20VC: Hubspot Co-Founder Brian Halligan on Leadership Lessons Scaling Hubspot to a $28BN Market Cap | The Best Series A Investment in Venture History & What Makes Sequoia so Successful?

25:31I've got a weakness that it's a minus ten extra. Just leave it at minus tax because I'm never going to get it to plus ten. That's kind of how I think about it. Did it upset you? Yeah, kind of. Yeah, reading that was a little upsetting. So I've been reading about Jensen Huang and Elon because they've got such unusual CEO styles that completely fly in the base of everything that any CEO coach or anything you write about being a CEO will teach you. Jensen Huang's really got a very different playbook like he's a CEO of NVIDIA. One of the things he does is he criticizes in public. So he's got his team, he's got 40 direct reports, which is pretty weird, or 50 direct reports.

26:09And if somebody says something disagrees with it does something that he didn't like, he will in front of everyone, I think he does it in a very nice way, but it'd monitor them or criticize them or give them feedback so everyone can hear it. And I remember back in the day getting feedback that I used to do that, people really did not like it. and I probably didn't deliver it as diplomatically as Jensen does. And that has popped into my mind and I sort of fix that. I always try to give kind of negative feedback in private and public praise in public. I think Jensen might be onto something on that.

26:42I think I could have delivered more diplomatically, but that was when I was thinking about this interview than I wonder if about. Brian, help me. I'm a young CEO. I am incredibly direct. Many you sit down and say, Brian, listen, that's beyond us. That was shit. you need to improve on this, this, and this. And please don't do that again. And people find me too direct and too harsh, if we're honest. I was seeing one of the things I worked on was getting more diplomatic over time. And the other thing that I didn't realize is how much Harry people really listen to everything you say. Yes, so you emerge as the founder with the company.

27:17Everything you say, people pretend like they don't listen and they push back at you, but they remember what you say. You run into something and you know, You'll be walking down Newberry Street in Boston, bump into an employee, you'll have coffee with him. They'll say something, remember when you said this four years ago at a company meeting, no, I don't remember that at all. So people really, really listen and over index on what you say. And so I do think getting better and more diplomatic over time did help me and help the company. These are the rather control freakiness. I get you, but I quite like sweating the detail.

27:51And I think some of the best armors do sweat the details. He mentioned Elon. You know, when you think about Elon and his mind, I don't know if he listened to the Walter Isaacson work that he did, but he said one of the most special things about him is like the detail orientation he applies to systems, machinery, systems thinking, I think Elon sweats the details and I think some of the best do. How do you balance sweating the details but not being too control free, Kish? I will tell you the one thing I learned from Elon. So Sequoia has an annual, I call it a glamping event. Darmesh and I would describe as is indoors.

28:25He's not outdoorsy. And so they invited us to the clamping event We debated it like should we go it's in clamping event as great speakers could be really good So we went and I'll tell you a funny story about but it's a first clamping event We went in the first night Harry was freezing cold freezing cold and it was freezing and we're intense and I'm like God, why did I come here? In my tent mate was John Collison from Stripe. And I just remember I was so darn cold that night. I was tempted to be like, hey, John, did we just cozy up here? So we don't freeze the death tonight. I fortunately resisted that temptation, but I've never been as cold.

29:07Anyway, the next day Elon spoke, and I remember his presentation, he probably would forget it, and he spoke above Vector, so he's a physicist, and he thinks about vectors and their power and their strength. And he talked about how organizations have all their people, their different vectors. And in most organizations, you have some strong vectors, really strong employees, and some less strong employees. And in most organizations, your vectors are pointed all over the place. And he's like, the one thing he focuses on if he's detailed about, it's just trying to get all those darn vectors pointing in the same direction.

29:38Small vector, big vector, but all pointing in the same direction. And I kind of think about it as inside of HubSpot is 8 ,000 people. And if everyone's pointing in different directions, you add, let's say, 8 ,000 is each a value of one, and they're all pointing each other. You get a value of zero. But if you get them all pointing in the same direction, you know, the value is 8 ,000, how do you get as close to 8 ,000 as you possibly can? I remember that clearly from him. So I think he's in detail on certain things, but certainly not everything. You see, oh, I'm X number of companies. I can't remember five, six companies.

30:09He can't be completely in the details and everything, but it's in the details on systems thinking types of things like that. It's funny because I went to a Sakura event and John was my attempt mate and he actually suggested spooning. So Sean's gonna listen to this and be like, what the fuck? My question is just on that, like the vectors. What does that actually mean Brian? So does that mean like set a North Star on a line everyone to the same goal? Or is it like, may everyone have the same similar broad set of skills? You don't want that because then you'll have weaknesses that aren't covered.

30:41What does that actually mean in reality? I think it's really underrated. I spend a lot of time with startup founders who are CEOs and want to go from startup to scale up. And I think a big leap for HubSpot was when we got on this vector bandwagon and we got into a planning cycle where we can be like, here's what our mission is. Let's not change that or change it rarely. Here's where our strategy is for the use this year. Here are the main initiatives we're going to work on for this year. Here's how we're going to track them. Here's the infinite number of initiatives that are proposed and people are kicking around and talking about and want to do in their pet rocks that we're not doing this year and we're just gonna ignore them for another year.

