From Zero to $100 Million: Growth Lessons from Brian Balfour.

Blake Bartlett, Partner by

Every founder wants to know what will get their company to $100 million, but the usual advice – build a great product – falls well short of providing an actionable roadmap. The truth is, there are plenty of stellar products that struggle with growth, and plenty of subpar products that have achieved phenomenal growth. Product quality is important, but it isn’t a silver bullet.

So, what is the secret to creating growth? More specifically, what’s the secret to creating growth that feels almost effortless?

I recently spoke with Brian Balfour, founder and CEO of Reforge and former VP of Growth for HubSpot’s Sales Product Division. In his former role, Balfour, along with Mark Roberge, former HubSpot CRO, and Christopher O’Donnell, VP of Product at the company, led the team developing HubSpot Sales and the HubSpot CRM, a product that in two years grew its weekly users figure from a couple thousand to the high six figures.

“Brian Halligan, CEO, and JD Sherman, COO, at HubSpot did a really good job at giving us basically a startup within a larger company,” Balfour says. “They made sure we had the space, headroom, and air cover to explore and screw up and try a bunch of new things that were so different from HubSpot’s core playbook. The point was to not only build a whole new line of business, but to learn a ton as well.”

During his tenure at HubSpot, Balfour learned what it truly takes to grow a startup from 0 to $100 million. His experience at HubSpot combined with his years working with dozens of other internal and external startups helped him develop an insightful new set of four stages of fit: Market-Product Fit, Product-Channel Fit, Channel-Model Fit, and Model-Market Fit. When aligned in a holistic framework, these four distinct pieces of the growth puzzle are instrumental in helping grow a company to $100 million and beyond.

Market-Product Fit

On his blog, Coelevate, Balfour explains why he prefers the term Market-Product Fit over the more commonly used Product-Market Fit,

“The problem your company solves is something experienced within your market and by your audience, not something that lives within your product.”

In other words, don’t start with the product and then look for a market and problem that need your solution; start with the market and problem and build your product to meet the real-world need. Going at Market-Product Fit the wrong way is a classic case of putting the cart before the horse.

Balfour identifies four key market elements that his team looked at while they were working on HubSpot Sales:

  • Category: What category of products does the customer put you in?
  • Who: Who is the target audience within the category? There are always multiple personas within a single category, so this breaks it down further.
  • Problems: What problems does your target audience have related to the category?
  • Motivations: What are the motivations behind those problems? Why are those problems important to your target audience?

Starting with these market elements, the team then aligned them with corresponding product hypothesis elements:

  • Core Value Prop: What was the core value prop of the product? How did it tie to the core problem
  • Hook: How could the core value prop be expressed in the simplest terms?
  • Time To Value: How quickly could we get the target audience to experience value.
  • Stickiness: How and why will customers stick around? What are the natural retention mechanisms of the product?

One of the key metrics to look at in this early stage to gauge market-product fit is retention. “When I first started working on Hubspot Sales, the first thing we looked at was retention curves,” Balfour says. “We wanted to see what the curve looked like, whether people were retaining on the product. If they are, that’s an indication that the product is delivering a core value.” Once you’ve established that the product is able to retain users, you’re ready to move on to the next piece of the framework.

2. Product-Channel Fit

Balfour says that Product-Channel Fit is what will make or break your growth strategy. It’s also another fit that many companies approach from the wrong direction.

“The biggest mistake that most entrepreneurs make is they think they can build an amazing product in isolation, and once they have a few customers loving it, they can Frankenstein channels onto it afterwards. But it’s actually the exact opposite — you have to build your product to fit the channels. You control what your product is, but you don’t control the rules of the channel.”

In his piece on Product-Channel Fit, Balfour offers some examples to illustrate his point:

  • Facebook defines the rules of what content and feed items appear in people’s feeds. They also define what is allowed via their API’s. They also define which ads get shown and how expensive they are.
  • Google defines what content appears in the top ten search results. They also control what the top ten search results look like. They determine what ads appear and the rules that govern their cost.
  • Email clients such as Gmail determine what is spam, what ends up in the promo box, and what the content format is allowed in emails.

So, instead of thinking about your product and your channels as independent entities, you need to think of them as deeply interrelated elements of a whole. Then, you have to tailor your product to suit the appropriate channel.

Balfour recommends strongly against taking a kitchen-sink approach to testing channels. Instead, he suggests that you reverse engineer your way to the right channels by studying your audience and your product, “You look at five channels, build some hypotheses about which one or two are the right fit, do some experimentation, and iterate from there.”

For the Hubspot Sales product, Balfour saw that they had a transactional model, a potential audience of millions of sales individuals, and a low friction signup. Based on these attributes, he determined that the best channel options were probably going to be some form of virality and some form of paid marketing. On the flip side, he could quickly rule out the sales and partnership channels since both were too expensive for this particular product to support.

