If you’re a SaaS entrepreneur and need a company to look up to and learn from, HubSpot is one you may want to study. The people at HubSpot maintain steady growth every year, have a great product and an awesome culture, and run a popular conference. In fact, they just wrapped up this year’s conference, which attracted more than 5,300 attendees.
So what’s the story of HubSpot? What are the forces behind the company that drive its growth? How do they run marketing? How does the company operate?
All of these are questions I wanted answers to, so I researched HubSpot. Read on to learn about HubSpot and some of the marketing techniques that help the company grow.
The Origin of HubSpot
Co-Founders Brian Halligan (now CEO) and Dharmesh Shah (now CTO), who met while attending MIT, founded HubSpot in June of 2006. According to Shah, HubSpot was “kicked off” during the New Enterprise class at MIT in spring 2006.
One of the first angel investors in HubSpot was Edward Roberts, who was head of the Entrepreneurship Center at MIT. The company was then founded at the Cambridge Innovation Center. HubSpot maintains its MIT roots at the top of the company, where 45% of the management team has a degree from the prestigious Massachusetts university.
Halligan gives the details of how he and Shah met:
“He and I went to MIT together, and there was an event the night before the first day of classes at MIT, and he’s very introverted. So what he does at parties is he has his wife go out and kind of scout and look for people who she thinks he’ll like and get along with.
“So she came over to me and she chatted with me, and we had a nice chat. I realized about halfway through the conversation that she was the spouse of a student. So she went away and went back to Dharmesh and she said, ‘I met this guy, Brian. I think he’s kind of interesting. He’s got a software background. I don’t think you’ll get along with him, though. He’s kind of a sales guy, kind of a jock. I don’t think you’ll like him very much.’
“I think that’s so funny because two years later we started a company together, and eight years later we got one of the hardest startups on the East Coast together. We’re pretty close and best friends at this point. We took some classes together and got along and I thought we were a good match.
“I think of the Venn diagram of so many firms. You’ve got a real tech person and a real kind of marketing sales person, and there’s a Venn diagram that overlaps a little bit, not too much. It’s where you have somebody who can really sell, and somebody who can really build, and that really worked for us. It’s a little ‘one plus one equals three.’”
Halligan remarks on the options he had before starting HubSpot:
“When we were going to start HubSpot, I had three choices in my career. At the time, I was an entrepreneur in residence and a venture partner, so I could keep doing that. I could go run sales at ‘kind of’ any company — I had grown up through sales. I had a strong sales background. Or I could be a CEO at kind of a crappy company. I wasn’t quite pedigreed enough to get a CEO at kind of a top-tier startup, so I was interviewing for CEO jobs at re-starts.
“My fourth choice was to start HubSpot. I never thought I would start a company, and I’m absolutely thrilled I did it. But the idea was, ‘Could I start HubSpot and turn it into a great company?’ Fortunately that happened. With lots of luck along the way, a lot of good decisions and good hires along the way, but that was sort of the decision tree.
“I don’t consider myself born and raised to be a founder of a company. I always thought I’d be somebody who would help the founder of a company move it along. But I had the right idea. I had the world’s perfect co-founder, and we just kind of closed our eyes and did it.”
So where is the company now?
They’ve raised over $100 million in capital, have over 600 employees, 1,300 partners, and nearly 10,000 customers. Let’s get a little more into their growth heretofore.
- 2008: $2.2 million
- 2009: Unknown
- 2010: $15.6 million
- 2011: $28.8 million
- 2012: $52.5 million
- 2013: $77.6 million
- 2006: 3 customers
- 2007: 48 customers
- 2008: 317 customers
- 2009: 1,150 customers
- 2010: 3,855 customers
- 2011: 5,961 customers
- 2012: 8,440 customers
- 2013: 10,595 customers
- 2006: 3 employees
- 2007: 15 employees
- 2008: 42 employees
- 2009: 96 employees
- 2010: 176 employees
- 2011: 304 employees
- 2012: 429 employees
- 2013: 668 employees
- 2012: 2,857 attendees
- 2013: 5,300 attendees
A couple of fast facts:
So with this kind of growth, they must be doing something right. Let’s get into how HubSpot markets their product and how they operate as a business.
