for your company 30:47 - Freemium34:27 - Structural pieces of HubSpot Brian would have changed if he did it again37:27 - Creating the voice of your company39:57 - Early metrics they tracked40:32 - Having a coach and reviews41:57 - How Brian's changed as a CEO from the beginning42:51 - What was the hardest thing to give up as CEO?43:57 - Humility

Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is with Brian Halligan and Kevin Hale. Kevin's a partner at YC and co-founder of Wufu. Brian's the CEO and co-founder of HubSpot. HubSpot builds software for marketing, sales, and customer service. You can try it out at HubSpot.com. Brian is on Twitter at B. Halligan, and Kevin is at I Like Fess. All right, here we go. So, Brian, I've listened to a few of your podcasts. And on one of them, you described yourself as an introvert who likes to work from home. That being said, you manage a public company. How do you mesh those two things together?

That's a good question. I am an introvert and I just try to manage it as best I can. It's hard to be an introverted as CEO. I'll tell you one thing that's interesting about HubSpot is both founders are introverted, but one is far more introverted than the other. So I'm kind of introverted. And one of you has to be the front man to the band, basically. And Darmesh, my co-founder, does not want to be that.

So I have to kind of play the frontman to the band. And so I have to manage my introversion a little bit more carefully than he does. Okay. And so what practices do you put into place? Well, I have to manage my energy because people drain energy from me. So a couple hacks I have. Every Wednesday, I work from home all by myself, just my dog and I. And no meetings, no calls, no zooms, no nothing.

I just work on projects, try to get cut up and recharge my batteries. That helps a lot. I tend to take a nap pretty much every day around this time, actually. Awesome. Thanks for sacrificing for us. I take a little snooze, and we have a nap room at Opspot. I kind of think of a nap as like your brain is just running around and lots of things are going on in your brain.

And it's a time for your brain to just kind of settle down. And I picture these little mini men with like brooms going around, sweeping up all the stuff and organizing it, and everything gets settled down in my brain, and then back to work in a half hour later. That works like a charm for me. How does that affect your like calendar management? Like normal CEOs, there's nonstop barrage of sort of meetings and people you need to interact with.

And so how does that affect you or how do you handle your calendar differently when you're an introvert? Yeah, I basically just block all that day Wednesday so no one can book a meeting there. I have an admin that manages my calendar and she'll typically manage little breaks in the afternoon, maybe at two or three or four, which she'll know if I have a packed day, I'm going to need a little breathing room to kind of catch my breath. take a nap, catch up on some emails, and kind of get back at it. And then on a daily schedule basis, do you leave in blocks for like solid focus work? Or do you just leave it open to like, okay, I can interact with everyone every 15 minutes,

you know, like that maker schedule manager schedule. I typically leave in like blocks of time where I can recharge and think and catch up an email and do some of that stuff. Okay. Yeah. Yeah, that's always the part I struggle with. Like the required socializing as someone who's introverted. Like it's part of the job, but I don't like to recognize it all of time.

that. Yeah. At one point did you realize you were going to have to do something differently to make that work for you? Like when you guys both got started? You know what? When we both got started, there was a we were in a, it was called CIC in Cambridge Mass. It was sort of like pre-we work. And there was a couch outside our, just having to be a couch outside our office. Every day I took a nap and everyone gave me crap for it. But I don't know. It just worked for me. I think what helped a lot of introverts. I don't know about you guys is when that lady wrote. that, what was your name, wrote that book? Susan Kane. Susan Kane wrote that book. It's like, oh, I'm not as strange as I thought I was. Lots of people are like this. And I didn't feel as badly

about wanting to take this time away. Didn't feel as badly as it was saying, you know, I've been in meetings all day. I know we're supposed to have dinner tonight. Can we push it to tomorrow and I'm just out of gas right now? And I think a lot more introverts felt comfortable doing that after that book came out. Yeah, I think labels can also be a crutch. Yep. And I felt that after that book came out. It's like, sorry, I'm an introvert. I don't do this stuff. I use that crutch a little bit. Yeah.

I use it a little bit. My co-founder uses it even more than I do. But, yeah. But life goes on. You can be an introvert and see you have a public company. Yeah, absolutely. And so you guys met in business school? We did.

Okay. I'll tell you how we met. Great. It was the night before business school at like a cocktail get together at the Marriott Hotel. And I was on my second Sam Adams. That's what we drink back there in Boston. And a woman comes out to me, a blonde woman. And she starts chatting.

with me. And I just assumed she was a student, but she asked me a lot of questions, like, really pounded me with, like, an interview almost. And nice enough conversation, he goes away. And I just thought she was a student. But what was going on there was Darmesh was there with his wife. That was his wife. So what Darmesh does, my co-founders, he hides behind the plant in the corner of the cocktail party, sends his wife out to interview potential people that he might want to talk to. And then goes and chats with him. And the scouting report on me was, you'll never like it. him. You two will never hit it off. He's into the Red Sox. He's into the Grateful Dead. You don't even know who the Grateful Dead is and you don't even own a pair of Red Sox. Like, it's never going to work. That's how the two of us met. Man. And so what convinced him to go over to you? We didn't actually chat that day based on the Scouting Report. But there was a class we took. We both went to Sloan together. And we sat next to each other in the class. And the teacher assigned a project on stock option pricing or something like that. And he said, well, why don't we work together in the project? And we went out for Indian food that day.

