All right, everyone. Welcome to INBOUND 2019. Thank you so much for taking the time out of your busy schedule to be here. We are so glad that you're here with us today. We're going to get started with just a quick video, and then we'll dive right in.
First time I met Dharmesh at MIT, we were going to business school. He and I sat next to each other, and it turns out magic happened right there. We both love tech. We both love the idea of helping companies grow. I think it was the day after we graduated, we decided to start the company together. When we first started HubSpot, there was kind of a problem and an opportunity. The problem I noticed was the way humans buy has completely changed, the way you sell has completely changed. In today's day and age, to be successful, you need to have a customer experience that's 10 times better than the competition. That's the way you build a great company today, is really innovating on the go-to-market and the customer experience. Our mission is we want to help companies very simply grow better.
We want to help millions of companies grow better. We're passionate about it. We want to help them grow in a sustainable, modern, better way. One of the things about the early days of HubSpot and Dharmesh and I is when we started the company, we just didn't want to build something and flip it like a lot of other companies do. We wanted to build something that would outlast us, that our grandkids would be proud of. That's kept us grounded and kept us really focusing on pretty far out in the future and making long-term bets and really trying to grow our business based on success for our customers. We still feel that way. We still feel like we've made a lot of progress. We've moved from a lead generation software company to a CRM platform business.
We have hundreds of thousands of users, tens of thousands of customers. The two of us feel like we're still just getting started. We're mission-driven, and we're happy with what we do and really proud of the progress we've made, but we have a lot more work to do.
All right. Some familiar faces here, which is always good to see. Welcome to HubSpot's fifth annual analyst day INBOUND, everyone. We're so glad that so many of you can make the trip to be here with us in Boston to absorb some of the energy, inspiration, and excitement from this week. Want to extend a warm welcome to those of you joining us over the webcast. For those of you that don't know me, my name's Chuck MacGlashing. I run IR as well as corporate treasury here for HubSpot. I'm going to be passing the mic to JD Sherman, our President and COO here in a second. Before I do, just need to run through a couple of quick housekeeping items for the day. Our glorious safe harbor statement, you can find an additional copy of this on our website at ir.hubspot.com.
Our agenda for today. We've got a packed day in store for you. We'll start off the day with an operations overview from JD. After he finishes up, Brian and Joe in the back of the room with the two lollipop signs there will be leading us to the main stage area for Brian and Dharmesh's founders spotlight. Just a quick note, as in prior years, we have reserved seating up front for you guys, so I just ask that everybody try and stay together, walk down as a group. It's going to be awfully busy down there trying to get into the main stage. Just want to make sure everybody gets through to the seating. You're also welcome to leave your bags in the room. We'll have security in here, and the doors will be locked, so take whatever you need.
Once Dharmesh finishes up his presentation, there'll be a 30-minute intermission. Feel free to stretch your legs, get something to eat or drink. Please do try and be back in your seats for Christopher O'Donnell's product spotlight presentation that begins at 4:30 P.M. Once Christopher finishes up, Brian and Joe with the lollipop signs again will lead us back to this room where we'll have dinner options available in the back right there. Set your stuff down, grab a bite, take your seats. At 5:30 P.M. or so, Kate Bueker, our CFO, will take the stage to walk through a financial overview. We'll cap off the day with a 30-minute Q&A session with our entire executive team here on stage. All right, with that out of the way, I'm incredibly pleased to report we've surpassed 26,000 registered attendees for INBOUND 2019.
As you can see, we've grown by nearly tenfold dating back to 2012 when we first had our INBOUND, an incredible result that we're super proud of. All right. I want to thank you again for joining us today and hand the mic over to our HubSpot CEO, JD Sherman.
Hold your applause, please. No, I'm just kidding. Okay, Chuck did all the thanks and everything. It's really good to see you guys again. I like the fact that we can all get together once a year and hopefully dive a little bit deeper into HubSpot, and some of the direction that we're heading, and hopefully you'll enjoy the keynotes as well today. I want to start with what I consider an innovation. This is my safe harbor haiku because you don't actually want to read Chuck's. This, I think sort of sums it up exactly right. I'm telling you stuff, and it's definitely true, but hey, things can change. That's pretty much a safe harbor haiku. I'm really not allowed to use that because our legal team doesn't love it, but I feel like it's a major innovation.