How They Market Their Product
HubSpot produces a lot of free content every day. They post a few articles on their blog every day, frequently broadcast webinars, and develop free tools like Website Grader and Marketing Grader (which have merged into one tool). According to Mike Volpe, Chief Marketing Officer at HubSpot, the website grader has been one of their most used tools. Within three years, it analyzed over 2 million websites.
HubSpot believes that producing content and getting people to your website through the content you create will generate more quality leads at a lower cost than traditional outbound marketing. Volpe says, “The conversion rate from those leads, if you compare…inbound leads vs outbound, or paid, the types of things where you’re annoying people and kind of getting in their face…the comparison between the two of those, the conversion rate is more than double…for the organic leads, or the inbound leads.”
So how do people hear about HubSpot?
“Website grader and the blog tend to be how people first find us…whether it’s through SEO and searching in search engines and finding a blog article or hearing about website grader from a friend and coming in that way.
“And the webinar is sort of where the rubber meets the road and we can have a little more of a conversation with folks…reading a blog article is maybe 5 minutes, but attending a webinar is usually 45 minutes or an hour. So it’s a little more detailed conversation.
“We’ve had some really successful webinars. For many of our webinars, we get thousands of people to sign up for them…they’re mostly educational, and then there’s a little bit of a ‘if you want to do something else with HubSpot, here’s the next step to take.’
“We do some paid (advertising) because we’re a growing company and have these big aspirations. I think there are times where it makes sense to do some of that so we do some pay-per-click advertising…and we do some sponsorships of like an email newsletter here and there, things like that targeted to our community. That’s only about 25% of the lead generation we do. So about 75% of our lead generation is inbound so it’s focused on blog, on the webinars, on website grader, on other things like that we’re doing.”
Expanding on webinars, Volpe says:
“Webinars are one of our strongest lead generation tactics, especially for that conversion step. I think the vast majority of our webinars, especially the more popular ones are…primarily educational content. That’s really how you attract a lot of people, by providing that value.
“We do have another set of webinars that we do as well that are more like a demonstration of the software and things like that, which are obviously valuable. The conversion rate on the ones where you’re demonstrating the software is extremely high. Sometimes 10 or 20% of the people that sign up for those will actually end up buying.
“Obviously, conversion rate for the ones that are more educational are much less, but those are the ones where you can get hundreds or thousands of people. Our record for us (as of January 2011) is we had 13,000 people sign up for one of our webinars.
“It was just really big, it was a huge hit. It was about the science of Facebook. We had a bunch of resources and things that our social media scientist Dan Zarrella did about how to use Facebook for business, things like that. That was really, really successful…webinars are a really, really powerful tool.”
How does HubSpot promote these webinars? One way is they have an “opt-in” at the end of each blog post. Volpe says,
“We added a [call to action] at the bottom of every single one of our blog posts. That tripled the amount of leads we were getting from our blog….a lot of people have calls to action offers in the sidebar of the blog and those work, but having one [at the bottom may work better].
“It wasn’t the same one in every article. It was tailored to that article. So if you’re reading an article about optimizing landing pages, you’ll have an offer at the bottom of that blog article that has something to do with landing page optimization webinar or something like that. Same thing if it’s about social media, or whatever. So tailoring the offer you have to the content you have and doing it on that sort of micro basis, I think it [could] really work.”
Volpe likes to use the analogy that outbound marketing is like renting and inbound is like building and owning. With outbound, you’re on someone else’s platform and have to rent space to build traffic. When you’re inbound, you’re building an audience on your platform (distribution channel). With inbound, you can take a month off and still get a decent amount of traffic, but you cannot take a month off from outbound marketing and expect the same. “You should build, not rent,” says Volpe.