And we discovered we had a lot in common. We both like doing business with startups and with small business owners and trying to turn small businesses into big businesses. Back then, we were into something that's passe now, but it's called Web 2.0, sort of an old meme that we're really into. And we were both very entrepreneurial. He had started a couple of companies, and I had worked in a couple of startups and done pretty well. So we kind of started on the journey on that project we did together at Sloan. What was that project? project was about how to price and value stock options in a company.

Oh, fascinating. Yeah, kind of. What I'm trying to think of is, like, after that, what was, like, the first little project that you guys worked on together that was, like, outside of school that made you sort of realize, like, oh, we're the right ones to be working together? Yeah, we started talking about HubSpot at lunch that day, and it was something called Legal Spot, not HubSpot, which was going to be a suite of applications to help you manage your law firm. And we tinkered with it all through business school. We put it in the business plan competition, the $50,000 now it's $100,000 business plan competition. We worked on it in a class called New Enterprises. We tinkered with the project for a while.

And then when I graduated a year before he did, actually, he was on a different track than I was. And I spent about nine months in a little venture firm as the EIR. And we tinkered with it. You know, we'd meet once or twice a week and work on the ideas. and pitch it to law firms. And we kind of zigged and zagged a couple times. And then during that time, we decided, well, it's not about building a suite of applications for a law firm. One of the applications we were talking about was a marketing application, was how do you get found on the internet? How do you get found in Google and social? How do you get found in the blog sphere? How do you grow business?

And all the law firms are interested in that. And so we pivoted instead of being a vertically specific application for law firms, we were going to build a marketing application for everyone. What do you think your unique insight was at that point? You're like marketing, whatever. I mean, at the time, I'm sure there were way fewer companies doing internet marketing. Oh, so there were 17. Now there's 6,000. Yeah.

I think we were pretty good at framing it as to everything in HUBSpot is rude to end user behavior. So normal human beings, how are they changing the way they live? How are they changing the way to work? How they shop and how they buy stuff? And what does that mean for marketers? And at the time, there was a sea change going on. There were two C-changes. One, humans were changing the way they worked.

They were living in Google, living in social, living in the blogosphere. So there's a big shift there. The second shift that was going on was humans were becoming very good at blocking, marking the out. Caller ID, spam protection, ad blocker, all that kind of stuff. And so we came up with the idea that marketers needed to turn their playbook on their head instead of doing outbound old school stuff, how do they pull people in and match the way they market with the way people shop and buy?

That was the basic insight. And then we pulled it together in a suite of applications for mere mortals who would want to do this that didn't have a bunch of developers running around that could do it and grow their business. And I think part of it was we framed it as this inbound thing versus outbound. The versus really works on the internet. And the other thing that worked was pulling it all together and building something not for technologists, but for mere mortals. There's a lot more mere mortals out there than technologists. And how did you guys contextualize yourselves and figure out pricing in the beginning? What was your pitch even like?

Pricing, we had no idea how to price it. I remember I came back from one of my meetings and I said to Darmash, I said, you know what? I actually think this guy wants to buy something from us. He asked me how much it costs. And he said, what did you say? I don't know. Let's talk about. What do you think?

We went back and forth and we randomly came up with two hundred, very scientifically came up with $250 a month back then. So I went back, got the credit card later that afternoon for $250 a month. And HubSpot was $250 a month for the first six years of HubSpot. We didn't change it at all. And then we got more sophisticated with our pricing. And now there's a lot of different products and price. What would you do differently now?

Like if you were to start over again and think about pricing, like knowing what you know now, how would you have thought about pricing? I think I would have flipped it on its head. We had designed HubSpot to be a model where you sell it through inside sales. You use inbound to pull lots of leads in, hand them to inside sales reps, have them sell it. the most recent version of HubSpot these days half our leads come through that the other half really come through a freemium model where people can try it use it bang on it and then they just like the consumer software they will and I think this will happen all B2B enterprise software

will turn a consumer software well they'll come over a tripwire and they'll buy the software in a much more natural way and sales reps can call on customers versus on prospect so I would have started with freemium and in what degree like what was HubSpot the first customer. Yeah. Did you have any software ready? Yeah, it was, um, it was rough. Yeah, well, because this was also, this was pre-AWS as well, right? Way pre-WAS. We built it on dot net, nuke and hosted it on a server under our desk. There you go. And, uh, it was janky. And I would tell you the early days of HubSpot, the software didn't do much. And so customers would ask us for help. And so we made up for the inefficiencies in the software by giving them good advice and how to

optimize their website and how to get going. social. And what we didn't want to fall into was the trap of building something that was a consulting company. And so we said all the stuff that we're consulting on and how to set your website up, how to get links into your site, how to set up your, and it wasn't even Twitter and Facebook. It was dig and Reddit back then. How to get everything set up appropriately so you can grow? How do we take all that stuff we know and build software to do it to automate it? That was basically the model in the early days. And I remember I had an early customer. The name of the company was CEO Dad.