I always like to start with our mission. I start every big talk with a mission, whether it's with our partners or with our employees, because I think it's really important. It's only a handful of words. We want to help millions of organizations grow better, but it's really every word kind of has a lot of meaning, and it has a lot of meaning in terms of the way we approach our business. First is help. We're a software platform, obviously, but we're more than a software platform. We're a philosophy about how to grow your businesses better using the entire sort of flywheel as we talk about it. We're also people. Whether those people are HubSpot employees or partners, we're passionate about helping our customers be successful. Millions of organizations.
Obviously, what that tells you is we're focused on the mid-market, not the very largest Fortune 500 or the top 100 customers. We don't index that way. I think part of our job is to sort of democratize the technology and the tools and the platform to help those mid-market companies compete with the big guys and run the playbook to match their marketing and sales and services with the way their customers live, work, shop, and buy, and then grow better. We want to focus on long-term sustainable growth, the right way, the healthy way for our customers, rather than short-term decisions. We think about our own business that way as well. Okay. Last year, we talked about innovating and adding a lot of new software products. We launched a few products at the INBOUND while you guys were here.
I wanted to give you a snapshot of how that's gone so far this year. Just as a reminder, I used this chart last year. Back in 2015, roughly, we kind of had one product line. We did have one product line, and it was kind of tuned for that sort of 50-100-person organization. I give that product an A for the sort of 50-person organization. Certainly, we had an enterprise edition that we targeted towards larger customers and a basic edition, but those were kind of C to C-minus type products. What we really accomplished in 2018, we're still on this mission, obviously, is to expand that very dramatically. I joked we've expanded both north-south and east-west. North and south, meaning that our enterprise products got much, much better and real and are a good fit for a 2,000, 3,000, 4,000-person company.
We went after a simpler, more frictionless model to acquire customers at the low end of that. Any company could start with HubSpot and grow with HubSpot throughout its life cycle. Of course, east and west, we added a Sales Hub and a Service Hub. I want to give you some information, some stats about how that's going. Let's talk about east and west first. What this chart shows is the amount of the Growth Suite adoption across our customer base. We have, you can see about 37% of our customers now are using multiple tools in HubSpot. I think there's still room to grow on that. Also, interestingly, about 6% or 7% of our customers are using all three of our tools. Obviously, the Service Hub being the newer tool, adding sort of to the third leg of that stool.
I think there's a tremendous amount of opportunity there. When we initially introduced the Service Hub product, it really had a very strong use case for our customers who were using Sales Hub and Marketing Hub that needed to extend into this idea, this concept of a ticket to manage a service ticket from their customers, and we've got a lot of traction with that, and that business is growing very rapidly. I think as we continue to invest in that business will sort of stand alone and be a more powerful tool, and we have a big opportunity to continue to cross-sell that into our install base. What that does, obviously, is it tends to pull up our ARPU, as we get customers to add more and more of the products that they use from HubSpot.
If I think about the north and south motion, as I like to call, let's talk about north first. We spent a lot of time focusing on our enterprise products so that we could sell to larger and larger customers. You remember last year, we added an enterprise tier for Sales and Service Hub, and we really beefed up the enterprise tier for our Marketing Hub. We've been able to, over the last sort of 18 months, kind of double the number of our customers that are using that enterprise tier. We have almost 8,000 customers now of our 65,000-ish customers that are using our enterprise tier product. Again, that tends to pull up our ARPU, which is a very positive thing. On the other side of the equation, let's talk about sort of the southerly direction, if you will.
What this is about is adding starter tiers across all of our hubs so that customers can start with our free product, adopt the starter tier really frictionlessly, often without talking to a human being, and start to use the product, get using it. We're adding value for our customers before we're expecting to extract value with a conversation to get them to upgrade into professional. What this tends to do, obviously, is lower the CAC, lower the friction of acquiring a new customer, and that, of course, tends to pull down the ARPU a little bit because those customers tend to be smaller when they start. You kind of have this interesting phenomenon that I've joked about as being a humidifier and a dehumidifier in the same room.
The humidifier is adding to ARPU as customers upgrade and cross-sell, and then the dehumidifier is we're bringing in lots and lots of new customers with this motion. You can see that we're getting a lot of nice traction on that. This is the chart that shows both our weekly active users and our weekly active teams. Over time, that's a really nice trend, you can see we're up to almost 70,000 weekly active teams. I like to look at the weekly active teams as well as the users, because what we notice is when a user starts and then they invite in team member with a very high percentage, almost 20% of the time, those teams become paying customers of HubSpot. That's a really powerful motion for us. By the way, don't worry about those dips in the curve.
