20Sales: Biggest Lessons Scaling Hubspot from $0-$100M in ARR, The Framework for How Startups Should Scale into the Enterprise, How to do Channel Partnerships Right and How to Construct Sales Comp Plans Early On with Mark Roberge

0:00I was consulting to HubSpot when it was like one or two people and eventually joined the company as the fourth employee. The skill necessary to get a million dollar deal done. There's so much in there in terms of like how do I identify and build a good champion. How do I understand the political dynamics. How do I differentiate between an economic buyer, a technical buyer, an end user, a coach, and a champion. How do I like deal with procurement. How do I deal with legal. My million dollar seller has all those skills. You are listening to 20 sales with me Harry Stebings. Now 20 sales is the monthly show where we sit down with the best sales leaders in the world to reveal their tips, tactics and strategies to scaling the best sales teams.

0:38And there is no one better than to stay guest. HubSpot is one of the generational defining companies of this era of SaaS companies. Our guest today was the fourth employee and their first sales hire. So as the founding CRO at HubSpot, Mott Rebege scaled Aero from zero to a hundred million dollars and expanded his team from one to 450 employees. In this episode, we unpack the biggest lessons from scaling HubSpot from zero to a hundred million dollars in Aero. But before we dive in, we need to talk about our sponsor for the day, Clary. Clary is an industry -leading AI -powered revenue platform that is purpose -built to help companies optimize their end -to -end revenue process.

1:20With over $4 trillion in revenue under management, Clarice customers have a material advantage to optimize their enterprise revenue process across all teams from rep to the boardroom by leveraging the world's largest and fastest -growing AI reservoir of enterprise revenue expertise. More than 1 ,500 organisations, including OCTA, Adobe, Workday, Zoom and Finastra, run revenue on Clarice to improve win rates, This prevents slip deals, forecasts with accuracy, and boost the productivity of all revenue critical employees. To learn more about how you can create, convert, and close revenue with clary, visit clary .com.

1:59Mark, I am so excited for this. I just mentioned I loved your content for a while now, so this is really exciting. Thank you so much for joining me today. Oh yeah, sure, Harry. I'm honored. Thank you for seeing that. Now, I would love to start. How did you first make your way into the world of sales? And when did you know that like sales was really one of your loves? Like a lot of the wins in my career. It was completely serendipitous, almost accidental. At 23, I discovered that I wanted to be an entrepreneur. And even to this day, I kind of consider myself more of an entrepreneur than a sales leader.

2:31Even though I was a founder CEO coming out of school, I knew I wanted a functional alignment and I was torn between marketing and sales. I was like, there's not a lot of MBAs that go into sales, so that's weird. But I really love the art of the deal. And I know generally speaking in tech sales people make more than marketers and I had a young family and like I was the financial Responsible for that sort of like that was important and ingredient But I felt like the MBA provided you more for marketing marketing was going more in a data driven direction I was consulting to HubSpot when it was like one or two people and eventually joined the company as the fourth employee And that's where it's Sarah kicked in because Haligan was the co -founder and he is a sales guy and he was like, if we're gonna use you one day a week of consultant, I want you to sell.

3:14And so that's how I got into sales. Do you wanna match hard for me for one day a week? You're now the CEO. If you want me to sell, I'll sell. If you want me to write code, I'll write code. Like it is what it is. So that's how I got into it. And it actually worked out beautifully because I was not only in sales, but I was selling cutting edge marketing software. So I got to learn about both, which was completely accidental but awesome. Where was HubSpot at that time? Did they have any customers? Did they have any funding just I'm just fascinated. I had sat next to Darmesh in school at MIT in O5 in a class and it was one of those classes where you there's like 50 students everybody shows up with a business idea on like one page that night you read them all you vote and 10 people get picked to be CEOs.

3:59I got picked to do mine which is in the social networking space and Darmesh got picked and his was a hotspot. So that was like the first time I met that house bought and then like he and I became friends. We would grab Chinese food like once a month or so, talk and get to know each other. And then when I was like, Hey, by the way, I'm actually gonna do mine and raise him money. He's like, I'm in, I'll be an angel. I'm like, great. And then at some point through that journey, he was like, can I pay you as a consultant too to helping with house bought? I'm sure you like need money. You have this big loan from MIT and all this stuff.