Volpe adds that marketers make a mistake when they don’t think about content from their potential customer’s point of view. Instead, they think about it from their own marketing point of view. They mistakenly ask the question: “What is the content I want people to consume?” They should be asking themselves: “What’s the content my prospects are interested in consuming?” He says, “A lot of it is looking at content from that prospect’s point of view and creating the things they actually want to interact with and want to share with their friends, not the stuff that you want them to consume.”
Volpe says that staying informed and updated on marketing trends is important.
“It’s important just to stay informed. I think one of the exciting things about being a CMO is your job evolves over time even if the company doesn’t and even if your market doesn’t…[but you should have to change those things]. But holding those steady, just the way you have to do marketing is constantly changing.
“So staying informed, making sure you’re reading blogs and other good sources of information, and things like that, I find it super energizing. We were one of the first B2B companies to use Pinterest, and Pinterest is this whole new thing. We started to use it as a B2B company. We had to do a lot of exploration, a lot of experimentation to stay on top of new technologies. That, to me, is energizing and exciting.”
Volpe believes creating engaging content is key.
“I think to do marketing effectively, what you want is make it very engaging and make it such that people actually want to love your brand because of your marketing. So…don’t interrupt them with something that they don’t want to consume [and instead ask] what can you do to sort of build the love and build the trust with people?”
To review what Volpe says:
- The majority of their leads (75%) come from inbound marketing efforts. These are free tools they build, the blog, webinars, free ebooks, etc. This is called inbound marketing.
- A free tool called Website Grader has brought millions of people to HubSpot.
- Most of HubSpot’s marketing resources are put into making free content.
- They put a CTA at the end of each blog post that links to a webinar (or ebook) related to the blog post. For example, a blog post about social media may have a CTA linking them to a webinar or ebook about social media marketing.
- HubSpot does two types of webinars – educational and demonstrations. More people sign up for the educational webinars, but the conversion rate is much higher for the demonstration webinars.
- Inbound leads convert at twice the rate outbound leads do. The cost per lead is lower as well.
- Create content from your potential customer’s point of view. Make content they’d be interested in, don’t try to force them to read content you want them to read.
- The key is to get quality leads. To do this, you need to test and look at data to see what kinds of content bring in the best leads.
How HubSpot Operates
From an outsider looking in, HubSpot appears to be a well-oiled machine. Everyone arrives at work, does their job, has fun, and the business grows. So how do parts of it operate? Let’s look at a few areas.
Dharmesh Shah has put together a SlideShare which explains the HubSpot culture. He describes it as “part culture manifesto, part employee handbook, and part diary of dreams.” I’d recommend checking it out.
Lars Lofgren recently interviewed Shah concerning the HubSpot culture. You can read the entire interview here.
“We’re trying to create an extremely flat organization, an extremely transparent organization, and there’s all sorts of things we do around that. I think that if you were in the company, on a day-to-day basis, you’d have a hard time figuring out that I was the CEO of the company versus one of the employees.
“I’ll give you an example: I sit out with everybody else. I don’t have a desk inside HubSpot, I don’t have an office or anything like that. My salary is not that different from regular employees. There’s a Wiki inside HubSpot, probably the world’s most active Wiki, and people have no problem calling me out on the Wiki.”
When asked how HubSpot assesses culture fit into the hiring process, Shah said:
“We’ve identified people “attributes” that we’ve determined are correlated to success at HubSpot. We specifically look for these attributes during the interview process — and actually score people on them. These attributes are also on the list of things people are assessed on during their performance reviews at HubSpot. This helps ensure that our team recognizes that culture fit is important and they’re not just things printed on posters and hung on the wall (in fact, these things have never been hung on a wall at HubSpot).”