“Once we had those hypotheses, we went in and started experimenting,” Balfour says.

“Paid marketing showed strong results within 30 days. We were able to acquire users for less than $1 using Facebook ads. On the virality side, we put in some invite mechanisms, did a few tests, and proved out a modest K-factor. Then we modeled out that K-factor over time. Based on what we could drive, we had the potential to acquire millions of users using just these two channels.”

3. Channel-Model Fit

“There are two components of the model. The main thing I look at is the annual average revenue per user (ARPU). The second thing is how you charge for your product — is it one year up front, free trial, freemium? This is important so you can identify how much friction exists in the model.”

Like everything else in the framework, these two components influence each other. “The friction of the model needs to align with the ‘touch factor’ associated with your channel,” Balfour says. “When those things misalign, your CAC to LTV ratio ends up out of whack.”

In his Coelevate piece on Channel-Model Fit, Balfour looks in more detail at where different SaaS models and specific brands fall on the spectrum of low ARPU/low CAC to high ARPU/high CAC.

In general, however, it’s simply important to remember the relationship between model friction and your channel. “What you charge and how you charge determines the amount of friction in your model,” says Balfour. “You need to be able to overcome that friction with the appropriate channel. So, for instance, if you’re using a really low-touch channel like virality or UGC SEO, you also need to have low friction on your model. On the other hand, if you have a transactional model like subscription ecommerce or a freemium combined with a low price, paid marketing might be the best channel. And, on the other end of the spectrum, sales and enterprise sales come into play in cases where the model has a lot more friction and customers need more help getting past that friction.”

Model-Market Fit

The last piece of the puzzle is Model-Market Fit, a concept Balfour developed based on an idea he’d first heard from Christoph Janz at Point Nine Capital.

“The basic idea is that you can look at a few variables to determine if your product has the potential to become a $100 million business. You look at your average annual revenue per customer or user, the total number of customers or users within your target market, and then multiply it by the percentage of people you think you can capture.”

ARPU x Total Customers In Market x % You Think You Can Capture >= $100M

“The core HubSpot business was mid-market, so our ARPU was somewhere between $8,000 and $10,000,” says Balfour by way of example. “Based on that, the HubSpot marketing product needed about 10,000 customers to create a $100 million business. Within our target audience, there were a million or more of these mid-market businesses, so we only had to capture a very small percentage. That’s a good Model-Market Fit.

“Had we looked at those dynamics and seen that we needed to capture 90% of the market, we would have known we didn’t have Model-Market Fit,” Balfour says. “No SaaS business that I know has captured 80% or 90% of the market.”

As with Channel-Model Fit, there’s a spectrum of variations for Model-Market Fit. In his Coelevate post, Balfour shares Christoph Janz’s graph illustrating the five different kinds of Model-Market Fit:

  • Elephants – Products that get 1,000 customers paying $100K+ year. These are typically products built for enterprise customers like ServiceNow.
  • Moose – Products that get 10,000 customers paying you $10K+ per year. These are typically products built for the mid market like HubSpot.
  • Rabbits – Products that get 100,000 customers paying $1K per year. These are typically products targeting small businesses like SurveyMonkey, Mailchimp, or Gusto.  Products targeting consumers at high value moments also live here.  For example companies in real estate, insurance, etc.
  • Mice – Products that get 1M customers paying $100 per year. These are typically products that target prosumers like Dropbox, or companies that are subscription ecommerce like Ipsy or Dollar Shave Club.
  • Flies – Products that get 10M customers generating $10 per year typically via ads. Facebook, Snapchat, Buzzfeed, etc. all live here.

Balfour’s multi-faceted and highly integrated approach to fit is one that’s worth deeper exploration and real-world application. It’s also something of a moving target because, as he points out, not only do each of these fits influence the others, each one is also always evolving and shifting

When I asked Balfour about how he knows when a product fit is working, he explained that — in his experience — there isn’t one definitive point at which you know that for certain. “It happens gradually,” he says.

“You place one milestone out in front, and if you hit it, you invest in the next milestone. Success happens step-by-step over time.”

At HubSpot, Balfour described the overall process as placing multiple small bets. “First, we looked at the retention curves, then we tried to move the needle on a few of our activation metrics, then we did some work on top of the funnel and tried to find a Product-Channel Fit that would allow us to start driving users at scale,” he says. “At each step of the way, we developed new hypotheses that we had to prove out. We placed bets and performed experiments and kept going. By the time we had achieved a few million in ARR and could see where we sat in terms of customer feedback and in the larger space, we knew we had the potential to turn this into a $100 million line of business.”