Dharmesh Shah of HubSpot: I Promised My Wife I Wasn’t Doing Another Startup After Selling My First One, Then I Met Brian

smallbiztrends · A Few Good Minutes With HubSpot Co – Founder And CTO Dharmesh Shah

Thoughts on the 14 year Ride Building HubSpot

Dharmesh Shah:  I guess I’ll use a couple of adjectives, one is relatively, I’ll say, smoothly. You have the ups and downs of any startup. That’s just the way it is. But I think of HubSpot almost in like multiple chapters. Chapter one of our life was we are a marketing software company. That’s what we did and that’s what we were known for, and did the whole inbound marketing thing and kind of promoted that movement. Then we got into sales and CRM. So expanded out. It’s like, okay, it’s a more kind of broader platform now. That was chapter two. We’re kind of at the tail end of chapter two, and that’s gone well.

But yeah, it’s been a fun ride. I’ll say, I’ve always thought of myself, because I am, a startup guy. So people ask me, “Well, Dharmesh, HubSpot’s closing in on 4,000 people, now, how have you lasted this long?” This is the honest truth. HubSpot’s a publicly-traded company, now, too. I’m having more fun, now, and so is Brian Halligan. We’ve chatted about this. It’s like, okay, well, why is that? How can we be, as startup guys, having more fun now than we were back in the kind of early years?

The simple answer is that we kind of get to sit at the grownups’ table, to some degree, now. We get to put down bets. Like, okay, we have this idea or this vision, we can actually do things and mobilize ideas, and we can bet on longer term things. I mean, of course, you’re always kind of worried about capital and things like that, but it’s nice to have some of the early formative growth years behind us and be able to do kind of bigger things.

Brent Leary: Is there anything that you miss about the early days, particularly when it comes to entrepreneurship and being a startup business?

Dharmesh Shah:  Yeah. I mean, startups are awesome. I love and I think I’m a startup person at my core. What I love about startups is there’s this constant underdog mentality, right? It’s like, okay, well, you’re not sure you’re going to see next week or next month or the company is going to still be around. It’s this roller coaster ride, which is a lot of fun. There’s just so much uncertainty.

Then the energy, often, of that early team is like these are all kind of people with a purpose. Not that we don’t have a purpose and a mission now, we do, but when it’s like three people and a houseplant, there’s just a different [inaudible 00:02:18].

I think it’s an awesome thing to do in your life. But scale-ups are fun, too.

Secret of Long, Successful Partnership with Co-founder Brian Halligan

Brent Leary: It was you and Halligan, just two guys. We’re 14 years into the journey, the HubSpot journey. Now you’re closing in on 4,000 employees. How has your relationship changed with Halligan from when it was just the two of you to now – you’re a publicly-traded company, you’ve got almost 4,000 employees, but you guys are still together? Talk about how the relationship has evolved over time and how you’ve been able to be successful and stay together, because a lot of these folks that start businesses over amount of time, they’re long gone.

Dharmesh Shah:  I think I attribute the modest success HubSpot’s had so far to the fact that Brian and I get along so well. It’s always been the case, from year one. In fact, I wasn’t really supposed to start a company. I’d promised my wife that I was not going to start another company after I sold my first one. Part of the motivation was the fact that Brian and I got along so well and we had a shared passion for small business. We wanted to do a software company together.

I think what’s made it last, it’s like any other relationship, and you have to think about it that way, it’s a relationship. There has to be a mutual respect, if not admiration. There has to be kind of a sense of kind of shared understanding and shared purpose, which we’ve always had from the early days. Then we had a lot of the, I think this has helped, and I recommend this to co-founders in kind of in the early stages of a startup, is to have the difficult conversations early, right?

It’s like, okay, well, what if someone comes along and offers us $50 million or a $100 million and wants to acquire the company? What if one of us wants to leave the company because we’re no longer? What do we do in these situations? How do these decisions get made? How does this work?

We had that in like week one, right, like all the things. The reason we started the company is there was overlap. It’s like we both had had some success in our path, but we had like a bit of a chip on our shoulder that we had something left to prove. We wanted one more step up to bat, so to speak.

Even though I’m not a sport’s guy, I’ll use a sports metaphor …

But the relationship hasn’t really evolved. The way we run the company now is very much the way we ran the company in year one. It’s that we kind of understand each other’s kind of strengths and weaknesses. We have complimentary backgrounds. We have shared values, but divergent backgrounds, and I think that’s helpful. He’s kind of a sales and marketing guy, I’m a tech guy, so that’s helped. It’s been, yeah.