4:27And I'm like, sure. When I first got engaged on that level with house bought is it was just our match. He was, Brian was in venture capital but had been working with Darmesh and MIT on the concept and Darmesh was trying to recruit Brian. And so about a couple of months through into my consultancy with Darmesh, he said, hey, I was successfully recruited Brian to be my co -founder and BCEO. And so we sat down and Brian's like, I like Mark. Let's keep Mark on. But Mark just do sales if we have you one day a week. So I did that for about six or seven months. And then he took me into a Red Sox game and was like, so at that point now, we've acquired between Brian and I, we've probably acquired like 40 customers.

5:06We're probably at like couple hundred thousand in ARR. We brought a Mike Vulpius CMO. Brian took me to a Red Siles game, was like, hey, listen, General Catalyst is coming in for our A -round. We're gonna raise $5 million or something like that. He's like, why don't you come join full time, be our first salesperson and sales leader? Can I ask, in terms of the evolution, the hardest thing is often for founders to transition. from a founder -led sales motion to a sales team -led sales motion. What do you advise founders who are struggling in that transition? Yeah, it's a really hard one, and it's a key.

5:41A lot of founders today are product and engineering oriented, and don't have a lot of experience in sales. Every time I ask them, what are you looking for? They always say the same thing. Ten years of experience selling a product like mine to a customer like mine. And there's tremendous research that shows that that mindset doesn't work out. And it's not that it doesn't help. It's just that there's a whole bunch of other things you need to assess largely around sales skills that are not looked at. And because of that, you end up with the bottom 25 % performers in your industry. That's the biggest pahole.

6:12Essentially what that means is a founder needs to learn how to assess a seller on sales skills. And that's like saying to a salesperson challenging them to assess an engineer and how well they write Java. It's hard to do. Like you almost have to go to school for five years. So it's kind of the same thing. It's difficult. I can't just like say a statement and like you learn it in a minute Go find an advisor. Advisors are cheap. They're usually a little bit of equity Go find someone that's hired a bunch of salespeople Particularly that in this case it could be okay that it's in your domain. Okay, a couple of questions One does the founder have to create the first sales playbook?

6:48Well, can they actually bring in a sales lead from they want on revenue? It depends on the aspect of the playbook Harry So in terms of like a Sandler level or winning by design, like Mathematical Force Management methodology, that's going to take a professional leader to like bring in and navigate. Like even things like how do you manage the first meeting and do discovery well? I don't see a lot of product founders coming up with that. But one of the underlying pieces of the sales playbook is a buyer journey. What are the different ways that buyers describe the problem you solve or the opportunity that you create and how do they look to solve that and how do they look to make that decision.

7:28That's something that a founder should be working on from day one just to start crystallizing that. Another piece is the ideal customer profile. You know, so what are the attributes of like what a home run fit is for us versus not? The other attribute is like just the general value proposition that we're pitching. Like these are typically areas where founders can make a lot of progress on their own. They might get it like 70 % of the way there, and then a professional seller is gonna come in and take it the final amount. Add the details like call calling, getting the appointment, doing discovery calls, tailoring the pitch, handling objections, dealing with negotiations, all that kind of stuff.

8:03I may found it in your portfolio, and I'm just, I don't know what I'm doing here, so you're gonna help me. For my first sales hire, then, I've got us to 700K in Aero. Do I have someone who's sold to customers like mine before? Or do I have someone who sold deal sizes like mine before if you could have one deal size or Category that they've experienced before which would you roll? I have a strong conviction that deal size has a higher weight in correlation to success Let's just say we we sell million dollar deals to banks and I have two candidates one candidate sells $10 ,000 deals to banks and one candidate sells million dollar deals to hospitals The skill necessary to get a million dollar deal done, there's so much in there in terms of like how do I Danify and build a good champion?

8:52How do I understand the political dynamics? How do I differentiate between an economic buyer, a technical buyer, an end user, a coach, and a champion? How do I like understand medic as a sales process? How do I like deal with procurement? How do I deal with legal? My million dollar seller that sells to healthcare has all those skills. Okay, my person that sells to banks, but they sell 10 ,000 or deals has none of those skills. I'd be much easier for me to teach the million dollar seller about banks that it is for me to teach a 10 ,000 dollar transactional seller, how to do all that other stuff.

