From App to Suite to Platform, with HubSpot's Co-Founder Brian Halligan

0:05Customer relationships are the lifeblood of every business and CRM a key system of record for every business is facing a sea change. Riding those waves is HubSpot, one of my hero companies. A unlikely SMB marketing software startup founded in 2006 in Boston has over almost two decades become the primary contender to Salesforce through brilliant strategy and consistent execution. And it's as much a community and a movement as a business. They've recently made big bets on AI. Today, I'm sitting down with Brian Halligan, founder, longtime CEO, and now executive chairman of HubSpot to discuss learnings from the founder journey, staying innovative as an incumbent, the impact of AI on workflow software and his new mission in climate tech with Propeller.

0:46Ryan, thanks for doing this. Welcome to No Priors. Thanks. I have two questions for you. Shoot. Why were we an unlikely success? Oh, I hope that is not offensive. I guess. Because of Boston? I think because of Boston, because in 2006 time period, the companies, you must have heard this from VCs. The markets that people thought were worth going after were like high-end enterprise in a small number of categories. And so the idea that you'd sell software for SMBs to manage an online presence and do social, that felt unclear that you'd become a$25 billion plus business. Interesting. It was clear to us.

1:30That's what makes you the founder. Okay, I have another question for you. You referred to us as a hero company, by the way, I'm honored. What's number one on your hero list? Oh, man. I feel like I'm going to offend friends if I choose one. What's your criteria? If I think the product has changed the world, if I think the people just made really interesting decisions, I'd probably say, but this is just because it's the one I'm closest to, Figma. I have a lot of admiration for Dylan and Evan, and I think they changed how a lot of people worked. And it was also like not obvious at the beginning. No, no, I am with you on that.

2:06But yeah, good questions. I'm supposed to be asking the questions. It's supposed to be easy for me, Brian. All right, fire away. Okay, so Brian, you actually started, I think, as a sales leader for PTC, like famous enterprise sales organization in Asia. How did you go from that to the founder of HubSpot? I actually started as PTC's first BDR and its headquarters in Boston and moved into sales and channels. And then the company was going incredibly well, and they moved me over to Asia to start it. So I moved to Japan, and I lived in Hong Kong for a while, and, yeah, I was there for 10 years. It was a really good run.

2:47But I just think of my – I have three chapters in my story. Chapter one was PTC, enterprise sales, eat your young, really a hard-charging culture, sales-driven culture, terrific company in its own ways, unusual culture, tough place to work. I left there and I had a second chapter that couldn't be more different. Started the sales organization for a company no one's heard of anymore called Groove Networks. And Groove is famous for its founder, a guy named Ray Ozzie, who's the father of Lotus Notes. And it did okay. Like we got the 20 million in revenue and Microsoft bought it. And it's like a little part of SharePoint now.

3:25But it really didn't tip. And what was interesting about that company and learnings for me was Ray was a product person and the company was very much a product company. And he referred to himself as a social anthropologist, which I thought was really interesting. He sort of watched where technology was going and he thought about how human behavior would change. And then he tried to create something kind of in the future to match it. And he did that with lip notes, sort of hit the nail on the head. He did it with Groove. It was a little early. Groove was like a little bit of Dropbox, a little bit of Slack, a little bit of Notion.

3:57It was on peer-to-peer platforms just a little early. Microsoft bought it, but I learned a lot how to envision and build compelling products. He was very early on product-led growth, freemium model, and I don't know anybody else in B2B who was really doing that at the time. And so I get to, we didn't figure it out, by the way, but we got to learn a lot along there. And then I went back to business school. And those three sort of, you know, this sort of right-wing-ish PTC, this sort of left-wing-ish groove and this sort of back to basics MIT came into my head and really influenced me personally.

4:30And I think still influenced HubSpot in a lot of ways. When I say unlikely, I just think it's actually amazing that there was this idea that was happening out in the market, like a change in the world. You should describe it. But the way I think of it is like people don't want to be advertised and sold to, right? They're out hunting for solutions. They want to be educated. And this thing around inbound marketing, around creating a presence for people to come find you and giving that value to your customers, your end users. You really created that category. How did you even discover the idea? Tell us about the beginning.