31:17Once we got some discipline around that then the effectors got aligned, the company worked a lot better. We mentioned that kind of my directness in terms of my feedback. And then I, you know, you mentioned listening to the score show from Atlassian, I speak to you. And I honestly look at other CEOs, read about other CEOs and go, I should be like that, I should be like that. And you said before, Or, you know, be yourself. Well, actually, I think it's time in ways to be fair. He said, be, you know, plagiarism is a friend unless you're Bill Ackman. Be yourself, because everyone else is taken. Did you always know the leader that you were?

31:54And can you take me to a time where maybe you didn't? I still don't, Harry. Yeah, one thing I've learned about CEOs, they're all very, very different. And there isn't one model or one formula or one background. I've tried to look at different CEOs and come up with a rubric of like, this is what you look for. Here's the five questions you should ask a founder to tell if they can scale as a CEO. I haven't come up with that yet. I had three CEOs prior starting up, so what I worked for. One of them was an inspirational sales leader. one of them was a very detailed finance venture type person. Another was a product visionary.

32:38They could not have been more different in background and demeanor and leadership styles. I tried to take the best from all of them but I would just struck as they look back at how different they are. So I don't think there's like a playbook or criteria that this is what a CEO should be like. I'll tell you another story Harry. When we had about 20 employees I joined a CEO group. By the way, if you're CEO at their CEO groups are incredibly helpful. And I joined one in Boston. It was called the high growth CEO group. And there were nine members of it and they were looking for a tent. And I interviewed to join and I largely wanted to join because one of the members was a guy named Colin Engel.

33:19You wouldn't have heard of Colin but he started I robot the room of backing cleaner. And I would describe my relationship with calling in two words, man crush. I really thought he was amazing. He was an MIT guy, started a company. It was public. It was a high flyer at the time. And I just wanted to learn from him. And there was another guy on there that had started a company called E -A, called Russ Wilcox. And that was another high flyer that you wouldn't have heard of, but they made the screens for the Kindles when the Kindle was first out. So it was up fire. And then there were a bunch of other CEOs of other kind of random companies.

33:51But I really liked those two guys. And seven of the CEOs were hired gun CEOs from the outside kind of been there done that and two of them Russ and Colin were founders. I remember at the time 20 employees and I wanted to seem like a CEO I wanted to act like a CEO and I wanted to be you know central casting and what I noticed in those meetings was Two of the companies were incredibly successful Seven were kind of going sideways. The two were successful. We're founder CEOs. And those founder CEOs were really friggin quirky. Like super quirky guys. And they're great. And the other guys acted like CEOs.

34:29And I was like, I'm quirky inside. Maybe I can just be quirky like these two. And so I tried to start being myself after that. And it paid off. Trying to be somebody else has a lot of overhead to it. Those two had a big influence on my crew. I love that. I totally agree with you on the quarkiness. Anyway, I'm just gonna I'll save you the wary of your already like are you working your quirky me? Yes, I am not Thank you so much. I do want to learn from you though and kind of start at the town funnel Hiring is something that I would say is my biggest weakness. Honestly actually Brian. I hire amazing people But I have a low hit rate So like 50 % work out was the review that we had I had 10 people in the last three months 5 stayed in 3 months.

35:15What are your biggest lessons on how to hire the best talent and what would you advise me? Okay, one of my biggest lessons is that's about right. I used to be myself up when we'd turn someone over, but I think most scale ups aren't that good at hiring. And I think there's a fair amount of luck involved. They don't have a great hit rate. I think 50 % within the first year and a half is close to what most companies are in scale up mode. It sounds a little high for where you are your small organization, but I was glad if we turned someone over a year and a half in, we definitely beat ourselves out in like, all that, but when I talk to our peer companies, it's kind of, it's high.

35:51Like there's a lot of turnover. What are the biggest hiring mistakes you made? I'm a big one for fooling for logos, one. Okay, I would kind of frame it a different way from the logo per se. My analogy for being a founder CEO, trying to go from start up to scale up. It's like you're climbing a mountain and it's very icy and there's like an ice cliff in front of you to get to the top. I think what in you're trying that you get your pick and you're going up the mountain and it's treacherous and most people fail and the reason they fail is really hard. And where I think people fall down in hiring and they have when they're hiring board members or hiring tech team members, it's not just the logo, what you want is somebody who's three years up the icecliff from you who's struggled through that same path.

36:39What you don't want is someone who's 10 years beyond it or even worse, somebody who's never really climbed that icecliff, they started their career on top and stayed on top. And so it's not just the logo, like I think it's okay if you hire someone from a much, much bigger company if they have climbed up that icecliff and they have seen the lessons. I'll give you a great example for a HubSpot. We hired a board member a long time ago whose name is Jay Simons. Jay was the COO at Atlassian and you had the Atlassian founder on your podcast. I know Jay well. I had Jay on. He's a absolutely legend. He was three years ahead of us on the icecliff and HubSpots, whatever, two points, something billion revenue there for something and there were a few years ahead of us on the ice clip.