I think the number one thing is mutual respect and admiration. Number two thing, maybe even the number one thing, is you have to actually enjoy spending time with that person. As simple as that sounds, if that’s not the case, if you’re just doing it for the money, you’re doing it for the success, and you just don’t like being around that other individual, the startup is not going to work. More startups fail from co-founder conflict probably than any other reason.

From Startups to Culture Codes

Brent Leary: You’re the technologist and you’re an introvert, but you started thinking about corporate culture really early on in your development. Why don’t you talk about when was it that you realized, man, we’ve really got to put some formalization around culture for our organization, and why was it so important for you to really deep dive into that, because that’s what you did?

Dharmesh Shah:  Yeah. It’s a fun story. So I was not supposed to do culture. We hadn’t really used the word culture a lot in the early years of HubSpot because we’re a startup that’s like, okay, we’ve got product to build, we’ve got product to sell, culture is something big companies deal with once they’re 100, 500 people.

Then Brian went to the CEO group. He would meet with other CEOs in the area, some highfalutin folks whose names you’d recognize. At this particular meeting, the theme was culture. Then Brian’s response was very much our thinking at the time, it was like, “Okay. Well, yeah, you folks are much further along than we are, you know?” Because they asked them like, “What are you doing on culture?” “We’re not doing anything yet. It’s too early for us to really be thinking about that.”

That group of CEOs really came down on him kind of hard. It’s like, “You don’t get it, Brian. Culture is like the number one thing. There is nothing else. If you mess that up, nothing else will matter.” So that was the kind of message he carried away and he’s like, “Okay, okay,” and listened.

Then we had a founders’ dinner shortly thereafter. He told me about this meeting. He’s like, “Oh yeah. I had my group meeting with the CEOs and evidently culture is like super important. It’s going to determine our destiny.” This is the sentence I won’t forget. It’s like, “Dharmesh, why don’t you go do that?”

So I look at him funny. It’s like, okay, I don’t know what that means. Of all the people in the company, I’m the one that likes people the least. Why would I be the one to dig into culture? But he was a much busier person than I was. I’m like, okay, well, how hard could this be? There were fewer than a hundred people at the time.

I looked at it like an engineer would look at it, which is, okay, if I had to write a predictive function to calculate the probability that any given HubSpot person was going to succeed and be one of our stars, I don’t know exactly what the weights are, but what would the coefficients be? What are the kinds of things that would likely play into it, can I figure that out, at least kind of the first order?

So I kind of dug in. I got the data from the team. It’s like, okay, are you happy to HubSpot? Why are you happy at HubSpot, if you are, and why you’re not, if you’re not. That was the genesis. So it kind of started really small as a kind of this internal thing.

I wrote this slide deck, which was 16 slides at the time, called The Culture Code. A fun fact about The Culture Code slide, which has since become relatively popular because we’ve made it public, is that people say, “Oh, it’s like a code of conduct thing. You know, the the word code.” Like, no, in my mind, the code was like literally if I could write code to run [inaudible 00:08:04] and make all the decisions, here’s the stuff that I would do. It’s the heuristics behind how we operate the company, so it’s more of an operating system than anything else.

But yeah, then ever since then, it’s weird, because I have no direct reports at HubSpot, right? That was one of the early kind of founding principals of HubSpot is I would not have direct reports because I suck at management. I’m just not good at it. So yeah, it’s been interesting. Although I was a unlikely kind of official keeper of HubSpot culture, it’s worked out pretty well, and it’s partly because I’m kind of, not outside looking in, but I don’t have a horse in the race. I’m not part of any particular team. I can take more of an engineer and scientist kind of view of it. Yeah, so I kind of just see what I get through osmosis from the team and figure it out.

The Culture Code is now on version 33. We just published an update recently. It’s been a fascinating journey. Of all the code I’ve ever written, I’ll say this, that’s likely been the most impactful. So it’s not the software, it’s been that. That slide deck is, in terms of my contribution to HubSpot, that’s probably number one on the list.

Evolution of CRM

Brent Leary: Also, let’s just talk about CRM. I mean, let’s kind of get into the wheelhouse a little bit.