5:07We started in business school. There were two ahas that led to it. And I have a terrific co-founder. Dharmesh had one and I had one. Mine was, while I was in B school, I was sort of an EIR at a little venture firm that was going nowhere in Boston called Longworth. And they had me working with their startups to help them teach them the PTC way. How did you build PTC? Can you show us the playbook? And they all were doing the PTC playbook. They were all buying lists and cold calling. They were all buying lists and spamming people. They were all doing other people's trade shows. They were hiring PR agencies, buying ads.

5:47And it just didn't seem like it worked at all. Like people were immune to the marketing at that point. They had caller ID. All of a sudden they had ad blocker. They had DVRs. Like no, humans got really good at that point at blocking traditional marketing out. And so it's kind of wallowing in like my playbook doesn't work. And then Darmesh blogged his way through business school. And he was an early tech blogger. He had a blog called OnStarups.com. So pity he didn't keep it going. But anytime you heard an interesting lecture, he would write about it. And I was looking at his Google Analytics reports and comparing it to all my wealthy venture-backed startups with like money and teams and expertise.

6:24He's crushing them. Like by two orders of magnitude more interest in this crappy little blog. And I started describing the world as, well, my folks are doing outbound marketing and he's doing inbound marketing. And you've got to match the way you market with the way humans actually shop and buy. And humans started to use Google. They stopped subscribing to magazines. They started subscribing to blogs. They started using the social media stuff. And so we sort of captured that shift and then said, well, let's build a platform to help marketers move from the old school outbound way to the new school inbound way.

6:58That was the basic foundational idea. And that was kind of chapter one. We've had a lot of chapters. Yeah. Yeah. Well, one thing that's stuck through many chapters has been the inbound conference, a conference that over 100 ,000 people go to. You can give me the stats, like people like Barack Obama speak at it. It's sort of a pilgrimage for people who work in marketing. Like, how did this happen? Why did you do it? So in the early days of HubSpot, the way we described ourselves to the venture capitalists like yourself was, at the time, Salesforce just said SFA. Salesforce.com is to sales, as HubSpot is to marketing.

7:34And the good thing about that is it's stuck on VC's heads. It's like, oh, that sounds like it could be a good thing. Like, we would go to Dreamforce every year. And by the way, we'd sit at Dreamforce and we'd sit there being like, God, I hope they don't announce a marketing product this year. Literally, the two of us would sit there like, fuck, please don't announce a marketing product. Anyway, we would go and we said, that seems like a decent idea, but it's more user conference. Let's create like a community thing that people will come, even if they're not HubSpot customers. So we said, let's create this inbound thing.

8:05And we just gave it a go. And we had a room of 400 people in the Marriott and Kendall Square. We invited Seth Godin and David Mermitt-Scott and Brian Solis, as these folks are still floating around, who are early sort of acolytes. They may or may not call it inbound, but basically the same ideas were coming out of their mouths. And we sold out in like five minutes and it was really good. And so then we sort of got on the treadmill and just kind of kept doing it every year. I really enjoy it. Like we had my I'll tell you, we had some amazing speakers like Reese Witherspoon and Guy Ross and people like that.

8:37But my favorite speaker, I got to interview one of my heroes, Andrew Huberman, who's he's on my Mount Rushmore these days. And then we have, you know, 12 ,000 people live, a couple of thousand people listen. And over time, what it's kind of turned into, like it's like it reminds me of a Grateful Dead kind of thing, like the parking lot outside the Grateful Dead concert. It's a community and it's very much a community. And the thing that people value most aren't those big sessions. It's the smaller sessions on like the hell are we what the hell is AI and how do we get our arms around this market or stuff like that?

9:09And people really connect. Yeah, that's that's very cool. I know you wrote a whole book about this, but I think for anybody who is not a deadhead, right? Like the Grateful Dead are as much about like community, human connection, collective experiences as music. A few people know this, but the Grateful Dead were founded in Palo Alto in a little music shop in Palo Alto, did their first studio recording at Stanford University. So it's actually a child of Silicon Valley. Oh, interesting. Yeah. It was in San Francisco. They later went to San Francisco and then they ended up in Marin. But yeah, they're a child of Palo Alto.

