Hello, everyone.
Some
familiar faces out there, which is nice to see. Thank you all for joining us today at HubSpot's Analyst Day at inbound. This week in this event are all about celebrating the helpful human side of business. It's something that's so very important to HubSpot and to our mission to help millions of organizations grow better. We're thrilled to be hosting our NLC at Inbound again this year so that you can see firsthand the energy, excitement and inspiration from the week.
For those of you who don't know me, my name's Chuck McGlashing. I'm the director of investor relations here at HubSpot. I'd like to extend a warm welcome to those of you that are joining us in person, as well as the folks that are, on the, on the webcast. I'm gonna pass it over to JD Sherman, our president and COO, here in a moment. But before I do, I've gotta review a a a few housekeeping items.
So first, here's HubSpot's safe harbor statement, and all of its glory, you can you can find a copy of it on our website at ir.hubspot.com to the extent that you're interested. As for the agenda today, you can see that we have, a lot packed into, to the afternoon. So after I finish up here, I'll be handing over the, the stage to JD Sherman. He's gonna go through our operations overview. He'll finish up about 2 o'clock.
And at that point in time, Joe Hanlan and, Brian how we're in the back right hand part of the room with the, the Wally Pop sign are gonna shepherd us down to the main stage to, to see Brian and Darmesh's keynote. We have seeding, sort of ripped off down there. So just make sure to kinda keep
up with the group.
After Brian and Darmesh finish up, there'll be a 30 break where you can use, the restrooms, grab refreshments, stretch. But I'd encourage you to make sure that you're back in your seats for 4:10 to 4:15 so that you don't miss the beginning of Christopher Donald's product spotlight. Once Christopher finishes up, you group will move back up here to Room Two Fifty Nine, for Keith, Bueker, our new CFO's financial overview that'll begin at 525. There'll be some food in the room. So as you come in, feel free to grab some food, grab your seat, and we'll get started, with a financial overview.
Once she finishes up, we'll begin our analyst Q and A just before 6 o'clock with the hope of finishing up sometime around 6:30. Okay. With that out of the way, wanted to just share that happy we're very happy to announce that we've surpassed last year's inbound record with 24,000 registered attendees up from 21,000 last year. Really, really excited about this. I want to end by thanking you for joining us, in some cases from from some faraway places, we're thrilled that you can make it.
We've got some really great presentations today. I think it's gonna be a really great day. So with that, I'd like to welcome up our President and CEO, JD Sherman, at this stage.
Thank you very much. Thanks again, everybody, for coming. So my objective with this very short talk is kinda 2 things. 1, you're gonna hear from Brian and Darmash And then also, Christopher, who runs our product team. So I wanna give you some business context around what you're gonna hear from those guys and then give you a little bit operational context that hopefully will rhyme with what, Kate talked about in terms of the financial model.
So, let me get going. As you just heard, from that video, we our mission at HubSpot is to help millions of organizations grow better. And I wanna unpack that a little bit because we put a lot thought into that very simple mission statement. I kinda wanna break it down down into, 3 sections. The first is help So, we're obviously a software company, software as a service, great software, gross margins, and all that kind of stuff, but we really think about our job is to be helping our our customers.
And we do that with, certainly, a platform, but also with a philosophy that you'll hear more about today and with people. So we really wanna make sure that, our mission is aligned with the success of our customers. So that's the first part. The second part is millions of organizations. So as we've been really since, the, IPO and since we started the company, we're focused on sort of that fortune 5,000,000, not necessarily the fortune 500.
We wanna be we wanna target the mid market, and you'll hear more about about that today and what that means You're also gonna hear about some of our awesome new enterprise features, but, I wanna put that in the context of where we're really focused on, on delighting those mid market customers. And then grow better. And you heard a little bit more about that in the video. We don't think, in this day and age, it's enough to just grow for growth sake. We think we you have to, you have to grow in a better way that's healthier for your customers that creates delighted customers that helps sort of grease your the growth with your business.
So this is my 7th inbound, at HubSpot it was about 24. I think the slide shows about 2400 attendees back when we started, and we're up to 24,000 now. The one comment I wanted to make on that slide is, you can see in the, when we go down to the big stage, we're kind of capped in terms of the capacity where we can grow and we grew a little bit this year by taking some additional spaces outside of the BCEEC here. We'll do a little bit more of that next year but we're we've made a decision to keep this conference in the Boston area. So I don't expect the attendees to grow at the same rate that we've we've grown over the years.
So that's just something to be aware of. But as I was getting ready to, to give this talk and a couple other talks I have, at the at the conference this year. I thought back to when I started back in 2012, and we had that inbound conference over at the Hind Center, And I thought about how Brian talked me into coming to to HubSpot. So I the for many of you might know, as a CFO of another an actual company down the road, an actual money making company. And Brian had Ryan Dharmesh had a startup that was targeting small businesses with horrible unit economics.
Like, you could see that the business was, like, teetering, honestly. But I met Brian, and I was really impressed by his sort of story because what he said is, listen, we found this arbitrage opportunity called to try to use a finance fancy word to impress me. We basically recognize that the way humans have lived, worked, shop, and bought has been fundamentally changed by the internet, but businesses haven't kept up. And we see a huge opportunity to help businesses do that with inbound marketing and with with HubSpot. And I thought that was a pretty interesting thing.
And so I said, that's great. Let's meet. Let's tell me more about this. And so Brian did something that I've seen him do, like, 10,000 times since I started work here. He went to a white forward and start drawing on it, which you guys will see if you know, Brian, that he loves to draw on whiteboard.
And he drew a funnel. And what he explained oh, I should say, by the way, this is a reenact This is not actually a 2012 just for legal disclosure purposes. This picture was from last week, so I have to just submit that. But it's a perfect reenactment because he draws he drew draws these funnels all over every conference room. And what he explained to me is the idea with inbound markets, you really widen the top of funnel.
You you get found by creating this asset called inbound marketing, and then you use that engagement to help nurture your customers through the process with marketing automation to create a lead, then you use all of that engagement to help your salespeople close them, and they become a customer. And that made a ton of sense to me. That sounded like a really powerful thing. And, so we built our business sort of around the funnel where the opportunity was to get found from a finance mindset. The asset you're creating is inbound working.
Once you've created that content, it keeps generating leads and business for you, and you can optimize the steps and do a really good job of that, and customers are a great outcome of that opportunity is still there. Still really a lot of the core of, of what we do. But there's a subtle change going on, and that's a little bit of what you're gonna hear about today. And, we noticed that particularly in the way, our customers talk to us, one one of the things that we like to do when we talk to customers is we find out why they bought HubSpot. What what brought them to HubSpot.
And the answer used to always be, Well, we found out about found you guys through the internet, inbound marketing, really buy into this philosophy. We want we want your help to get started, and it's working out really great. That's awesome. Still hear that, but more and more we're starting to hear, well, our our, neighbor uses it at their company, or my colleague uses it at their company, and It's really great. And so what we're seeing is, word-of-mouth is becoming super important, in, in this landscape.
You you can still see there's there's Google, there's the HubSpot blog, big drivers for us, but more and more, our customers are hearing about us through word-of-mouth. And that's pretty important, and that's sort of a a new garage opportunity, if you will. And so what Brian's been doing lately is still drawing on whiteboards, but he's drawing this thing, which I'll explain to you as flywheel. You can't really see what it is. By the way, another I just wanna mention.
So when at the end of the day, we're gonna do a q and a, and we're all gonna sit up here. We're gonna wheel that whiteboard over here. So if we get going, Brian can draw on the whiteboard. And I have inside it here, I have a HubSpot t shirt, a grow better t shirt, The first person who asks a question that gets Brian to draw on the whiteboard wins the t shirt. So we'll just do a little contest like that.
But what what Brian's point is, and I think he's right about this, is, the the funnel has some problems. In this new world. First of all, the obvious problem is that the customer is the outcome, not the center of the of the of the picture, whereas in this modern world where the customer has such a loud voice, the customer is at the center of your flywheel of spinning that flywheel for growth and eliminating the friction from your process. So the new opportunity that we see is customer delight across the entire customer experience. The asset that you're creating is happy customers, and I I have a talk later tomorrow, actually, where I sort of, analogize the, your customers to, working capital, like customer capital is the number of happy customers you have minus the number of, unhappy customers you have.
And if you have a lot of customer capital, much like if you have a lot of working capital, it's gonna be really easy to grow your business. The friction is gonna come out of there. If you have negative customer capital, you're gonna really have trouble, growing your business. And what you wanna do in this model is you wanna optimize themes. You wanna take the friction out of the process.
You wanna make it easy, for your customers to buy from you. It's about it's how you sell as much as what you sell. And so that's a lot of what, you're gonna hear about, Brian talking about. It's also what we've been investing in as a company. And I don't have to tell you guys that we've been spending, a significant amount of, of investment on R And D.
And you're gonna hear Christopher talk a lot more about this in his section But, we've really ramped up. We're spending in in the first half of the year, we spent about 80% more year over year on R and D, and we're spending about 18% of revenue. On r and d. And we've really been doing 2 things. 1 is investing in this suite and platform that will help our customers sort of spin that flywheel And the other is moving our own model towards more of a product driven lighter touch, less friction go to market model.
So let me talk about those couple of things. As I mentioned, and I showed a chart that wasn't quite as fancy as this last year, but we're kinda on this journey from this marketing app that helped people get found and create an asset called inbound marketing to a suite that helps customers create an awesome, end to end customer experience to a platform where, our customers can plug in and integrate all the other software they use to to drive their business. And we've spent most of this year, on the 1st part of that journey. So let me talk about that. First.
So coming into the year, you guys will remember if you're here last year at inbound we announced. Hub professional products. And that's been really super excited about it. But really coming into this year, we had a marketing hub And then we had a product in the sales area, a professional product and and built on a a CRM that's free to start with, which was pretty awesome, but still not a full suite. And in fact, the marketing enterprise, edition kinda long in the tooth.
We hadn't really invested it in a while. The primary reason that you would have bought the enterprise of this was actually not for features. It was for the number of contacts. That you had in your system. What you're gonna see today is that we've totally completed the suite, of our products.
So in marketing, We've done 2 really interesting things. We've really beefed up that enterprise edition. I think that, there's not there's a lot of functionality that larger companies are are knee needed to really utilize HubSpot, and I think that's exciting. And we've also introduced a starter product at $50 where where small companies can get started with HubSpot in a in a frictionless way. And, and grow with us over time.
And then of course, we talked about the sales, product that we introduced last year. We introduced the service hub professional product in April of this year. And at this inbound, we're introducing the enterprise tier for both of those products, and you'll hear a lot more about that. I think this is a really interesting opportunity for us and for our partners, because what it does is it allows us to really significantly expand the market for ourselves. Kind of North And South expansion as well as East And West expansion.
Let me talk about what I mean by that. If I go back to HubSpot at IPO time, you know, we had a marketing app that was really geared towards, I'm going to say that 50 to 200 person company. And we fit really well for those types of companies. We were a sweet spot of what those kind of companies needed. And we sold the larger companies.
We talked about being a 10 to 2000, company, and, employee focus, for our, our go to market efforts. We sold to those larger, companies, but I would say we're probably like a C minus, maybe a C terms of our ability to deal with that. And we also we had a basic product, but basic was kind of a tweener product. For a lot of small companies that just wanted to get started, it was too expensive to get started with at $200, And also, it was a little too inexpensive for us to really sell it with our go to market model. This wasn't making sense for us to really push and sell that.
So I think with, with marketing, as I'll talk about, we we've addressed both of those things in terms of the, of the north and south. On the east and west, Of course, we now have the ability to help our customers across their front office, across their customer experience with sales and service, and that's a big opportunity. And then as I was as I was mentioning before, now that we have an a true enterprise edition, and we also have a way to start for customers in a very touchless frictionless way that that has a very low cost of acquisition for us. We have the ability to kind of go north and south as well. I think there's a big opportunity for us and our partners who are helping these, these companies succeed, to really expand the footprint of HubSpot east to west And also the, the sort of market reach that we have, North And South.
Hopefully, that, Compass analogy makes somewhat a sense. Some of these same investments have helped us, evolve our go to market. And I wanna I've shared some of these numbers with you guys last year, want to kind of give you an update, on that. So a big part of our playbook has been this free CRM. Just get started with HubSpot for free.
Using our CRM. We've seen tremendous amount of growth in that. We're up to about 350,000, weekly active users at the end of, q 2, and that's tremendous growth year over year. And that sort of fuels a lot of things about our flywheel, if you will. The key thing for us to do, though, is get those folks engaged, start adding value for them with the free tier, and then get them get that first user to invite their colleagues and and start using HubSpot as a team, and we call that weekly active teams when there's 2 or more, users from the same using, sorry, this thing is kind of cutting in and out.
I hope that's, not trouble on the webcast. But when they're starting to use it as a weekly active team, they become paying customers at a very high rate at, like 4 or 5 times the rate that we saw, in our traditional inbound marketing funnel. And you can see that that's really ramped up dramatically as well. We have now approaching 50,000 weekly active teams using our CRM. So that's a big move in terms of our sort of a lighter touch product driven model where we add value before we extract value.
What we're seeing there is more and more of our customers are starting by using that free software. In the second quarter of 2018, well over 50% was about 55% or so, were u were using HubSpot software for free before they became a paying customer. That's just a much better experience for our customers. The o the the motion that we had with inbound marketing was find out about HubSpot, download an ebook, become a lead, engage in a sales process, commit to HubSpot and buy, get implemented, then start getting the value from the from, HubSpot and then hopefully hopefully grow. Now what happens is find out about HubSpot, start using the software, get value start paying, then engage with sales and grow.
And that's worked out, really well, and it matches the way customers wanna buy. That's that's been dramatic. And what we've been able to do with that is get more and more customers over time to adopt, the suite. So we're at about 28% of our customers at the end of Q2, that are using 2 or more of our, of our hubs, as part of their HubSpot solution. And that's pretty that's pretty great.
We're pretty with the tracks that we're seeing there, and we see, an opportunity to continue to grow. Now what's interesting about the way this whole model works, and I think Kate will talk a little bit more about that. Is, we're really spinning our growth flywheels. What what you're gonna hear about Brian talking about also, you kind of have opposing forces in terms of the metrics that we look at from a financial standpoint, ARPU and, customer count. If you think about that lighter touch model where customers get started touchlessly very often and and generally at a lower price point, that's gonna really crank on customer count, which is great, it will tend to pull down ARPU.
On the flip side, you have this motion which is to get customers to expand their wallet share, with us. And we expand our footprint in in their, solution, that tends to grow the ARPU, but is obviously not a customer count driver. So you're gonna have those 2 things sort of opposing force. I always joke that we've, like, taken a humidifier and a dehumidifier and put them in the same room, let them duke it out. That's kind of what's happening, here.
But, I think if we can see that motion continue both of those sort of metrics continuing to crank, we'll be really, really happy. The last thing I'll briefly talk about is, the sort of third step on that that roadmap that I talked about, which is moving towards a platform. And if you sit around tomorrow, I don't know how many of you are, but Nancy Riley, our VP of Platforming, general manager of our plat of our pro product general manager of our platform business is gonna be given a talk, and she'll go a lot deeper than I will in this very short period of time. Would encourage you to do that. But as I mentioned, we've been investing along this path and starting to invest in the platform if you don't believe me, look at that arrow that just shows that we have indeed been investing in the platform.
These proof points are very, very powerful with investors, I think. But we we're really sort of there's two sides to this, and we have a mini flywheel going here as well. So we really have invested in APIs and the robustness of our platform to make it easy for our software, our connect partners to integrate with HubSpot. What that of course, is get more and more partners to integrate with HubSpot, which in turn has gotten more and more of our customers to, to use those integrations. And as our customer base grows, we're more and more attractive to connect partners who wanna find a market for their software, and that flywheel is really starting to spin, which is exciting.
You can see that sort of two sides of it This is a a a graphic of our HubSpot connect program. We have over 200 connect partners and various types of, functionality that that tie into the HubSpot platform. That's tremendous. And we're also seeing it on the other side of of the coin with the number of our customers and the amount of integrations that our customers use. So as you know, we have just under 50,000 customers as of the the, second half of this year, you can see we have almost 200,000 integrations to those customers.
So that's a pretty good ratio, and that's more than double from last year. So we're really starting to see some traction around our platform play as well. So overall, I think we're feeling really good about the progress that we're making. We made, you know, we sort of started with this observation that There's a new opportunity on top of inbound marketing and getting found to help our customers create this, delightful customer experience and get their flywheel spinning, take friction out of their model. From that, we sort of identified that we wanna make a bunch of, R and D investments to drive our capabilities to help our customers with that.
We've built out, a bunch of new tools for our suite. We built out, we started to build out a robust platform that our customers can integrate with And we've used it to revamp our own go to market model. And I think you've seen a lot of progress on all three of those, over the year, over the last sort of 6 to 12 months. And again, feeling really good about that investment we've made in R&D starting to pay off and starting to see the benefits of that. Okay.
So that's just a really brief overview. Really looking forward to, having you guys listen to Brian Dharmesh. I personally listen to it about 22 times now. So if I've, you know, if if I'm not paying as close attention, you know, don't don't, let that be a, an indication to you. I think it's really think their talk is is really good and and hopefully helpful to you guys.
So with that, brief introduction, I guess we'll, head over and head down to the Analyst Day. Or to the the talk. Thank you.
Phone.
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take advantage of you fine, timely.
Again, we're gonna begin shortly. Thank you. Welcome to HubSpot Center.
Yo, Brian Halliburton.
Okay. Welcome inbound nineteen. Just kidding. Okay. I have been thinking a lot.
A lot about how do you grow your business in 2019 2020? I've come up with a whole new model for describing how you grow. And the model is based a lot in physics. You see, when I was in university, I spent a tremendous amount of time following the Grateful Dead around. In between Grateful Dead concerts, I squeezed in an electrical engineering degree.
When you take electrical engineering, you take a ton of Physics was my favorite class in college. I love physics. I love physicists. Physicist, what's cool about them, is they love models. No.
No. Of those kind of models? These kind of models. Now what physicists do that's super cool, they study our world, they study it very carefully, and they'll come up with a model to this cribe the way it works in a bunch of math to back that model up. Then they'll publish it out into the wild.
When they publish it, the physics community will study it. They'll test it and they'll put the bright light on it and they'll look for cracks in the model. If they find a crack, they'll publish a new model that better describes how our world works, like in these cases. Now all of us in the inbound community We're kind of like growth physicists, and we've all got a model we've been using our whole careers. We have a model I call it ye old funnel.
Clap if you've ever used the funnel, of course you have. Where's the guy? Now, I've been I've been using the funnel for 28 years, my whole career. And I'm starting to see a couple cracks in yield funnel. I want to talk about those cracks.
There's 2. I want to share the weather. Maybe you're seeing the same cracks. Let's talk about the first one. You see once a week, my dog, Romeo and I, we have a very good habit that we've gotten it to.
Once a week, we interview a HubSpot customer. And Romeo, he's like a dog on a bone in these interviews. And during the interviews, what Romeo was trying to get at is what is the What's the most influential voice in your head when you make the decision to buy HubSpot? And here's how the conversation goes. Romeo will say, well, what was the most influential voice that you have when you bought HubSpot?
And the answer will be, well, Romeo, that's a good question. There's a couple of things. We were subscribed to your blog and liked your content, and then we were talking to your sales rep who was very helpful, and we decided to buy HubSpot. And that's the answer we've been getting for 10 years that we've been doing. That's the same answer.