37:28He had just seen everything already. So he's on the board, we're having an issue. He had just solved that issue or just dealt with that issue. And so that recent relevance was incredibly valuable. And so that's what I would encourage. And so like a HubSpot's hiring today, we're looking for a board member. I'm pretty skeptical of hiring someone who's been in Google a long time or Microsoft a long time. But if I'm looking for somebody who's in service now or into it, yeah, that's pretty interesting to me So I'm looking for somebody a few years ahead of us would you hire someone if you had reservations about them I'm asking specifically.

38:01I'm hiring someone potentially now. I do have concerns I don't think I ever hired anyone where I didn't have some concerns. There's always red flags And you just got over them how often did those red flags materialize versus they didn't they usually did you mentioned the quirkiness Yes, I'm quirky too. I also work really hard and I drive a very intense culture of hard work. That's not very popular in modern society with younger people. How do you think about like founders who are quirky showing their quirkiness and hiring? Do you know what I mean? I don't want to put people off by being too quirky up front.

38:39I think you have to be yourself. You have to shave off a little of your hard edges probably. I had to definitely shave some of mine. I was very much myself and I think it attracted a certain type of people and it definitely repelled a certain type of person like You spent your career at McKinsey you come in and interview with me You're probably not that interested in working for me. You're probably not And that's funny now I think you've fallen a trap where everyone's similar But I would be surprised if anyone you hired didn't have some red flags Everyone would be hired. It's like well, they've kept some strengths and weaknesses Scale ups fall down on hiring, a founder's fall down on hiring is you've got a panel of people who are interviewing a VP from whatever of products and you've got eight people interview them.

39:25First candidate, Mary gets four out of 10, four out of fours and gets four two out of fours. And so it's mixed. And then you've got Jane who's got eight three out of fours. You always hire the Jane. That's all that's just always happens. You always have the Jane. I think you're better off in the Mary and you want kind of spiky team with some people have great strengths and great weaknesses And you want to spike in different directions. I think you want to avoid that Lois common denominator type of hiring. I always actually say that to LPs a lot of LPs Asked me about manager selection and I say like you should invest in the ones where it's like they were terrible they never responded to an email, but they also had Brian saying they transformed my company, and I couldn't have done it without them.

40:11That's an advantage I want to get behind. Yeah, I get pretty irritated, though. I do think it's a signal that people take three days to respond to your email. I think that's always been a big red pie for me. Do you think speed of response is a feature, not a bug? I do. How do you manage it, though, Brian? Okay, this is the run apart because I'm not that good at this. So we were just talking about like reflection, And I don't do New Year's resolutions, but every quarter I do a quarterly plan. So I kind of grew up in sales, so the sun rises and sets in the quarter for me. So I just wrote my quarterly plan, and I typically get about half of my quarterly, I've got like six or seven items on there.

40:45And so I sit down and do those quarterly plans. Now the tricky part with working with me is if something's not on my priority list or my quarterly plan, it could be weeks or months before you get an email response from me. But if you happen to be engaging me on something that's on my quarterly plan, I'm back to you and half a second. If I were hiring me, I would have some red flags on that. Another thing would say about prioritizing, Perry, is I think too many people run their life through Slack and through their email, and that's everyone else's priority list imposed on you. And so you're really just spending your whole time, we're gonna never once do so, and you have to do some of that, of course.

41:20And people just don't spend enough time like, well, what am I trying to get done this month or this quarter, whatever it is, and like have their list and like I need to make progress on my list today not just be responding to everybody else's emails I think the way email and Slack and text works is you're just very reactive Brian, what's on your list today? You're not seeing your hub spot anymore Okay, you want to know yeah my list today or this quarter you choose okay, so this quarter I have some things I don't want to tell you about on there. I do want to get married I've never been married.

41:53I don't want to get married this quarter but I want to get married Are you dating? Yeah, this is part of it. Why do you want to get married, Brian? I've never been married. I'm tired of being single and I want a life partner. I think it will make me happier. A lot of my are health -related so I'm a little obsessed with like everybody who comes to your podcast obsessed with my longevity and Andrew Huberman all that shit. So fair amount of it is health -related. I like what sort of thing if you don't give me one. I absolutely crushed my back last quarter movie a couch It was like I had a knife stuck in my back and I don't want to do that again And so I go to PT.

42:34I'm doing yoga. I think I'm obsessed now with my back if it's much better But I want my back to be it's like okay I think of it's like you're redoing a house You've got the crappiest room in your house You want to go in the crappiest room and make your crappiest room your best room and same thing with your body Okay, my back is the worst part of my body. How do I make the worst part of my body to the best part of my body? So like that, for example, is on my list this quarter. Okay. What else? Okay. And preview back. Okay. I don't know if I want to tell you anything. The shit Harry. Then why is the judgment freezoned?

43:04No, I can tell you. Okay. Listen, we do quarterly planning. Do you review them, by the way? Like do you do morning? Every morning, I look at my quarterly thing. I'm like, I'm actually working on the important stuff. Or am I working on the big stuff or am I working on the little stuff? Am I working on every else's stuff or am I working on my own stuff? Do you mind if you don't hit them though? Like you said, you may have... I'm okay. I typically have like a 50 % hit rate. Some of them are hard. Do you carry them over if you don't hit them? I sometimes do it, sometimes kill them. Sometimes they become habits.