It was a professional comedian. Wait, what? CEO Dad. And he's a comedian. He's a comedian, yeah. Professional Dad Jokes. Oh, okay. And he was setting up a site in my,

in our first sales guy, Mark Robbersh, sold him on HubSpot. And he said, yeah, our co-founder, he's going to get you all set up in the software and he'll help you with anything you want. And I said, okay, that's interesting. So I got the account. And I helped him set up his blog.

And I remember he wrote his first blog article. And he said, can you set this up and get it on the interwebs? I said, well, why did I teach you how to do that? And so I got him on the phone. I'm setting it up. And he said, what do you think of my article? I said, I haven't read it yet. And so I read it and I read through it and read the whole thing.

And he said, well, stop. He said, start reading it over again. And he said, I want you to read it out loud. I'm reading through the article and the thing out of that. And he said, stop. I said, what? He said, you're not laughing. I say, no, it's not funny.

That was the early days of HubSpot. Like, not only helping people set their blog up, but actually, like, posting it and editing it. Like punching up jokes. Yes. Was there any feature that you guys developed in the early days that ended up being, like, this killer feature that all of a sudden, like, changed their direction?

Yeah, the SEO stuff we built was pretty cool in the early days. And we built a tool called websitegrader.com that's very popular still. And that was an unbelievable tool. You go to our website, website greater.com, and you type your URL in, and you type your competitor's URL, and it gives you a score on how inboundy your site is. How good are you at attracting links? How good are you at getting found in Google? How's your social media setup?

How many followers do you have? All that kind of stuff. Was the competitor checked the actual big thing that helped make it really drive people to actually want to change? It was one of them, yeah. It was one of them. Because you put yours in, then you put your competitors in, then you taunt them. Or what I would do is show up at a sales call and I put your company in Ycommonair

and then put in whatever 500 startups, mass challenge and I would use that as information. That was really motivating to get people to move. Wow. And it gave us a lot of credibility. I think about selling and modern selling. It's about helping people understand that they have a problem

and really making that problem real to them. So in the early days, a HubSpot, that was a tool to really point out, boy, you're falling behind the competition. There's a lot of low-hanging fruit here. you're falling behind, all these other folks, what are you going to do? Oh, you need some help of that?

Well, let me see, let me show you a demo of our software. That's sort of how we thought of it. I think another really cool thing that you guys do is that you eat a lot of your own dog food. Like you guys kind of try to practice as much as you preach. Is there anything that you guys initially had a hypothesis around that didn't work out? That you're like, oh, we think this would be sort of a good thing to do.

And then when you put it out there, it was like, oh, that didn't work out so well. One thing that we thought for sure we were right about a lot. The one thing we were dead wrong about is we thought the whole world, we thought this idea of people having customized gorgeous websites and bespoke websites was just a foolish idea. Like I don't have a custom car, for example. There can be a thousand templates out there. That's enough for the world to have.

But it turns out everybody wants their own custom website. For the longest time, we're like, stop worrying about the design. Use our template. Put your blog on and put your site. You're going to be happy. We lost that battle. We fought that battle for years. And so at what point did it feel like you really shifted to a startup from a consulting company?

Because in the beginning, you're spending all these extra hours doing things that you definitely can't do forever. Yeah, it was probably as gradual. But, you know, a year and a half in, we were probably almost all software. Okay. And at that point, were you profitable or had you raised money? We had raised a million of Angel in Boston pretty early on. And then, yeah, we did a series A. Back then, what was a big series A, it was five million.

bucks now a small series a yeah yeah yeah what was the split between like you talked a bit about like in the beginning it felt like a consultant's that you're giving all this advice like you said you eventually turned that into software but I imagine some of it was just turned into content that's sitting under that what was the slip between actual software features versus content you had on the side to help people just get going like documentation etc uh we tried to get as much of it in the software as we possibly could some of it's hard to put in software yeah we also created a university, HubSpot Academy, and we made really high quality, really nice videos to teach people about this stuff. We were a content machine. And I still think of HubSpot as a little bit

like it's code, there's software, there's content, all that content out there, and there's a community around it. That's sort of how HubSpot works underneath the covers. Yeah, I mean, because it makes sense with the website competitor comparison, what is it called again? Just so I get it right. Well, website greater.com. Websitegrader.com. SEO is such this vague, murky term. It's the most underrated marketing thing there is. Still. Yes.

We had 10 million visitors a month through SEO. It's fantastic for us. Fantastic. Why do you call it underrated? Because I feel like a lot of people know, do you think it's just people have turned their attention away from it? Or just seem so old. They turn their attention away from it.