And that tells me that inbound marketing and selling is working as advertised. Marketing and sales are in their head when they're making the decision. But the last 2 years, the answer's changed dramatically. And here's how the Q And A works. Romeo will say, well, why'd you buy HubSpot?
And the customer will say, well, that's a good question. You know, as her friend Meredith talked us into it, you see Meredith, she's been used in HubSpot her whole career. She started her career. Where was she working? Bubba Gump Shrimp.
And then she left Bubba Gump Shrimp. She used HubSpot there and she went to a new company. What's the name of that company? Dunder Mifflin. I love HubSpot at Dunder Mifflin.
And she talked us into it. You see the answers change it went from being sales and marketing being the loudest voice in their head to being word-of-mouth being the loudest voice in their head. It strikes me that's a sign of the times these days. Whether we all like it or not, trust in sales and marketing is at an all time low. It's about 5% on the trust index.
Now there is some good news for all of us sales and marketers in the room. Two pieces of good news. The first piece of good news is we get those goddamn politician speed, don't we? The second piece of good news is when they put the trust index together this year, they didn't include CEOs on there. Perfect.
Okay. This is a sign of the times. Nobody trusts anybody anymore. They don't trust marketers. Sellers, vendors.
They don't trust the government for sure. They don't trust media, social media. Who do they trust? They trust your customers. That's the only people they trust these days.
And that's at sort of the end of the buying process. Romeo and I were interested in what happened at the beginning of the buying process. How did our best customers find us in the first place. Once again, it was word-of-mouth. Word-of-mouth is becoming a more powerful channel, whether I like it or not than sales and marketing.
And here's the thing for you, sales and marketers out there. I don't think this is the end for sales and marketing. I have some ideas on how we can tweak how we market and sell to really make this happen for all of our businesses. This, my friends, this is the first crack, of course, in the funnel. Funnel shows customers as an output when we all know that customers are actually in input to our business in today's damage.
Okay? The second crack, well, I want to tell you a story about an old boss of mine. She was a great boss. She ran marketing for a company I worked in back in 2000 and 1, 2002. And she had an expression.
What she would say to me is, you know, Brian, the sun rises and sets on the quarter. And what she meant was by the end of the quarter, she had rung every ounce of energy out of marketing and you start the next quarter on 1st day from a sand still with no momentum and no leverage, right? I don't think that's true anymore. All of you are doing You have content, you have links into your site, you have social media followings, you have keyword rankings, you have all these assets, and you have momentum that swings from quarter to quarter. So the funnel my friends, I think, is a broken metaphor that we're using.
Everybody with me? Okay. I've been wallowing a bit of misery over this, and I talked to Romeo about it, and we're very upset about it. And I go to a lot of meetings at HubSpot, as you might imagine, probably 30 a week, And every meeting I go in, there's funnels. There's funnels on the whiteboard, funnels on the slides, with customers, with partners with employees, funnels.
And it's frustrating because I know the funnels have broken way, an old way to look at the way growth really happens. But I was frustrated because I couldn't think of a better way to describe how growth actually happens in 2018. And then I saw a great presentation by somebody who knows a lot about growth, a guy named Jeff Bezos. Into a jet, the way jet Bezos described growth was fascinating. He said the way we grow we increase the selection, the more selection we have, the better the customer experience, of course, the better the customer experience, the more traffic and word-of-mouth, more traffic and word-of-mouth, the more sellers and so forth and so on.
What really impressed me the most about this presentation, he went through the entire thing he didn't drop a single f bomb. He didn't say the word funnel once. He had a new word, a new f word, very clever one. He referred to this thing as a Flywheel, excuse me, as a Flywheel. Now why would he call it a flywheel?
It's a circle. It's a loop. Why create some fancy word for it? I don't know about you guys, but I didn't know what a flywheel was, so I Googled it. What a flywheel is, is an invention by a guy named James Watt, 200 years ago, who was a physicist.
And we invented this machine that was very good at capturing energy, storing energy and releasing energy, in this flywheel was the key part that enabled the steam engine to happen, which enabled the whole industrial revolution to happen. So it turns out phasos picked a very, very cool word for describing the way a modern business in 2018, 20192020 really gross. I like this a lot, and I think we, the inbounders, the inbound community, auto embrace this new metaphor, this new model, the flywheel. I like it so much. I made my own flywheel model.
You wanna see it? I love that thing. Okay. We have some businesses to take up. We're going to talk a lot about the flywheel today.
How to apply it to your business and get your business going fast in 2018, 2019 2020. But before we do that, let's the funnel the funnel has done terrific work for all of us, his whole career. Let's throw him a great retirement party. Let's get him the gold watch. Let's get him the new clubs.
He's retiring down in Naples, Florida. Please join me in congratulating the funnel. On his permanent retirement from the sales and marketing business. You're a good sport. Okay.
This right here on the screen, this is HubSpot's flywheel. This is how we run HubSpot. And we've retired the funnel. And by the way, during this presentation, I'm going to weave in and out a couple of times, stories about HubSpot. I hope you'll grant me that privilege today.
The reason I do it is HubSpot's got lots of smart people I learned from, lots of smart partners and customers, and it's like for new ideas. So I'm gonna talk about HubSpot here. And I'm gonna talk about our flywheel. But before I talk about our flywheel, I want to show you the impact it's had on me and my life in HubSpot. And to do that, I have to wind the clock back to when I was a little boy, I was six years old.
Now when I was six years old, I was one of those kids that repeated kindergarten. Had a hell of a time tracing those letters and numbers those clay snakes were vexing. Couldn't get those snakes roll those snakes. You know what I mean, right? The only good part about staying back in kindergarten is when you're sixteen years old, you're first in line to get your license.
Freedom, and all your friends are counting on you to get your license. So I'm sixteen years old, right on my birthday, I show off in for my, learner's learner's permit test, right, written tests may do very well, and then I go and I do the eye test. And, I put my head in the thing. And the woman says to me, oh, Brian, can you read the bottom line? He said, I can't read the top line.
Okay. So I failed my test. I went to the optometrist, and he gave me a full workup. And he said, you know, Brian, you're a very tricky case. You're right on the edge, you're right on the border.
On the one hand, I could give you a pair of glasses. On the other hand, I could give you seeing eye doc. I was blind as a bat. So I ordered some glasses 2 weeks later, they came.
Oh my god. Blades
of grass.
Birds in the trees. It's a basketball rim. I finally That's how we feel about the flywheel. Really like our flywheel in HubSpot. There's a couple of things I like about it way better than the funnel.
First, it's got customers on there, and it's got our happy customers, our promoters on there. And it's a circle, their inputs to our new customers. The second thing I really like about it is it doesn't just give us credit for what's going on in a given month or quarter, It's got all our leads, all our customers, all our promoters on there. It's got a sense of leverage and momentum. I really like this playbook.
There's a customer that Romeo and I interviewed a couple of months ago that's got this flywheel thing nailed, and it's a company called Airstream Let's have a look at the video. These guys are awesome. Purchasing an air stream can be a lifelong dream for some people.
We affectionately call people who own the air stream streamers, and that don't own an air stream today, streamers.
Having a large database allows
us to build a unity that gets us to conversations around the Campfire, connecting that digital space with the real world and using Airstream's dreamers to promote the brand for free.
I have yet to meet someone who owns an air stream who doesn't want to talk about it or tell you their story. And in my past, I'd had to pay people for those stories, or I'd had to go and not make them up, but you had to work a lot harder to try to get people to interact. Even if they may never buy 1, because they're all influencers for us that would cost us millions to reproduce if we did it in a more traditional way.
Okay.
The air stream folks are here. Let's give him a big hand. Alright. They're fantastic. Okay.
Every time in college, I had a physics lecture, the professor would give me a backbreaking set of problems. Today, you're sitting through a bit of a physics lecture, and I'm going to give you a back messagingly easy set of problems. Here we go. Here's your first problem. There'll be 3.
The first little exercise I'd like you to do is just like these two folks in the video, during the break, when you're back in the office, draw your flywheel, right? Take elements from your funnel add all your customers and promoters in there, put include all your leads, everything you've ever sort of created all your asset there and go ahead and draw it on on the board. If you'd like me to grade your homework, I put a hashtag on there. Hashtag our flywheel. Go ahead and post it on Instagram or Twitter.
I spent way too much time on those platforms. I'll take a look. Give you a Greg. Give you some feedback. The person who does Okay.
You don't have a phone. You've got a flywheel. How do we put that wheel to work for you folks? How do we think about your business differently? Where do we invest in 2019 2020?
How do we really grow? Well, to build a flywheel, James Watts of Physicist would say there's 3 important things. The first is you need, of course, to apply a force to your flywheel. Very simple idea. Apply a force to the flywheel, and it spins the more force you apply, the faster it spins, the more place along the flywheel you'll apply a force, the faster it spins.
Now one of the things I find most fascinating about selling and marketing these days is where the best return on investment is. Where should you apply your force in your business to get the biggest return? Because I think it's shifting a lot. And it impacts everybody in this room. When I started my career, the best place to invest, the biggest return on force was in the Engage stage.
That's where the sales reps come into play. And you rack mounted sales reps. Now why did that make sense back then in the 1990s? My theory is back in the 1990s, customer or sales reps had a lot of information. Customers had relatively little, In the sales reps, leverage that information gap to create a lot of trust.
So it made a ton of sense to hire sales reps back then. The reason we started HubSpot is we saw this shifting back in 2000 and 5, 2006, and it shifted, of course, to attract to marketing. Now why did it shift? It shifted because the sales rep and the prospects had the same information at the same time. And so it behooved you as a marketer to create as much information as possible and pull people in with that.
But what about today? Well, it's shifting again, right? Of course, today, the loudest channel in the market is delight. Now I'm going to talk a little bit about how you increase the light in your business, but this is where the biggest return on your investment is today. Now there's a company that I love that's doing this really well that my son, Luke, educated me about, and I want to tell you about it a little bit.
This is Luke, and I were horsing around in New York City one day, and, it was getting dark. As you can see, the picture's getting dark. We didn't have jackets on. And Luke said to me, I was getting cold at it. I mean, we should get some jackets.
And I said, Luke, I am your father. You're right. There's a gap right around the corner. Luke's perfect. And Luke gave me one of these emojis, the other no emoji.
And I was, what's wrong with the gap? He said, the gap's fine, but we gotta go to Patagonia. What's the big what about Patagonia? He's a Patagonia's fabulous. I got a Patagonia jacket last 2 Christmases ago.
I trash all my clothes. You cannot rip this jacket. I beat it to shreds. It is a tank. It's so comfortable.
It's the most comfortable piece of clothing I own. And by the way, if I ever did rip it, the zipper breaks, anything happens to the jacket. You know what, dad? No. Did you bring it back to the store?
He could keep brand new one for free. We're not going to Patagonia. It's a 30 minute lift ride, Luke. We're not going to Patagonia. Here's Luke with his new Pataguchi jacket.
You see Patagonia's got it right. They've got all of their force on delight, right? They got it all here. They're not trying to close Luke. They're trying to delight Luke.
All their forces, they're quality policy, the return policy, their ads, everything are designed around
delight. And what they want to do and
they're succeeding is they want to turn loop into a walking, talking, patagonia flywheel, right? You've done a nice job with that. Okay. This is what HubSpot's flywheel look like in 2015. For better or worse, HubSpot is very much a reflection of its CEO, probably similar to your company.
And I'm a sales and marketing person. I grew up in sales and marketing. I'm passionate about sales and marketing. We really focused on this. All of our energy at HubSpot was sales and marketing really wanted to close as many customers as possible and frankly delight what's an afterthought.
But I've been influenced. I've been influenced by Romeo, by Patagonia, by Luke, by Airstream, and I've come to see the light. And so what we're trying to do is shift our center gravity and shift our forces from down here to up here. And we're making progress. We're by no means perfect.
We're making mistakes, but we're on our way to creating a flywheel that looks more like this. Okay? Now I've made some mistakes along the way. One mistake I made along the way is I just
said, Hey, we're going to be
a delight company, and it was lip service and no one listened to me. The second mistake I made was they assigned this to the service department. I said, the service department, you have to fix this problem. We need to delight our customers. Neither of those things work.
What really works is getting your whole darn organization behind it. And the most important part of your organization to get behind it is sales and marketing. Let me give you an example of how sales and marketing can shift its focus from down here in closing. Sorry. I'm saying nothing spins really well.
Hello, up there to delight. It's our commission plan of all things. So our commission plan in 2015 was very simple. You if you're a sales rep, you get commission on everything that closed. We made 2 important tweaks to it.
We added a carrot and a stick. The stick was very unpopular, but the stick was if a sales rep closed a new account and that account canceled within 8 months, the company would claw back that commission. Painful, but useful. The carrot also useful The sales reps who do the best job at setting expectations and have the highest retention rates in the happiest customers, while they get paid at a kicker, a higher rate. That carrot and the stick has moved that, that force from sales over to delight.
And our sales reps now are focused on closing customers, but on delighting customers. This is the key, by the way, to growing your business. This is the key in sales and marketing. Sales and marketing want to continue to invest in it, but how do you get your sales and marketing focused on in closing, but on delighting? That's the key to growing your business in 2019 and beyond.
Okay. 2 more small homework assignments, really easy. Just like these folks in the video, take that flywheel you built and draw your forces on it, okay? Put your commission plan. Where does that really set put your best people on there.
Put your pricing plan. Is your pricing plan designed to close or to delight? Do your customer pay you as they gain more value or do they pay upfront? Put everything on there, all the forces you can think of, and then redraw the darn thing with your forces up in the top right like hub spots trying to do. Again, the person who does the best job to VIP tickets to inbound I will I'll look at all of them that are submitted on Twitter and Instagram and give you some feedback on.
Really looking forward to seeing what you come up with. Okay. Now if you ask James what, how to build that flywheel first thing is for us? What's the second thing watt would set? What was the smart guy?
He would say you want to put a force on it, but you really want to lower the friction in your flywheel so that if you you just barely touch it. It spins and spins and spins. You get a big return on investment. What I want to tell you about is my low friction warning. At a very low friction morning.
I woke up on my new mattress I bought from Purple. And then I put my Warby Parker glasses on. So I'll know I'm blind. And then I picked up my phone and I put on Spotify and I put my favorite Grateful Dead song on. The wheel.
Danced my way into the bathroom, my shave with my dollar shave club razor, and then I went in my closet, and I got my, my new outfit from trunk club. Now By the way, I'll give you a little non sequitur. Before we do this big presentation in front of all you, we do a dry run inside of HubSpot with about thirty people. And 29 of the people gave substance feedback, but one person decided to give me style feedback. And so the remark, it was from someone's name, Andy, is, oh, I really liked presentation this year.
He said, but the problem you're gonna have is you're wearing dad jeans. He said the problem you've got is your jeans are too wide at the bottom. He said, what you need are skinny jeans when you're up there on stage. So what do you think of my new skinny jeans? I love them.
I love them.
And
then I got in the list and I came over here. These six companies have woven their way into my daily life in a lot of years. Fascinating companies. They're all startups. They're all less than 10 years.
They're all younger than HubSpot. They also commodities, relatively undifferentiated products. You can get skinny jeans at the gap in Patagonia in anywhere these and they're all growing like a week.
How they do it?
What's the secret modern 2018 handshake? It's friction. They took all the friction out of their flywheel entirely removed the friction from their flywheel. And they've reimagined their industries. Now let me give you an example of what I'm talking about.
2 months ago, I bought that purple mattress zero friction in the process. Didn't talk to a single human. It was fabulous. Everything worked great. 2 years ago, my previous mattress, I bought from a store called Bernie and Phil.
Clap, if you've heard of Bernie and Phil. Yes. A lot of people around that. The best thing Bernie and Phillips has going for it is his jingle. Bernie and Phil's quality, comfort, and price.
That's nice. The worst thing they have going for it is they're stuck with a very high friction model, right? It's full service, but full service means humans means handoffs between humans and means haggling. And by the way, I want to try the mattress. I want to try it at home.
Romeo wants to give it a go too. Right? We want to give it a try. And so you need to move your model. The key these days, all of a sudden seems to be friction.
Everywhere I look, companies take the friction elsewhere. Why is that? What the heck is happening on the internet in the world that frictions all of a sudden the secret handshake? I blame the iPhone. This is my iPhone.
Before I use the iPhone, I have the patience of a saint. Now I have the patience of a squirrel on his second Espresso, That's my favorite part right there. I can go home now.
I like
I love this squirrel. Okay. All the examples I've been giving you so far, they're B2C, they're glasses, they're music, they're things like that. If you're in the B2C industry, the train is about to leave the station. You need to get 90% of the friction out of your model, or you're going to be in trouble.
You got to move. If you're in B2B, the trains parked at the station, but it's leaving soon. You want to gain competitive advantage against your competitors. You want to disrupt incumbents, you disrupt it using this low friction play. Now I had a great professor in business school, and she said this mantra over and over again, Hey, Brian, if you want to build a great company someday, your product is going to be ten times better than the competition.
I think that's terrible advice now. I think it's dated. If you want to build a great company in 2018, your customer experience has to be ten times lighter than the competition. The rules are really changing. It used to be the best product one Now it's the best customer experience wins.
It used to be what you sold really want mattered, and now it's how you sell rate under our feet today, everything's changing. It feels to me like 2006 all over again, everything's shifting under our feet. There's a big opportunity for those of you who want to take advantage of this to build big companies and really grow. Now I wanna give all of you three tips you can take back with you to your headquarters, and there are gonna be actionable tips And I think these are the 3 most important things I have to say today. The first thing I want you to think about when you go back to get the friction out Is your company today most likely 80 percent of the touches with your customers and prospects while they happen with your employees and your humans.
And I love humans, and I love employees, but employees mean friction and friction is the new enemy. In the future, 80 percent of your customer interactions have to be self service in 20% with the humans. You need to turn it upside down and turn your model on its head. How do you do it? In making those frontline employees 80% of your IT investments should go to making your customers more efficient.
Turn it on its head. What else? One more. Today, Today, when you grow, you add humans. And what tends to happen is those humans get specialized.
You go from having a sales rep So you have a BDR, in a hunter, in a farmer, in an account rep, in all kinds of different roles. And I love specialists, but specialists mean you're getting handed off between them. If you're a customer, if you're getting handed off, you're feeling friction and friction is the enemy. In the future, 80% of this is going to be done with automation. Your humans are going to handle the more complicated cases, the exceptions.
Your employees will have to change too. Today, your employees are what some people call eye shapes, very deep in what they know. The BDR is the world's best BDR. In the future, We're gonna have to train our employees a little differently so we can avoid the friction. So you have somebody who's very deep like a BDR, but they're t shaped, and they have other expertise they can do more things to avoid those handoffs.
Okay. I want to show you a video of a customer of ours that really rocks and is headed on the right path. Please pay attention close to this video. These guys are awesome. Let's have a look.
On the rock and roll Hall same Facebook page, we have a lot
of band interaction. I knew that Facebook Messenger would be a very busy channel for us. I really believe in 120 engagement. Automation does things to prioritize your workflow, but with chat in particular, people are really looking for that answer to their question or that direct interaction at the moment that they're reaching out, you have to be able to deliver the information and respond. Otherwise, it's just setting someone up to be disappointed, and that's absolutely what we want to avoid with any previous year experience.