43:35So some of the things they put on my to -do list are habits that I want to inform. So last year a lot of them were about work out every day. Now I work out every day. It's a habit. I do it every morning. I don't have to put it on my goal list or eat in a certain way. that kind of thing that takes certain supplements. Some of that is all kind of baked in though. I don't think people really care about that kind of stuff. And like, why would someone care about my quarterly plan? Oh, they know they am see Duke. If you think everyone wants to be their best selves and everyone wants to improve in some way, I didn't do quarterly planning.

44:05It actually be quite helpful, Brian. I'm pulled in every fucking direction. Yeah. And I end up probably misusing a lot of my time. Actually, every day to go, right, this, this, and this, that is my job. Yes. How do you help? It's super helpful actually. Yeah, maybe you're super helpful. I've started doing it a couple of years ago. It's been huge. Also, I think people forget this with like content and shows, which is like, yes, people want strategy and theory, but they also want to who you are. I think this is why shows with venture capitalists are very difficult because the venture capitalists don't even know who they are.

44:35So it's difficult for them to say it on a show. Nobody knows where it is. Anyone really know where they are? No, but you can pay $300 an hour on your therapist or tell you if you're me. Can I ask on the talent side the thing that I struggle with is actually letting people go as well? I mentioned I'm going to be in direct. It sucks letting people go. What's been your biggest lessons on how to let people go the right way? The most frequent reason I let someone go in the most common failure condition is I kind of think of this equation of Are people solving for themselves for their team or for the enterprise?

45:12In the failure condition for people scaling up in their careers, your VP, your first time VP, or whatever it is, they don't solve themselves, almost never did they solve for themselves. They're solving for their team, and they're optimizing for their team, and while they're optimizing for their team, they'll, by the way, they're sub -optimizing for their neighbor's team. That's the number one failure condition, where, as we're scaling up a VP or a director, whoever just isn't doing well, and their team's giving them feedback that they're not doing well. other peers to give them a feedback. That's the failure condition, solving for their team over the enterprise.

45:46Solving for their team over the enterprise. Do you think they know that they're doing that? They definitely get feedback on another thing I would say, this is a little depressing, but we do net promoter surveys, the whole company, we've been doing this for 15 years. Where once a quarter we ask every employee, scale it one to 10, how likely to be a root for HubSpot is a place to work, and then why? People write novels on that too. And we track it, and then we track it by department, And the scores move around by departments they can move around a lot. And so let's just say you've got a VP of marketing and their net promoter score for marketing.

46:19It's like 55, 65, 58, 59, then boom, 30 and some feedback on that VP. And so we package all that up. We give feedback to the VP. Oh, you're solving for the team over the unprep, blah, blah, blah, blah. And they work on it. What I found in its little depressing is you put somebody on a recovery plan. more often than not, they don't recover and we end up parting ways to that person. Once they've lost their team, they almost never can get that team back. Do you agree when there's doubt there's no doubt? Mass Levchin told me that. I don't actually know what you mean by that. When you doubt someone's abilities, he's to a job.

46:56There's no doubt that you should let them go. Never before have you been like, gosh, I really don't think Brian's got it. And then actually you were wrong and Brian has it and he surprises you massively in a year's time. Yeah, I've been wrong, but generally that process of having the whole organization weigh it on it like me individually I've been wrong the organization is usually right. Do you have any tips on actually how to do it? Like the words that you use in terms of letting people go the words that you use the settings you have other people in the room Anything not to say do it live not on zoom.

47:30Don't have anyone else in the room the empathetic be fast if it's a surprise It's your fault. You mentioned the MPS there. HubSpot is always hailed. And I've listened to sort of like, you've done shows before. I've listened to all of them, by the way. And people often ask me like, what was HubSpot's magic about the culture? And the kind of the fourth time I was like, God, I wish someone would ask, when did it go wrong? And what did you learn from it going wrong? There's always a time in a company to judge you where it breaks. It broke around 100 people. What happened and what were the signs? I think it always breaks at 100 people.

48:05100 people you go from knowing everyone in the organization knowing a bit about their background you interviewed everyone to Gosh, you just don't know some of the people it goes from very flat like there's no layers or there's one layer to like There's two layers in there or two layers of management in there. It starts slightly to go from everyone's missionary to their summer scenarios. There's something about a hundred -ish people, 150 people, where most CEOs I talked to, something kind of changes in there. And we started getting very serious about culture around that time. It was shaky in there.

48:42And then we started going quite serious about writing down what our culture is, trying to embed that in our interviewing processes, tracking it with net promoter scores, being very transparent about what those scores are, what UP Beck is working on all that stuff. We got very serious about culture and over index on it for many, many years. I think we got quite good at it. Brian, a mercenaries bad if they're pointed in the same direction. I think most of your employees are mercenaries, post 20 employees, largely mercenaries. And I think it's fine. I think mission -oriented companies have unfair advantages in that they're able to track better talent, retain better talent.

