Perspectives: A Conversation with HubSpot CEO Brian Halligan

Questioning conventional wisdom, along with a willingness to shift gears, has helped fuel HubSpot’s rapid growth

Brian Halligan and Dharmesh Shah are co-founders of HubSpot, Inc., Cambridge, MA. Brian serves as CEO and Dharmesh as CTO. They
founded the company in 2006 after meeting at MIT two years earlier. The company received $5 million in VC funding in 2007, $12 million in 2008, and $16 million in 2009. HubSpot announced on March 8, 2011 that it had accepted a fourth round of financing – an additional $32 million from Sequoia Capital, Google Ventures, and Salesforce.com. This was the first time these three companies had ever invested together in one company.

HubSpot, which has transformed the marketing world by emphasizing the shift away from outbound marketing to inbound marketing, offers an all-in-one marketing software platform for small- and medium-sized businesses. More than 4,000 companies in 31 countries use HubSpot software to increase the number of visitors to their websites and convert more of those visitors to leads and customers. Applications in the software platform include website management, blogging, search engine optimization, lead management, marketing analytics, e-mail marketing, landing pages, and social media monitoring. HubSpot also developed and offers the free website analysis tool, WebsiteGrader.com, which has over 3 million users.

 

Brian and Dharmesh wrote the book Inbound Marketing: Get Found Using Google, Social Media and Blogs, and Brian co-authored the book, Marketing Lessons From the Grateful Dead. HubSpot team members regularly speak at industry conferences and events and have been featured in various media and publications. HubSpot has won numerous awards and has been recognized by organizations such as NEDMA, Boston Business Journal, Mass High Tech, MassTLC, AlwaysOn, Ernst & Young, Red Herring, MITX, ad:Tech, and others.

 

We recently asked Brian how HubSpot is faring while it scales.

 

How did you and Dharmesh realize that you would make a great team?

When we met at MIT, I wasn’t really looking to start a company. However, the more we got to know one another, the more we realized that we had a lot of common interests. We worked well together and kept pulling strings on ideas. With us, one plus one equals three. I’m the marketing guy and he’s the technology visionary. I don’t think it’s a good idea to not have a co-founder. For one thing, it’s lonely at the top. I also think it’s harder to raise financing. On the other hand, it’s a bad idea to have a lot of co-founders, say four or five. By the end, if you raise a lot of money, there will be a lot of dilution and you won’t own enough. A group of four or five also tends to make more conservative decisions due to the group-think factor. If you’re going to win, you need to be aggressive, counterintuitive, and fight conventional wisdom. A co-founder should be someone very different from yourself – someone who will complement your skill set.

Please illustrate HubSpot’s rapid growth in terms of numbers.

In 2009, we had 600 customers. By early 2010, we had 1,700 customers and 12 months later, we had 4,000 customers. We’ve grown to 200 employees – 80 of whom we added in 2010.

Are you and Dharmesh still very hands-on? What role does your senior management team play?

We got lucky in that we had a good early team. We hired people we knew through MIT and our networks. Our current senior team members were among our first 20 employees. We picked well, and they’ve scaled well. I am very hands-on in certain areas, for example in raising money and key metrics. In the early days I sold a great deal. There are months now when I don’t sell. It changes a lot over time.

What are the top three factors you attribute to your rapid growth and success?

1) Before we settled in to scale, we zig-zagged twice. We had one idea that we ended up changing. Then we changed the second idea. Then we found the right idea, the right team, and the right ballpark. The key here was that we stayed open minded.

2) Our positioning is focused on inbound marketing versus outbound. That tension we created early on garnered us a lot of attention. We were snarky and polarizing and it captured the essence of what was happening in the marketplace.

3) We created a ton of content – blogs, eBooks, videos … we wrote a book … each piece became a magnet for customers. Bloggers and customers started talking about us, links multiplied, we came up through the Google rankings. We began to scale in a very interesting way.

 

In the midst of rapid growth and change, how do you stay close to your customers and employees? How do you keep your team aligned?

I try to talk to at least one customer per week – our customer group arranges the meetings. I also spend a lot of time in our customer forums. As for employees, we have a no-door policy – literally, there are no doors on our offices. I sit among the employees and this gives us opportunities to talk. Our internal wiki is also very popular – it’s very active and the conversations are very transparent.

Trust is at the heart of the HubSpot culture. We trust our employees, and hopefully they trust us too. Everyone here has incentives – everyone owns stock. There is no vacation policy – you take what you need when you need it. It is our thought that the basic nature of corporations and work is changing. GenY thinks very differently. They are constantly connected, generally smarter, and much more self-sufficient than previous generations. At HubSpot, we’re working to create a culture that will enable us to attract and retain stars who are well-versed in very modern technologies.

What is one of the major challenges you’ve faced as you’ve scaled?

Different parts of the organization have grown faster than others. We had overfunded sales and marketing and underfunded development – so now we’re investing more on the R&D side. We found that we needed to hire faster. It’s hard even for us to attract the best software developers. So we’re doing some radical things. We recently launched an initiative where if you refer someone we hire, you get $10,000. Anyone who makes it through the first-round interviews and those who get hired get incentives as well. We’ve been fairly creative in attracting R&D talent. That works for us. We follow all the best practices that companies like Google and Microsoft follow, and we use recruiters. However, if you always do the same things other companies are doing, you’ll get the same results – and that is not good enough for us.

I’ve also found that as you get bigger, it gets harder to get away from conventional wisdom. I am the enemy of conventional wisdom. I question everything. A lot of conventional wisdom doesn’t necessarily make sense anymore – a lot of it is broken. But then again, some of it is right … sometimes you find yourself spinning your wheels.

Please describe the role that venture has played in your growth. Any words of advice for others seeking venture?

For us, venture capital has been fantastic. We’ve raised $65M so far and have added great expertise. The cash has fueled our growth. We’re using our latest rounds to invest more heavily in R&D – we’re trying to build a giant. For typical industries in the past, there have been oligopolies – three or four customers holding nearly a quarter percentage each in the total market share. All of that has changed with the Internet – nowadays, the winner takes all of the space (e.g., EBay, Amazon, Salesforce.com, Groupon, Facebook) … there are no number two’s. HubSpot has raised venture to help us keep our lead and push out even further up front.

That said, my advice is to think long and hard before raising money. You have to swing for the fences. A venture capitalist is heavily vested to go for home runs, not singles, doubles, or even triples. If you are not prepared, don’t do it. I’d also say not to do it if you have a billion dollar idea. You also have to be careful about how much time you spend on the process. It can be a long and complicated endeavor, so you have to consider whether that time would be better spent with customers. Know, too, that even if you connect with one partner, his or her partners can be skeptical and hard to move. So it’s very important to find the right fit.

What advice do you have for other founders and senior managers of young technology companies?

First of all, don’t waste your money on traditional outbound marketing. Pull people in with Google, Twitter, blogs, etc. This strategy scales better and costs less. Second, question conventional wisdom – it’s often wrong. It is said that 80% of startups die. If you do what most of them do, you will probably die too. We’ve never had to walk through the valley of death. Ours has been a rather smooth ride. Sure, we have weeks where we’re putting in 60 hours – but there have been no near-death experiences. It doesn’t have to be awful like that! If you have a great idea, a great co-founder, great people, and a good market that’s changing, you have a shot. It’s really hard if you’re in a crappy, crowded market — and even harder if your product is not remarkable. It’s very tempting to follow the herd, but in the age of the Internet, you need to be remarkable in every way, shape, and form. And the nice thing is that if you are remarkable, the Internet will put wind through your sales. But you have to radically differentiate yourself. Watch your competition, but never follow it.