We were prioritizing conversations able to balance automation and a real person interaction conversation. What we found was that there was a lot of common facing questions, and we built the first menu to get their answers as they needed them as fast as possible. The fan questions that come in a lot of them are about the people in the Hall of Fame. You can tell that these people are really passionate about these artists. The rock hall just wants to give these fans a voice.
That's we do what we do and why this organization exists, and we just want everyone to feel like they're part of the conversation with us.
Okay. Rock and roll hall of fame's in the house. Just give me Great job, rock
and roll hall of fame.
Okay. I wanted to give them
a test, right? I wanted to go to their Facebook page and have a little chat with their bot and see how that went. And so the other day, I went to their Facebook page, and I had a little chat with the with the bot, and here's how the conversation went. Or is he grateful to add in the Hall of Fame?
The bot said yes.
Is there Rita Franklin in the Hall of Fame? Yes. Go over Rita. Is fish in the hall of fame? Yes.
Are the Almond Brothers in the hall of fame? Yes. Are the flywheels in the hall of fame? No. W t f.
How did this flywheels not be in the hall of fame? I love the flywheels. They're the best man with comedians working over there. What's wrong with you? My inner scroll brain took over for a minute there.
Fortunately, 30% of the customer interactions on their bot are taken over by humans, the more complicated cases like myself. And I was rotated to Eli from the video. In my sense of Eli, is she had handled a few flywheel fanatics in her past. If you talk to me right off the ledge, who's been? Ellie is 2 Shades.
Ellie is a content marketer, as you saw in the video, but she is very good at custom service. These guys are fantastic. Now this was an important chapter, so I'm going to summarize. We're moving we're in a big era shift. It's similar to the shift that I saw when we first started HubSpot.
The Internet has really shifted under our feet. We're moving for an era where the best product almost always won. To an era where the best customer experience almost always wins. We're moving from an era where we created a funnel and filled that darn funnel with friction to an era if you want to win and have a light cut from experience, you need to build the flywheel and free it of friction. This is where the world is going, folks.
And, an exciting opportunity for all of us. Okay. One last thing that James Watt would say, if you want to build a high growth flywheel inside your business. He would say if you're putting force on your flywheel and you've got low friction, it's going to spin. It's going to spin really fast.
If it spins really fast, it will break. You need to build your flywheel of very high quality scalable materials. Now I've got some experience with scalable materials, and I want to tell you about, these 2. That's my mom and my dad, back my mom's here, back in the 1980s, and they're on the back deck at our house. And 99% of the time, this is what they were happy with each other, touching each other, smiling.
One percent of the time they fought like absolute banshees. It was always the same issue they thought about. Constantly arguing, never stopped. It was exhausting the ants. Here's how it went.
You'd be sitting on the back deck with mom and dad. And my mom's got a very thick Boston accent. I don't do this. We're sitting on the deck, and then sure enough to be ants crawling around, and my mother would say, Bob, I got ants crawling up and down my leg. You're so cheap.
When are you gonna get an exterminator around here? We got a wicked problem. So they're a very happy year in the 99%. Bam, the Antsport and rate in the 1%. And my dad would say, he's heard this before.
He got out of Costco, and he got the giant pack of Ant Hotels, you know, those Ant Hotels. And then beyond the deck and putting the hotels down and so many Ant Hotels, it looks like an Ant monopoly board up there. Back to the 99% settled down. And then as a couple of weeks later, my mom had a good idea. She said, why don't we have a potty on the deck?
Cool. With
that said, sure. And so 2 weeks later, we got a potty. And we had about twenty people up on the deck. We had a great time. Think of beers, listening to music.
It turns out as we were having a potty on the top of the deck, the ants were having a potty down underneath the deck And about halfway through the potty, the whole damn deck just went, boom. It crashed. We didn't have scalable materials. We had pine, and it wasn't pressure treated. All of you these days well, you're building flywheels.
If flywheels have humans in them, they have automation, they have software, and they need to scale. What we're working on in HubSpot is trying to build all of you a scalable platform. Let me tell you a little bit about that journey, Ron. If you looked at HubSpot 12 months ago on this stage, we had 3 marketing applications, and we had one sales starter
out,
our towing the wire there. We've had a huge year. Now the first way we're scaling, is we've got a full flywheel of come out with a bunch of new products to really help you grow and build one of these awesome customer experiences. Pretty cool, The second way we've scaled is we're relatively well known for working with entrepreneurs and working with startups in small companies, and we love doing that. But we want we don't just want to work for you to start.
We want to scale up with you. And so today was a big day for us. We came out with a brand new sales enterprise product. That's awesome. We came out with a brand new service enterprise product that awesome.
We took our marketing enterprise product, and it had a big step function improvement in it. And so today, we can work with you when you're two people in a garage, all the way up to The other thing we're psyched about is we've HubSpot started as an app, really, and we moved to a suite, and we're starting to move to be more of a platform. A year ago, There are 80 companies, software companies that integrated into our product. Today, there is over 200 really cool ones like slack, and Stripe and Shopify. Lots of other ones that began with us too.
Okay. If you're interested in
HubSpot, and by no
means you don't have to, this is a this isn't a HubSpot conference. It's an inbound event. Come to Christopher O'Donnell presentation. He's the one after Dharmesh. It's a little break, but he'll be presenting here.
He's going to show demos. It's going to be awesome. Now, I think about myself and my personal journey with HubSpot. We started 12 years ago, there was a window of opportunity that the 2 of us saw, and the window was create content pull people in, the internet created this arbitrage opportunity for all of us. And it's been great.
The sheet's down a hair on that window, but it's still a pretty good window on the set. It's changed and there's a sliding door new opportunity for all of us to create one of these killer new great customer experiences. That's the business we're in now. We want to help you do that. That's what we're up to at HubSpot.
So I'm really excited about that. Okay. One final thought. At the beginning of the presentation, you might remember this slide, some of these businesses were better at branding than others. Isaac Newton's pretty good branding, right?
Every classroom around the world. Albert Einstein, every university physics class, you talk about Albert Einstein. But who is Quantum? Who's the atomic? You have to go deep into the bowels of Wikipedia to find these guys.
I've learned my lesson. Now I'm gonna end on Halligan's growth model. So what's my growth model? Of course, my growth model is a flywheel. Throw out your old concept of the funnel, embrace the flywheel.
And then my flywheel behaves according to this equation. The equation looks complicated. It's actually quite simple. The numerator at the top says keep investing in sales, keep investing in marketing, but boy, the investments you make in delighted customers, you get a bigger return on investment. I would also say that take your sales and marketing resources and see if you can move them slightly to not just focusing on closing customers but delighting customers.
A lot of power in the numerator. The denominator, of course, is delight. I'm sorry. The denominator, of course, is friction. Get the friction out, the lower the friction in your model, the faster you're going to grow.
If you like this kind of stuff, we built a new site for you, our flywheel.com. Check it out. Really cool stuff. You want some help for your own work on there. Darmesh will be up in a minute.
I want to thank you all. You've been
a great crowd. Thank you very much.
You.
Please welcome HubSpot Founder and CTO, Darmest Shaw. Thank you. Greetings, everyone. We all want to grow better. The question is, how do you grow better?
This is the question I've been obsessed with Now we've already looked at the physics of growing better. We've looked at flywheels and force and friction And I think it's also useful to look major milestones in my life that have kind of helped me explore this idea of growing better. This is my son, Sohhan, I introduced in to y'all. I've lived in the south for 10 years. I'm allowed to say y'all.
I introduced in to y'all 7 years ago, from the inbound stage. And so yes, this is a photo of him projected on the inbound So next year, what I'm going to do is I'm going
to have a
photo of me with the photo, and the back screen will be like a inception thing, or modern family opening credits based on your preference. So when someone was born, I was overwhelmed with emotion. All the emotions, fear, anxiety, excitement, enjoy, uncomfortable joy. Uncomfortable because imposter syndrome I wasn't sure I was ready. Wasn't sure if I was deserving of that kind of joy.
Many parents in the room, I think, have experienced this. Now when a child is born, you're never really sure what they're going to be like. Someone got lucky He's more like his mom. But he and I do have some similarities. We have some traits in common.
He too is more indoorsy than outdoorsy. He too is musically inclined which in our family means he too knows how to create a Spotify playlist. And he too is a technology geek. This is a photo of Sohon when he's 2. He's making some money on the side as a freelance mobile app tester.
Now I know some of the parents are thinking is that really age appropriate Dimesh? Don't worry. It's okay. Only accepted payment in Bitcoin. It's all right.
Someone's long cryptocurrency for those keeping score. By the way, if you have young children in the family and they're not making money on the side, you're missing on a big opportunity. It's the gig economy. I'm telling you. You heard it here.
So stolen is 7 now, so he just graduated 1st grade. And this summer, he went to coding camp as one does. Now he's written more code this summer than I have. It's not a competition. I mumbled to myself.
It's not a competition. But if it had been a competition, I could have imposed his screen time limits, and I could have won. I'm just saying. Could have won. So so is my younger one.
My older one also had a milestone this summer. My older one turned 12. And by my older one, I mean HubSpot, or as my wife likes to say your actual firstborn. Now this is a photo of an early HubSpot birthday party. I'm going to make note of a couple of things.
Number 1, I'm wearing a HubSpot T shirt. Shocking. I know. Shocking. Like, the odds were 100%.
That was my entire wardrobe back then. But what's noteworthy is I'm wearing a large HubSpot T shirt. It was too big. I didn't need a large HubSpot T shirt. Every t shirt I bought was a large HubSpot t shirt.
Why? Because I had vision. I had foresight. And as we heard from Beth Comstock, vision doesn't matter unless you act on it. You have to execute.
So I will make note in this photo. I am holding a slice of pizza No one else in the photo is holding a slice of pizza. And while holding the slice of pizza, I am simultaneously eyeing the cake with serious intent. I didn't do have vision. I executed on the vision.
I executed a lot. By the way, with all due respect to skinny jeans, I am very comfortable in my dad jeans, just so everyone knows. Also wearing dad jeans in the photo years before I was a dad, vision, people, vision. Okay. So I got to thinking, okay, I've helped out growing a tiny human.
I've helped grow a company. Are there similarities? Are there lessons to be learned? From the 2. So I got together with my wife.
And the answer is yes. There are similarities, and so we made a list.
What do
what does growing a human and growing company have in common? Both involve a moment of passion followed by years of hard work. Neither one will make money for the 1st couple of years. People will find you insufferable because it's all you can talk about at parties. It's not as easy as your friends make it look on Instagram not that easy.
Around year 2, you decide to never ever do this ever again. All the wrong people are eager to give you advice. And finally there will be days You want to sell them, but you shouldn't. The overall lesson here is that you start out being completely clueless startup, kid, same thing. And as time goes, you've come slightly less clueless over time.
So let's dig into the growing accompanying part. We'll save the deep conversations on kids for when there are grown up beverages available, which is the appropriate thing to do. So this is a photo of HubSpot in the early years. It's the 3 of us. And by three of us, it's Brian, myself, and an office plant that my wife gave us as a present.
The plant is named DUO because it's the second one. Uno, the first one well, we don't talk about Uno. It's not important. So in the photo, we're shown in ascending order of socialness from less social to somewhat more social This might explain why Duo the office plant got invited to more after work parties than I did, I probably wouldn't have gone, but it's nice to be invited sometimes. Okay.
So in these early years, Brian joined a CEO group. So he would get together with several other CEOs of high-tech companies in the Boston area. They would meet quarterly to talk about their companies, talk about growth, And I'm not really sure where they had their meetings, but I always pictured it like this. Now, Ryan has repeatedly assured me that they did not meet out in the wheat fields But to this day, Brian has never provided photographic evidence to the contrary, so my theory still holds. And as far as I know, they met like this.
So they would sit in the corner, and they would talk about their CEO dreams, they would confess their CEO problems, they would sing CEO songs, And at one of these meetings, the very pivotal meeting, the key topic was culture culture. And now we were in the early stages of HubSpot. We hadn't talked about culture a whole lot. As far as I knew, culture was that stuff you put in yogurt, or make yogurt with, or is that gluten? I don't know.
Anyway and so as this conversation is progressing with his CEO buddies, Brian's like, oh, yeah, you folks are further along. Like, we have product to build. We have content to write. We have growth to generate. Like, we'll deal with culture later.
But as CEO buddies were insistent, they're like, Brian, no, you don't understand culture is critical. It defines the destiny of a company. I was like, okay. So the next day, Brian's awesome, like, Fermish, Fermish. I learned something super important at my CEO group meeting.
He's like, okay. Right. Lay it on me. Culture is critical. It defines the destiny of a company.
Okay, Brian? So I waited for him to finish his dramatic pause. That's the role of a co founder. He would do the same for me, and he went on to say, You know what would be great is if we could dig into this culture stuff. Now when he said we He did not mean the royal we.
He meant the very unroyal me. What he meant was Dharmesh. It would be great if you could dig in to this culture stuff. And my reaction was this. And I remember thinking, dude, Like, we went to grad school.
We've been co founders for years. I've spent more time with you in those years than I have my wife who I love. Do you not know me at all? You see, I'm not a people person. And from what I know of culture, what little I know there are people involved.
I'm an introvert, right, I'm not a cultural anthropologist. I'm an introverted technologist, otherwise known as a technologist. And so after a few weeks of anxiety, I finally sent to Brian this email. 9 years ago, this week, exactly this week, 9 years ago, And I apologize for a couple of the typos. This was a late night email.
Brian. Not sure how I wound up being the guy, To lead the discussion on culture, it's freaking hard. Eventually, we need to give this to someone that actually likes humans. Now this is a bit of a misrepresentation because it's not that I don't like humans. I just don't like being around them.
A whole lot, especially in large groups, which I define as being like 3 or more, including me. But, I did some deep breathing. I did an unguided meditation, best I had at the time, And then I had I scheduled a 1 on 1 with Duo, the office plant, which I know it sounds it's not weird. Do you owe us head of HR at the time? It's it's all we could afford.
But then I'm like, okay. This this is a so I did what engineers do. I got distracted on Reddit for a few hours, but then right after that, I started collecting some data for weeks and months, connected some dots, found some patterns, made some observations, and I took all the lessons learned and put it in an internal document called the culture code. Now I know the culture code sounds like a Dan Brown novel, I know, but it's a slide deck. It's a slide deck that explores the relationship between people and the companies they work for in the modern world?
What do people want from the companies they work for? Because this was the idea we wanted to create a modern company at HubSpot. And so we later published this deck, shared it with the world, all 128 slides, got some traction, well received, and now a few of you are wondering, why are you telling us this? Is it just vent? Is it just to do a not so humble brag that you got 4,000,000 views?
On a slide deck, and my response is, well, no. It's not just that. I mean, it's that. It's not just that. The reason is the biggest lesson I've learned in my career about growing better came from an idea in the Culture Code deck and it's this slide, solve for the customer, solve for their success, put the customer first If I had to get rid of all the other slides and keep only one of the 128 slides in the Culture Code deck, this is the one I would keep.
And the lesson here is that to grow better, you need a culture that puts the customer first If you do not have a customer focused culture, it's not like friction in your flywheel. It's like a full metric ton weight sitting on top of the flywheel. You need to start with a culture where people care about the customer makes everything else easier. Now there's a problem. It's the trendy versus truthy problem.
It's trendy to say We're customer obsessed, customer obsessed. Truth is companies are often self obsessed It's trendy to say we're customer centric. Truth is companies are often customer Circumfrick. Circumfrick is a word that I made up 3 weeks ago. I don't expect it to get added to the Miriam dictionary dictionary anytime soon.
But, you know, a word that did get added this year, this year, Chawini, 2018, the word Chawini was officially as the dictionary. A Chawini is a breed of dog that's the intersection of a Chawala and a wiener dog also knows a Dachshund, Chawini. Chawini. Sir, Comfortick. Never know.
It's trendy to say we're a customer first company. Truth is many companies are customer eventually will get around to some of our customer stuff. Now when I say companies have this problem, I'm not talking about all those other companies, HubSpot isn't without fault via Colpa 2. Over our 12 years, we've made decisions that weren't always customer first. Despite our best intentions.
And over those 12 years, we've accrued some bad habits. And so for the last several years, Brian I have been working on a new season of breaking bad habits. I know this is a dated reference, but I just binge washed all five seasons of breaking bad. And I worked on this slide too long, not to sneak it in somewhere. So Brian once said, well, actually he just said, well, just, I mean, it's minutes ago, you don't need to make your product ten times better you need to make your improving I am going to add, like right now, improving your experience 10x is much easier that improving your product 10x, which is good news because as we know, how you sell is as important as what you sell.
Now speaking of what you sell, what does Starbucks sell? We're going to do a quick economics review. If you were selling coffee beans, you would have little price differentiation and as a result, relatively little price leverage. It's a commodity, literally a commodity. I'm using the word literally, like, literally, a commodity.
If you took those coffee beans and you put them in a bag, now you have a product, not a commodity, more differentiation, more price leverage, If you brew the coffee and serve now you have a service, yet more differentiation, yet more price leverage. If you kept going and you opened a coffee shop, and you put in comfy lounge seating. And you created a Spotify playlist every week of mediocre lounge music. Which Starbucks does, by the way, every week. You can look it up.
They create a new Spotify playlist. It's not random. Then you have an experience. So the question really isn't what does Starbucks sell because for some, it's like, okay, well, they sell a cup of coffee and a place to charge my phone. For some, it's a cup of coffee and beginner Italian lessons.
For me, Starbucks is a global network of restrooms where the price of admission is a price of a muffin, 2.95, and also you get a muffin. Awesome. So the question isn't what does Starbucks sell, the question is what does Starbucks offer and what Starbucks offers is the experience of relaxing and recharging, the coffee is somewhat incidental. What does Amazon sell 20 years ago, easy answer, sellsbooks, Amazon sellsbooks, 20 years later today. You could say You could say that Amazon sells whatever Jeff Bezos wants because nobody puts Bezos in the corner.
Especially now that we know he's been vin diesel this whole time. This whole time. So the question isn't what does Amazon sell? What does Amazon offer? What Amazon offers is the ability to look up product ratings and reviews, put you order in, maniacally track the package all the way through as it goes through smack and saw smack over Arkansas, which is the place.
And like, why is that at your doorstep? It doesn't matter what Amazon sells. What they offer is the experience of buying things. That's what Amazon offers. But as HubSpot sell, easy answer.
We sell software or more specifically software as a service. But what HubSpot offers is success as a service. Yes, we invest tens of 1,000,000 of dollars in R And D. I could not be more proud of the product team at HubSpot, but we also spend 1,000,000 of dollars on training and education and community and hosting events like inbound So what HubSpot offers is the experience of growing better. That's our mission.
The lesson here is to grow better, you need to offer a delightful, differentiated experience that customers love. That's the key. So let's look at that phrase customer experience. The natural way to think about the customer experience is, okay, well, it starts when somebody buys and then stops when they stop buying or they cancel. That's the customer experience.
That's the way I thought about it for a long time. I think there's a crack in that thinking. There's a crack in that model. I think the right way to think about it is it starts the very first moment someone encounters your company or your brand and ends never. That entire time is the customer experience and that's what we should be thinking about and optimizing.
So the question is, okay, what do customers want from their experience? What do they want? This is a lot like the question the culture code tried to answer only this time, it's the relationship between people and the companies they buy from. What do people in the modern world look for? What do they want from that relationship and what do they not want from that relationship?