HubSpot, much like Google, has taken an innovative approach to culture. As Shah says, it’s not the ping pong tables or posters on the wall that make your culture. Culture is intangible; it’s the shared set of beliefs, values, and practices. Forcing culture by buying material objects (foosball, ping pong table, air hockey, television, etc.) may seem cool, but if the employees don’t work together and if they’re not on the same page, all these material objects are for naught. Culture is intangible, and it starts with who you hire.
Three Step Process for New Ideas
If an employee of HubSpot has a new idea they want to implement, they have to go through a three step process. The first step is alpha, second is beta, and third is version one (similar to the development process of new software).
In alpha, the employee begins working on the project nights and weekends (their regular non-work hours). Employees do not need to ask for permission to start an alpha project.
In beta, the employee presents the project to the management team. If the management team thinks it’ll bring a positive ROI, the employee is free to continue with the project. The company gives developers and other necessary team members to the employee to work on the beta project, which becomes the employee’s full time day job.
The team is given three months to get traction and, if at any time the project gets headed in the wrong direction, the program gets shut down and employees return to their normal day jobs. If the project does well after three months, it exits the beta step and becomes a normal way of doing business. This is called version one, and not many projects get to this phase. But, at any one time, there can be dozens of projects in version one and in the beta phase.
People Who Fight Conventional Wisdom
You can’t break new ground by using conventional wisdom, so HubSpot tries to attract people who fight that way of thinking. They want people with an “entrepreneurial zeal” who aren’t afraid to fail. Many HubSpot employees belong to Generation Y. When asked about Gen Y, Halligan says:
“I think the disconnect there is that Gen Y’ers think, work, and act differently, and we’re trying to manage them with the Baby Boomer or Gen X playbook, and it just doesn’t match very well. If you have a new playbook that embraces them, they’re plenty loyal, they’re not narcissistic, and they’re terrific.
“I think when the history books are written, they’ll be the best generation that’s come along. They’re just smart. They grew up on the Internet, and they know how to get stuff done. They’re much more sophisticated, I’ve found, at least, than I was when I graduated college. So we do a whole bunch of stuff to embrace that.
“If your mission is to increase your bottom line by three-fifths this year, gouging customers and gouging the Earth — that really turns off Gen Y’ers. I don’t think Gen X’ers care about that stuff, but I think these new folks do.”
How They Build Their Sales Team
1) Before beginning to interview candidates, Roberge listed 12 criteria he thought would make a successful salesperson. Each criterion was weighted as to importance. Then each candidate was given a score in every area.
After 500 interviews and 20 hires, they ran a regression analysis that correlated individual scores to success in the sales funnel. This continual process has helped form their personalized predictive index. A few characteristics that are highly correlated with a successful salesperson are prior success, intelligence, work ethic, and coach-ability. Roberge explains:
“One of the things we did in our first year was collect about forty to fifty thousand data points relatively quickly on how the leads were coming in and how our sales team did with them. Did they connect with them? Did they convert them into a sales opportunity? Did they convert them into a customer? Did they end up being a good customer?
“We literally ran regression analysis against all the data we collected on that lead automatically at the point of conversion to predict whether or not they’d be successful. That’s how we wrote one of our first lead grade exercises.
“To this day…we only pass about 20-25% of the leads we generate directly to the sales team. Some of them go into a lead nurturing bucket [where] we force them to get more engaged with us. Get into a trial, request a demo… And some of them go into a bucket that we’re not going to sell to because they’re not going to end up being a successful customer.
“But that whole mechanism of automatically figuring out at the point of conversion: ‘How big is this company? Where are they located?’ For us, a surprising one was they mentioned the word ‘leads’ in an open ended question that we have called ‘What’s your biggest market challenge?’
“If they use the word ‘leads’ in that response, the conversion rate is through the roof on those….the point is we constantly refine that model quarter because it does change. We have a system that allows us to get those leads…to the right salespeople at the right time.”