49:20I think people today have lots and lots of opportunities like the unemployment rates are quite low. Generally speaking, very talented people have lots of opportunities. Humans are quite mission driven these days. I mean this in the nicest way. Do you think so? If we think about hubs or empowering SMBs to do more creating opportunities and jobs, respectfully, of the 7 ,000. How many people are like, yes, I'm empowering SMBs today. So first of all, our mission is enabling millions to grow better. So not grow in a crappy way like creating spam and in co -call and advertising of people but like how do you market and sell in a really match the way you market and sell with the way Humans actually want that to happen and so I like our mission Really like our mission and I personally motivated by it And I think some of percentage of the employees are but like are all of them definitely not and it's okay You know, that's okay.

50:13I do think a decent percentage of more I don't think though like okay, let's say 7 ,000 employees at X percent are very motivated by the mission Let's say we're at 70 ,000 employees is that 7x? I doubt it How do you think well? I owe only higher A star players? I'm like when you get to 7 ,000 people by very nature of A star you can't have that many A star You just inherently have to have B and C team players at that stage. Is that fair or am I being unfair? I think these you gotta sneak in, you gotta keep the seas out. And I think companies need to have good review processes and good feedback, and they have to move people out if they miss the hire.

50:51And I think the companies do that. Can speaking of people around you, a Sequoia obviously led around, can you talk to me about how Sequoia came into the fray and what that looked like? Sure, Sequoia was big help tops by the time. So we're a Boston based company, and Boston based company is like, no one gave us a hoot. I mean, we would go out to the West Coast and raise money. I remember the fundraising trips where Darmesh and I we get on the plane we're all fired up like we got this We got 20 meetings of San Hill Road up and down San Hill Road and then I remember getting on the plane on the way back We're both Just get crushed up and down San Hill Road in this one particular trip We had like whatever 17 meetings with VCs and got 17 dose row our last meeting was a guy named Jim gets Jim Gatz is kind of a legendary BC.

51:38It's Coius. Remember, Darmesh wasn't with me this time, sitting in the conference room. And I was nervous. You know, it was just a coyote. It's like the center of capitalism. Sweaty palm, sitting there waiting. Jim's kind of a legend. And Jim walks in and as I'm shaking his hand, like my hand is moving up and down like this. He says to me, Hey, Brian, what's it gonna take for Sequoido in a piece of up spot? And I said, really not much. Just give me a turn. I'm ready to go. I had no other options. And so Jim kind of shook my hand. We spent a bunch of time with Jim. And then he handed me off to an up and coming partner named Pat Grady, who I think you know.

52:13And I thought we would have a term sheet and would be done in a week. And Pat spent the next three months going through unit economics through just every line of every spreadsheet. And I'll tell you one funny story about Pat. So we're in Boston and he wanted to talk about how we calculated Cat or something. By the way, during the time he dug through all that, He figured out we were calculating unit economics wrong and he got our head straight or a pricing model He fixed a bunch of stuff during that and I thought that was gonna say no as you went through all this But my pack -ratey story is and I think this part of why it's quite successful is he texted me and he said hey You get time tomorrow at 10 and I said no, I'm tied up at 10.

52:54How about 11? He's like no, I can't do 11. He said how about nine year time. So I can't do that He said, how about seven years time? And I said, well, I'm usually just waking up, but sure. And then I thought about it. Four o 'clock in the morning his time. I was like, Pat, do you have a life? Anyway, we had that meeting. Pat was incredibly helpful and squamous, incredibly helpful, sort of rethink your pricing model or your economics. It really got us on the other path. They were really good. But that was the process was to co -aggishake with Gets. Really was engaged. path dragged us through the mud eventually got to yes and then we did the deal.

53:30What do you stand do you think Sequoia is a needle moving event when they invest in your company? You know a lot of people say like oh it's really all down to the found I mean at the end of the day cash is cash and sure it helps a little bit with brand but whatever or is it actually no it really is a seismic help. For us it was huge it was needle moving there was one of the biggest needle movers it was the brand was huge for us they helped us with our business this model a lot, pricing model to their network. They do something or they did something cool back then. They called the Sunrise Tour.

54:04So once they make the investment, they invite the leadership team to come, just meet everyone in this school, community, all the right people at LinkedIn and at Google that you name it. And so like, bam, your network gets three times bigger when they become an investor. They were kind of huge for us. I love that part though. I always do calls with him. We have like a monthly pool. And it's always at like five a .m. and he's already done a workout and I'm like, I'm fucking strong with it. He's a machine. I think they all are, by the way. Is that what you think makes them successful? You've worked with them for years now.

54:35What if you were to say, what made some successful? Are you an LP in them? I know. I am. Yeah, so we're both, what do you think made some successful? OK, nothing quite well. I think there's a network effect in the venture business, of course, so they have an unfair advantage in that they did LinkedIn. They did Apple. They did all these companies. So they have that network and they have all that knowledge. and they have that brand. In some industries brands more valuable than others, it's very valuable in ventures. So that, of course, is given where I think they're special is they don't take any of that for granted.

55:07So there's a whole new crew over there that runs it Pat and Ruloff and they're paranoid. They don't wanna lose that mantle. They know they have something fantastic that more it's in the rest of the game, that we only gave them. If they work much harder than any of the VCs that come across and they're absolutely paranoid that they're going to lose it. There's something in their genetic code where I think this works for them, but they can be depressing if this is in your company. They don't celebrate their successes. They beat themselves up for their failures. Really beat themselves up for the failures.