So I did what engineers do. I watched episode 4, 5, and 6 of Star Wars, to get jar jar jar out of my mind, personal problem. It's not an issue. But right after that, I started collecting data. I started with a focused longitudinal study on the customer experience.
And by focused, I mean, N equals 1 and by N equals 1, I mean n equals me. Now before these status statistic the before the statistics people get all judgy, I'm a customer. I buy things. It's not just pizza and large T shirts, and exercise equipment that falls conveniently and goes under your bed, never to be seen ever again. I buy lots of things, and all modesty aside I thought I provided myself brilliantly insightful feedback, but I acknowledge, I acknowledge my critics, let's say, well, that might have been too limited example to be useful.
They may not represent the larger population. Okay, I'll concede that maybe. So I doubled the survey and surveyed my wife. Now this just didn't improve the sample size. Now it's much more reflective of the overall population because unlike me, my wife Kirsten, is normal.
Expanded the audience again. Went to social media, which is awesome for antisocial people like me. When to Twitter, Facebook, linkedin, Stories and anecdotes and experiences started flowing in, which customer first and customer friction I didn't use Instagram for the study, and the reason is it's really hard to get unfiltered feedback on Instagram. I know. Sorry.
Sorry. I know that was cheesy. But for, like, the the three of you that found that clever and witty, we just became BFS, just so you know. So stories and anecdotes are great, but the plural of anecdote is not data. It's also not anecdote.
What I needed was some some quantitative information, something I could analyze. So I had the HubSpot research team go out and surveyed thousands of actual people in a specifically valid survey and came back with a bunch of data. So I'm excited to share with you the patterns that we discovered from all those stories, all those anecdotes, and all that data. So first time I'm sharing it, and I'm super excited. I am this excited about what I'm about to share.
I'm as excited as a labradoodle on a lawn. Now I know some of you, the more astute amongst you, he was like, well, that looks an awful lot like Brian's dog, Romeo. Well, Romeo's a minor celebrity now. That's his stunt double. Romeo's back in the air stream relaxing and curled up in a patagonia fleece.
By the way, labradoodle officially in the dictionary.
It's a
real word. Circofrig. Okay. There were a bunch of insights and observations that came back, from this study and from this research. I'm going to share the top 5 with you, things that I think would be most impactful for you to take back to your business and grow better.
Number 1, earn my attention. Don't feel it. Give me something I value before you take something I value like my time. Now people have pushed back on this use of the word stealing, because it's a little harsh, but it's like, okay, well, what word would you use when someone takes something that you value from you without your permission and doesn't give you anything in return. And you have to admit some of these kind of permission free outreach can be somewhat inconvenient.
It's like then when would be a good time to tell you about our special offer? The data backs this up. When we surveyed people, 85% said they think less of a company that reaches out to them without getting permission. 11% said, yeah, unchanged, and 4% said their opinion went up don't know. Maybe they were just happy to get some attention.
I don't know. But the point here is the worst case scenario is not Oh, well, we did that, and it didn't work, and we got 0 return. That's not the worst case scenario. The worst case scenario is you damage your brand you dig yourself into a hole and companies that may have bought from you in the future are now less likely to do so. So when you do this permission free outreach, It's like applying force to the flywheel, but in the wrong direction.
Number 2, solve for my success, not your systems. Don't make your process my problem. Now we've all tried to buy some things and experience this. Thank you for your interest. Let me take you through our sales process.
Now I understand some of you have beautiful hand crafted artisanal processes, made with only the freshest organic steps. I get it. But if a customer wants to skip some of those steps, let them. If a customer wants to skip all the steps and just give you money, let them do not impose your process on your customers, it adds friction. And just like you shouldn't impose your process, you also shouldn't expose your org structure to your customers.
It's embarrassing and it's unseemly. They don't care that you have a customer success team and an account management team a customer support team, and they all report to different people who may or may not like each other, customers don't care. They want their question answered, and they want their problems solved. Making customers deal with like your departments and their dysfunctions is friction in the flywheel. Number 3, own your screw ups.
We all make mistakes, just say sorry, be sorry, and make it better. So I'm going to share with you an email from a fictional company that had a fictional outage, but the email itself is very, very real. Now I changed the name of the company. To protect the innocent and by the innocent, I mean me. Now what I'm going to do is I'm going to read through parts of this email and I'm going to put my brain on speakerphone so you can kind of hear what I was thinking as a customer of this company.
Here's what I was thinking. So we're aware that you may have lost connection to your internet. You may have lost connection. I've been a customer for 14 years you know I live on the internet. You have the data.
And like, like, the internet goes down, like, all we have is each other. Like people? A horror. They go on to say, There were major cuts to the fiber provided by 3rd party partners blah blah blah blah blah. I don't care about your 3rd party partnerships, For all I know, fiber is the thing that my doctor keeps telling me I'm telling me I need more of in my diet.
But here's the most egregious problem with this message. Nowhere in the entire message, it goes on for 2 more paragraphs. I'll spare you. Nowhere in the entire message does the word sorry, apologize, or any of its synonyms appear nowhere in the message. That is not how you own your screwups.
Now let me tell you about another company that screwed up. Kentucky fried chicken. Kentucky fried chicken earlier this year had an issue. They ran out of what many would consider a critical component of their offering. They ran out of chicken.
And as it turns out KFC alone just doesn't cut it, like the C is is important. And so what did they do? They didn't say, oh, well, this will, we'll get over it. It's it will be fine. We'll brush this aside.
They took a full page add out. Let me repeat this. They paid for a full page ad to broadcast their screw up. Here's the ad. Now there are several things that are noteworthy in this ad.
The first is just like the playfulness they didn't take some fails too seriously. The second is the headline of the ad are the two words we're sorry, Those are the perfect words to use, not if we happen to have interrupted your culinary behavior and habits, for that, we, like, sincerely apologize. No. We're sorry. And I love the first line.
A chicken restaurant without any chicken. It's not ideal. I love KFC for this. Right? And this is from a lifelong vegetarian.
I've never been to a KFC, and I love this. Love this. The data substantiates this 96% of the people if you acknowledge a mistake and fix it 96 percent of the customers will not leave you. Just own your screw up. So when you own your screw up, you save yourself from a possible slowdown in your flywheel.
Number 4, I don't mind paying but I do and make it fair, kept coming back from customers, kept coming back from the data. So let's start with being open. If I visit your company's website looking for pricing information, it's like, hello! I'm not seeking the Holy Grail, just some pricing information. And the response is, go away, you son of a silly person, or I shall taunt you a second time.
That was just me doing audience survey of how many people watch Monte Python. That's not important. Don't guard your pricing information like it's a treasure. Now I know some of you are thinking Odarmesh, where B2B, we're in a very niche industry, every one of our prospective customers is a special little snowflake, and we create special little price quotes for each individual one. I get it, not every industry is the same, but that doesn't mean you can't provide some guidance around your pricing.
We charge by the hour. We charge by the project, and it starts from $25,000 and goes up to $75,000. Give them some idea And the reality is is out there anyway. People can find this stuff. There's this thing called the internet.
The data substantiates this again. We asked people if a company doesn't have pricing information, what do you do? 70 5 percent of the people said they would look for an alternative. So unless you're working at a monopoly where there are no alternatives, the absence of pricing information is friction in your flywheel. We've talked about open pricing.
Let's talk about clear pricing. Customer should not need a mass degree to understand what they're going to pay for the product or service, mere mortals should be able to understand it. Now I show this cartoon to Brad Coffee, who's the head of strategy at HubSpot, also one of the smartest people I know. And as expected, he was confused. And he's like Darmesh.
So what part of Sigma over the first derivative did people not understand? Like, what was confusing here? Data, once again, says, if you have confusing pricing, people don't buy as often 69% said, yes, I would leave as a result of confusing pricing. So we've talked about open pricing. We've talked about clear pricing.
Let's talk about fair pricing which brings me to blockbuster. So blockbuster for those of you that are under 30 It's like Netflix in a little plastic box, except you have to get out of your pajamas, You totally can't chill. And then like an idiot, you go to the store and, like, browse shelves for a movie. And there's negative selection bias because the only movies there are the ones nobody wanted to rent including Chad who works there, right? It's so you go home with your movie and you put it in this device that's, like, the size of 20 iPads and you watch it, and then like a caveman, you rewind the thing, and then you have to repeat the process to return the movie when you're done.
So in 2004, there were 4500 of these non pajama friendly locations. That Blockbuster had. Today, they are down to exactly 1. This one in Bend, Oregon. Now when the analysts and the media dug into the reasons behind the fall of blockbuster, the most commonly cited customer complaint was what blockbuster called the extended viewing fee.
Otherwise known as a late fee, extended viewing fee. That's like, oh, well, I know you had elk for 43 days. I hope you really enjoyed it. Here's $200 tab, right? It's like, no, because even though they called it the extended viewing fee, customers perceived it as a you're lazy and we're greedy and we're going to charge you fee.
One of the critical pieces of the blockbuster downfall. So here's an actual takeaway for you. When you get back to the office, pick 10 random receipts or invoices that you have sent to customers recently and read it as if you were the customer. Does every item on that invoice does it sound reasonable? Does it sound fair?
How would you react if you got that invoice? Now there are 2 parts to being fair. There's the charge that's proportional to the value received But there's also the charge, me, the same price that you charge other customers that are like me. Pricing should be programmatic, don't make customers negotiate. Reluctantly if they have to, but you should not make them.
Now some of you are thinking, well, not suggesting you like to do away with discounts. No. You can have discounts. They just need to be programmatic. So you can say, we're running a promotion for the holiday, or it's a full moon or this is a repeat customer or this customer bought multiple products, all those are great reasons to offer a discount just don't offer different discounts to different people at the same point in time if they have a similar profile.
In the future, that's a recipe in my mind for discrimination. There's going to be a time where people pay a higher price simply because over their farm and what they look like. That's just bad. It's just bad business. So charge them fairly.
Last one, number 5, don't block the exit You made it so easy to buy, don't make it so hard to cancel. It's like customers buy with the best intent we wanted it to work out. Sometimes things don't work out. Relationships just don't work. We don't always know why.
It doesn't have to be awkward I didn't leave clothes at your headquarters. We can still remain friends. We might get back together someday, right? Don't block the exit.
Don't don't be that person.
Because we've all had this, okay, well, to cancel service, you'll need a letter from your doctor notarized by the Dalai Lama and filed at the end of that rainbow. We've had variations of this experience kept coming back in the surveys and the anecdotes. Once again, the data says if you make it easier to break up with you, more people buy, This is not counterintuitive. If you make cancellations easy, it adds fluidity to your flywheel, which brings me to an idea. We've all seen this button.
It's the buy now with one click. Brilliant. We've all seen it. We've all used it. Here's the idea.
What if we started putting up a cancel now with one click button? Do we think that if our company's built a reputation for being easy to break up with, easy to cancel that more people would buy from us? I think so. There's precedent in the retail sector, Zappos, Nordstrom, lots of it's like, if you make it easy for people to refund or cancel, you get more sales. I think that works.
So those are the 5 biggest insights and lessons drawn from the research and drawn from the data. There are more You do not need to speed read all these. We have kindly and conveniently put all of them into a new slide deck that we creatively named the customer code. By the way, I sneakily took that slide off just so you know, I'm kidding. I'm not that diabolical.
Oh, I am, but that's
not why I did it.
It's called the customer code, and it's atcustomercode.comlaunches today. It has all the tenants, the lessons we've learned, more data, more fun cartoons, and at the end of the deck, is an email that can come straight to me in an email address, but more importantly, there's this report card. So you can do a self assessment of yourself.
It's always of yourself, a
self assessment. Give yourself a score from 0 to 10 against all the things that your customers, my customers, people want from the relationship with you. Give yourself a score from 0 to 10. Just to see. Now some people are cringing and squirming a little bit.
It's like, I'm not sure how my company would do on these things. It sounds like it could be painful and possibly embarrassing, and you're right. It is painful it is embarrassing. I know this because HubSpot went through the exercise. I went through the exercise.
But one thing more painful and embarrassing than going through the exercise is taking the results and putting them on a fifty foot screen and sharing it with the internet. This is HubSpot's 2018 report card as honest as I could be. Not great. We have work to do. So we are, as we speak, working on getting this score to like an 8 or an 8.5 over the next year.
I encourage you go through the exercise it will be revealing for you. It'll be useful. This is Domino's. They sell pizza, which I love. Perhaps a little bit too much.
I've probably had a 1000 Domino's pizzas in my life. I've almost never been to a Domino's store. Because Domino's doesn't just sell pizza, they offer a pizza buying experience. Domino's has the pizza builder, on their website. So instead of talking to someone and trying to explain the exact configuration of the pizza you want, you build it online.
Okay. It's like I want a large pizza, hand tossed crust, And the whole thing, I want green peppers. And on half, I want black olives because I married an alien. Like, who
puts
black olives on a pizza. There's very few ways to mess up a pizza. Black olives is one of those ways. Okay. So I know culinary experts.
I do know black olives, but I know culinary. Here's what pizza is. You start with a bunch of bread and then used tomato sauce and cheese to cleverly disguise the bread so people feel less guilty. I'm not an expert, but I think that's basically what pizza is. And so when I go to checkout and I see this page on the Domino's website, It bothers me a little bit.
It's like, okay, well, we know you just ordered a bunch of bread cleverly disguised. Would you like some more bread? Have you considered some more bread? Perhaps you should think about some more bread. Now I'm okay with this.
I'm okay with it. It's like, but at least make it a fair fight. You're trying to upsell me so that you have these big green buttons. And the thing I have to click on find and click on is this, like, No. Go to check out a tiny little link, not even a button.
Not even a button. That's what it has to do to get my pizza. And so the thing that goes in my head is like, I'm weak. I'm very weak. I give up.
Now some of you are thinking, Dharmesh, have you considered that they're running an AB test? I know how the internet works, I don't have an aol.com email address. Give me some respect. Yes. I considered that it might be an AB test, so I tested it with multiple browsers.
Multiple devices log in from different countries. This is not an AB test. They are showing this frick into everybody, not just the week of will, like me. Now Domino's is well within their rights to do this. They have the right to do this, but just because they have the right to do it, doesn't make it right, which brings me back to the question we started with how do you grow better?
The answer is simple, not easy, but simple Do the right thing. Treat people with respect. Treat them like you would want them to be treated. Recognize people's differences. Some of us spend $120 on a Patagonia police.
Some of us spend $120 on pizza. And extra bread, we need to recognize and honor people's differences. Do the right thing even when it's hard. I know it's hard to own your screwups. I know it's hard to not get taken in by the temptation of short term results.
I know it's hard to let a customer go and not hug them too tightly, All these things are hard, but do the right thing, especially when it's hard. Because when you do the hard things by definition, you are differentiating it yourself because the hard choices are the choices few others will make. So we've all had these moments faced with a tough choice and we make the right choice. We do the right thing for the customer. It feels good.
It doesn't just feel good. It doesn't just feel better. You actually do better. We need more of those moments. Because if you put all those moments together where you do the right thing for the customer, all those moments together is what creates delighted customers.
And customer love is the most powerful force you can apply to your firewall. That's how you grow better. Thank you.
To grow. Relatives comment on it, doctors track it, and parents encourage it. But once we're older, we begin to obsess over it. Somewhere along the way, growth becomes our ultimate goal. Our only goal, something to be achieved at any cost.
So we compromise our values. We mislead. We put our customers at risk. We trade trusts for a payout and choose what's easy instead of what's right. The world says you must be called, cruel, and cutthroat to succeed.
We disagree. Here at HubSpot. We believe it's not enough for businesses to grow. They need to grow better. But what exactly does that mean?
Growing better is remembering you're helping people with unique needs and dreams. It's letting them interact with you on their term. Not yours. Growing better is adding value before seeking a reward. It's more than what you sell.
It's whether those you sell to succeed. Growing better is placing long term relationships ahead of short term gains. Staying true to your values and making the right decisions. Even when they're not the easy one. Growing better is succeeding with a soul.
At HubSpot, we've made it our mission to create a platform and community that help you do just that. Because when our customers succeed, we do too. Grow better with HubSpot.
You guys both talk a
lot about putting customers at the center of everything that you do. How do you individually as leaders of an organization do that? And how do you make sure that HubSpot as it scales continues to do that day in and day out.
Yeah. There's a couple of things I do personally. I meet with one on 1, at least a customer a week every time we have a management team meeting, we kick the management team meeting off of the customer. We try to pick a customer that's not that happy. And so we get really good feedback there.
Every time we have a company meeting, it's kicked off by a customer. We are constantly serving our customers to get feedback on what they're saying and what they're doing with the product. And I'm a I'm a voracious consumer of that stuff. So always trying to solve for the customer customers do 2 things for us. One is they're obviously a source of revenue.
The other thing that's happening and that I've seen in the pattern of our customers is most of our new businesses coming in really is a function of word-of-mouth from the existing customers. So there's like this flywheel effect that happens with our customers that we're really leaning into.
I'm really glad you mentioned the word flywheel because I want you to define it because I think flywheel can be a tricky term sometimes. Like, I've heard it. I think most people that have maybe gone to business school have heard it, some organizations have heard it, but like the average person maybe doesn't know exactly what that means or the context. So can you give us like the straightforward definition and why it's a business term?
The the first person I heard used that term was Jeff Bezos. And when he started the company, there's kind of this this famous napkin drawing he did in the early part Amazon or he drew the Amazon potential Amazon Flywheel. He hadn't didn't have any product yet for an investor and the Flywheel basically was how do we introduce the customer experiences like customer experiences good, somebody buys something, they get revenue, that revenue turns into profits, that's all well and good, but the more traffic he got into that system, the more customers he got, the more additional products will get attracted in there, which made the customer experience better. Enabled them to grow more and it just became kind of a flywheel. And it wasn't just about a funnel where we're bringing in more visitors and more leads and more customers and ended that way It was the idea of additional customers were pulling in additional products, which made the product more valuable to additional potential customers and that thing just got spinning and spinning sping.
Every company, by the way, I think needs to move from this idea. It's kind of an archaic idea of this idea of a funnel where
we
got the marketing department pulling visitors and leads in and they got a sales department bring them into customers. And that's it. Well, that may have been the way it worked in 19, you know, 98, but today it works in a very different way. We're word-of-mouth for almost every business is the major driver for growth.
And so
there needs to be a new metaphor to describe how people actually decide and make decisions and how a business really works. And I think it's more like a flywheel than a funnel.
Is that a product of like scale or size or is that like from day 1?
I think it's from day pretty early. Day 1, typically your first flight for us, our first were all friends of ours. I'll tell you a funny story about HubSpot. We had a list of, I think, around 50 customers, and we had a management team meeting. And we went through the list and said, how many were friends of Brian?
We had FOB column, and almost everyone was like a friend of Brian's. And then we went to we got to 100 customers and we went to FOB calm. And what we were excited about is less and less of our customers came directly from our network and more and more were coming through work. And that's what businesses want to do. They want to get that word-of-mouth flywheel really cranking.
We had a friend of Darmesh as well, but both of them were on there and that was pretty good.
Let's talk a little bit about the customer code as well because HubSpot has had a relatively long standing point now culture code that you spearheaded and has really taken off and been a heart of the company for quite some time. And now we're diving into this idea of
a customer code. So can
you just briefly explain what that is and the why of it all HubSpot's
original culture code, which was, you know, really well received. The idea there was to kind of, kind of revisit the relationship that companies had with their employees, the people that worked there. And it felt like something was kind of fundamentally broken. In the modern age like okay well there's a bunch of things that companies do including HubSpot at the time that don't make complete sense in the modern world. What the customer code said is like, okay, here's how we think the relationship between employees and companies should work now to reflect the current reality.