9:25Okay, I'm in this process hiring all sales, rap, wafa, sales edition. What are the most asked questions? I love getting into a roleplay. That's the most important part is this part where it's like, okay, Harry, we're hiring for HubSpots. Like, let's just pretend you're a small business owner and you downloaded the HubSpot in about marketing ebook yesterday and you got the lead. Let's just do the first call. And so we'll do the call. And I'm looking at things like really good, open -ended questions, follow -on questions to do discovery and qualifying need and quantify need. I'm hoping that there's no show up and throw up and they give me like a five minute commercial on HubSpot that I could have just read online.

10:02And then I'll stop the interview a couple minutes in. And then I'm going to assess coachability. You know, in most startup contexts, no one's going to come out of the gate hitting their productivity in month one. Like they have to learn the product, the methodology, the customer. So I'm assessing their ability to be coached. And so I'll have you self -assess. And if you're like that, I was awesome. I have no feedback for myself, then that's a red flag. Every interview, I give a piece of positive feedback and a piece of need for improvement. So I give a positive, I give a need for improvement, I watch how they take the coaching, and then usually I have them redo the role play.

10:34And then if we're going to do another meeting, I'll say we're going to do it again. So let you think about it for two days and then come back. And that's a big part of my assessment. How false do you know when you've made a messiah? It takes a while and I have a lot of situations where I had a rep that was in there for three or four months and we weren't sure and they weren't hitting it. But we gave it a shot in seven months and they were toward the top and they stayed there. So that was perplexing to me Harry because I want a lot of early knowledge and leading indicators. but I've seen that happen quite a bit.

11:06It just took them a little while to get there. The only thing I can say early on kind of comes back to that coachability again. If I have a manager come to me and say, oh yeah, Pete's not working out. And I'll say, how do you know? Like, we'll look at their numbers. And I'm like, okay, well, what are you coaching Pete on? And I'm like, well, we're trying to get him to do a little better job on sense of urgency development. And I'll say, okay, how are you coaching him? So now I can assess if the manager's got a good diagnosis and good coaching model. and then I'm like, okay, when you're coaching them, are they staying?

11:36When you move them up a little bit, are they staying there? Or are they there for a week and then they go down? If they're going up for a week and go down, yeah, we probably need to make a cut. But if they're staying there, this is taking a little while, let's stay in there. I think we're gonna get there. That's the best I can see to get in early signals to where this person is gonna make it. In terms of the hiring process, when it comes to titles, what are some of the biggest lessons in terms of the title discussion and what it might reveal about someone joining a company. It's probably a red flag if they're over obsessed with it.

12:06A little bit of ego stroking and that's not going to be great for culture, especially early on when it has to be like, let's roll up our sleeves and do whatever it takes. Should young companies be worried about giving away VP of sales or how do sales too early because it makes it difficult to layer or not? I don't think it does. You know, to your point, I think it's a red flag for the candidate. But if I have a star and I have to give them a VP of sales title instead of director or a CRO title instead of VP to get them to do the job I see for them for the next 18 months and the assess. I don't see it being an issue.

12:38Like, is that okay? I hire someone. They kill it for 18 months and then after that we decide we've got to up level them. In one case, they're titles, director sales. In another case, they're titles VP sales. I don't think that's harder. What about money and incentive packages? Any big lessons there on advice me? I've never hired a sales team for, never hired a rent. How should I do it? How should I structure it? What do you advise me? What most people do, which is I think a big mistake, is they hire a sales personal leader and sort of delegate it to them because they sort of like are the functional expert expert on it.

13:13And then that person uses the sales comp model from their last company. That's really broken. What a lot of founders don't realize is you can get pretty creative here, especially in their early stages. The best way to to rise a comp plan is to think about what you need the business to do in the next six to 12 months, strategically. Don't even think about sales, just strategically, holistically. Are any of those re -enforcible with sales, Pearson, behavior, or action? And if so, that's going to start deciding your complaint. So I'll give you some really common examples. First off, which is like semi -related to that point, I don't like Commission Plan sales people in the journey to product market fit.

13:54Like, I just want pure equity people. If we're trying to find product market fit, if we have three design partner customers and we need to get to like 20 to understand product market fit I'm gonna bring on a salesperson to help us do that and that person make and say 150 like 75 base 75 commission I don't want to put them on a comp plan. I'm gonna say like listen I'm gonna pay you like 125 flat out no matter what with some equity That's the right person because like we're sitting around and we're pivoting pivoting pivoting We're shoot we've got it wrong We have to go back to the driving board and it's gonna take us three weeks to build this thing.