55:37And I think they kind of dwell on their failures and they don't want to repeat those failures. I think there's something in the culture that will sustain that competitive advantage, at least through this generation. It's very, the current crew is really good. I think the current crew is fantastic. I agree with you as well on the work hard. I've never seen Atheic like it. Can I ask another slightly personal one? But I heard that Sequoia bought some stock off you and it was one of the most costly mistakes you made bluntly. Can you take me to that? Why are you sold and just the decision making for you then?

56:09Yeah, it was sort of series D. I forget how much they invested, $40 million, $250 million valuation. Like I said, if they didn't do it all 17 other VCs had said no. And so we were very grateful they did it. Okay, it was a complicated route because Salesforce .com invested in Google invested. This is before they had like big venture arms. So there just wasn't a lot of room in there and they came up with the, I thought a clever solution which was, we'll buy some of the, the Zech team and founder shares, which is very common today, of course, buying secondary. It was, it wasn't back then. And so they bought it.

56:41And if you think about that, I sold some shares at a $250 million valuation that the companies were 100 times that. But I would also say I don't regret it at the time. I don't know how much it was call it a million dollars Relative to my current network. It was very much a life -changing and so people think by the time value of money the time value of money And they think about okay, you have 10 % return out. That's not how I think about it like a million dollars Then was so much more valuable to me than today, let's say and so it was very valuable to me It was very valuable to Sequoia and they was smart of them because they were nervous We were going to sell the Salesforce .com Salesforce .com made an investment They were not thrilled about that idea at the time because there were worried Salesforce would come in and buy a sip Whatever at 2X and you know Sequoia wants to make a ton of it and so they come up with that clever solution I think it worked for them because it gave us a backbone It moved our Verizon from like two years out to like 20 years out and really let us plan for the long term and have a strong backbone if someone did command a one -on -quire it.

57:41It worked for both of us. What advice would you have for founders who are considering selling some secondaries? I would do it for exactly those reasons. It's going to give you a little personal cushion which is useful. It aligns your incentives with your venture capital investors. We never built HubSpot to sell it. We could have easily built HubSpot on top of the Salesforce platform back then and we would have probably grown faster. We decided to build it separately and integrate in which made it less convenient but we always thought will build a standalone company that will last for many decades.

58:12What was the most tempting opportunity to sell? I'm sure there were many. There weren't. There really weren't. We had very, very, very little interest. We've never had like an offer. We had very, very little interest in the acquiring. By the way, that surprised me. I just assumed people would be knocking our door down back in the day. Almost no interest. We mentioned Pat. We mentioned our love for Pat. I definitely have an insecurity and people People throw shit at me on Twitter, Brian, for commenting on operations without actually having had a career as an operator. I vehemently argue back, I'm building a media company.

58:47We have many people in the media company. It does millions in revenue to me. It is building a company. Whatever that is, you said before about the importance of investors have been former CEOs and former operators. Why do you think it's so important that your VC has been a former operator or CEO? Can you just take me to that thinking? Okay, I remember when we were starting HubSpot, we wanted VCs with Ben CEOs. And by the way, most startups don't have a choice of like 20 term sheets. We certainly didn't. If we had the option of having a VC who was the CEO before, that was, we would go with that.

59:21It was a plus. Give the terms are the same. And our A and our B were VCs who had Ben CEOs before. Pat had not, and he did the D, and he had an observer C. And I would say Pat was relatively quiet, but Pat figured out ways to add value that were super useful around benchmarking relative to every other tech company in the world, network with every other tech company in the world, and really geeking out early on unit economics for SaaS companies. So we found ways to add value where he didn't stick his nose into operational details per se. So I think both can work. I think the reality is there's very few VCs today who are been there done that CEO to build big companies.

1:00:02There's very, very few of them. I don't think you can have that criteria anymore. And I actually don't think it matters. And so let me just unpack that. If you were a CEO before COVID, very different approach to work, different generational thought process around what motivates them, pre -AI, very different, pre -cloud, very different, what it takes to be great is so different. You can play book and templatize it. It's fucking different. It doesn't matter. And so actually, Are they a good source of cash? Are they supportive and won't throw you off a board when it's a shit quarter? And do you like working with them?

1:00:37Well, I think it's important if your VCs haven't built companies before, or their pattern matching is light, they're new. Having a great independent is worth his weight in gold. So we were early, we had two founders on the board. We had two VCs on the board. Our first independent was women and gale goodman that people wouldn't have heard of. She was the CEO of Constant Contact, which at the time was a real high -flyer. And she had real operating experience that was relevant, timely, she was a couple years up the ice -closed from us. And the thing she had that was useful is that the VCs would get on me, like really grinding me about something not growing fast enough or burning to me, whatever it would be.

1:01:11From time to time, if they were being too aggressive with me, she would sort of back them up. They were a little bit intimidated by her. And that was very, very helpful. She gave us great operational stuff. So having other people in the room who have seen the movie is useful. And I would push back a little yes, everything is different post COVID. Yes, everything is different post AI, but building a team, raising money, how do you build a category? How do you build a go to market machine? Like all of that, that transcends across from the friggin 1990s to today so much of it. So I don't think things are totally different from pre COVID to COVID.