And the customer code essentially is an analog to but it kind of rethinks the relationship that customers want to have with the businesses they buy from. So the ideas identify what are the points of friction, what the customer experience really look like. What like when they care about, what, you know, because lots of companies talk about kind of being customer first, customer obsessed, be a bigger term of choice. But then if you ask them, like, well, what have you, like, what is it that you do on a day to day basis that causes you to, you know, be customer first? I think, you know, step 1 is really understanding, what customers want, what that relationship should look like and what that experience, should look like all the way through.
When I hear the phrase grow better, I think of
Eating my vegetable growing healthily.
Think go better to me to step out of my comfort zone?
Go better means being able to work
on fulfillment and
not on a
team you know, making sure that there's a purpose behind what I'm doing.
Moving in a direction that will allow me to accomplish my goals and accomplish them in a way that will make me feel empowered.
When I think about growing better, I think a lot about, day to day, we're trying to do some of the right things for the world and how can we do that in a satisfying way? So we feel really proud of ourselves at
the end of the day. You know, progress for progress is safe.
It's really really progress in all
seeing when people start businesses, they actually dream of achieving something or solving someone's problem. And along the way, because of the pressures of growth and cash flow and pay salaries, they may have to make decisions that are not the best for what they dream they want to fulfill, growing better means a context where you can actually pursue those trends.
All of this that we've talked about so far is a little bit about like or a lot about how you're thinking around the business and how you're thinking about HubSpot and its sort of evolved, especially in the last year, a couple of years. HubSpot celebrated its 12th anniversary this year. This is the 7th inbound stage you've been on, what how have you changed as leaders in that that timeframe? And is there any point along the way that really stands out to you.
Go for it. What I've
tried to do over HubSpot's kind of his 3 is kind of narrow the scope of things that I spend time on and focus on. As I found that, the narrow of the focus is, the deeper I can go on those particular things. And I think the more value that I can add. So I've gotten it down to, three things that I care about and work on in HubSpot. 1 is HubSpot Brand and the overall story of HubSpot.
Who are we how do people perceive us? Number 2 is culture of which, you know, manifests in the culture code and and in other ways. So the third one's a little bit odd It's around boldness to make sure we're taking enough risk for the long term essentially is. I don't really think through how do we systematically think about, investing in things that may not have a short term return, take, you know, a while for those things to show up. And and there was a time that comes 5 year later, and this is the time, you know, I think all startups go through this.
You start off being very much a generalist, essentially, like everybody does everything. So you're, you know, you're writing code, you're making sales, you're doing marketing. But then over time as organization scales, and I think this happens for people too. You tend to specialize in that square. I think you get real return is to be able to kind of narrow that focus and then really dig in.
I would say I just come out from a different angle. I'm a big believer in getting feedback and feedback is kind of the breakfast champions. And as I've grown from just the two of us to 2500 employees, my role has changed a lot over the years. Every couple of years, it seems to be like a kind of a tectonic shift in the types of stuff I'm supposed to do. What's helped me along the way a bit is I get it actually Dimesh gives me a world class review every year.
Last year's review is 31 pages single spaced with feedback from 21 different employees and board members and customers and all kinds of people. And about half of it is here are the bugs that you've got and how you're managing the company and the people and the community and here are the features you have. The bugs you need a lot of Scotch to get through the bugs 1 and the featured one is fantastic. You're like, floating around the office when you read the judgment. But I take that very, very seriously and try not just to fix the bug.
Some of my bugs are permanent bugs. They're hard to fix. But fix the ones I can fix and then lean into some of the features that maybe uh-uh are unique to me. That's that's been a big help. I also hired an executive coach, which has been helpful, that had coached other CEOs of companies that had scaled and and gleaned a lot from that.
So I'm a I'm a learner. I like to learn. I like to evolve, and, that served me well.
Do you give Darmesh a review?
Yes.
How important is your relationship with each other as co founders as like you're in a unique position where despite your title as CEO or CTO, like you're the only 2 co founders, how could you be solo founder, do you think? Would you want
I think I could be easily be solo founder of HubSpotton would be about a tenth the size we are now. I don't think we'll be sitting here having this interview.
I don't know.
I couldn't be a solo founder. I'm just not, I don't have the requisite skill set, essentially, in of, being able to grow in scale. So I think the partnership has worked out, really well. It's been symbiotic. Yeah.
It's been
It worked remarkably well. I think now Dermesh tweeted this the other day, the number one cause of death for startups as co founder, dysfunction or conflict. And I think one of the things that we've been aligned on from the very early days is we want to build something much bigger than ourselves, something that will have a big impact in the marketplace, some featuring the change lots of employees and partners and customers and investors' lives. And we consistently strive really for the very, very long term and always made very long term bets then willing to take a step back or 2 so we could take 4 or 5 steps forward more quickly. That alignment has been really helpful.
In all of that time that you guys have evolved, so is the business and how's gone from being a one product company to a multi product platform organization, and nowadays seems to be really driving that and then sort of messaging that that all of that carries us this idea of growing better. What does growing better mean to you?
Yeah, I think there was there's been 2 arbitrage opportunities that have opened up in sales and marketing. When we first started the company, there was a real opportunity in lead gen, the people the way people were shopping for things were changing, they were going to Google more and they were going to social media sites, they were ignoring all the traditional marketing ways like cold calling emails and stuff that. And so we said, well, let's do inbound instead of outbound. And that was where there was sort of like there's just opening in the universe to create value. I think there's still plenty of value there in doing inbound versus the old school thing.
Many people are doing it now. The new opportunity is around building these flywheels. So creating that gorgeous fast flywheel that spins and is a very convenient flip bind process for your customers. And so our value props move from a lead generation platform to kind of a full flywheel platform, go from marketing into sales into service. We got a free serum in the middle.
And so we're trying to match our value prop and our product where we're where we think the opportunity is for for companies to grow in a much more effective and fast way now.
Probably I think from the real better kind of the ideas was analogous to the kind of original marketing idea, which is you know, people are just sick and tired of essentially taking advantage of it being marketed to, but, you know, it doesn't, will itself just to market. I think growing better is really about understanding, you know, what people want, what they want the relationship to be like. And, you know, we talked about trust earlier I think the way to grow better is to actually earn the trust to customers and say, you know, we wouldn't do something that we wouldn't want them to ourselves. We're not gonna charge you in a way that we wouldn't want them to ourselves essentially. And I think you know, growing better is recognizing that, growing bigger is not enough.
That's not sustainable. All you're doing is tracking some metric and making that number go up. You can make that number go up, by doing an unnatural acts essentially or, you know, putting your customers through pain But that only lasts so long. So if you're truly solving for the long term, you not wanna don't just wanna grow bigger. You wanna grow better.
You wanna improve. You wanna really understand this kind of modern world where customers are people are looking for.
To feed with soul,
by being positive, by being open to change just letting
go and enjoying letting go, being part of whatever you're doing and living that moment,
you know, making sure that there's a purpose behind what I'm doing and being sure I'm putting the, benefit of others
It's putting out good into
as a number, possibly Pacifica Business entity, hitting my goals, my personal goals and my professional goals in a way that is moral and there.
Always being
conscious of the people around us when we're doing the work and making sure that we're not taking advantage of others, even when be easy for us.
Okay. We're going to jump into a little bit more of like somewhat rapid fire question. What drives the work that you do?
It's kind of the impacts we're having. And it's when we started HubSpot, we said, boy, we're going to be great if we built a great company that one day our grandkids will brag about, you know, Brian and Darmesh created this awesome company, a company that we're super proud of, and It's starting to happen a little. It's cool. Like we have 2500 employees for the most part. They're pretty happy.
We have lots of great partners that many are doing great and we're really happy and proud of them. We have tens of thousands of customers. We have lots of investors who have done well And for me, it's that's super gratifying and motivating at this point in my life.
Duramesh, what drives you?
It similarly just having, having positive impact. But the other thing is in, like, making those that kind of believe in HubSpot, both our customers or our partners and all people, making them look brilliant someday. That's the, you know, overall goal is to can we do something meaningful? Let's see it.
Are there any books that have inspired you personally or professionally or both?
There were 2 books of the 2 of us rev when we first started HubSpotter reread One was the innovator's dilemma by Clay Christensen Mhmm. Which was we took his class, actually, when we were in business school, and he topped the class. And one of the cases in the class was the iPhone was the iPod case, and it was very inspirational to us. I remember just thinking, oh, that whole iPod thing, that's like internet marketing because you have to buy an analytics package and a website and apply it. It's complicated.
Like how do we pull all that together for a mere mortal? And the other one we rep with Blue Ocean strategy was super, super helpful back in the early days.
On the on the quake version, so that was interesting. Early in the HubSpot history, we were like 2 to 100 employees at the time. We invited Clayton because we were just, you know, so
fanboys.
And, like, looks like a woman. We just, like, come in and, you know, you know, talk to the team, talk to the company, and he did. So they were, like and there's
You don't know what you're saying. You can't
played Christian's top in, like, 50 of us.
Anyway, it was awesome. That was awesome.
He's a wonderful
person. Yes, he is.
Knowing all the things you know now, what advice would you give to your teenage fifteen year old self?
Tell myself to, like, reduce self doubt if I say it's gonna be okay. Life will turn out alright. That'll be one. The other one is around, it's okay to to, like, pick the things that you want to be good actors as, I think prevailing things like, oh, you have to kinda shore up all these particular skills. It's like, nope.
It's actually there's a path where you can say I just wanna do these limited set of things over time. Pick those things really, really love them. And if you do, you'll kind of obsess over them. You can get good at them and I think you can do okay versus, you know, going to the classic on a manager, you'll pass it. I'm gonna go off and build this like there's never path that I think there's that works too.
I think if I eventually wanted to build HubSpot or folks out there wanna build HubSpot. There's this the startup world is a hammer of this idea of failure and failing fast learning failure. And then we certainly do that and we embrace that. But success helps too. And if you join a company that's had some and learn some things and iterated through stuff and really got some scale, that is invaluable experience that you can bring to your own startup it gives you confidence in backbone to take risks.
So my advice to myself would be go to work for good sized companies that you really respect and admire with great leadership teams. If you want to start your own company, that's invaluable scale up experience. It's hard to get very few companies really go through hyper growth for a long, long period of time. And you learn a tremendous amount and those are very rare skills to acquire So I would recommend that to anyone thinking about starting a company.
Thank you guys so much
for sitting down and chatting with us. Excited to be here at Inbound this year and excited for next year and everything, see where all these product announcements and spot goes from here. Thank you.
That's a tough one. I can think of many people that inspired me to grow
better. A lot of people.
My mom, she's selfless and always others in front of her. And I think that every day, inspires me to grow better.
My bad.
Yeah. He grew from nothing. To build these business, people who do hard things, but, you know, that is the right thing
to do?
It's just to Ginsburg. Not only does she show up for herself and for her community every day at work. She really inspires tons of women and girls throughout the world for right, that she stands before. And she still makes it to the gym every day, so I find her really in process.
I think it's important to look at people in different realm.
A really good example is Tiffany Pham inspires me. She co founded moguls she coded the whole thing herself and she didn't know how to code before she created this app, but she taught herself unrails at 3 am just so she could build her own prototype.
You know, people that I look up to that I would probably never ever meet. So somebody like Martin Chesky or Jeff Bezos are probably people that inspire me in terms of the professional environment.
My coworkers, they are driven, they are passionate, and
they are,
good at what they do.
Yes, That's pretty awesome.
Please, what come back. Your MC and host, Mr. Mark Jeffrey.
Good afternoon.
Hi, everyone. Can believe it. We have reached the final presentation in this room for today, and it is a good one. We've had amazing presentations from Brian and Darmash and just backstage now, I'm chatting with Christopher, and he told me this has been the biggest year yet in product development at HubSpot. So now we're gonna take a look at some of the cool products that are coming your way as we welcome to the stage.
The senior vice president of product at HubSpot. Please welcome, Christopher O'Donnell.
My three year old daughter loves Baby pics.
The other day
I came downstairs early into the kitchen, at her request to try to make little baby cake, baby pig, shaved pancakes. And there I am, I'm kind of struggling to do it, but doing my best. And she kinda walks in and walks up to me and smiles. And she says, dad, when I grow up, I wanna do what you do. I'm feeling very proud.
She says I wanna be a pancake slipper. And I'm thinking to myself, like, I I'm more than this one thing that I happen to be doing in this one moment. But I don't say that. I say, sweet, strong girl, just last week, you said you wanted to be a veterinarian. And she smiles and tilts her head and says, dad, I can do more than one thing.
Yes. You can. Everything is possible for her. Three years old. She could just follow her imagination wherever it goes.
You know, when I was a kid, never did I think that I would be here doing this. Growing up, actually, I wanted to be a tornado chaser, not exactly following my father's footsteps into the world of equity research, which is an actual profession that exists and is respectable. But that's the great thing about being a kid. You see, as a kid, you can be anything. And you want to know everything.
You want to be everything all at once. There's no such thing as work. There's only play. Do you remember that feeling? So put yourself there, okay?
You're a kid. You can play firefighting ballerinas. You can be a crime fighting airline pilot. You can play dentist's office with your friends and explode into a musical number. Work is play.
The only limit is your imagination. Work is play. What an idea. And that reminds me of my gaze working at a start up. This is actually, this is me.
Obviously, I wore my hair a little bit differently, startup days. But see, startups are just like being a kid. You get to come in and play 10 different roles in one day. You get to be the marketer that hops on closing calls for key accounts. You're a sales rep, but you also answer the 800 number, you blog, you put on events in the office.
Get to be the founder who picks up coffee when you feel like the team could use a boost. And honestly, startup life is pretty great. Well, at HubSpot, we make stuff for startups. That's right. In this year, our starter products have matured.
More than ever, starter products keep your imagination big without becoming a burden on your budget. And this my friends is where we begin our story today with our massively updated marketing hub starter product. Let's dive in. The number one thing that marketers need to do, we all know this, is generate leads. Marketing Hub Starter has done this since its very birth.
In just seconds, starter gets you up and running, collecting leads off of your website. Last year, many of you were here. It was a big step we added support for Facebook lead ads to marketing starter. It's good times. By the way, Facebook lead ads are just dynamite.
One of my favorite things that's new to marketing technology, they really, really work. Comprehensive analytics baked right in. You see this is why we made the decision to build marketing Hub starter on top of the free HubSpot CRM. The native CRM integration alone puts Marketing Hub Starter in a class of its own, it is in incomparable value. Nothing like it in the market.
Alright. Well, marketers, as we know, don't just manage lead lists. Huge part of their job is to engage and reengage these humans, keep them coming back, getting that flywheel that Brian and Darmeasure talking about, getting that flywheel to really crank. That's why I'm so excited to announce that we've taken a big step. We've added the power of HubSpot email marketing tools to marketing Hubstarter, HubSpot Email Marketing in a starter product.
Can you believe this? This is huge news. Who's excited about this? Massive. Okay.
It's not just email. It's better email. What we did is we went in and we rebuilt our email editors from scratch from the ground up. We built them to be sleek and intuitive, fully drag and drop, And today, we can confidently say that we have the best editors in the business of email marketing. All right, lots of exciting additions.
They're available right now. One part of marketing starter that we did not add to, it's the price. It still starts at just $50. And we have Sales Hubstarter too, very popular. It's been a huge hit.
We talked about it last year, but you guys are here for the new stuff. I get it. I'm with you. So look, if you're starting out. In fact, especially if you're starting out, do not wait to make an amazing customer experience, a key part of your growth strategy.
This flywheel idea that we've been hearing about today is really real and it's never too early to start. Today, I'm pleased to announce service hub starter, It's a new suite of tools that will help you delight more customers and to do it in less time than ever. Let's take
a look
inside. First up, ticketing, native ticketing, native help desk in the CRM, a gorgeous universal inbox that helps you organize and respond to questions track customer issues closely all in real time. Share help articles, guide customers faster with features like email templates, snippets, documents, Book customer meetings faster by letting customers choose what times work for them. And hop on live chat, hop on the phone from CRM to connect with your customers seamlessly right from within HubSpot and nothing falls through the cracks. Your entire team will have the context they need And managers will managers benefit from deep reporting and key performance indicators.
So they can help all right, pricing? Why reinvent the wheel on pricing, right? We think at $50 a month per user, service ops really going to turn some heads out there. What do you guys think? You guys excited to see service up expand?
Us,
too. So hold that thought. We have actually a bunch more exciting stuff for service hub coming up a little later. All right. Another cool thing about being a kid, it's free.
It's free for the kid. You know what really is free? Our conversations product. What is conversations? It's a bunch of stuff.
It's bots. It's live on-site chat. It's team email, and it's tied together in a beautiful universal inbox. In the words of the Great philosopher, Paris Hilton, It's hot. If you haven't checked it out, seriously, while you're here, when you get back to the office, give it a shot.
Really serious about this. I mean, think about this for a second. This is actually pretty huge. Live chat, which is just one feature of conversations, This is the kind of product that some companies pay 100 of dollars a month for, just that one feature, not here. You get it totally free.
Why do you get it totally free? We think that this is absolutely the most important thing that you should be doing is having these immediate one to one conversations with customers, and we don't think that that should have a price tag. We think it's the right thing, and we believe the right thing has a way of working itself out. All right. We just took conversations free and already the growth has been really thrilling.
Real time chat. This is the future of marketing, and we're thrilled to claim a spot at the forefront of this rapidly, rapidly evolving space, all right? That's a lot of free product love. Who thinks giving this stuff away is going to help a few companies out there. As you can probably place in my heart.
And I really love these starter products. Every company should be able to do things that are bigger than its team, bigger than its budget, bigger than its brand. And as they do, that brand will grow and it will grow better over time. An asset brand grows an asset brand grows better, there still will be times when you wish it would grow, just a little bit faster. Let's do it again.
Put yourself there. You're a kid. It's a summer afternoon, You're at an amusement park with friends. Friends want to go over to the roller coaster. You head over.
And you're not tall enough to ride. Just then, your friend's older sister comes around the corner. All you want in the world is for her to notice you and she gazes. Right over your head. It's the absolute worst feeling.
And so you close your eyes
And you wish
you wish that you were big. You dream of the day that you get to take your company public. You dream of the day when you look around you and you realize you're building a company that your kids could work out one day. I remember 10 years ago or so, I was at an event, a lot like this one. And I made a wish.
I wished as I watched the fell on stage demo the new product stuff, all the cool stuff, I wish that I could be that person on that stage. And I'll tell you, be careful what you wish for. Because this is totally and completely terrifying.
It's a lot of
fun, but it is, it is terrifying. It is quite a roller coaster. But really, what happens when you wake up and you actually get this wish? What happens if you wake up and all of a sudden, you're living in that world
of scale.
You're a household name. What could go wrong? See, at first, being at scale is scary. You know, your friends told you it'll be fine. It'll be fun.
But their twists, their turns suddenly you're upside down. The world of yesterday is gone, and the rules have changed on you in an instant. Let's learn together how to survive in this new world and to help us, a trio of products. We have the massively updated marketing hub enterprise and to swashbuckling new products, sales hub enterprise and service hub enterprise. Let's take a look.