I took vacation during those periods, so I was able to get the ship righted relatively quickly. In all seriousness, that's like Christmas week. That's holidays, the December holidays. By the way, the other thing that happens with that motion is we reduce the friction throughout the whole process. What this chart shows is the percentage of our ARR that we're signing up after the customer is already using our product at some level. You can see that over 60% of the time, that's the case. I don't think this ever gets to be 80 or 90% because we have a really strong motion with our sales team. We have a lot of considered purchases of folks coming in and looking for a CRM, a marketing solution, a sales solution, but that's a really healthy motion for us.
It really lowers the friction for our sales process, and it's better for the customer, I would argue. Let's talk about 2019 and what we've been up to this year. I call it a year defined by our customers. We really said, this is going to be a year where we want to focus on that customer experience. Last year during Brian's keynote talk, he talked about the flywheel and how you have to reduce the friction for your customers and turn your customers into advocates, and that's something we took to heart ourselves. You're going to hear a lot about this in Christopher's product keynote in particular this year. I'll give you a little bit of a preview on that.
As we talked about last year, we used to think about this sort of as a funnel, where you thought about what leverage can I get out of my marketing and sales motions to produce the most customers here? The problem with a funnel idea is it doesn't give you credit for delighting those customers, and that in turn turns into your best route to market. We shifted the idea to a flywheel where the customers are at the center of that, and this is really what's driving our thoughts around our efforts, particularly on the product team this year. Let me talk about that a little bit. The first one is, and I want to introduce this concept that we call internally the Mainsai l. We love nautical references. Everything, like we call our planning season tuna season.
When we make a decision, we don't actually make a decision, we sail a ship. We have a bunch of stuff like that inside. We introduced this idea shortly after, probably you guys have forgotten about this, but we had a little bit of an outage at the end of Q1. That was actually very rough at the time, but I think it's turning out to be one of the most monumental and seminal moments for the company as we grow, because it made us rethink how we sort of develop software. We came up with this idea of a Mainsail where at the bottom of the Mainsail are the things that customers absolutely need to be able to count on.
We also learned through this is when we were a marketing app and the product had issues for a short period of time, customers were like, "Oh, my emails didn't go out. They'll go out in two hours." Whereas when you're running your entire business on HubSpot, it really becomes critical. The way we thought about it is sort of guardrails and goals. Our product teams, who operate pretty autonomously, they sort of listen to what customers want and sort of deliver on that. We said, "That's awesome, we're going to have guardrails around the product has to reach a level of security, reliability, performance, and usability, before we start working on value and growth items." Those are obviously at the top of the Mainsail . If we weren't a company that loved nautical references, this would be a pyramid or something.
What we want to do is we want to make sure that we're delivering on the promise of security, performance, and reliability. That's sort of our first big effort this year. We also delivered a lot of really new stuff that I won't go through in detail, because you'll hear about it from Christopher next. Our themes were, this year, for our customers, we want them to be able to grow easier. We want to take the friction out of the way of how you have to use HubSpot. We want that to be better. We want to give them tools so they can grow faster. We also added a bunch of tools to our free product that we think will drive a lot more usage and in turn, feed sort of our internal motion about acquiring customers. I think that's gone really well.
I won't get into any of the specifics about the product launches. We can talk about that later, but also Christopher's going to talk about that in more detail. My summary is we sort of made life easier for our customers. The other thing we invested heavily in is our platform. This year, we've continued to add capability and robustness around our platform. Far this year, we've added over 100 new connect partners to the platform. Our customers are really benefiting from this. Our average customer, even though we tend to have small and medium-sized business, we see that they're using five plus integrations on the HubSpot platform with their HubSpot implementation. That's pretty fantastic, and we've gotten 700,000 cumulative integrations so far.
One of the things I'll talk about a little bit is I think this would help sort of spin an investment flywheel for us. As this platform gets better, it makes the experience better for our customers. Customers are happier. They grow. It makes the platform more attractive to developers. We've made some investments there. Another thing that we don't talk a lot about, but I think it's really important and interesting when you think about HubSpot as a platform or an ecosystem, is education. We've been known for a while for our HubSpot Academy and the content we've done to teach customers about inbound marketing, teach customers about how to grow better.
