The Exchanges

Q thought about this a lot, two elements to it, but I don't think it's obvious who wins are Cummins in startups. It's obvious there's a thousand startups, there's a thousand flowers, but what's your nuanced learning from HubSpot plus Sequoia on who wins in B to B? Who wins in AI? Who benefits the most? Or who benefits the most is maybe a better way to put the question, right?

A I think that the age of old, it's the startups are innovating and they're racing to get distribution and the bigger companies have distribution and they're racing to innovate. The twit this time Is that the data is very hard to acquire for a start. So it's not just the innovation, but you need a proprietary set of data to do something cool with AI. And I think of HubSpot, for example, We've got the Zoom data. We've got the calling data. We've got the email data. We've got a lot of the unstructured stuff. And then we have all the structured stuff too. And if you're a startup breaking in and you want to do some amazing AI work, it's tricky with all that. And so I think it buys Salesforce HubSpot, the bigger companies, a little ton. The other thing I think is a little bit different about this than other platform shifts is it feels like everyone has read and learned the lessons of Clay Christensen and The Innovator's Dilemma. And the incumbents seem to be moving very quickly, whether it's Microsoft or HubSpot or Salesforce, you name it, no one seems to be sitting on their hands in this one. So I like, as I play both sides of this, but I, but in this particular case, I think the incumbents have a little bit more advantage than in most platform shifts.

AI assessment note: “in this particular case, I think the incumbents have a little bit more advantage”

Q Yes. What's the secret sauce? We built our last point.

A We built our marketing app. We have, let's say a workflow engine in there. We have reporting in there, and then we decided we're going to build a CRM suite. Sales. We started building the sales app. We built, started building our own workflow engine, our own reporting, everything. And then one day we woke up. It's like, why don't we put those all down below the stack and have a set of, we call them primary colors that we can paint from data, uh, reporting, uh, workflows is a handful of these. And then each application, we take these pieces and we paint the application because they share these things that makes the application just Fit together so nicely, so much easier to use, so much easier to unwrap, and it's just unique relative to the landscape of these cobbled together monstrosities that the competitors sell. That's the secret.

AI assessment note: “why don't we put those all down below the stack”

Q mean? Is it, is it, is it just SMBs finally getting to use this, these, these SAS products? What is it? Is it just the, cause it's not just the cloud getting big. This is SMBs in particular. This is not CIO budget, right? What, what's happened? Did it just take SMBs a while to get here? Why, why beyond HubSpot being a world-class product, Our SMU is accelerating now.

A I think these products are getting easier to buy and easier to use and approachable for SMBs. And that just wasn't the case for the longest, longest time. The market is there. If you add up the number of SMBs, it's a giant number. And if you add the ARPU of what someone would pay, it is an absolutely ginormous market. Uh, and the good news for HubSpot is we're like two percent into that market. That market is Very, very big, and they're just waking up to SAS if they can use it in most of this market. The market today versus 14 years ago is very different. The buyer of HubSpot 14 years ago was kind of a Luddite, you know, they, they did press releases and they did sort of You know, brochures and stuff like that. The buyer has changed, and they're pretty technical, and they're very savvy with software, and they're very fast with software, and that's been a sea change in our buyers that, uh, our original buyer was someone we call Mary Marketer, and Mary Marketer was kind of a Luddite. Didn't really understand, didn't understand technology well, didn't use it well. We had to teach her how to use technology. Our buyer today Is very, very different. It's pretty savvy actually with technology. Maybe they're not writing code in the middle of the night, but they know how to use software and they know how to deploy and get value out of it.

AI assessment note: “I think these products are getting easier to buy and easier to use”

Q People would have wanted you to do all. Okay, I have this agency and their software, just you, you guys do it all for me. You, you write my blog, you do my actual SEO engineering, you do my ads, you do every, I want everything for me, right? And I'll pay you a hundred grand a year, right? Instead of 10 grand a year, if you do everything, right?

A I'll tell you an early story of what we had a bit, but so you, you know, our first sales guy, it's the guy named Mark Roberge, who spoke to your conference and stuff. Uh, And I remember the first customer he signed up, Jason, was a company called CEO Dad. And I don't know if he's still around. CEO Dad.com. And he was a professional, uh, he was a professional comedian and his professional dad joke guy. And Mark signed him up and we didn't really know what we were selling at the time. This guy was like our fourth customer and Mark said, no problem. We're going to have our founder write your jokes for you and read them.

AI assessment note: “Mark said, no problem. We're going to have our founder write your jokes”

Q was pretty interesting. And this is, I actually think once you even have two million in revenue, all that matters is the management team. Nothing else matters. You think competition matters, but a great head of engineering and product will outpace the competition, right? A great growth marketer will max a great sales team can punch above their weight class. Is that what you think? 50% of them? What's that?

A I would push back on that, but I would say that too. 50, 60%. So I, one of the things I do at Square, I run something called the Kids Table and the Adults Table. The Kids Table is a company between five and fifty million, growing infinitely fast. The Adults Table is a company between 5500, growing at least 70%. And I just saw with HubSpot, like we've hired a lot of its ex, many haven't worked out. And then I just started asking around the kids table and the adults table is similar. So if you're, if you're hiring people and a few months later, 60% of them are gone. Misery left company. I think it's pretty typical. Now they might be able to limit that, but there is a couple of things at least that we're trying in HubSpot to try to get better at it. I'll give you an example. Like we were hiring a head of revenue at one point and we had eight people on the panel to interview the head of revenue and all eight people gave him a three out of four. So good, solid. Everyone saw one of them. And we had somebody else that got Four fours and four twos.

AI assessment note: “I would push back on that, but I would say that too. 50, 60%.”

Q It's got a plateau. It's got a plateau, right? But it doesn't.

A The problem with it takes a long time. You got to build up tremendous amounts of domain authority over a long period of time. And it's, and you know, it's easier to venture back startup. You just get a big round. Give the money to Google and Facebook. First is give it to a content creator, the great, great content that will build you a sustainable, Moat over a long period of time. That's one thing we have going for us that's super sustainable. The freemium product, like we think of ourselves, we want to, the thing that's different about HubSpot than Salesforce or Adobe or, uh, Microsoft or Oracle, all the other CRMs. They started with Salesforce automation and they just bought a whole crap ton of other companies and glued them together and built a CRM that way. And it's a tried and true way of doing it, but I think that's gonna, I think this is something that we're right about that, that we're gonna be right about for a while that everyone thinks we're wrong about, but we're building ours from scratch. Like every line of code is ours and we're building from the ground up and we're building it to be Apple-like, easy to use, like really easy to use, super scalable on the back end. And we're building it off from scratch, so we're handcrafting it versus cobbling it. And I think that's going to really benefit us because we do it that way. We can actually do freemium. Like if one of …

AI assessment note: “You got to build up tremendous amounts of domain authority over a long period”