Immediately, you notice this terrifying new world of scale is full of data. Your customer database has roared to life and expands geometrically even when you're sleeping. In this new world, you're generating more leads. You're closing more customers. You're collecting more data.
You're using a whole host of new tools to do it, and a lot of this action has been automated. It's been optimized. As surely as the sun rises and sets, this customer data set continues to grow, not just in size, but in complexity. This precious asset, this complete picture of the customer journey, risks shattering apart and scattering to the wind. See, with scattered data, you risk missing the point.
You risk having the wrong conversation with the wrong person. Growing your data better starts by connecting everything you do, every tool you use to one single source of truth. As of today, there are now over 200 free integrations that allow you to connect HubSpot. To some of the best tools in the business. You can use these right from the beginning and as you scale, they become more and more impactful over time.
If you have a custom built system or a system you want to build in house or maybe something else that we haven't thought of, We're thrilled to announce that we've increased the number of public APIs that we offer by a third just this year and we're just getting started. We are committed to becoming an API first company. Now all of this data does not exist in a vacuum. It's connected. When you import data into HubSpot CRM, you can now import that data with associations.
This means that you can import your data and maintain the relationships between all of these data points. Even for large companies. It's a real enterprise feature. This one we thought, every company on the planet deserved, So we decided to offer it for free. We think every business, getting started in HubSpot should be able to pull their data in and get the most out of it right away.
Workflows.
Workflows are what we think of as the brain of HubSpot. This last year, we took a look at that brain and asked ourselves if it was smart enough and fast enough, and we decided it wasn't. So our engineering team dove in. They rewrote workflows, they replatformed it, and I'm happy to tell you that the version of workflows that is live today is ten times faster that it's been in the past. You guys excited about that one?
What this powerful automation does is it's really what transforms HubSpot into your single source of truth for the customer journey. Why is this important? Again, you can't waste precious time and money resources, having the wrong conversation with the wrong people. It's not good business. It's not how you grow better.
So this was our vision. When we built the new version of predictive lead score, to put in HubSpot Enterprise. We made a monumental investment in artificial intelligence. And this investment really paid off. The new enterprise predictive lead score is more accurate It's stronger and more powerful.
Now when you're small, You can have someone crunch some numbers in Excel. Have someone stitched data together. We've all done it.
I used to do a lot
of it. The truth is as you grow, that's no longer a scalable option. So we enrolled our CRM in a math course, and we added to HubSpot calculated properties. Who's excited about calculated properties? Think about everything you're doing you know, things like sales rep commission or deal profit, support costs for account, total marketing interactions by contact or by company.
I mean, the list goes on and on and on. And now you can let HubSpot do all of that for you. And here's my take on this one. The truth is, so much of HubSpot comes down to the contact and those properties that you have on the contact, your smart lists, your workflows, smart content, CRM views for sales reps, everything really touches properties. And so to have these new properties means all of HubSpot is now infinitely more powerful, I am thrilled about calculated properties.
And so you use these tools. You customize your CRM, and over time it fills with valuable customer insights. How do you get at these insights? How do you find the needle in the haystack, the one piece of information that you're looking for. Historically, you haven't been able to available today in enterprise,
custom property search allows you
to use the global universal search bar To unlock data stored anywhere in the CRM, no matter how much data you have. Thrilled about this one. Alright. I wanna introduce you to someone that I've known since I was a kid. Truthfully.
We went to high school together. We nerded out. We took computer science together. This is my friend, Aaron. Today, he and his friend, Ariel, have a company.
It's called blissfully, And I love this company. Their entire company is centered around this idea of an explosion of data that's happening to growing companies. All right. So should we meet these guys? All right.
We're gonna hear them and how they think about this problem of exploding data, scaling data, and also the choices they've made and growing their venture backed business.
At Blissfully, we know that modern companies are built on top a huge number of amazing SAS apps, but it becomes really challenging to manage that. We help companies figure out all the products they're paying for and which ones they're actually using so they can improve their business.
My name is Ariel Diaz, co founder and CEO of Blissfully.
I am Aaron White, CTO and founder of Blissfully.com.
Blissly was founded in 2016, 4 out of a pain that my co founder and I had experienced ourselves building and running businesses, and we wanted to help companies like ourselves have easier way to manage their different SaaS apps and vendors. We're now about 10 employees have raised 5,000,000 in venture capital, and we've got over 500 customers now using it.
So we've integrated HubSpot with of our analytics products to pump data into it to enrich our customers with their profile data. We've integrated HubSpot with our various lead captures and other marketing activities. We've integrated HubSpot with some of our conversational platforms. We're going to be integrating HubSpot very directly with our products so we pump data directly from inside our app into HubSpot. At Blissley, we're in the business of cataloging 1000 and 1000 of SaaS apps, and we use dozens dozens of them.
So when we choose HubSpot as our CRM, that has real meaning, because we played with, huge number of products. HubSpot is, in fact, a very robust platform, and that's what you're looking for when you're choosing a CRM. So the fact that it's free is fantastic and lets us build and integrate against it with confidence, we think every company in the future is going to get to cherry pick the best vendors. So we think at scale, we're successful, we'll be helping a large chunk of the world's businesses.
It's really critical to have that data in a single place, and that's what HubSpot enables us to do.
Alright. Let's hear it for these guys. In particular, I loved hearing this quote from Aaron. You know, it's a big vote of confidence that these folks who know so much about the world of SAS that they've decided to centralize their own stack on HubSpot CRM that really made my day. Alright.
So here's the question.
What do
you think? Should we let our customer data fly in a million directions? I don't think so. Who would rather grow their data together? Alright.
You know what's fun about scaling? Hiring. You know what's really terrifying about scaling? Is when all those people actually show up and want to do something. How are you gonna train 100, thousands of people How are you going to know if they're even doing stuff at work?
Are your growth tools going to hold up or what? How do you keep your team from growing apart? What if your whole stack could magically and transparently support your growing organizational structure. Look, it's no secret that HubSpot was originally built for smaller companies. And so in the past, HubSpot has been rather lacking in this particular aspect.
Today, that all changes. HubSpot Enterprise allows you to group your folks in a zillion ways. You can group folks by team, by region, by product line, literally any dimension that you can think of, all in our elegant, unified interface. We think this is really cool. This opens a HubSpot to a whole new class of growing companies, some companies we've really wanted to serve.
All right. Let's continue. You've scaled your company, physically scaled your company around the globe. But each new international office is a huge investment. Show me the money you say.
How are you gonna know how one particular region is performing. Guess what? You got this. You've already set up your teams, automatically, you're halfway there. You see with custom analytics filtering and enterprise, reporting on the performance of, let's say, a regional website or activity from a certain country.
It's as easy as choosing it from a drop down menu. Alright. HubSpot is now, as of today, great. For managers of big teams, even teams that have lots of layers, lots of levels. Got it.
But what about the people on the front lines? What about the people actually doing the work on a day to day basis? Is it the downside of one system that everybody's gonna be stepping on each other's toes all day? Well, it shouldn't be. With content partitioning, it's breeze.
In HubSpot Enterprise, you can section off your content by team. And it's as simple as tagging that content. That lets you control who sees which assets And maybe more importantly, who can edit and publish different assets inside HubSpot. Now there's a bonus here for those of you who are marketing internationally, if you're publishing content in multiple languages, our support for multi language has come a long way. You no longer need to have 7 different copies of an asset to market in 7 languages.
This is exciting. Every person on your team can have a clean, organized workspace without having to worry about stepping on another team's toes and ruining their day, or their quarter. But how do you give sales prospects? The content that they ought to be seeing based on their actual business needs and priorities, announcing a new feature called Playbooks. Imagine being able to surface everything from knowledge docs to competitive battle cards, call scripts, presentation decks, case studies, and present it in the right way at the right time based on that human you happen to be talking to.
As you grow from 50 to say 500 reps, with Playbooks, you'll sleep easy knowing that everyone on your team is having productive relevant conversations with prospects relevant conversations are the ones that actually lead to new business. This call may be recorded for training purposes. How many times have we all heard that? You ever wonder if that training ever happens. With call transcription in HubSpot, your managers have an easy way to coach frontline reps to show them what a good job looks like and actually how to help customers in the best way.
And the benefit for All right, growing your team. With HubSpot's enterprise tools, growing across regions, across product lines, industries,
or
any other dimension, you could cook up now feels natural. Instead of scattering your team to the wins, Who here would rather grow their team together? What do you think? K. A few minutes ago, you heard from the team at Airstream.
It's amazing how word-of-mouth is driving their business. Talk about a flywheel story. Talk about a grow better story. We love air stream love what they're doing. Now as it turns out, this has meant some massive growth of their team just like we were talking about.
Growth with their team, growth with their data set, basically everything that they're doing physically to footprint is growing very quickly. So we're gonna hear a little bit more about Airstream and how they have decided to scale their team using HubSpot. Let's take a look.
5 years ago, we were a company, approximately 250 employees. Today, we're over a 1000 when it comes to manufacturing, that's a lot of growth. We've added at least 250 to 300,000 square feet of manufacturing space in those last 5 years. And we currently investing at the scene. So next year, we'll be building a whole new facility as our 1st new complete manufacturing facility in 50 years, and it'll be 765,000 square feet.
So significant growth. If we didn't have HubSpot, we wouldn't be nearly as efficient. I don't think that we'd have a good understanding of our customers. We certainly wouldn't know what's working and what's not working. And so the idea of how this omnichannel approach and kind of having a holistic view and seeing everything has really made us better, not only at marketing, but I think that now we're putting money where we should be.
It takes very complicated things, and it delivers them with such simplicity that I can share
tech database is grown in excess of tenfold in just that 3 year timeframe. And that transformation, that growth has really been made possible buy everything from digital advertising to really sophisticated email marketing and an overall improvement in customer experience. We have hundreds of workflows built because we understand that that pre purchase customer experience is really critical.
And when I think about HubSpot, it's the nucleus. Everything has to work through HubSpot. You're the connection point for everything that we're doing. I mean, I think that's a testament to how important you guys are to our business and our digital strategy.
Alright. Go air stream. Let's hear it for air stream. What a cool company. I mean, that is that's what we're talking about in that last section.
I mean, this is real employee growth not to mention job creation, very, very cool. Imagine being air stream, absolutely crazy growth, doubling tripling, actually quadrupling the size of their employee base, 10x ing the size of their customer database. I mean, we're not making this stuff up, life at scale, is really something. And it feels like it happens overnight when it happens, believe me. Wow.
It seems like Airstream has really adjusted to this scary, grown up world. So now like Airstream, you've learned the new rules. You're moving quickly. You've adjusted you feel good. But how do you make sure that your growth doesn't take you further from your customers.
How do you make
sure that you don't become that big brand that's disconnected, that's distracted that spends all of its time solving for itself. Dharmesh had some really good examples of when companies get this right and get it wrong. First up, email marketers. Do you ever worry that you're sending more email than you'd like? And I'll tell you, if you're sending more email than you'd like, people are hearing from you a lot more than they would like.
Now as we grow as we scale as we rely increasingly on automation, this becomes, frankly, more frightening over time, announcing send frequency cap in HubSpot Enterprise. You can avoid accidentally over emailing customers by simply choosing the maximum number of emails that any one human can get within any specified time period. And that's it. You'll never over email these wonderful kind people who are trying to do business with you. Honestly, this is a feature that we all want.
We all need it in more ways than 1. How cool is that? Send frequency cap. At scale, conversion matters more than ever. Every percentage point of conversion that you can squeeze out of those AB tests that you sweat over day in and day out really matters.
We celebrate even the tiniest improvements on these tests. Here's the thing though, the world keeps turning. People change. Times change and those gains that you get from conversion optimization fade over time. What I'm gonna say sounds a little nuts, but bear with me.
What if HubSpot could always be testing and tweaking for you. Today, ongoing optimization in HubSpot Enterprise is here and it's constantly testing all of your different conversion points and optimizing them based on everything that you can imagine, visitor history, device type, a million other things. Imagine a smart artificial intelligence engine using all of the data that you have in that CRM, in that customer data set. And working around the clock for engagement and conversion. Next up, everyone's workday is different.
Some sales reps spend their time out in the field. Some support reps, let's say, are full time remote. You know, in this day and age, people, by and large, work where they wanna work, were no longer tied to a desk the way that we have been in the past. But what if something really requires someone's immediate attention? What if that is solving for the customer?
I invite you to take a look at are telling you. My favorite part here is you can take action in HubSpot without even leaving slack. Slacks is an awesome company and a fantastic product, a love slack, and I absolutely love this feature. Well, we've established by now that everyone should be using live chat, but few companies are in a position to actually chat live. Bots are a great way to scale these 1 to 1 communications.
Enterprise makes deploying your bots surprisingly intuitive. Let me show you what I mean. HubSpot custom bots. With our drag and drop custom bot builder, you can craft custom conditions, flows. You can add answers to the questions you're getting most often.
And you can do all of this and then deploy those experiences to your website in just minutes. Now here's the reality more and more people aren't even on your website. A lot of folks prefer to spend their online life in Facebook. They don't even go to websites. It sounds kind of crazy.
That's the world we live in. No problem. Take a look at HubSpot's Messenger tools. See, with these, you can create rich conversational experiences in Facebook Messenger, experiences that do everything from create contacts to qualify leads and get information from those contacts, deliver personalized content. And the best part is that customer never has to leave the native experience of Facebook.
What you've seen so far in HubSpot Enterprise truly is just a taste. HubSpot Enterprise is comprised of dozens of different features that help Starting today, HubSpot's brand new enterprise products. They mean you never have to worry about outgrowing HubSpot. Enterprise helps these 3 key departments and more importantly, your customers continue to grow better. So let's talk turkey.
Here's the deal. Each of these hubs is available individually. But what's really cool is that they're available together as part of what we call the enterprise growth suite. Now when you buy them together, you get the very best of HubSpot for larger, more sophisticated scaling companies, and you get it at a terrific discount. Now the price of marketing hub enterprise with all of these new additions is going to go up on November 1st.
So my advice to you guys is take a look at this, take a look at the package, the suite before November 1st, and you'll get an even better discount by acting early. Now with these enterprise tools and a lot that we were not able to get to today, growing bigger doesn't mean you have to grow apart from your customers. So once again, who here thinks the right idea is to grow better together with your customers? What do you guys think?
A lot of new stuff,
a lot of bold claims. I see some skeptical faces out there. It's okay. That's cool. What about a real life example?
What if I told
you there was a company publicly traded, offices around the world, tens of thousands of customers, dozens of products, 1000 of employees, growing and scaling by using everything that you just saw. Who wants to meet this company? Yeah? All right. Let's take a look.
We have about 2500 employees across 8 offices worldwide.
As a company, we're growing by about 80 to 100 people every month.
The company's huge. It was small when I started. There are so many people here now. The bigger marketing team is, like,
gosh, maybe 250 people. Our team has been growing so fast. I'm having a hard time track of all my new colleagues, especially in the last couple of months.
We have about 500 people in services at our company. When I started were probably a little bit over 200, and this year will be close to 5 hundred people on
our team.
My entire day is in HubSpot, whether it's helping a customer with a Quest or learning something new for myself, the entirety of my work day is within HubSpot's CRM.
We use it for email, our website posted on it. We use conversations and live chat from HubSpot, so it's really the center for all of our efforts.
Myself, as a manager, we do customer assignments, we do a lot of tracking and customer success long term and manage the renewal through HubSpot.
My daily use of HubSpot is around paying attention to a lot of
the leading indicators to let me know how we're gonna finish at the end of the month. And HubSpot is tremendously helpful and making sure that I spend my time in the right place.
We're growing really rapidly. We're growing in a 35% range
year over year in revenue.
We have almost 50,000 customers now in 100 countries around the world, and we're using the entire platform of HubSpot to run our business. I'm JD Sherman, President and Chief Operating Officer of HubSpot, and we're powered by HubSpot.
What do you guys think of that?
That's right. HubSpot is powered by HubSpot, we are using Marketing Hub Enterprise, Sales Hub Enterprise, Service Hub Enterprise, and of course, and most importantly, HubSpot CRM. And I wanna tell you something. We are one of the most sophisticated users of CRM software in history. So if you're wondering whether or not HubSpot can really live up to this and help your grown up scaling company, I hope that this DataPoint convinces you to check us out.
This is a very, very exciting step in our history. Our singular goal is and that creates a delightful experience for you and for your customers. And now everyone can use these tools from the first employee up through growth into a company of thousands of employees. What about HubSpot Professional? If I were professional and I were somehow sitting in the audience, I'd be thinking, where's my stuff, man?
HubSpot Professional right now is like that middle child. They're feeling a little bit like Jan Brady. All the small companies are squeezing starters' cheeks and saying, you're getting so big.
In the
in in in that larger enterprises are like enterprise enterprise enterprise and surprises like, you know, combing and tear and stuff, but we didn't forget about professional customers. So let's take a look at some of the improvements we made for you this year Frank, this is a bunch of stuff we consider putting in enterprise, and we decided to put into professional to continue to deliver an enormous amount of value for all of you. The first one, and I love this, is multicurrency. Previously, in our CRM, you could only track in one currency. You had to commit fully to one currency.
Now we've made it straightforward to add multiple currencies into the same CRM portal. This is super cool. So reps can track deals and manage their pipeline in the currency that they work in, in their local currency, but their managers, VP's CEO, can roll that up into a base currency, a home currency. And you might be thinking, well, what about all of the currency exchange? We handle all of that for you.
It's invisible to you. We do it all behind the scenes. The way the team solved this problem was actually super, super cool. Multi currency is available, across a ton of products within HubSpot reporting, products, line items, quotes, quotas, and a bunch of other places. Very exciting.
All right. The second thing, custom reporting. Until today, if you have professional you had the standard reports that we gave you. We got a lot of feedback from you guys. We heard you loud and clear.
And as of today and professional, you can now run up to 20 custom reports on anything from contacts to companies to deals, not to mention across objects. One of the biggest efforts that we had in the product this year came to professional and enterprise cross object reporting. We're also going to give you one more additional custom dashboard to play with in professional. And we have one more thing. You know the best way to grow better?
The best way to grow better is to actually get face to face and make a human connection with your prospects, with your customers from anywhere in the world, by the way. We'll buckle up for this. Announcing HubSpot Video. So this is a massive set of features across huge swath of the product. We'll take a look at a few of the big ones.
And, huge thanks to our friends who are helping power this at Vidyard. Let's check it out. First up, with 1 to 1 video recording and CRM. Now your sales, service, and marketing teams can record and send video in a single click. Now we have lots of options.
You can record your webcam. You can record a screen cast. You can do both at the same time. And I'll tell you, this has transformed our life internally at work. We use this constantly.
It's amazing how great this type of video turns out to be for sharing complex detailed information in a way that's still really digestible and really relatable very human, very effective. 2nd, built in video hosting upload video directly to HubSpot and then set it up to succeed. You can add all kinds of marketing tools like smart calls to action. You can embed HubSpot forms natively in the video content that is freaking cool. And for the SEO Geeks out there, we have you covered too.
You maintain full control over the metadata of the videos so you can make sure it fits into your overall comprehensive technical SEO strategy. And third, as you'd expect, rich reporting. Check this out detailed analytics that let you understand how your videos are performing, that show you what's working and what needs work. That's HubSpot video, and it rounds out 3 big new features for Professional. And of course, they're all available in enterprise too.
I gotta say I'm really proud of the work that's been done this year to improve our suite of products. I hope you guys are too. Now I'll tell you a lot of the engineers and designers that built this stuff for you guys are here today. We have a ton of people from our Dublin office. We have the whole engineering team.