A couple of years ago, we said we want to sort of brand this as a learning center, and we basically created a learning center where you sign up, you get a free user ID, and you can access all of this content. You can see over the time, we've had almost 400,000 sign-ups and about 250,000 people have earned certifications on HubSpot about how to do inbound marketing, how to do SEO, et cetera, right around the flywheel. I think this is going to be a really powerful sort of force in the overall platform flywheel as we go forward. Okay, let me look a little ahead and maybe make some actual forward-looking statements at this point about how we're thinking about investment for the next, call it, three to five years.
First of all, as you've heard me talk about, and I've sort of showed you some stats, and if you don't believe me, just look at the arrows. We're on the process of evolving from an app company where we started as a marketing app to a suite to a real platform, and sort of that's our theme as we make all of our investments. I think it's starting to pay off, and I think you can actually start to see the return that we have on this investment. You guys are as familiar with these numbers as I am, probably. Three or four years ago, we spent maybe 13% or 14% of our revenue on R&D, and a lot of companies at that point were public, starting to get some scale. They were starting to get some leverage for that.
We, in fact, have actually increased the amount of R&D spend to the point where the last sort of 18 months, we've been spending about 18% of our revenue on R&D. We've really increased that a lot. I think one of the places you can really see the benefit of that is if you look at where our revenue is coming from. Obviously, our Marketing Hub is still growing very nicely. I still think there's a big opportunity there. We've layered in additional products driven by that R&D, and that's taken our growth rate up very substantially to the point where we have a pretty big Sales Hub business now and a nascent but growing very fast Service Hub, and I think there are more opportunities to do that.
I still think we're in a situation where R&D investment is going to pay off for us, and there's a big opportunity to do that. Kate will talk more in her section about the way we're thinking about the go-to-market and the marketing sales investment. Our LTV to CAC is still fantastic, and we want to keep cranking there. I think we're getting a return on R&D, and I think that opportunity is actually growing for us to get more of a return on our development spend. Where are we headed with that development spend? I think we're headed in sort of two ways. There's sort of two big opportunities for us. The first is to continue layering in fast-growing hubs on top of the platform that we've built.
The nice thing about our platform, as we've talked about in the past, is it's built on a common framework so that the pieces all work really well together. The value add for HubSpot when we launch a product is, of course, the product has to be excellent, but it's the sort of the one plus one equals three. It's the magic of the way those hubs work together to enable our customers to do really powerful things to help their customers. I won't talk today about what those hubs look like or when they're coming, because that would be a little bit I'd have to swear you guys to secrecy, which we're not going to do, obviously, in this room. There's sort of two things I would say about that. One, over the next three to five years, I expect us to launch several hubs.
I don't know. I'm not going to say one's coming in Q4, Q1, whatever, but I think we'll have the opportunity to launch several new hubs over the next 3 to 5 years. The decoder ring sort of on what those hubs look like is to the point that I was making earlier. The magic for HubSpot is we want to introduce software where our customers get a 1 plus 1 equals 3 with the way it all works together. That's the way we start to think about what might be next in terms of our investment in fast-growing hubs. In addition to that, and on top of that, really, I think there's an opportunity to layer in the ability to sort of monetize and grow our platform business.
What we've been doing really with our platform is sort of trying to reduce the friction for our customers to find the help they need, find the software they need, pull down the assets that they need to be able to leverage their HubSpot implementation and grow better. I think we're starting to develop sort of a marketplace for our partners, marketplace for our connect partners with software, even an asset marketplace for templates and forms and landing pages, et cetera, that our customers can leverage as they look for help to grow their businesses better. I think there's a big opportunity to do that for us as well.
I think in addition to delivering more software, I think there's an opportunity to continue to grow that marketplace, to grow that platform and sort of build marketplaces around that we can both monetize and help our customers with. This is what I was talking about before. What I think that does for us in general is sort of spin what I call the platform investment flywheel. We like to use flywheels around here. What's happening here, and I think we're starting to see the early stages of it is, as our customer base grows, there's a bigger opportunity for partners of all types, software developers, agencies, implementation partners, et cetera. As that occurs, more investment is happening in the platform. Obviously, from us, I just showed you that we're taking up our R&D spend over time, but also we're seeing developers build for HubSpot.
We're seeing partners invest in HubSpot. We're seeing customers invest their time and energy and expense in using HubSpot more efficiently. I think as you get more investment, the platform gets better, and of course, happier customers, and then hopefully we can continue to spin that investment flywheel. Hopefully that's the formula for us to become a really big company over the next few years. I'll just wrap up really quickly with sort of three key takeaways that I think you guys could take away from this. One is we have a really strong go-to-market model, but we're continuing on focusing on improving that by taking out the friction, and then by cross-selling across that for other software packages or other hubs that we deliver.