1:01:50I don't think things are totally different in the pre -AI to AI. Do you think the VC product is good to stay, Brian? I think it is. I mean, at the end of the day, they're selling a product to their LPs. The customer's kind of the LP, actually. 5 % of the VCs are incredibly successful, and 90%, or a MAH. Very few are really successful, but they're so successful that the category writ large does pretty well. So from that perspective, I think it's a good category I continue to invest in it. If you look at it though, the small VCs are the ones where the alpha is, not the big ones, and these tenancy to get bigger.

1:02:24But in terms of the offering to their other customers or the founders, when we did our series A, it was a $5 million around on a $6 million pre -money valuation. So we sold 47 % percent of our company in series A. That was standard, Harry. Why was the business not then? We had a half million dollars of revenue growing fast, or maybe even a million. It was doing all right. You know, it was in a whole new category that no one really understood like Mark. You did a tail. General catalyst. They killed it. million at six million. Yeah, we had three term sheets and we're all all right around there. I'm not surprised you had three term sheets.

1:02:57Yeah. So I know we've had a bubble in 2021 or what not. It's popped. But even today you're doing a series A. The product is much better. You're raising five million on a Ford. I mean, you're not really you're not deluding 40 % on your round. Do you think venture is broken though in the way that you are incentivized to scale? A lot of firms are a gallery and asset managers. and we've moved as Doug Leone says from a high margin boutique business to a low margin highly commoditized industry. I do, I think this tendency to grow the AUM because you get management fees on the AUM and limb off those management fees in such a long timeline and where the returns are coming in.

1:03:38I think there's just incredibly tempting to general partners and venture firms and and that's led to too many firms, there's too much money. Let's say we're gonna start a venture capital firm in tech right now. Oh my goodness, you better have a good angle on it because it's so hard to compete. How did you think about that? You're investing now. I have an angle, you know, we're doing a $25 billion dollar company. It's a pretty good angle. I don't even think that's enough on the angle. Like if I were to go in and try to compete with a recent Sequoia with all those folks, I don't think that's a good enough angle.

1:04:09My angle is I started a climate fund and investing in ocean startups. And the reason I did that is because the oceans absorbing much of the carbon dioxide today and it can absorb, if you're careful with it, much, much more. And there wasn't like a real ocean climate fund out there and I wanted to have an impact on like, that's worrying enough to spend my money. And so we become like a magnet. If anyone's got an ocean tech startup, you know, they come to us. Final one before we do a quick fire. You mentioned like 17 VC meeting, 17 nose. What was the worst for you see a meeting you had? It's with a firm here in Boston, a storied firm.

1:04:46It had a storied founder. We had pitched one of the partners several times, Guy Jeffrey, and he was interested, so we came in for the full partner pitch. And the founding partner was a little rough. Anyway, he sat next to me. I hadn't met him. He's kind of a legend. And I've done a lot of venture pitches. I had it down. Let's just say I'm lively in the pitch. And he fell asleep. He felt fucking sound asleep during my pitch. And they sat next to him and I kind of just shared a welcome up. And so we finished the pitch and I remember our match when I was looking each other well. I guess we're not going to turn sheep in these folks.

1:05:23And then ironically they went away and came back and gave us a trim sheet. That's like that's strange. And then we got the trim sheet hairy. It came through facts a long time ago and we got it. And I quickly looked at it, I was like, oh, it looks decent, sent it to my lawyer. And when the five minutes my lawyer called me which is bizarre and he said I saw the term sheet I was like yeah, how's it look? He's like did you see the pool and I said I didn't really take a look remind me what the pool is As a series day he said oh yeah, it's about you you're holding a side to hire people He said did you see the size of it?

1:05:56I said no, he said it's 22 % and I said okay is that normal? He said seven or eight is normal 22 is a lot. He said why don't you call him and ask him about that I hung up the phone call Jeffrey and I said thank you by the way Thank you for the term she very surprised we got it after the River fell asleep, but thank you just had a curiosity. Why is there such a large pool? He said well just in case we need to replace the CEO. I was like God miss you When we were gonna tell me that you were planning on replacing me. He's like well There hasn't been a good time up up to now, but why don't we talk about it?

1:06:31So that was sort of a bad experience with me with founder falling asleep and yeah, they wanted to replace me. And so you said, where's the doc you signed? When did we stop? I've been wanting to get out of this since the start. Oh, listen, I want to do a quick part. I've so enjoyed this, but I'm going to say a statement. You're going to give me your immediate thoughts. Does that sound okay? That sounds fabulous. Okay, NBA is a ridiculed today. Do you still think they're worth it? Okay, I'm going to give you a snobby answer. I got three things from my MBA. I got a lot of knowledge. I got a great network, including a co -founder and all our angel investors.

1:07:06And I got some pedigree. The truth about an MBA is you can get the knowledge from any MBA. It's the same stuff they teach at every MBA program. You can even get it online now. You only get the pedigree in the network from top tier MBA programs. So I think it's worth it if you go to a top tier MBA program. I would also say I don't think MBA programs are breeding grounds for founders. It's a relatively like if you're doing the decision tree on your career and you decide to do an MBA, it's a pretty risk -averse move. It's not a risk -seeking type of a move and so I don't think MBA programs are breeding grounds for great entrepreneurs necessarily.