Dharmesh Shah: Sure. Yeah.

Brent Leary: Your interaction platform started with marketing, and then you built CRM and sales and service into it. How have you seen CRM evolve since you began HubSpot to where we are today? Some people say the principles haven’t really changed. It’s just kind of the way it’s trying to be implemented, the way people are trying to leverage technology, but the philosophies and kind of the foundational aspects, pretty much the same. How do you see it?

Dharmesh Shah:  I think that’s mostly true, right? I mean, customers are customers. I think we are, as a society, more skeptical of the companies we buy from and people we do business with. So that’s kind of changed. The relationship between buyers and sellers, that’s changed.

But in terms of CRM as an industry, I think what’s happened is that if you look at kind of first-generation CRM, Siebel and those folks, that kind of layed the early groundwork, and we have Salesforce for kind of we all think of it as generation two, the one thing we’ve learned, though, is that in the early formation CRMs, one of the questions I’ve asked myself is why are there not more CRM software companies? Like there should be literally hundreds, right? There’s hundreds of marketing software apps, and arguably CRM is much more important.

I think the challenge is that CRM is actually hard because the expectations of the industry now versus let’s say even 15 years ago, CRM was thought of as the database to keep track of your customers. That was a fundamental kind of use case. You need a shared database where all your customer data was. It evolved, to a degree. Okay, well, it’s not just individual contacts, but it’s also companies and deals and all. But the underlying kind of architecture was relatively straightforward, right? It’s like, okay, I’ve got this database.

What’s happened now is that in order to really effectively compete in the CRM industry, you can’t just be that database, you have to be a platform. The thing that’s becoming clear now is when most people think of a platform, it’s like, oh, other people are building on top of it. You have APIs and you can kind of extend it. That’s all very, very true. But the other part of it is to what degree is the company itself leveraging the platform in terms of are the various kind of software services being used cohesively across the whole thing, right, so it kind of sort of makes sense?

So the way I think about it is at HubSpot we have this term we use called our primary colors, and these are the kind of shared software services that underlie the actual HubSpot platform. That’s been important. So for instance, we started in marketing and we had a marketing automation application, as you would expect, but we took the word marketing off the front of it. What it really was was an automation system that says, okay, well, you want to be able to do these workflows and to have this branching logic and do these things and send this email out? Awesome. That’s great. But automation is actually important in sales. There is such a thing as sales automation that you want to do similar, but not the same, things. Same thing in the service, right? It’s like, oh, if a ticket’s been outstanding for more than 90 days, I want to send this series of emails out, I want to escalate.

Deep down inside, it’s all the same thing. It’s all automation. You’re taking manual processes that might’ve happened and you’re trying to code software. I think what the CRM players have done, I think, well is like thinking of that in a broader sense. It’s like, yeah, like automation is the same.

HubSpot has definitely thought of it this way, which is once you learn how automation works within HubSpot, it can cascade across all the other kind of groups, right? It works the same way because it’s the same software. I think that’s helpful.

So the big shift that we’ve seen is the number of channels, the number of interactions we have with customers is obviously dramatically higher over the last couple of decades. The other thing is, and this is, I think, the big shift, is customer expectations back then, I’ll say 20 years ago, to be doing CRM right, even though it’s considered a front office application, because it kind of has the word customer in it, it was mostly a back office thing. It was a database and the sales reps and the customer team people would use it, but the customers would never really directly interact with it. Not in any meaningful way.

Today, most successful businesses kind of recognize that every business is a digital business. You have to be online. You have to have a website. If someone has an issue, they have to be able to report it. They have to be able to track their order. So the level of expectations of consumers, the end-end customer, of what the CRM, they may not even know what a CRM is, but they know they want to get the status on their order. That they know, right?

That’s the one thing that pandemic has accelerated is that people have known that they need to go digital and do more of that and they’ve seen this kind of steady rise in customer expectations, the pandemic has been kind of a forcing function. It’s like, okay, if you were sitting on the sidelines and wondering whether you should do this, you are no longer wondering. You can’t not be online, right? It doesn’t work.

So we saw, and this has kind of put some wind in HubSpot’s sales, no pun intended, is people are just ready to get something out there. They want their website connected to their CRM, connected to like everything has to kind of fit together. So we’ve had our best quarter ever last quarter, even in the midst of this, because there’s this higher sense of urgency now.

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