I think that's going to be a motion that we can continue to rely on to drive a great lifetime value for customers and continue to reduce our CAC or keep our CAC low. The second one is we're getting a very strong return on investment on our R&D, and I think there's continuing opportunity to do that. You can expect us to continue to invest in R&D over time. I think that we'll see the payoff from that. The third is we think we're still in early innings. We talked about having 65,000 customers. I think the opportunity is much larger for that. I think we've talked about moving towards a platform model. I think there's a real opportunity that we're just starting to see get traction around the flywheel.
We're investing in this company based on the idea, and we really strongly believe that we're in the very early innings of the opportunity for HubSpot. Okay. Thanks for listening. Thanks for coming again, and our two gentlemen in the identical outfits almost will lead us down to listen to the keynotes. All right. Thank you.
Good afternoon and welcome. We are about to begin. We invite everyone to please be seated. Just a reminder, this would be an excellent time to silence your devices. We appreciate your cooperation, and again, we're going to begin shortly. Thank you.
We're told to grow at all costs. We're told to sell to everyone, demand attention, and push our way to the top.
We're told to not take no for an answer, reach out over and over, and never put the phone down.
We're told to cut costs, increase margins, and bow to the bottom line.
We're told to get in people's faces, force conversions, and make it hard to leave.
We're told to grow at all costs. I see a different way. I choose to grow better.
I choose to help customers, not interrupt them. See relationships, not just deals.
I choose to sell what people need, only when they need it. Solve for my customers, not just my quota.
I choose to focus on impact, not just revenue. Measured in loyalty, not leads.
I choose to get better at purchasing and seek out feedback. Own up to my mistakes and get better every time.
I choose to do the right thing.
Even when it's hard.
Stay true to my purpose.
Build a community.
We're told to grow at all costs. I choose to grow better.
Please welcome HubSpot's Co-founder and CEO, Brian Halligan.
Thanks everybody. It's a real honor to be able to present to you today, and I'm super excited about my topic. I'm going to tell you about a new species of disruptor in the economy. Before I get to that, I want to tell you about my nightly routine. You see, every night, Romeo and I, we come home from work and we take a Lyft. We cruise up to our apartment, and the first thing we do is we put on our favorite band. First thing we do is we put our favorite band on Spotify. Of course, that band, you all know it, you all love it. Cranking the music, we boogie over to the doo-dog area, and Romeo's chicken toys are everywhere.
We've got to clean out those chicken toys and make room because we got a new package in the mail from chewy.com. He loves those chicken lollipops. He just loves the chicken lollipops. We finish up our snack, the two of us head down to SoulCycle and we get a good workout in. We come home, shower up. We get our new package from Dollar Shave Club, so we both shave up and then we come downstairs and we order a little Chicken a la King from DoorDash. We're a little tired and we want to put our toes up and watch Romeo's favorite movie on Netflix. Like a lot of you, the two of us are trying to avoid screen time before bed, so we read our favorite comic. We lie down on our Casper mattress. We have a good night's sleep.
I think we have a fascinating evening routine. You don't? I think it's fascinating. All these companies, I just ripped through all eight vendors. We swapped out the incumbents for a whole new set of vendors in our lives. It's not just our evening routine. It's our daily routine. It's all of our daily routines, isn't it? There's been a massive wave of disruption happening. Frankly, when we started HubSpot back in 2006, I thought disruption was at an absolute peak, couldn't get higher, but disruption is at an absolute peak now. All these companies, terrific companies, are all worth more than $1 billion. Disruption's speeding up, not slowing down. Did any of you notice anything funny about me in those pictures? Broke my arm. I'm going to tell you how I broke my arm. We caught it on video.
If you're squeamish, I'd like you to look the other way. Okay. In the video, I'm the guy in the orange pants. Boom. Works every time. Okay. B2C, everything seems to be changing in our consumer lives. Massive waves of disruption going on in the consumer world. What about the business world? What about at HubSpot? What about at all your companies? Is there a change afoot? Is there disruption happening? I'll let you guys be the judge. See, a typical day for me, a typical morning, I might be out on the West Coast and I cruise into our WeWork office over there. I got a big important meeting that day. I get in my cubicle and I want to collaborate with Dharmesh to prepare on Slack, and then I run over to the conference room.