And I think people are really focused on ads. And ads have gotten a lot better over time. And people perceive that SEO has gotten harder over time. And I just think people have lost focus on it. And it's, if you do it right, it is a gold mine. Yeah. I mean,

that was a huge motivator for us to do YouTube versus just a podcast. Because YouTube is just like, there's not a lot of good content out there. I mean, you've done some videos, but even once you get to the second page

when you search your name, it falls off pretty quick. Yep. Yeah. So you can just do it for anyone. So I want to kind of get back to the beginning stuff, but we're going in the direction of trends

and I want to talk about that stuff too. So in terms of the future of marketing, where do you see like the big trends happening? Yeah, if I thought there was, if the arbitrage opportunity when we started HubSpot in 2006 was generating leads online, I don't think that's the arbitrage opportunity there now, but there's a new one. And I like to describe the new one with my morning routine. So I get up every morning on my Casper mattress. I put on my Warby Parker glasses. I take my phone and I turn on Spotify and then I shave with my Dollar Shave Club Razor.

and they put on my trunk club outfit and they take a lift to work. And what's fascinating to me about my mornings is those six startups and they are startups are all very much part of my life and have completely disrupted the incumbents in those space. And they've done it with much lighter go-to-market models and a gorgeous end-to-end customer experience. And I feel like all those industries are being disrupted dramatically by people who are just better at customer experience, step function better.

And I think that's coming to B2B in a big way. Like if you haven't already figured that out in B2C, you're kind of screwed. In B2B, this is coming, I think, in a big way. What's a good example of that? I think Freemium is coming at it. I think the way Alassian sells, the way Zoom sells, that's the future. You look at the metrics behind the Zoom IPO that just came out the other day. Holy crap, do they have virality, right?

Premium, right? Same with Atlassian, their model is fantastic. And so I think there's a new breed of software companies that have not only better go-to-markets, lighter go-to-marks, but it really matches the way people want to buy. People don't want to have to wait for your sales rep to book a sales call. People don't want to have to do that stuff anymore. They want to go to your website. They want to be able to chat with someone. Use the free product. Oh, they get confused. Chat a little bit more. Buy it. Oh, you want to talk to our CIO and spread it? Great. Let's have a conversation then. I think this transformation

in the customer experience is coming to B-2B, and I think it's an arbitrage opportunity today. Yeah, well, I mean, it's the same people that are using Instagram on their phone are using your enterprise software. Yes. I think the way people buy Spotify. modify is the way people are going to buy enterprise software in the future. All the new models are end user driven. The Zoom thing is fantastic. Their S1, it's an unbelievable company. I couldn't believe the numbers on it.

But Atlassian is another one that I think has it exactly right. Interesting. And so when it comes to actual outbound or inbound marketing trends, what other stuff do you say? I think outbound is largely just dead. Okay. I don't think cold calls work at all. In fact, I think they're negative. You cold call into someone and they don't answer the phone, so you leave them a message,

then you follow the methodology that's out there and you co-call them again three days later. And then they tell you to co-call them again three days later. And all you've done is just ruin your brand. I mean, you really piss that person off. And so I don't think that outbound works. I think inbound, I just stretched the definition of inbound of really creating a lovely end-to-end experience that matches the way people actually want to buy today. I also just think in the world today, the other thing that's changed, the supply and demand has really changed along every dimension.

It used to be really hard to start a company. Back in 2006 was hard. It was expensive. You need to get an office space for a year. You didn't have AWS. The startup costs are amazing. Now the startup costs are incredibly low. You go to Y Combinator.

You go to, you name it. Everything is cheap or almost free. And that's great. It's never been a better time to start a company. The downside of that is it's never been a harder time to scale a company. Really hard to scale, really hard to break out. You guys see it more than anyone, I'm sure. Very, very hard to break out in today's day and age.

And it used to be, how did you break out? Well, you need to have a better product. Your product has to be 10 times better than the competition. Today, the way you break out, it's hard to do that on the product side. You get in front of your competition a little bit. Wow, they catch up quickly. The way you get ahead of the competition is create a go-to-market experience that 10 times better than the competition.

That's the way I see companies winning today. That's how Zoom does it. Frankly, it's how HubSpot does it. This is kind of the future, I think, in B2B. I think it's almost the past of B2C. People are figuring this out already. How do you apply these ideas to startups with little or no funding? I just don't.

I don't think you need a ton of money today to build a great customer experience. It's not something that costs a lot of money. Creating word of mouth doesn't cost a lot of money. I think old, your success these days is much more about the width of your brain than the width of your wallet. I don't think you need a ton of dough to grow your company. ad dollars are not, that's the most expensive way to grow your company. It's not a good way to do it. There's an argument to be made that for a lot of young companies that like to do inbound right,

it's actually a good like long-term investment, but in terms of getting like short-term sort of growth and getting results on a week-to-week basis, which a lot of times we're working with our companies to do. It's really hard to like have that investment and and sort of hold off on sort of outbound stuff. And so I'm just wondering like, what are ways that people could think about doing them? that helps them get that sort of like results that they need to maintain momentum. It sort of depends on who you are, but like I remember the early days of HubSpot, Darmesh and I would write two blog articles a week, and we compete to see who could get more leads from the article.