If you liked what you saw today, let them hear it. Who's excited? I see a ton of them here, and it's great. They've been plussing their butts. This is like our new years, today.
It's a lot of fun. Alright. So for everybody who's here physically at inbound this week, I have a a good call to action for you guys. Tomorrow, you can dive deep into any one of these 3 hubs with our product leaders for each of these hubs, the general managers, That's Nicholas, Mike, and Lou, for marketing, service and sales, respectively. They've put a ton of work into these talks, and I'll tell you, they are the world's expert each of them on these product lines and, introduce yourself, get to know them.
They're a lot of fun to work with. One of my favorite parts of my job is getting work with those guys. Now whether you're here with us in person or if you're joining on the live stream, I see you on the live stream. You look lovely. You can learn more about everything you saw here and a lot more by visiting hubspot.com/new.
Your growth is at the forefront of everything we do at HubSpot. To us, it's not about growing up. And it's not about even growing bigger. It's about growing better. And today, I promise if you commit to growing better, you will never outgrow HubSpot.
Join us and let's grow better together. We'll see you next year.
We way.
The
play
away.
2 minutes. I'm gonna give the, the heads up again. So
Wow. Sorry. Yeah.
You
wanna go live?
Okay. If we can take our seats, we're going to go ahead
and get started here with a financial overview in just one minute.
Is Joe Annoise?
Is Joe gonna do noise?
They're already set. They're on 4. If you want them darker No. This is this
is yeah. This wonder
Anak?
Hello, everyone. I'd like to add my thank you, for coming today I know this is a first time for me personally to have a chance to meet a lot of you. And so I really do appreciate you taking the time and making the trip. I know it is a long day and a lot of time. We have not seen the forward looking statements in a good couple of hours So I thought I would add those, for good measure before diving in.
And what I wanna do today is really three things, The first is to on some of the key product announcements that you've heard about all day, but really with the view and how they translate into the financial impact on the business, And then finally, we're going to checkpoint on the long term financial model for the company. So let's dive in. Many of you out here have been with the company for a long time, frankly, a lot longer than I have, and already have an appreciation that HubSpot delivered consistent top really since the IPO. Today, HubSpot is 500,000,000 Excess growing in the mid-thirty. 5 public software companies that have achieved this combination of scale and growth.
And we believe the right investments to continue to drive top line growth. As you've heard consistently today, we are investing in areas I think the platform.
Yes, for some reason, that's it.
All right. Hold on one second, please.
Now.
Center. Can you hear me now? Yeah? Just the thumbs up. Alright.
So I'm gonna come over here a little bit. I think there there've been 2 consistent messages around the investment today. One has been that we're investing to expand the platform. The second is that we moving toward a more products driven go to market. On the first, last inbound, we introduced a sales professional product and in May, we launched more than one product from HubSpot.
29% at the end of July. This is important because we continue to see stronger retention rates from customers who buy multiple products. And we believe there's still a ton of opportunity here. 1% of our customers currently buy all three hubs And lots of our new customers are starting with HubSpot with multiple products upfront. In fact, the majority We are also starting to see the benefits of our product driven go to market.
Morning about the road growth in our pre user base. The good news for me as the CFO is that this motion is also helping of new ARR that we are seeing from customers who have tried a product before they pay for it has increased Sedily, and we are now seeing that percentage consistently over 50%. As you can see in the chart on the left, total customer growth continues to be strong. 40% per year our subscription revenue per customer has come down a bit over that same period of time, and we've gotten a lot of questions in my tenure about this decline. The simple answer is that it's a product mix driven change.
A lot of the investments that you just heard about are mean that more and more of our customers are buying the lower priced sales products and marketing starter products, which is driving down ASR see. And so what we tried to do here on the right hand side is to strip out those impact. So you can see more clearly in the marketing hub x starter, and in the sales hub, cleanly, that ASRPC is actually growing year over year in each of these cases. As we've said before, we are going to continue to launch new products, and these numbers are going to move around from time to time. Another big area of go to market investment for the company has been an international expansion.
International revenue has grown an impressive 67 RAD now represents 37% of total revenue. We operate in more than 100 countries around and we have fixed international offices. Our strategy with English to develop, primarily English speaking market, and that remains the majority of A few years ago, Another might change. Hello?
Alright.
Now we only have operator to fear, so don't we're not out of the woods yet. International, we talked about the fact that we first started in English speaking markets, that remains really the majority today of our international business. A few years ago, we really started to localize content. We've opened offices in other developed markets. These are growing really fast and we will continue to make investments here.
More recently, we started to talk about expansion into more emerging We now have a nice low touch way to go into those markets and we think there's a lot of opportunity here. The company is also realizing balanced growth. We've steadily increased profitability since the IPO, We have strong gross margins in excess of 80% and we have generated positive operating profit since the beginning of 2017. Importantly, we are also generating positive free cash This year, we expect to generate $34,000,000 to $35,000,000 of free cash flow. And we have a strong balance sheet which affords the company the chance to make opportunistic smart investments.
So overall, I think we are in a very strong financial position. With that, let's look forward As JD described this morning, we've expanded our addressable market in two ways with today's product announcements. First, we've introduced a set of tools that can reach across the customer experience. We he referred to as our east to west expansion. We've also created additions of all of our products that fit companies from sizes 2 to 2000, which he refers to as our north to south expansion.
Today, we have starter, professional, and enterprise versions of all of our hubs. And all of sit on top of our now full featured free CRM. Let's walk through a few of the notable changes you heard about today. There are a lot of exciting function upgrade to the Marketing Enterprise product. And with that, we have increased the price of Marketing Enterprise to $3200 starting on November 1st.
Hello, and enterprise service additions, both of them priced at $1200 a month. As you just heard from Christopher on the main stage, the suite of enterprise products includes a number of management features, for larger, more sophisticated teams, as well as advanced analytics and built in machine learning features. Well, there are no foundational pricing or product changes at the professional edition level. The professional suite also got a bit of an upgrade. In particular, video is heavily integrated into our professional suite reporting and analytics have been up leveled and the suite now supports multi currency.
Finally, at the starter level, we recently relaunched our Marketing Hub starter product with Email, and launched a new ServiceHub starter program product today at inbound completing the suite of our starter products. All of these starter additions are priced at $50 a month and can be purchased touchlessly. We have not shared performance results of our individual hubs in the past. But given the volume of announcements today, we thought it would be helpful in framing the future growth prospects for the business. We do not intend to share this information going forward on a quarterly basis.
But let's start with a review of our largest business, which is marketing. At the end of Q2, Marketing Hub was a $425,000,000 ARR business growing in the mid to high 20%. The product announcements today create really 3 major new growth drivers for the Marketing Hub. 1st, The Enterprise Edition upgrade allows us to compete for a new set of customers at the top end of SMB. Think about companies that are 200 or more employees.
2nd, the new functionality in both the Enterprise Edition and also the Professional Edition create interesting upsell potentials within our installed base. For example, The majority of our marketing hub customers today, by the professional edition, and we think about 10% to 15% of those customers are of the size and sophistication that would be natural fit for the new enterprise product. Finally, the early results of our new relaunch starter product would indicate that we have found the right value proposition for an attractive entry point. Since we launched in mid July, we've had almost 2000 customers sign up for marketing starter. A huge majority of these signed up touchlessly.
Our sales hub was a $50,000,000 ARR business at the end of Q2, and it is growing at a rate north of 100%. I quit marketing, the enter addition allows us to compete at the high end of SMB for customer additions. We think about the target market for our enterprise sales product as any business that has 10 or more sales professionals or roughly 50 or more employees. At this scale, the team really can leverage the management tools and playbook that the new enterprise edition provides. About 20% or so of the sales professional customers that we have today fit this profile and we believe that there's also a natural upgrade opportunity within our sales professional install base.
We're obviously still in early days for Service Hub having launched product only in May. But at the end of Q2, service hub was a $2,000,000 plus ARR business. And it's obviously growing really fast. Service Hub was and has been the most successful hub launch to date, it took us less than 3 weeks to get to a $1,000,000 of installed base ARR with ServiceHub. We talked actually a lot about ServiceHub in the Q2 call.
And one of the things we talked about was that the primary go to market motion for service hub has really been to sell into the install base. We think there's still a lot of opportunity here, and we continue to believe that this will be the primary go to market motion in the near term for Service Hub. That said, we have been pleasantly surprised to see some success in selling Service Hub to new customers about a quarter of service hub sales have been to new customers to HubSpot. And we think the launch of the starter edition of ServiceHub provides an even easier onboarding path for new customers. Okay.
At the end of the 2nd quarter, We had more than 14,000 active customers with more than 1 HubSpot product. And since then, we have passed the 15,000 mark. The product announcements today do a couple of things here. 1st, we have created multi product solutions that make sense for customers of all sizes. And second, we've tried to make it as simple as possible for customers to buy the suite with our new bundled pricing.
Okay. That was the exciting part. Now I would like us to take a little bit of a look at the long term financial framework. The first thing to notice is that we are not changing our long term target for operating margin. It remains 20% to 25%.
There are a couple of more detailed changes, however, that I would like to highlight. First, we've increase the long term gross margin target by 1 to 3 points to 81 to 83%. Our R and D team does a really nice job of managing our infrastructure costs, and we have been operating within this range. Offsetting this change, however, we are increasing our R and D spend as a percentage of revenue to 16% to 18%. You've seen the impact today of our R and D investments and all the product announcements and we expect that we will continue to spend at these levels.
G and A expense as a percentage of revenue continues to show some of this scale as the business is growing, we are holding our G and A target percentage of revenue at 10. Finally, sales and marketing expense remains the farthest away from our long term target. Well, we believe that 30% to 35% is still the right term goal. We are not in a hurry to get there. The reason that we're not in a hurry to get leverage out of sales and marketing is that our unit economics remain very strong.
In fact, the union economics today are modestly better than when the company went public. Our LTV to CAC of five times means that we expect customer that costs us a dollar to acquire will deliver to the company $5 in value over its expected life. At these unit economics, we believe it makes sense to continue to invest in sales and marketing. That said, we do continue to believe that the financial framework that John and Brian outlined last year for you makes sense for the company. Specifically, what we've said is that our growth rates over 30%, we believe that we can deliver 1% to two points of leverage every year.
We would expect to be able to deliver more leverage to the extent that gross flows below 30%. Overall, I think we have a healthy growing business that's delivering financial leverage. The strong set of product announcements that you've heard today demonstrate the early returns from our investments in R&D they expand TAM in all directions and create a solid foundation for long term growth. And with that, I would like to ask the rest of the leadership team and join me for Q and
Good
afternoon, and Thank you for hosting today. Stan Zlotsky from Morgan Stanley. Just one question for me. You mentioned that you're really focusing on this product driven go to market strategy. What does that really mean, right?
It's not like you guys are an Oracle type of shop where you put out software that doesn't necessarily do things. You put out really solid software that's you've always had good products. Is there some kind of change of what's really changing? Why the focus on your product driven go to market.
Do you
want to start? Do you want me to go for it?
Okay. So I'll start and then Brian, our Dermesh can can chip in. So I think maybe it's, 2 things. 1, is about matching the way you know, our customers want to shop and buy today. And as I talked a little bit about in my prepared remarks earlier, the old model that we had was, you know, you engaged through a lead.
You talked to a salesperson. Hopefully, we talked to you into using HubSpot, you got started, and then you started to get value from the product. And there was a lot of friction. There's friction in that model, and, you know, the customer was we were extracting value before we were adding it. I think the a much more modern way to do that is get the customer to start, start adding value for the customer with the software and let them experience it and start to, adopt it and get value from it before we ask them to, pay us and start to extract from this.
So part 1 is let's match that. Let's take the friction out of the model. Let's match it to the way modern customers want to shop and buy today. Second part is it's a, lighter touch model. It's a higher velocity model because what we find, as I mentioned, is when we get people started on that software and that first user invites a second user and becomes a weekly active team, they convert at a very high rate and with very low touch from a a human standpoint.
Often touchlessly. So the second part of that is the benefit to us, which is it's a lighter touch, model that's working on the CAC. So we work on the CAC, from that standpoint. And we work on the LTV with a happy customer, with the first point.
Thank you, Norman. We can hear you.
Well, I'll repeat the question when you say it. How about that?
Mark Murphy. There we go. Mark Murphy with JP Morgan. Great to be here and thank you for having us. So the pricing that you showed, the price of marketing, enterprise edition is about two and a half times, even more, than of sales enterprise or service enterprise.
Is that reflecting, what do you think you can realize there, is that reflecting the value that you think is kind of being, derived perceived for the users? Or
is this
a case where maybe that pricing would reach parity over time as you build out the functionality in, in, sales and service?
Yeah. Good question. The I think you have to think about the sales and the service products a little bit differently than the marketing products because that pricing is driven by seats. So the way to think about that $1200 is you get up to ten seats with that. So the 1200 is sort of the enterprise price of entry.
And as you're a larger sales team, say you're a fifty person sales team, that price is gonna scale at $120 a seat. So in some sense, it's kind of apples and oranges to think about what's the value of the sales product versus the value of the marketing product. So the marketing product is $3200 for the enterprise, but it doesn't have a seat limitation. It grows with contacts, whereas on the sales and services side, it's a it's a c driver. So I think that's the right way to to think about that pricing.
Does that make sense?
So just as a follow-up, where where do you think you can derive the the as, patients seem to be union at all than that.
You mean, in terms of so again, Mark We wouldn't think about how does that scale per the number of marketers on your team. I think, we've, you know, the the pricing on sales and services as they're roughly they're aligned in terms of the price per seat. If you're asking me over time, where do I see the value of it? I think the value is as it gets more robust and larger and larger teams can adopt this this product, we're gonna see that some pretty high ASPs.
The sales and service side will see some people buying 100 seats of that sales enterprise product. So the price point is going to be pretty high, actually. So it's an apple and an orange. We use context based pricing on marketing. Base price is a little higher on sales side and service side context based pricing, that's just not the way people do it.
So we use seed based pricing. But I think as we start to sell the sales enterprise service enterprise product, we're going to start to see customer spending $10,000 a month with us regularly. Yeah.
And we have customers today who are paying us more for the sales products than the marketing product that they use.
Vince Rivers, Jay Ohambra. Brian, you spent a lot of time obviously in the speech downstairs about this change from the funnel to flywheel. You talk maybe a little bit about how you operationalize that? I mean, you guys are a young company, so it's not like you have to redo culture, which we spoke about in the second presentation, but you've been doing it one way for a while now. And as an investor, that does create some risk for us.
And Kate just went through your operating model where there was no change there, but how should we think about it both in terms of operation and financial impact?
Sure. I think operationally, we've been on this path for a while. It's not like there's a step change that's happening now. It's we started working on a couple of years ago. And it's just a focus on the fact that boy, our installed base and our customers and our installed base of users really growing very, very rapidly.
The users growing really rapidly. How do we get more focused on people not just buying their first product but buying additional products? How do we get focused on delighting those customers servicing them properly, meeting their needs so that the word-of-mouth increases. I honestly don't think there's a risk operationally in your models from this. I think it's all All goodness all upside is is my take.
Currently, we're calling on the install base and we're getting revenue water. Of course, it's actually going pretty well. I think there's more opportunity there for us going down the road as we look into 2019 2020 where we've got more products now on our installed base is growing. I think there's just a huge, huge upside if we can execute on it well. If we can delight customers right upfront and then sell them more products then get them telling more people That's a nice recipe for a great company.
Hello,
this is Andre. Again, add my kudos to the Analyst Day. Very helpful. Thanks for throwing bringing it on. Yeah, inviting us to this.
So,
I had
a couple of questions. I guess I wanted to specifically address the flywheel from Brian. First, you know, you talked about how the, model has changed from sales leads to from Kingfounds to sales leads to just allowing the customer. Now, yes, conceptually, if you look at the flywheel, that means you're putting more emphasis on on just that one section of the flywheel, it it would seem not symmetric, not balanced, and therefore not be able to hopefully. So and I know you're you're probably saying this is more just con yes.
You know, more conceptually, not so much figuratively, but it just seems like if you're putting all your emphasis on this area of delighting, the previous years of focus that you had before will be less resourced. Sure. Can I have a second question to you after that?
Yeah. It's a trip somebody in the audience was paying attention. Thank you very much. I'm I I I my presentation was what it was. And when I talked to customers and I asked them why they're buying, they say it's somebody else told them about it.
You know, it's word-of-mouth that's shifted. Of course, marketing and sales is still in the mix, but word-of-mouth seems to be very powerful. And so as we're thinking about resourcing anything inside the company, whether it's our lead scoring, whether it's our commission plan or pricing plans? Like, what can we do to set that customer up so that they not only buy, but they're delighted and then buy more stuff? If I showed the more detailed flywheel that we have inside of HubSpot, it's a visitor, it's a user, it's somebody bought one product, then they bought a bunch of products and their promoters and they tell more people.
And so that's sort of how I actually think about their flywheel. I dumbed it down a bit through the audience today. Furthermore, the flywheel, there's the spin on the flywheel that's quite interesting. The more customers we have, the more partners, 3rd party software providers we have. That are adding value to it.
The more customers we have that are happy, the more, agencies we have. And so our flywheel is actually quite quite a bit more complicated than I showed on the on the slide today.
Okay. Just one quick thing to add to that, which we haven't talked about. You know, historically when we have premium model or thought was, oh, some number of these freemium users are going to convert to paying customers or so at some percentage. And so that's the kind of primary monetization then we're starting to learn now those that even those 3 users that never buy are a great word-of-mouth because if they like they'll they have friends or colleagues that work in larger companies that might be perfect customers So we get credit now for all that large and growing base of free users as well. So that's
that's back to the question earlier about moving to be a more centric go to market before we create a content and we pull people in with those content, sales reps spend a lot of time working with them. We converted them into customers. It's kind of the big step functions there. Today, we flip it and we say, hey, use our free products. If you like it, upgrade, it's a lighter touch, lower cost to acquire.
But even if you don't buy all those free users are a magnet for partners and software developers. So we go to slack, we go to Stripe, or we go to Shopify, we're like, let's build an integration into HubSpot. The slide we show is the number of users in how that thing's hockey sticking up into the right. And so there is a There's a bunch of flywheels to get spun up from that product driven go to market. Same type of flywheels to get spun up in slack's go to market.
In G Suite's go to market and all the modern go to markets of companies that are really growing these states.
And my second question is also about the flywheel. In regards to where you are planning to develop further resources, you just introduced the enterprise versions for all these 3. Three products and loading them up with features like that. There's still more that could be added in terms of, sales and, marketing and, and customer service. I mean, everything from order fulfillment to vertical, applications and stuff like that.
I guess if you look at, these three areas, where do you see some of the, features that you that you would be adding in, or you're planning, you would consider adding in the near future. And, well, I forgot to introduce myself, Jonathan some of
the insights. Thanks. Okay. Thanks, Jonathan. I still feel like HubSpot's early in the second inning of the baseball game we're playing.
Very motivated by our mission still very motivated by what we're up to here at HubSpot. And in terms of the flywheel, all the products we released over the last year in that sub are really designed to help people with delighting those customers and closing that loop. So I'm thrilled about that. The market's really enjoyed it. The sales reps are selling it looks like a winner product line for us.