14:26All the engineers are making their salary paying their mortgage and the sales rep is desperate and sweating, I don't need that. And furthermore, that's not the rep I'm trying to attract right now. I'm trying to attract a rep that enjoys that design journey is sitting there with the engineers not sweating making the mortgage payment or thinking short term. But then once we get into, okay, now we have product market fit, then this is a classic example where it's like, Now we need to get like go to market fit, but we have to make sure that as we scale, we keep customer value and success top of mind.

14:59And so I wanna make sure that my reps are not just selling customers and revenue, they're selling healthy customers, customers that are in my ICP, they're gonna see a lot of value from our product. Most comp plans don't motivate that, don't incentivize that. But here's an example of what we talk about, like think about your strategy and a line of the comp plan, it's like, okay, Harry, when you sell a deal, you're going to make 5 % on that deal. I'm going to give you half of the commission when the customer pays and half the commission when they hit their leading indicator of retention, which usually happens in the first 30 days.

15:32So that could be as simple as like they set up the product and process their first transaction. So as long as that leading indicator of retention is something meaningful, that again can happen in the first 30 days of the customer's life. But if it happens, they're probably going to be with a throw a long time. And if it doesn't happen, they're probably going to turn. And you'd be shocked how much like the sales process in terms of what's discussed, how the product is presented, what types of customers are pursued, drives that. And that's like a not commonly used compensation plan, but should be at that stage and is aligned with the strategic objective of the company.

16:06Are there any big fuck ups that you see portfolio companies make on comp plans for sales teams that you're like, Harry, don't make this mistake. So many, if you're pursuing like PLG or land and expand, the sales compensation plan can really eff that up. Because most sales compensation plans put most of the payment, the commission on the first ACV from the customer and have very little if any on expansion. It puts the salesperson at odds with how you want customers to buy your product. Because when you're in PLG or land and expand, the buyer wants to start small to test it and then expand it, whether that's with other functions or departments or whatever.

16:45And you as a company start up, your strategy is to do the same thing. Make it easy for customers to just like, give it a shot and expand it. But if your reps are paid in that way, they want the opposite. They want you to buy everything up front and you're likely to contract or turn. So that's a huge fuck up that we see a lot. Well, it's the right way to solve that then, because I'm just taking a say, it's like a 10K PLG product. And like a 10K is kind of the entry price, but we hold them to scale to 100K. As a company, you don't want to pay 100K up front, get hit with cash flow problems in that way.

17:15I would do something like this, Harry. You're a salesperson, your job's bringing customers. I'm going to pay you 3 % rate on the first ACB from a customer and 5 % on any expansion revenue. So now it's like, oh, sweet. Okay, I get it. So I will make the most money if I sell customers on a very small ACB to start and expand them later. Yes, that's what you do. And then the salesperson's like, wait, wait, wait, wait. Am I a CSM now? No, no, you just go hunt. You go hunt, you sign up customers, and we have a CSM team that onboards them. They expand them. They have their own different complex. They have their incentives too.

17:52That's just how yours works. If you sign up good, healthy customers with good expectations, you'll make a lot of money. If you sign up a bunch of crappy customers that don't stick around and don't expand, you're not going to make a lot of money. The thing that worries me when I see the biggest problem I see even in all of the company's is sales led growth with PLG pricing that doesn't expand. And what I mean by that is traditional large sales team selling three -day ACVs. And they say, ah, but you know, if we prove it and if we do this and this and this, then it'll expand to 30K. And truth be told, it rarely does.

18:28And so we have this kind of enterprise sales cost base for a PLG pricing that doesn't often expand. At what price point does it make sense to have a sales team? Yeah, that was a really good question. Okay, so my approximation would be even in HubSpot We started at like 3000 a year. I would say that's on the lower end now that required a lot of inbound Leads there's a big missing part to that is like the ACV is only one portion to answer like whether or not our go -to -market Motion is working whether we have a salesperson or PLG or we're using marketing inbound or we're doing cold call it whatever The absolute right answer comes down to unit economics.