And we have a very friendly competition, but we used to do that. And we figured out, you know, you have to write really good content, of course, that's table stakes. You have to have a great title, and would A-B-tested titles a lot. and you've got to get, you've got to, yourselves had to have a large presence in the social media sphere so you yourself could market it. Maybe you could do that through some of your friends as well. And you could get it to go.

And once a week or so, we would have a, you know, a home run blog article. And that's how we really started the company. How long did it take before, like, you got to be seen as experts in your sort of space so that people will listen to you and be like, oh, I should try their tool? Because for us... Still working on it. it took us a couple years. We basically built our audience on a blog before we even started writing

the first lines of code for our startup. You're talking about Wufu? Yeah, for Wufu. We had started this blog called Particle Tree and we literally didn't know what we're going to do. But we were like, we heard these guys at 37 signals. They basically did their blog first before they ran Base Camp.

And I was like, oh, man, that's a pretty good plan. So that's what we started. We were like, we could do that at the beginning. That's what we did. And I feel like a lot of people do undervalue that like do something to build an audience way ahead of time, they get very impatient or think like, oh, my first couple block posts are just going to like be a home run. And usually it's like, it takes a really long time. So for you guys, how long did it take? It didn't take that long.

You have to write really good stuff. It has to be timely. How did you know what was good? Because I think everyone's bar is so different. Yeah, I think at the time we were writing, there was not much content out there about how do you market properly on the internet for mere mortals. I think what was also out there was, okay, I'm not a big Donald Trump fan, but what Donald Trump has mastered is the versus on the internet. He's used polarization to his advantage. Polarization works in the internet, and we did the inbound versus outbound work very well. It made the argument really easy to understand. I mean, now it's base camp to a T.

Yes. So like narrative general. in terms of like you versus opposition. Like understanding like... As well as quantitative stuff. We did a lot of quant stuff that we posted online. Would take analysis of those website, greater reports and we post them online that were very interesting.

We did a fair amount of quant stuff. Today if I were doing it, I might do the blog. I would be tempted to do a podcast. Podcasting people spend time listening to podcasts. You got to match the way you mark to the way people buy. I would be tempted to do something, a video cast, so you're on YouTube once a week, something like that. I'd be all over Instagram.

I'd be all over Twitter. I'd be all over the new stuff. I'd tell you what I wouldn't be all over. I wouldn't be all over ads. I think of it like this. What an ad is, let's say I want to put an ad on your, I wanted to buy an ad on your podcast. It cost me, whatever it would cost.

I'm essentially renting space on your podcast, right? I rent it once a week, get the space. Y.C. doesn't have to know. It's perfect. What I really want is I want to say, yeah, your podcast is great. I want to create my own podcast. And I want to rent myself space on the podcast.

That's the basic idea behind it. And it used to be really expensive to start your own radio station. Holy crap. I got to buy the whatever, the frequency and I got to get a studio and all this stuff. Now it costs you nothing. I can start a radio station today. There's been a big disruption in the content creation industry. If you can create good stuff, man, it's a big arbitrage opportunity. And when you guys got started, were you blogging for yourselves or for the company? Because this is a question I often get from founders. Like, should I come out here as like, Brian, Halligan or should I just be on the HubSpot? You should do on the company's blog.

Company's blog. Why do you say that? Because you're building a company and you want the domain authority flowing into the company. You want those links flowing into the company. You want to associate your brand with the company in a big way. You don't want a separate domain for your name building up all this domain authority. It doesn't help the company enough. I think the guys who were pretty good at this were Andresen Horowitz.

And they did it, I think they did A16Z slash the person's name. Well, P. Marka had a blog. He did before. So did PG. And then they moved it. Yeah. She has not. They moved it over.

PG's always been on his own. Which I thought was a good model. And those guys did a hell of a job in the early days on their blog. Oh, yeah. Yeah. Yeah. And they stopped. Yeah.

It's too bad. Well, there's podcasting doing YouTube now. I miss Andresen's Twitter account, too. He was really good. Do you have any other advice for startups with little to no money? Find a good co-founder. Okay. And so how did you know that your co-founder was right for you?

I didn't know. I think what happens, I spent a lot of time at Sloan, and I just see the co-founders typically, they start the company with someone who has the exact same skill set, like two product developers or two marketers or two former McKinsey people. I think you better off with somebody who's really on the product side and somebody's on the go-to-market side, and they have a little overlap in the middle,

and they have similar passions and goals, I think it gets dangerous when they have the same overlapping skills. We had a nice overlap there. Was that your story with your co-founders, Kevin? All three of us coded, but all of us had different domain expertise. So Ryan did a lot of the backend stuff, some front-end stuff. I did all the design and coding work. And then Chris basically was willing to do whatever.

He was a good soldier. So he was like, I will do all the shit work. So he was like, payment integration, fine, I'll do it. I see. If it's a bunch of weird social media or like paperwork, etc., he'll say, I'll do it. And so he was one of these like blessed founders to have where he was just like, I'll do anything that needs to be done to make the company successful. Was he non-technical?