I would say in terms of all of our 3 hubs today, there's plenty more work to do. There's a lot more innovation the thing that never changes the way people shop and buy seems to continue to evolve over time. Like video now is a huge thing. So of course, we announced video into the product. There's a lot more enhancement and a lot more work that we'll do inside of the 3 tiers of each of the hubs we have.
Having said that, there's a couple more big opportunities in front of us. We could in theory build more hubs. There's more hubs kicking around in our heads. Question of when, not whether we'll probably build more hubs. And then there's the platform side.
Christopher talked about how we've increased our API footprint by 30% over the last year. We've the number of 3rd party ISVs that integrate into us from 80 to 206 year over year. Lots of opportunity to build potential marketplace effects and really over the long haul maybe monetize the marketplace. So we feel like it's still very early days in terms of matching what's in our head for the vision of HubSpot for long term.
Hey guys, thanks for taking the question. Brad Stills from BofA Merrill. With the focus on the different hubs now, you've got the 3 different hubs, a lot of investment in service and sales, you see the makeup of the channel changing at all going forward? Do you feel like the readiness is there already or could we see more sales oriented partners be come into the channel, even SIs as you go after more of the backend integration as you kind of moving up market within your target market.
That's I think that's exactly right. It's a good question. I think we're gonna see 2 things happen. One, that opportunity that we laid out for you guys, what I called North And South And East And West, that's an opportunity for our partners as well. And some of our partners are really, grabbing a hold of that opportunity and, you know, evolving their agencies to help their customers sort of spin that flywheel.
And that's been really, really productive. The other thing, though, is as you mentioned, we're we now have a really robust CRM and a sales hub and a service hub. And there there are different, types of agencies and integrators who participate in that. And once we get that flywheel spinning, we have lots and lots of customers who are using the CRM, migrating to that CRM, integrating other software with that CRM. I think we'll have an opportunity, and we've we've got some initiatives in place to attract different kinds of partners.
And I think what we'll end up having is sort of a we'll have some of our agencies that stay focused on marketing and web development and content marketing. That's going to be awesome. We'll have some of our, we'll have some new partners who come in and focus on getting customers set up and really leveraging our sales products and our service products and making that work super well. And then we'll have some of our agencies that have been with us for a long time or into these, really premier agencies who help to help customers leverage the whole suite, the whole platform to to run their businesses.
Hey, guys. Thanks for having us, Tom Roderick here from Stifel. So a bit of, an eat your own dog food question here. If I, if I'm not mistaken, I think I heard earlier, during the keynote that HubSpot is now internally using your own CRM product. So if you got that right, that's a pretty interesting data point, insofar as you're testing CRM at scale at a pretty sizable company.
So you know all the proof points, all the challenges, maybe you could talk a little bit about what that might mean internally, what the challenges were as you integrated with your own CRM. And, Kate, if you wanna touch on, is there some cost savings that we might be aware of that could help you out there? That'd be great. Thank you.
And you want to
do that one? Yes.
Okay. Well, first of all, that was a very that company has a very handsome COO. I don't know if you noticed that. She watched the video. The
video was a great Yeah.
I thought they did a nice job on the video. So we've been working on, eating our own dog food, as you call it, for drinking our champagne, for, for quite a while. And what's interesting about that is we're a complex company And it's challenging. When you're on, when you're deeply, using whatever CRM it is, it's it's challenging to come off of that. So that's that's sort of, informed us in terms of the way we want to go to market with that CRM.
We want to make it easy to use. We want to make it, scalable so that it grows with you, but we didn't, we don't necessarily have a a target plan to get go to the big enterprises and get them to rip out their CRMs. It's really, really hard to do. That's first point. 2nd point is, you know, the way we've thought about our CRM is, as I mentioned in my prepared remarks, we're a software platform, but we're also a philosophy, and we've built that CRM with a with a sales philosophy in mind that we think makes a lot of sense And then obviously, therefore, it makes a lot of sense for us.
So some of the things that we're adopting with our own CRM, the approach that we're, asking our salespeople to take with that. You know, it's just a really nice, easy match for us. And what we've seen as we've moved our sales people over to the to the, our own CRM, is they're just delighted. I mean, it's a much easier product for them to use. It's just they're just very happy, and we're getting a sort of a, ancillary benefit of it as much easier to sell a product you're already, using.
So I think that's, I think we're gonna we're gonna see both of those benefits. Another secret benefit, by the way, is we've been spending a lot of effort and time doing that migration with our internal software team, if you will, like our internal enablement team, And I'm excited next year about that team freeing up to be able to do a lot of the other stuff that, you know, as we look at our own flywheel and look at a point friction in the flywheel. What what other things can we go after? I'll let you come in on the
Yeah. I think, actually, JD's last point would, you know, transition nicely into the one that I would make, which is we have been making some internal investments as we are migrating on to our own CRM. And so any savings would have already been baked into the long term model that I share.
Hi, Taylor Reiners from Piper Jaffray here. I had a question on the platform opportunity that you talked about. You mentioned that you've seen over 100% growth in total platform partners. And I was wondering if you can offer any thoughts or metrics around the impact that's had on retention or full suite adoption for customers who are using other app in the ecosystem. And then as a follow-up, do you have any preliminary thoughts on what the longer term vision is here in terms of either adding development tools we're monetizing it much like Salesforce has done.
Yeah. Well, maybe I'll try to answer the first part and Darmas can comment a little bit more on the long term vision of of the platform. So you you definitely see there's two things that you will see underneath that that, that sort of, chart that I showed one is when customers are using HubSpot and they're integrating other software with it, well, we're really, you know, sort of core platform where their system of record and their retention is definitely better. The other thing you see is, and this is interesting as we launch our enterprise products is, you know, 200,000 roughly integration points, 50,000 customers, that's 4 per customer on average, but there's a curve. Right?
The, you know, smaller customers tend to have fewer integrations. And then the big customers really have a lot of integrations, and they're really important to that business, how those integrations work. And so as we start to address those larger and larger companies. That's going to be super important. It's also going to spin that flywheel that Brian talked about.
It's going to more and more soft companies are going to be interested in, being part of that platform. I think it's a really big
moat for us going forward obvious one where we have network effects and more partners we have, the hardware hosted displays. But the other thing that's interesting about SMB, so all of us all of you have likely seen the landscape chart with 5000 locos of companies in the marketing space and sales that's something similar is growing. We made a decision years ago that we work way to fight particular trend that we were going to actually embrace it to say okay what do we do to help orchestrate for our customers and provide that backbone. So we're not trying to squash these little companies. We want to make them more efficient, give them access to our customers and have this kind of joint relationship that's super positive.
And from a branding perspective, I think we have an opportunity. And there have been platform companies for, but in terms of rethinking what our relationship between the partner and the platform looks like. So I think we've got some interesting opportunity there beyond this monetization. Can we actually take the things that we've built in house to build our own company and make those available as tools and things to help these smaller companies scale essentially. It's not just access to the customer.
It's access to Insight, access to the internal analytics reports and all the things that we've kind of learned over all 12 years building a company in this space.
Thanks so much, Ross MacMillan from RBC. Thank you for doing this. It's great. I think I'm right in saying the historic mix of products and these are approximations was a little bit under 10% on, basic this is ARR, I guess, something like 55% on, on pro and then the rest in enterprise. And I guess two questions on that.
One is, But the new pricing scheme, do you think that mix between starter pro and enterprise will be similar? And then do you think it'll be similar across all the product areas I. E. Sales, marketing and service. Let's make Chuck answer.
I see you're correct, Don. It was his idea to give that data.
So you are correct. Now that would have been of our marketing business. That wouldn't be of the, the total business. And I think from me personally, I would start to say that I think that there is an opportunity obviously to build at the starter layer Kate gave the data point that we've seen a lot of success just last couple of months. So into 2000 customers with that new marketing starter product.
Which is up very substantially when you look at, prior periods. And I think there is also an opportunity with 60% our professional base being on the professional layer to sort of reengage those folks up market with our revamp marketing enterprise scale. Yeah.
I'd add, we've been talking on the last couple of earnings calls about ASRPC. And we've been talking about customer count and we foreshadowed that those are going to be tricky things to track in HubSpot. And now you know why because we have all these new enterprise products going to get new starter products and we have some guesses on where these are gonna break out and where's ASRPC gonna go, but it's gonna be a little bit hard to predict. What I know for sure, I'm pretty sure, for sure, is that revenue's gonna go up margins will go up and the business will be very good and the customers will be happy with it. But down below, I know I it's hard for me to predict what ASRPC is actually gonna do in the next couple of months.
That's fair. Maybe I have one more follow-up. And this might even get me on the board. So
maybe it's a
t shirt here. When you when you change the basic, ask you I noticed something else you'd introduced, which is a standalone CMS view, and you used to have sites. And so I wonder if you could just walk us through the thought process of that change and what the CMS stand alone is intended to sort of drive toward?
You want me to take that? Go for it. Okay. Yeah. We used to have it.
I don't need it, actually. Sorry.
Okay. Clint, is this the point where I on there. Okay. So I have to tell you I have to tell you something. There's a little bit of a contest going on.
The first person who gets you to draw on the whiteboard gets a t
shirt, just so you know. Sorry, Ross. I'm a big roster military. But what what was the question? Oh, CMS?
Okay. So CMS used to be if it was packaged in as an add on with, with the marketing product. And that worked pretty well, but what our partners really wanted was because these that CMS stand alone start somebody on the CMS, have it connected with the CRM and then later they can put the marketing product in. So it was pretty much a reaction what the partners have been asking for. The partners are super psyched about it.
They want to be able to stick somebody in the sandbox with that CMS, have them use it, play around with it, build their site and then come back later and connect with other stuff. The way I think we compete with that and the way we can win with that is that CMS is priced in a reasonable range and then you combine it with the free CRM and that's a very powerful solution. And so I'm excited about where that goes. That's an interesting area of opportunity for us.
Rakesh Kumar from UBS. You have long been an SMD focused company, but over the last 12 months or so, you have added lots of new features and functionality in the product set and expanding the product set, which made see you, a company that could be always be that could be used by enterprise customers as well. So all the next 1 or 2 years, 2 years to anticipate getting more into the enterprise and competing with larger vendors like Salesforce and some of those guys.
A good question. The way I would kind of okay. I'm gonna give him a t shirt.
Yes. Well done. Well done. Here we go. Here.
Deliver that t shirt for us.
Hello. The way I kind of think about the products is we got our enterprise layer. We have a pro layer, and we have a starter layer. This pro layer is where 90% for historically of our effort has gone in. Can you see the whiteboard back there?
And the pro layer, frankly, is for companies. Let's call it between 2200 employees. And if Michael Porter were analyzing us, he would give us call it an a in our product market fit there. Our product's perfect for a company of that size. They're very happy with it.
What's going on with the starter and pro products is we wanted to get people earlier between call it 2 and 20 employees and let's call it before we were C, we're gonna try to get to an A there and these are rough grades. In the enterprise, we hadn't invested really anything in the enterprise from call it 200 to 2000. You know, maybe we had a c or even a d, we're trying to get to an a there. What we're not doing is working on, you know, 2000 plus. So the word enterprise to us really is this.
The word enterprise to us is mid market for Salesforce. You know, that that's really what it is. So we're really trying to strengthen here. 1, we wanna win accounts in here. There's lots and lots of opportunity there.
2, we wanna start with somebody down here and not have them outgrow us and go pick another form when they're two hundred people. That's what we're up to.
Hi. Scott Berg with Needham And Company. Kate, you had brought up an interesting statistic there around LTV, the CAC, and the changes since the IPO. Given that the company is very different today than 5, 6 years ago because you have more products you sell into different customers, you get a freemium model, etcetera, Can you help break down the drivers between that? And then a secondary question on that is given that the premium product has a lot of support costs, but it's driver for new paid customers.
Are you taking the costs of that that are probably in the COGS line and adding that into that calculation?
A great question. And, the good news is I have a smack team in the back who, from FPNA who has dug into unit economics beyond anything I have seen before. We actually did a complete revamp of the calculation of the LTV to CAC over the last couple of years as the company has gotten more com more complicated. To take into account all of the factors that you are raising. And so we have actually seen over time that both the LTV and the the costs to acquire have come down as the as the portfolio has expanded.
We have tried to take into account that there are some portion what we would otherwise call R and D that really is part of the customer acquisition cost. And so I think we have tried to take all of those things into account. I think there's a bit of a summary in the presentation that will end up on the IR website that gives you a view of how that calculates actually works Well, I would say the 2, the biggest changes in the overall drivers are, 1, the freemium motion is the biggest thing that is going to lower the cost of acquisition. And it's the cross sell that has been the biggest change in sort of the opportunity once the customer becomes a customer to grow over time.
I would just say maybe 2 things to that. 1, as you think about, you you mentioned support costs, so, like, our free customers, the folks just using the CRM, they have a not we we use our own product product. And we provide them a knowledge base, and that's how they get support. When you get to the starter tier, they can file tickets with email, but they still don't call us. We don't answer it on the phone.
And then it's our, pro and enterprise customers that can call us on the phone. So we do manage that somewhat The other thing I would just add for color for that is, like, if you did seg like, if if you could magically, of course, you can't. If you could magically segregate out the new the acquisition, that freemium acquisition funnel and just looked at customers who bought marketing first, and then eventually bought other products. I guarantee that that LTV has gone up while the Cactus would have stayed relatively consistent. So what's happening is We have a bunch of new customers that we're acquiring at a lower, cost, and that's awesome, only a portion of and then they, you know, they have a lower LTV and only of them become like the the very largest customers.
In some sense, like, when we talk about starter, I think about starter as part of that freemium motion, you know, that we're developing.
Hi, thanks. Alyssa Johnson KeyBanc. I wanted to ask a little bit around artificial intelligence. I attended a session earlier today that was packed. It seemed like a bit of a change relative to the last few years, which is interesting kinda given your SMB market.
So I was hoping to just kinda try to get a sense of, you know, how big of a priority for you is that. And then maybe kind of within, you know, your sizing of customers, given that it seemed like a lot of the AI functionality is put in at the top. And so what extent you think you could leverage and anonymize data or whatever to get good AI for really the true small business as well.
I'll take this a couple of things. One is we've made significant increases in investment in our AI team overall over the last, a year or 2. And our approach because we're an SMB is actually different from other companies that have, you know, talked a lot about AI. Our approach is more applied AI, which is we don't need our customers to necessarily understand what's artificial intelligence machine learning is. The way we approached it is, our, AI machine learning team goes across the entire product and talks to every product manager, say let's go through a list of features that you have, and let's figure out where machine learning might make this particular feature either more efficient or reduce the work for the customer or do something automated instead of manual.
And so we have this long, backlog of like, here are the things we could do that apply EINML to our customer base. And that's going to kinda continue to be the strategy, which is not sell AI ML as a particular thing or branded or, you know, have large implementation projects is to just make the software better based on available technology that we have now. I think and that's proving out to be pretty good. There's lots of opportunity across the marketing sales and service to apply machine learning and we do get the benefit of on the enterprise sector to see, okay, well, here's where people seem to be investing money. I'm personally very excited about it.
I think 2, 3, 5 years from now, It'll be a little bit like the web was. You know, back to that, it's like, oh, if you could build a web application, you were really cool. It wasn't that nice. It's the new thing. 3 or 5 years, a mail will be baked into every a company.
There won't be software companies that don't use machine learning. Now, they may not talk about it, but it's going to be baked in, versus sprinkled on. Yeah.
Baked in versus pickle bond? Right now, it just came up here? Yeah.
And it's awesome.
I wasn't thinking about cake or anything, Brian. That was just coincidental.
Probably time for two more questions here.
Doing. Josh Bennett with Weatherbee Capital. Wondering if you could talk. You're now moving up from the enterprise. You have a pretty full product offering across the enterprise.
Prior to having this, you were losing customers who are kind of getting to the point of maybe kind of growing out or graduating from HubSpot and moving on. Wondering if you can give us as investors any sense of, the number of customers or how much revenue you were kind of losing that we're sort of graduating beyond, and and now, you
know, in in doing those kind
of exit interviews with those customers, how much of that need are you filling with the
current enterprise product for is where you
might get to 2 or 3 years from now. I'm trying to get a sense of
you had a leaky bucket. Now you've kinda flood those holes.
I don't know if that's I don't have the exact number on it. But we did we would lose customers to Salesforce into, Marketo, companies like that. And there was a relatively clear list of of enhancements they wanted. If you you can you can see them. You go to ideas.
Hubspot.cometer. Our customers vote on them and and it it wasn't a stretch for us to figure out what to build. And Christopher showed a bunch of them like formula fields like cross object reporting, some like stuff that enterprises would want. And then we picked a bunch of amounts. So the reason for leaving up spot.
That list has gotten much, much shorter. So hopefully they'll stick around longer. Hopefully, too, in the group that sells here, we're winning more deals against these folks. There's a double win to doing it. I would also just caution that word enterprise.
We use the word enterprise. Sometimes it cring a bit at that word. It's most people would call 200 to 2000 mid market. Salesforce would call that mid market, Oracle would call that small business. But we're way out of the range of where, let's say, a GoDaddy lives or a, you know, Mailchimp or in contact, you know, we've lived traditionally in that 2200.
We're moving up a little and down a little and really filling out the full product offering. I hope people stay longer I think they will and hopefully they'll buy the whole platform up front or eventually buy the whole platform. I think today's maybe the biggest day in HubSpot history with all stuff we've announced. You saw how much we increased R and D investment this year. We got a lot of questions about this is the return.
A whole bunch of new products And I think our customers are going to absolutely love them. I think it's going to help a lot.
Follow-up from Doctor. Murphy.
Thank you. Doctor. Murphy, I like that one. So I was thinking about trying to tear apart the, the growth rates of the business. And, you know, Kate, you gave us some really meaty new disclosures today.
And I was thinking of sales as $50,000,000 and it's growing 100 percent. Sacra's. Sacred's 100 percent. I don't know. North of 100.
North of 100. Right. So if it if it slows down to a 100%, I realize it could slow more than that, but, you know, you get about 10 points of growth in the aggregate business, right, on a $500,000,000 run rate. Marketing, you said, is growing around 25%. I believe.
I see where you're
going with. I'm conservative,
and I'm shooting. I
think you're gonna get to like 75% growth.
Even if it was, right? Yeah. Yeah. What do you think? 75% make sure?
But, you know, I was thinking 25%. You add that together, you're at 35, right? And then you start thinking, well, but could marketing, marketing bigger? Does it decelerate? But could does it accelerate?
Because you have all this new high end functionality, Brian, you're talking about kind of this, the leaky bucket concept. You're losing less to Salesforce and Marketo, you're winning more head to head against them. And I'm not even kind of commenting on service. Right? Because I guess I just figured it's 2,000,000 in ARR.
It's kind of a rounding error, right, for right now. Any comment on just how to think about that overall framework as we move into next week.
I'll just make Chuck answer that.
I was hoping that's the gift of our best. Thank you all coming. Yeah. Anyone with anyone with dad pants can,
no skinny jeans.
Of that.
I don't know. I think it really come.
The business is good though. We're we're not we're not modeling the business to all of a sudden slow down. We may just made a bunch of we're feeling good about I can't recall feeling much better about HubSpot. Feeling really good about it. Things are going well.
And we give 2019 guidance coming up out of Q4 and so they'll probably stay tuned in that respect.
These are the good old days,
Yeah. I wanna thank
you all for coming and making us, very successful. I don't stay. Wish you all safe travels, back comb wherever, wherever that takes you.