19:06And there's a couple different ways to measure unit economics. Let's just say payback period, which is the CAQ divided by the ACV. Someone pays us $10 ,000 a year, then the CAQ needs to be $10 ,000 for us to have a payback period of a year. Right? So if someone pays us $10 ,000 a year, and it costs us $10 ,000 to acquire them, we get paid back in 12 months. Anything above that, you start to question whether your economics work, anything below that, it's really good. The problem is ACV is only one part of that formula, Harry. The CAC is the other piece. The CAC for outbound sales teams is all over the place, because it depends on how many calls you have to make to get an appointment.

19:45How many of those appointments turn into a demo? How many of those demos close? Right, so there's a lot of different variations in there. Are you calling CMIOs of hospital systems, or are you calling like, Landscapers of small businesses that pick up the phone a lot? It really comes down to the absolute academic and practical answer is it have to have good you in economics, the CAC and the ACV have to match up, but it's not always like at 3 ,000 ACV you can have a sales team and at 2 ,000 you can. When you look at payback periods as an investor say, what do you like bad, good, great? At the IPO, less than 12 months is excellent.

20:2512 to 15 is good. 15 to 20 gets concerning above 20. It's going to be a real problem. 20 months. At the series A, less than 12 is a, it's almost like you're probably being too efficient. Like we probably like try to grow faster. 12 to 15 is really good. 15 to 20 is fine. It's kind of like, that's fine for now. We'll have to work on it later. above 20 it gets concerning. So you kind of have some semblance, but there's a little more flexibility at the Series A, because we know that there's a lot of improvement that's just gonna come with scale potentially, and then there's a lot of opportunities and low -hanging fruit for us to get to that just isn't a priority right now.

21:08So I see a lot of two to three -month paybacks, which at Series A, which to your point, isn't either. Yeah, there's always a game with numbers though Mark, isn't that? What's included in your CAC? And I've had somewhere, it's like, well, it's just my marketing spend, or it's just my outbound sales team. And it's like, well, that doesn't count. It's not quite that. What should be included in a CAC for a founder to truly understand that actual payback? Yeah, so at scale, it's going to be like, on your income statement, the entire sales and marketing align is going to be the CAC. And you divide that by the number of customers that are acquired in that period that say in a quarter that you're evaluating.

21:50Now that gets challenging at the series A because if the founders are selling, well then you have to attribute a part of their salary hypothetically. And if like you're throwing just general network and events for the company and that's leading to leads is that quote. So there's always these squishy costs just to keep it simple. Everything you're spending on marketing and salespeople and sales leadership and sales ops and all that kind of stuff and easygoing there. The one thing that we didn't discuss so ashy is the LTV and it does matter because if we look at banking customers for example, or phone customers, and I'm saying them because they are generally the longest serving customers, you know, they last for seven to ten years and so you can actually have a higher cack if your LTV is a much longer.

22:33How do you think about that when analyzing early stage companies where we have in the UK we would say fuck all data. You know, there's multiple ways to measure your economics, there's payback, and then there's LTV to CAC. For whatever reason, the industry talks about an LTV to CAC greater than three. It's a little bit of a farce, but it's not like a terrible measure. It's good to know what your LTV to CAC is. That's where you could find that, Harry, and that's going to be tricky because theoretically the lifetime value should be your ACV divided by your churn rate. You don't know your churn rate really for five years or more, so you have to make some pretty heavy assumptions there.

23:13Do you not think you know your turner? So if we take like the you know hub spot, why did so many investors pass on hub spot? Oh, you serve SMBs, don't they go out of business as such a high rate? Absolutely. The turn rates gonna be horrible. I think actually, I think there's some discrepancy and are not blaming anyone, but on I think the early hub spot turn rate, some points has been said to be like three to four percent and some eight percent. Point just being SMBs go out of business. A month, yeah. A month by the way, yeah, it was high. It was the highest ahead in February of 2008. Throughout 2008, it was mostly between three and four, which is terrible.

23:50I mean, even at three or four, that's 40 to 50 % a year. It's really bad. You're an investor, say. Do you invest in a company that serves SMBs with three to four percent share on rice? We do invest in companies that serve SMBs. That's become like a really great starting point and you can build a healthy business there, but more importantly, use that success to move upstream to the mid -market when you're product and brand and your sophistication, justifies it and then eventually to the enterprise, potentially these are very common plays. But yeah, with three to four percent, not a lot. I mean, you have to have a lot of other things going right because actually you just don't have a business.