No, he could program. Oh, wow. So that was like kind of amazing. We're really lucky. Yeah, yeah. That's super rare. Okay. So in another interview, you said the internet disproportionately benefits small businesses over big ones.

Why is that? It's like that old New Yorker cartoon with Zizi. a dog typing on the computer. And there's a dog looking over his shoulder or typing on the computer. And the dog on the internet says, you know, the great thing about the internet? And the other dog said, what's that? He says, nobody knows you're a dog. And it's very true. You can get, you can get outsized marketing advantage on the internet without a lot of money. You don't have to be rich to grow a big company. Whereas back in the day, to get noticed, you had to buy ads. That was the only really way to get noticed. Or you had to go call in to be.

people. You can now create content and if that content's really good, it'll spread. You can create a freemium application like that website greater thing or HubSpot CRM or Zoom or whatever you think, and that can spread much more easily and virally these days. Okay. But now that you guys are a big business and you can do those other things, how do you keep your company hungry to do those things that are like kind of weird but might have an outsized impact? I generally think the hunger comes from like we've done all right we've got a 7 billion market cap but who do we compete with

well we compete with Adobe Salesforce Microsoft you know those companies are hundreds of billions of dollars of market cap so it's hard to get cocky when you're competing

with those giants in terms of it continued to want to stick with the content stuff and with the long term stuff I just see so much long term value in it like if you look at where our customers come from today

They come from search engine optimization. They come from our freemium model. A very small percentage of them comes from ads we do in Facebook and Google. And those are assets that we built. We talked about assets before, whether I'm renting space on your asset or creating my own asset. Assets we created seven, eight, nine years ago are still generating leads for us today. They're permanent assets on the internet. As a marketer, as a seller, you have an asset balance sheet just like a CFO has, but on your asset balance sheet.

The links into your site, followers on social media, pages on your site, all that kind of stuff are assets. If you've got a viral model, the number of users you have is an asset as it will spread from there. So you want to increase the number of assets you have and the return on them. I don't like the game of renting assets. Okay. And content obviously has been a core asset from the beginning. Freemium has been a core asset over the last three, four years. Okay.

Yeah. What do you mean by freemium as an asset? Because I can understand content as an asset, but freemium as an asset. But freemium as an asset seems like it's more like a strategy or a tactic. It's probably more of a strategy. I just think of, I look at where our revenue comes in and half through content and half through freemium, I guess. But you're probably right.

And then how do you think about free me? I mean, like from your perspective, you're able to understand freemium in a very different and numerical and quantitative way. That's so different because like I feel like the experiments that you can run and the things that you can assume as a small startup is. It's just you're really in the dark. And I feel like a company of your size, you probably understand free me in a very sophisticated way. That's true.

We started our freemium business about three years ago. So our sales products all freemium. So it's kind of an interesting story. HubSpot started as a marketing application. I talked about it was $250 a month. And it was kind of an inside sales model. We wanted to go into the sales CRM business. We said, well, there's a lot of competition there.

Let's build a better product, but let's build a lighter go to market. So we said, let's build a premium business. So we kind of started as a separate business inside of HubSpot, separate part of the building. I moved to that part of the building. I had a co-founder and we worked on it in there. And back then, we were like an early stage company. We had a very lightweight, not very strong yet CRM product. We started getting users in.

We started to measure, you know, okay, got that user. How many clicks did they go into the app? Were they sticky? Did they stay through what amount of time? How many other people do they invite? And we've just gotten better and better and better at it over time. So you have to kind of start. somewhere.

Start with yourself and your cousin and your sister and your brother. You can basically give them the application. Tell them to talk out loud as they're going through the application. Tell them where they get frustrated and just keep it. It's a very iterative process and we're by no means done. One thing I've come to understand while working at YC is that Freemium won't work for every company, mostly because what it requires is a very, very large market.

And so, like, I think for marketing software, I was lucky to be one with, like, form software, I think website creation, etc. The market's so huge. Like every company needs one of these things. And so, therefore, it's okay to give away the product. It's sort of this inverse model of, like, free samples.

So that way, that small conversion, you're still making money off of it because the market's so huge. When a company is a little bit more specialized or the market that they're going after is a little bit smaller, How do they rethink their sort of pricing and model? Because you guys started off doing sales,

which is what a lot of those companies will have to do. And so, I don't know. I think about it. If you're in a very nichey business, if you're in the business of there's only 100 potential customers in the world, and they're the CIOs of the car companies, you might make an argument that that's not the best way to market. But if those CIOs are making the decision based on how everybody's using your product

internally and all the influencers coming at them, it still might be a good fit because I don't know, almost every company I know, CIOs are making decisions, not anymore based on top-down decisions, but they're looking at who's using these applications, who's using this pieces of software, and who's lobbying them to make those decisions. All these decisions become bottoms up. Our CIO doesn't make any decisions unless somebody in some line of business is screaming at them, hey, we need to have this piece of software. Also, CIO's lost a lot of power. It used to be you have to get approval to getting on their network, that doesn't have to happen anymore.

Yeah. Yeah. I mean, you saw it with GitHub. That was the first time I saw it was like everyone was using GitHub. Yep. By default. Gmail, Slack. Yeah.