2) New sales hires at HubSpot go through a pretty rigorous training process. The first month on the job is spent in something similar to a classroom. After that, each hire must pass a 150 question exam, earn six different certifications on the HubSpot product, and learn the sales methodology and the concept of inbound marketing.
To help salespeople connect with prospects, HubSpot has each new salesperson build a blog and website from scratch. This helps them experience the pains of building an audience and generating leads. Doing all this makes them a better rounded salesperson than if they simply shadowed someone for a few weeks.
3) Each salesperson at HubSpot gets the same amount and quality of leads each month. HubSpot closely ties their marketing and sales teams together (we’ll get into this later) and sets a monthly quota for each. It is the marketing team’s job to bring in a certain quantity and quality of leads each month, and sales works to close those leads. They don’t focus on a sales quota, but rather ensure that each salesperson has enough to be productive for 40 hours a week.
4) HubSpot uses the same process for each lead. They’ve done some analyzing and testing and found the ideal method for success in turning a lead into a customer. I’ll let Roberge explain:
“We examined a sample of 50,000 leads to determine which call patterns led to maximum sales efficiency. Once we identified the ideal call pattern, we agreed to follow the proven pattern that will lead to the greatest possibility of success with those hard-won high-quality leads. These patterns are programmed into our CRM, Salesforce.com. This allows our salespeople to focus their energies on more strategic questions, like how to break the ice, what the prospect’s most pressing needs are, and how we can best help them.”
One of the worse things you can do as you build a sales team is go with “gut-feel.” Putting a system in place (based on data) will mean you’ll have better sales people, a better sales process, less turnover, and ultimately increased sales.
More on the HubSpot Sales Process
Roberge explains a little more about the sales process and how to approach leads:
“We had a whole bunch of reps out there that were taking all different types of approaches to their leads. Some of them were really taking a surface approach, calling the lead right away and maybe just once or twice (again), and then cycling through new leads.
“Others were really good about doing a little research, finding the ones who were the best prospects for us and really drilling into them for two months. I honestly think that is the better approach because…[they’re not] leaving the same voice mail over and over again. I see that out there a lot in the sales organizations and I also see [a very] bland elevator approach. [They say things like] ‘Here is what we do, give me a call back.’
“Once you have inbound marketing cooking for you [and] once you have these people coming to you, there’s a relationship and a conversation happening even if you’re not really getting on the phone with them….we’re not going out there saying ‘Hey Raphael, this is Mark from HubSpot. We help people generate more leads from the web, blah blah blah.’
“Instead, we say ‘Hey Raphael, this is Mark from HubSpot. You attended our webinar on generating more leads from Facebook. I notice that you asked so and so question. I happened to help three customers with that question. Let me know if you want to talk about it.’
“It’s very consultative from the start….the reason we put these guys through three weeks of non-sales training to start [is] we have them just do inbound marketing [and] write their own blog. I want every one of our salespeople to have offers from our prospects to run their internet marketing department. They need to be consultants.
“That’s really what’s happened here in sales 2.0 is the buyer has control. Twenty years ago they had to talk to you as a salesperson to buy your product and to figure out what you’re about. Today people can research your product, they can try your product for free, and they can often buy your product without talking to you. So what the hell does a salesperson do?
“As [salespeople], we have to step up our game. We have to be consultants, we have to be out there winning their trust, understanding their pain, and coaching them on their pain right from the start.
“And that starts with this 8-touch process. The process itself has been pretty scientifically developed. We ran a bunch of algorithms, like, is it good to keep calling these guys every day, every other day, etc., etc.? What we learned was it depends on the lead.
“So some of our best leads, we’ll call every day for 2 or 3 weeks, other leads which have a slightly higher yield rate, we might call them once today, once in a week, and then we’ll give up. So the answer to that is we’ve really kind of systematized and customized that process in terms of what we say, how frequently we call them, and when we give up based on historical data and how those leads will perform.”