9:45Yeah. Doesn't strike me as the most counterculture starting point, but we'll take it. Now, one of the things that's interesting that about inbound, that word, there was a huge debate in the early days of HubSpot. What is this thing? And half the people were like, you know, it's Internet marketing software, which it was. And a couple of us were like, it's inbound marketing software. And I was like, what the hell is inbound marketing? One of the early battles and decisions we made is let's try to create a category around this idea of inbound versus outbound. and that did work. And we still have the inbound conference.

10:22I would just say we tried to do inbound sales, failed. Very difficult to create a category, it turns out. I tried to create this thing called, instead of the funnel, it's the flywheel. I don't know why it worked, but some of the things we did that seemed to resonate was there was an enemy outbound. And I think it always helps to have an enemy. It was a little catchy. It seemed to stick on people's minds. A whole bunch of other people like Seth Godin and David Merriman Scott and Brian Solis were kind of talking about similar things. And we just kind of stuck a word on it. And then we just worked it.

10:56We each wrote two blog articles a week. Someone invited us to like a flea market. We would go and speak. We wrote a book, which is a crap ton of work, Nice and Weekends. So anyway, we did that and we created a category. And for those of you listeners going through that battle, I would say it worked. And it's been one of our keys to success. But it was a ton of work. And it's very hard to pull that off. Were there a few things that made sort of the sales terminology not as successful? Because like what we should talk about in a second, the sales product for Hussbot was incredibly successful. Sales products are on fire.

11:34That's our kind of second act. We tried to call it inbound sales, but sales leaders were like, no, no, no, no, no, no. We do outbound sales. you don't get it we do outbound sales that's like what we do and marketers they're like no no no no we do outbound marketing and the thing is market the marketer's bosses were like i searched on our company in google and i couldn't find us you know and i went on this this thing called facebook i got an account there they were getting asked about it but i don't think the ceo was asking the head of sales about, why are we getting more inbound leads? And then they kind of put that in marketing.

12:12Anyway, it was sort of, it was pushed back on by salespeople. We really had to support outbound selling to build a viable and big business on that side. We have some friends in common, Elias and David, who were acquired into HubSpot by their own startup at the time for Performable. I don't know if you guys did any other acquisitions that were This one felt important. What did you learn about acquisitions from this? That one was important. And I could kind of give you the background on that. When Darmesh and I started it, we were really about the top of the funnel. How do we help people turn total strangers into visitors to their website and then turn them into leads?

12:50But we hadn't really thought of like a database, segmenting the database, drip campaigns by email. Honestly, we weren't that passionate about it at the time. We didn't have deep domain expertise about it. And so, little known fact at the time, we actually closed around with Sequoia. And some of the proceeds we were going to use, we were going to acquire a company in what we call MoFu, middle of the funnel, the database size, segmentation, drip marketing, all that stuff. We made a bid for ParDot, couldn't get to a number. I went out to Marketo, CEO, and proposed Marspot to merge the company's merger of equals.

13:27I offered them the CEO gig. They weren't interested in the time. Too bad. I know. I think that would have been interesting. And then, you know, Dave and Elias were well-known quantities. We knew them in Boston and they were passionate about this middle of the funnel stuff. It was an acquirer. We acquired them and their team and it worked. They sort of built that middle of the funnel. I would say we haven't done many since at all. None of that scale. It's hard to get the cultures to match. And I think if I had it to do over with David and Elias, I think it could have done a much better job of sort of assimilating them and partnering with them.

14:01I was pretty junior at the time. So I am kind of. But we've only done very small acquisitions. Like I'm a big believer in the Peter Thielism of you've got to be right about something that everyone else thinks you're wrong about. And you've got to be right about it for a long time. And you've got to zag when everybody else says you're going to zag. and we've had a few of those in our history. Okay, the first one was SMB and I kind of think of this as the M in SMB. We're sort of the startup scale up. That's who we sell to. We don't sell it to the big slow moving enterprises. Everybody thought it was a bad idea.