For better or worse. Elassian. Yep. So in terms of other assets, I'm curious now that you guys have been around for 13 years, were there any things that you thought might have been assets or basically like foundational elements that weren't ideal 10 years later? You're like, maybe it was a cultural thing. thing, things that you would have changed from the beginning.

Yeah, one of the things I would have changed is I would have, I think CEOs are reflections of their founders for better and for worse. And I'm not a product person. I'm not a developer. I grew up in sales and marketing. And so if you look at HubSpot in the early days, holy, we had a hockey stick customer curve that we were really proud of. And we used to raise a lot of money and we used to brag a lot and use with our investors.

but our churn rates were high. Our customers weren't happy enough. And we got very, very good at showing up and closing customers on the first call, but we weren't great at delighting them and making them be very happy. And we use tools like longer contracts to lock them in. That's not the right way to lock them in. You've got to actually make them happy and tell their friends. It took us, took me a long, long time to figure out the way to build a great company

isn't to get great at that, but at delighting these customers and getting the word of mouth to spread. And so our DNA early on was to sales and marketing heavy, not customer product delight happy. And we've really shifted it. And we wouldn't be sitting here unless we made that shift. Yeah. What was the main thing you guys sort of implemented to help reduce that churn and to create that sort of delight? Just investing more in product. Like if you looked at our P&L in the early days, Kevin, it was a huge amount of our P&L was going into sales marketing. A relatively small amount was going into R&D. And you just look at ups part of the last few years. We're increasing R&D spending by 50% a year.

We're increasing sales or marketing spend by something. Did you have to change it with in terms of like when you're talking to PMs or talking to people about like, hey, when we're designing new features and we want to solve this? Did you like put like this is a number on the wall and like we're rewarding people who are solving? Yes. One of the big things we talk a lot about is I would specifically talk and I would cringe for our salespeople about how we're moving from a sales or marketing company to a product driven company. And we're moving from a company that's obsessed with the company prospect relationship to a company's obsessed with the company customer relationship. We sort of shifted our DNA there. And we changed all our company objectives around it.

Our compensation plan for the executive teams around NPS, for example, things like that. And genetically, we've changed. But it's been a hard change. And it's, I think, would be much farther ahead if I had realized that earlier. Why was it a hard change? It seems like it'd make sense to do so. Is it because it was so sales and marketing led before? We were just, yes, the DNA and the strength in the company and the budget negotiations, it was so sales heavy.

And the input into the product development roadmap was very sales heavy. Like, here are the things we need to do to win new customers versus talking to customers. Here are the things you need to do to delight me. Those were big changes we had to make. Can you ask you about voice? So when it comes to this content creation, sometimes what I think a lot of found, and companies have difficulty with is like how do I create the voice of like my company and then when I'm writing out this content because like there's all these different ways that

you can sort of do this and I feel like I've seen lots of companies do it incorrectly. Okay that's a real one's asking that question before. It's interesting one. The first year and a half of HubSpot, we had a relatively geeky voice. We had just graduated from business school. It appealed to a certain crowd. crowd, more business school geeks, let's just say that. We hired a marketing person who was good, and he started writing on the blog, and he shifted us to be more, I don't know how to say, but more just basic stuff that everyone can understand.

Like fundamentals. Yes, that he would say, we want mere mortal marketers to understand and spread this stuff, not just your professors from freaking business school. So it was like technical or was like quant stuff? Our stuff was quant and lots of stuff from like Michael Porter's Five Forces analysis of that, the other thing should like that. Some people really liked. And it's a little bit like Thomas, I don't even how to say his last name, the guy from Red Point, his blog is really good, stuff like that that we would put in there. And we got much more down to basics of like how to.

How do you create a great blog article? How do you do SEO correctly? How do you, I don't know what it would be, but just very, very basic stuff. So we shifted our voice. And we're still pretty basic now. So we're trying to appeal to the mainstream of sales and marketing sales and marketing ops people. Yeah. We're not really trying to appeal to CEOs and whatnot.

Did that shift happen overnight? So you hire this marketing person. They say, hey, I want to switch up the voice. Was it immediate? Because I think you see people. Exactly. Took a while. It took a while to convince us.

Okay. He kind of had to lean on us. And his articles were doing better than our articles. are like, all right, maybe he's right. So ultimately you fell onto the numbers and you're like, hey, this is what works? He was definitely right. Okay. And then what about the other shifts in the company?

Because you were talking about, all right, we're shifting away from just being this pure sales approach. Yeah. Say you're an early startup. You're going to have some metrics. But like what are other ways to kind of like have a mirror put in front of you and be like, oh, this is not working? Yeah, we were very early on just trying to move visitors, leads, and customers. Those are the three things we looked at. And we looked at them quite often.

We had a weekly meeting every Friday and we'd go through those numbers. And then we'd go through the list of customers and would say, how are they doing, happy or unhappy? And way too many unhappies in the early days. But yeah, very early, we looked at visitors, leads, customers. We didn't look at churn. We should have looked at churn. And then later, we really got obsessed with cost to acquire a customer in total lifetime value of customer. And what's the return on that cost to acquire a customer?