1:07:48Speaking of breeding grounds for great entrepreneurs, are people born CEOs? No, I don't think so. I think I learned a lot about being a CEO from those three other CEOs I worked for. I learned a lot about being a CEO at Sloan because they brought so many in to do fireside chats and whatnot. And I think even as a CEO, I've gotten, I'm gonna say even better just like evolved with the company over time and improved. I think it's a craft just like products crap. What was the most poignant near death experience for HubSpot when you reflect back through the journey? We started in 2006 2009 it was the rate in the teeth of the recession.

1:08:27Our retention rate was really we were losing 7 % of our customers a month. That was the only time I thought that we're not going to make it. This is going to go out of business. I thought that was it was about the three of four of them. What would you invest to say? I mean, all their companies were going side -based, but we were going really sideways. I don't remember what the invent, that wasn't, doesn't stand out to me. I just remember being in the company, talking to customers a lot, working on that retention, working on the products. What changed? The economy got better, which helped. I would say one of the things I would criticize about HubSpot in myself is, I think oftentimes companies reflect their CEOs, and I grew up in sales and marketing, and we over invested in sales marketing, we over invested in our hockey stick curve, we over invested in the process of turning a prospect into a customer and get really good at that conversion rate.

1:09:20We should have over invested in turning a customer into a delighted customer. So through all that, we went from being kind of a sales driven culture to much more of a product driven culture from turning prospects into customer culture from two customers into delighted customers. So it's or change the culture, change where we put things in the P &L, it really changed a lot. Did Figma kill the M &A market? It killed part of it, I think. Let's say you're a scale company and you're looking to buy business for 20, 30, 40 million dollars. It's not just that it might not get approved like Figma didn't.

1:09:53It's a 15 -month cycle to find out. And so it used to be you're doing an acquisition. It's three or four months. Now it's like a good 15 months to get through the US, get through the UK, get through the EU. and so all that time a lot can change. So I think you've got to think long and a part before doing a good size acquisition. Having said that, I think the smaller M &A market is going to be wide open. What I think to that point though, like you know, Figma today correlates to about a $30 billion price with the appreciation of Adobe stock price. If you actually think about that, that's very disincentivizing for large players given Nasdaq's rocking.

1:10:28The fact that you could end up paying double for an asset that's actually only worth half. I'm not saying that at Figma, but of any appreciating stock market price that's the way it would be. That's not very encouraging. Why will smaller M &A be wide open? Why would you bother Brian? I think a lot of companies are going to have to sell. They're going to get stuck. He's going to buy them. He's going to get blocked. Private M &A, private to private, which board members are like, oh yeah, blow up your head count by acquiring another company. I don't think they get blocked. I think you're doing that position under 10 billion.

1:11:00and unless it's super strategic, I don't think it gets a long look from the regulators. I think those flow through and they happen pretty quickly. We just bought a company, it was a couple months, it was fast, it was $400 million each deal. So I think more of those happen, I think VCs, I think they'll be very happy to sell their company to a HubSpotter and Lassie and or a Dropboxer, you name it, or even a bigger company. I think Microsoft can buy companies or Google that are five billion or less. I think those go through. Why do you think the IPO market will be wide open? I think it's just correlated with NASDAQ.

1:11:34There was this weird bump that happened in Q4 and has come down a little bit. NASDAQ's up. You look at stocks like HubSpot. It was running along kind of in a normal path. A market cap on up to 40 billion back down to 10. It's at 28 now. We're not a NASDAQ for a new recession, but you know, the tech public valuations are decent. So I think it's a decent time. If you're a striper or you're, I don't know, any number of companies read it. I think you get a decent valuation. I get you. I look at like look Jeff at Twilio and I'm like fuck that's a brutal one, isn't it? You're an activist investor. That's a root of one and I think people will talk about that a lot in Twitter And I do think Jeff is a good CEO But that's skin exception like the number of companies where there's activists crawling all over them There's a lot of public tech companies out there.

1:12:18It's not that common final one Where is Brian in 10 years time with 20 fuck 2034? Okay, one thing I'd like to do is I like to spend time with founder CEOs, startup CEOs and want to be scale up CEOs. They want to go through that journey I went through. And I like helping them avoid all of the mistakes I made. I'm sure. And I do that with my climate fund. I do it with like Sequoia. I'll do that with Sequoia founders. And I enjoy it. It's sort of a hobby and I feel like I'm giving back to that founder and giving back to the universal a bit. So I want to do more of that. I think it's quite enjoyable and a good thing for society.

1:12:54Brian, this has been one of my favorite shows to do. I knew this is one of.

1:13:02Pat Wood in my number one. Thank you for having me on. Dude, you've been fantastic. I have to say, I had really high hopes for that episode, but it really went above and beyond. I think it was one of the most fun shows that we've ever done. I want to say she used Thank You to Brian for putting up with me. What a great show. You can watch it all on YouTube by searching for 20VC. But before we leave it today, Hyve is the market place for private stock. Whether you run a fund, lead an investing syndicate, or invest solo, Hyve gives you unparalleled access to some of the most exciting companies in the world, all before they go public.

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