Aligning Sales and Marketing
The alignment and connection of your sales and marketing teams is known as SMarketing. HubSpot keeps their SMarketing operations humming along and, because of that alignment, they close more sales. Let’s learn a little bit about how they do that. Here are a few principles to follow for effective SMarketing:
- Communication between sales and marketing is critical. It needs to be consistent (not fits and starts) and open.
- Have the sales team give feedback to the marketing team on the quality of leads.
- Encourage marketers to sit in on sales calls and close deals when called upon. Doing this helps everyone feel like they’re in it together and working as a team to close deals.
- The executives of sales and marketing should meet regularly to discuss the SMarketing strategy and discuss it with their teams.
- Schedule a weekly SMarketing meeting to celebrate joint efforts of sales and marketing. Other topics can be discussed here as well.
Measure and Hold Teams Accountable
- Marketing should be measured on the quantity and quality of leads they generate. The amount and quality of these leads should grow every month.
- Sales should be measured by the number of leads they work and close. The formula of leads worked/leads generated should yield a high percentage rate.
- The entire SMarketing operation should be data driven. Use data to drive decisions. Data is the “truth glue” that holds SMarketing together.
Have Sales and Marketing Form an Agreement
- Each team can form a Service Level Agreement (SLA) that states the guidelines of each team and what each must deliver.
- The SLA should be easy enough for both teams to understand. Keep it simple.
Integrate Sales and Marketing Software
- Integrating the software into one helps both teams understand what’s working and how they can optimize.
- With integrated software, sales will be able to track the online behaviors of their leads. This can help improve the communication between the salesperson and the lead.
- Marketing will see where their best leads come from and they’ll be able to iterate their campaigns with this data.
HubSpot has been growing quickly, and it hasn’t been without hitting a few cultural rough patches. They’ve done two things to maintain their culture: communication and measurement. Here are some key ideas:
- Spend time talking to and listening to employees. Hold town hall meetings with your team and let them talk and vent their complaints.
- Work with employees to find solutions to issues they are having.
- Ensure you communicate everything with the management team.
- Use surveys and interviews to get a baseline of employee happiness.
- Use Net Promoter Score to gauge employee happiness. Try this every quarter or every six months.
Engineers Talk to Customers
David Cancel, Chief Product Officer at HubSpot, says tech leads and engineers at HubSpot go out and talk to customers. He speaks about using that practice during his time at Performable and then carrying it over to HubSpot:
“Something we did since day one with Performable – probably the best thing we ever did – was every engineer was customer facing. They answered support, we rotated support, everyone did support: interns, me, everyone. Now we’re trying to instill that practice at HubSpot, and we’ve started by following up, mostly on NPS (Net Promoter Score) results, when we see differences in there.”
The Future of HubSpot
In November 2012, HubSpot closed a $35 million round. There is speculation that this is prepping them for an initial public offering.
When asked about the possibility of an IPO, Halligan said:
“At some point, we’ll change the type of investors from private to public, but we’re in no hurry to do so. We’re trying and we’re on our way to building a sustainable lasting business.”
Don’t be surprised if we see a HubSpot IPO in or around 2015.
HubSpot Blog – The popular blog written by HubSpot employees and occasionally some guest bloggers. A few articles posted every day.
HubSpot Webinars – Remember the webinars Volpe was talking about? Here they are, on demand, for your viewing enjoyment.
Brad Coffey – A blog written by HubSpot’s VP of Product Strategy and Corporate Development.
Brian Halligan Books – Halligan hasn’t been just running HubSpot. He’s also written a couple of books.
David Cancel – HubSpot’s Chief Product Officer has a blog.
Put HubSpot on your “Company to Watch” list. They’re growing fast, are very well run, and one day will rank with SaaS superstar Salesforce.
If you have any feedback for this article, put it in the comments!
About the Author: Zach Bulygo is a blogger, you can find him on Twitter here.
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