14:39Every venture capitalist we spoke to, we got lots of no's from venture capitalists and the reason was they didn't like that idea. And the question they would all ask is, well, who else had done it? And at the time it was into it and they'd say, who else? and literally there was no one else and they're like why and we explained well historically you couldn't get your cost to acquire a customer down because you needed humans to do it and there's new ways to acquire customers using you know in-bound marketing and then you're going to lose customers so you need to upsell your existing ones you got to get your total lifetime value up and your revenue retention rates are over 100 if you get that math to work you can build a scalable business but people were very skeptical our board members were very skeptical even when we went public people were very skeptical about it.

15:21I still get asked about it all the time. But we zig when everyone else zagged. And we diluted a lot more than we would have if we just went to the enterprise like Marketo did. Everyone wanted us to be Marketo. Just be like Marketo and Elipa. We're like, well, they're already there. Why do we want to be like them? The world doesn't need a third one of these things. The second kind of zig when everyone else is zagging was I described earlier how Darmesh and I would sit in the audience at Dreamforce, hoping that Salesforce.com didn't want to wake up one day and say, we're going to be the Salesforce.com of marketing.

15:57And of course, they did one day. And we saw that coming. So they bought four marketing companies in one year. And we went from being their best partner to kind of an enemy. And we pivoted. We had been talking about pivoting to CRM, but we pivoted and we said, let's go to CRM. Let's come underneath them. let's zig when everyone else is asking let's not make it like theirs let's make it incredibly easy to use and let's make it freemium and everybody thought it was a terrible idea investors are bored most of employees but we saw it we use salesforce it's hard it's expensive and we were like let's make an easy inexpensive one and that was their second product sales product that was almost 10 years ago.

16:40And now we got a, we have a marketing hub, sales hub, service hub, ops hub, CMS hub, commerce hub. We have a whole suite now. But we drew on a whiteboard at an offsite that we were going to transform the company from a marketing app to a CRM platform. And we drew on a whiteboard where we were going to go from a pure inside sales organization to, we called it freedom then, people call it product-led growth. And honestly, we're still on those journeys. Nine years later, we're filling out that platform and we're getting better and better at that PLG motion. But I'm a big fan of zinging when everyone else is adding.

17:10So I have to stop you here because it feels so like it is not under, I mean, it is under your control, but it's certainly not deterministic in terms of launching a freemium product, especially as a company that didn't start exactly that way. Yeah. How did you have the confidence to say like, we can get something organically adopted and we're going to stick with it? And can you, can you talk about that? Because, you know, when, when the sales product for HubSpot did work, it really worked. Like it grew faster and was more profitable than the original marketing business. It made you guys really important and strategic.

17:48The story played out as your strategic offsite described. Yeah. But I think most people, most product teams, most companies would say like, you can't just make a freemium product, right? Or if you know you can, you should call me. Right. I think what's kind of interesting about that pivot. We were eight years in and we pivoted. We wanted to build a West Coast company in the East Coast. We wanted to build a multi-billion dollar company. The one thing Dharmesh and I had in common, we had been somewhat successful earlier and we wanted to swing for the fences. So we were willing, kind of risk-seeking a little bit.

18:22And a lot of people ask me, like, how do you become a multi-product company? How do you go from app to suite? How do you go from suite to platform? And the answer is with great difficulty. So back then, we wanted to do both things. We wanted to build a sales application and we wanted to build a freemium motion. So it's kind of two changes at a time, which maybe wasn't a great idea. The way we did it was like a lot of things at HubSpot, we copied Apple. And there's so many stories about how Steve Jobs built the Mac. And they had a separate building and they had a separate login to that side of the building and a separate stack and everything was different over there.

18:57We said, we're going to have to do that because it's such a big change. So we had a whole separate part of the building. Then we took three leaders inside of HubSpot, Brian Balfour, who people probably know, a guy named Christopher O'Donnell, who people may or may not know around Product Force for a long time, and a guy named Mark Roberge, who a lot of people know. He's kind of the sales professor at HBS now. And I jammed them together, and I said, let's go, let's build this thing, and I'll do whatever I can to help it, but I'll keep you isolated from all the HBS.