That's not very helpful in your first year of a startup, though. No. No. It's challenging. Have you ever had a coach? I have had a coach, yes. Okay. Still? No, but I had one for a few years there that was really good. And he was part coach, part shrink. He's a professor at Columbia, a really good guy.

And we hired him to coach me and help me improve. And he was really good, really good. One thing we do that's helpful is every year we do very aggressive, I would say, the most aggressive 360 reviews you can imagine. So my review every year that it's done, it was 30 pages long this year. And Darmesh writes it after surveying lots and lots of people. And the first 16 pages are the things I'm doing well, right? These are your strengths.

And I read the first 16 pages. And I'm confident. I'm the best CEO in the world. I've got this. And then he turns you down. And the last 14 pages are the bugs. And he categorizes the bugs as new bugs or this used to be a feature. Now's a bug.

And it's incredibly helpful. And so I've got that every year. I'm working hard on it trying to get better. And the coach helped me a lot with that. It's an unnatural act to run a company, I think, at all. And it's unnatural and unusual to move from early stage startup to, you know, we're kind of a mid-stage scale up I call us right now. And the company goes through lots of changes and you have to change along with it.

And it's a challenge. And I've had a lot of help along the way. Yeah. What have been the other challenges? Because like even in this spectrum of time from like 2006 to now, now you're, this like public face who's tweeting, you know, thought pieces for the company, basically. Oh, I always did that shit. Okay.

Before Twitter. Yeah, yeah, yeah. So what have the other change has been that you've had to like kind of will yourself to go through? Aaron Levy actually had a great quote. I'm going to mess. Or a great tweet. I'm going to mess the tweet. But he said something in the fact that in the early days of the company, your success is

dependent on you're being really good at everything. Okay. And in scale up mode, your success of the company is you're getting the heck out of the way so other people can get really good at what they're doing. And that's been a challenge. Your biggest strength as a founder is typically that you're a control freak. And that greatest strength turns into your greatest weakness kind of in scale up mode, that desire to control decisions, desire to control the organization.

And I think almost every founder, if you're a good founder, you're probably a control freak. You have to shake that somewhere along the line. At what point? What was like the hardest thing you had to give up? okay for a long time i wanted to be the head of product at hubspot and i was and i made a lot of product design decisions and a lot of product roadmap decisions um did you give it up because it's what hubspot needed or did you give it up because you realize like you're needed elsewhere i gave it up because i wasn't very good at it and in that 360 review process and lots of feedback it was like

brian you're just genetically you're just not that good at on the opposite of your background. I'm the exact opposite. And I thought, I can figure it out. Can't be that hard what Kevin does. It's extremely hard what Kevin does. And like the talent of Steve Jobs, like, you can read about it. You can watch the movie. But those are very rare talents that people have. And I think some of them are genetic and I just didn't have them. So getting out of that and getting someone who ran product that I really trusted, that was a big transition for the company and myself. How do you sort of develop that humility sort of muscle? Because I think a lot of people in charge have a really hard time in understanding that I need to be in a place where I realize

that bringing on other people is really about me asking for help and being a little vulnerable for the company. And so like I imagine like part of coaching and part of doing all these things and doing a 360 review where you actually get honest feedback is about like, oh, I'm, I understand that I'm not going to be perfect. And so do you do things or exercise or read anything that like helps you develop that muscle? Because I know I have to work on it constantly. I think there's a humility gene inside a HubSpot. I think it's a humble company.

I don't know how or why. I think there's always this feeling we're just getting started and there's so much more we can do. And I just think it's been part of our DNA from the early on. So I don't know. Yeah. We just feel like we're just. One of your cultural values when you guys hire or look for people? Yeah.

Humility is a big part of it. Humility is an interesting thing. So I think I told you guys I've been out in San Francisco for the last month. I do feel like in San Francisco there's a sea change going on. Like the old guard people who ran companies that started, let's say, in the 90s, early 2000s, there's a certain personality there. And it's very different today. I'm noticing the founders of this generation of companies and my peers and younger.

there's a lot of humility out there. I've been surprised at the humility. Like I met the CEO of Gainesite today for lunch, Nick Meta. I met the CEO of Zoom last week. And they're just very humble. It's like there's been a personality change in the CEOs over the last 10 years. It's really interesting what's going on. Ben from Pinterest is my favorite.

I have never met Ben from Pinterest. He's like one of the most humble and like down-to-earth people I've ever met. And he's someone that I always like aspire to. That's interesting. I've noticed it out here. All of the folks have met have been wonderful, humble, down-to-earth people and they're the exact opposite

of the previous generation who were, you know, my shit don't stink generation. I'm really cocky and that's how you just got things done back then. It's changed. It's nice to see, actually. Yeah, we have mindfulness billboards now. Cool, man. All right, thanks so much for coming in.

Thanks for having me. Thank you, Brian. All right, thanks for listening. So, as always, you can find the transcript and the video at blog.w.Ycombinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.