19:28The truth is, those three couldn't come to grips on what the vision of the thing was. They disagreed on what the vision was. And one of my lessons learned there is people need to really want to come together. You can't kind of mush people together. They're immensely talented, but that there wasn't the alchemy with the three of them. So anyway, we found other gigs and some left. And what ended up happening is I became the co-founder with Christopher O'Donnell. And we made a couple of decisions on what the strategy would be. And we just kind of ran fast. And it took us a good two and a half years to get a half decent sales product out there and a half decent PLG motion.

20:08And we kept it separate. So we had separate sales teams selling it. It was PLG motion. And the marketing salespeople were like, you know, we really just want to sell that thing. We're like, no, you can't sell it. You can't sell it. So we had a separate instance of HubSpot to manage all these everything. And then one day we're like, okay, we're ready. Let's merge them back together. And we did a counterintuitive thing. We took the sales business and we acquired the marketing business. So we took that freemium PLG motion and we applied it to marketing. We took a bunch of the leadership and applied it over to the marketing side.

20:37And so I say with great difficulty, like individually for me, dealing with the fallout of those three, trying to figure the strategy out, having patience through it. Like I've made a lot of mistakes and I made a lot of mistakes in there, but I consider that maybe, if not, maybe my best chapter inside HubSpot is pulling that off. Yeah, it's extraordinary. You just said you wanted to build a multibillion dollar company, like a West Coast company on the East Coast. So I also happen to know Christopher O'Donnell. And he said the one question to ask you was how HubSpot succeeded more after the IPO when so many Boston-based companies have struggled.

21:15Yeah, C-Town is a very smart man. Okay, a couple of thoughts on that. I listened to podcasts with Mark Andreessen the other day. He's obviously a big Silicon Valley booster. And he talked about, he's not crazy about investing in companies outside Silicon Valley, because the companies tend to optimize for like a local maximum. Like, you want to be the biggest tech company in Boston, or you want to be the biggest tech company in Austin. Whereas companies in Silicon Valley want to be the biggest tech company, you know, want to beat Apple, want to beat Google. And I think he's right. And I've never heard anyone say that before.

21:48When we built HubSpot, we always said we want to build a West Coast company on the East Coast. So we'd like once a year, we would drag the entire management team out to the West Coast to visit a whole bunch of people that were respected, that would push our thinking. We were really built like a West Coast company. And the East Coast companies were just thought a little bit differently. I think one thing we did around the IPO is we always said the IPO is starting line, not the finish line. Starting line, not the finish line. Starting line, not the finish line. We just said that a million times and I meant it.

22:16Do you know how much this worked, Brian? I think it was my very first conversation. I have no idea how this came up, but my very first conversation with Chris, he brought this up and he said, starting line, not the finish line. How interesting. It has permeated, you know, at least your leadership incredibly deeply. Interesting. Chris and I work really closely together. So I'm not shocked. The other thing we did is when you go public, companies change a lot. And the biggest change that happens to startups when they go public is you need to name like five officers. And these are five people who have access to all of the information in a given time.

22:51In exchange for all those information rights, they're locked into trading windows that they can trade the stock in. And then you have to block lots of important information for the rest of the employees. We flipped that and we said every employee, the terminology is a little different, but basically every employee at HubSpot, front line support person, anyone, they're all officers. So they all have the same access to information. Everyone's locked into certain trading windows. So it didn't feel like a big change when we went public. And I think that helped a lot. The other thing was, it was quite clear that we were heading towards being a CRM platform.

23:26We had our second product in the market. On the IPO Roadshow, it was super awkward because, you know, we have whatever$200 million marketing business and we have this like$1 million sales business. and it was like the last slide and everyone just was like, yeah, whatever. Why don't even bring that up? The bank was like, don't even bring it up because no one gives any credit for it. But it was a big initiative inside the company so people could see it. I think that helped as well. And people believed it and they were, they were like working on that despite, you know. Yeah. I think everyone believed us in that both Darmesh and I wanted to build something big and special.