I don't want to be late because I want to scarf down a sandwich from ezCater. The meeting's about to start, so I fire up Zoom, make sure everything's perfect on Zoom, and then we have a great conversation with our new partners from AWS. Fascinating. I think my morning is fascinating. Again, just a wholesale swap out in vendors we do business with that morning. It's not just that morning, it's every day for me, it's every day for HubSpot, it's every day for all your companies. Disruption's speeding up. It's not slowing down. Really interesting. These companies are fabulous companies. They're all worth over a billion dollars. Okay? Did anyone notice anything funny about me in those pictures? That's right, I had a ice pack on my back. Okay. Last time I said, "If you're squeamish, look away." I was kidding about it.
This time I'm serious. If you're squeamish, I'm looking out at you, everyone's looking at the screen. If you're squeamish, I'm dead serious, look away. I'm going to tell you what happened with my back.
Oh.
I told you to look away. I was bit by a brown recluse spider.
Oh.
Hell of a summer I had. Put me in the hospital. Darnedest side effects. I keep talking about this word disruption. That's a word first used in this context back in 1995 by a guy named Clay Christensen. He's a Harvard Business School professor. He talked about it in this context in a terrific book called "The Innovator's Dilemma." Highly recommend that book to everyone. Since then, though, this word's been heavily overused and heavily under-understood. It's on my top five list of words that are most overused and most understood. It's number three on the list, right behind artificial intelligence and blockchain. What's so confusing about this word? Why so under-understood? I have a theory. My theory is when most of us think about disruption, we think about companies like these.
They're technology disruptors, the browser, the Google, the Intel, the iPhone, maybe the Tesla someday. Big, deep technology companies. You add up all the patents across these five companies, 50,000 patents. These are technology disruptors. What about our friends? Are they technology disruptors? I'm not so sure. I'm not so sure. I like this list a lot. About four months ago, I started preparing for this presentation, and I went very deep on this list with two of my colleagues at HubSpot. We talked to almost all the founders, we purchased pretty much all the products, we read all their terms and conditions, we talked to their big investors. We went deep on them. My thesis here is they're not technology disruptors, they're a new species of disruptor that's emerged in the economy, and I call that species an experience disruptor. Okay?
When I look at the genetic code of these experience disruptors, and I look at the adaptations, there's five of them. There's five things, like modern adaptations that they have that have allowed them to really run over the incumbents in their industry. Today what I plan to do is unpack those five genetic adaptations. What I want to do is leave you all with a playbook that you can take back to your company so you all can become experience disruptors, too. How's that sound? Sweet. Let's get started. The first adaptation, if I talk to the incumbents, you see, they focus on product-market fit. The experience disruptors work on experience-market fit. Here's how they think about product-market fit. They think of it as necessary but insufficient to get the disruption that they're really after. Necessary but insufficient.
Let me give you an example of what I'm talking about. We started this project four months ago, and at the time, I had never heard of this company, Carvana. A bunch of my colleagues had purchased cars from them and were raving about them. I did some research and they are an awesome company. It's a startup. It was founded five years ago, and within five years, it's already the largest car dealer in the United States. It went public last year. It's got a market cap of $12 billion. This is a killer experience disruptor. How'd they do it? Now, you might think they did it with inventory. Typically, a car dealer, they got cars all over the parking lots. These guys do it differently. They build a giant car vending machine. Now, that's necessary, but insufficient to get that crazy growth they've had.
The reason they get that crazy growth is they're focused on the experience-market fit. What they're really focused on is they've set out to create a whole new way to buy a car. You don't just buy the car from them. They do all the crappy paperwork. They deal with the DMV, they deal with the taxes, registration, all that crapola that none of us want to do. You tell them, "Hey, I bought the car. I want it delivered at my house on Tuesday." You give them the address. The car shows up at 2 o'clock on Tuesday for you. Pick a time and a place. Awesome. You drive the car around for one week. For whatever reason you're not happy with the car, return it, no questions asked. Experience-market fit.
They've taken the cringe-worthy process of buying a car, automated it, institutionalized it, and made it awesome. When I look at these experience disruptors, they all have great products, but they have even better experiences. Here's how I think about all of them. How they sell, that's why they win. Okay. Let's talk about the second one, and sit down for this one. To unpack this one, this adaptation, we had to take some DNA from the experience disruptors, and we studied it under a microscope. DNA under there. What we expected to see when we looked under the microscope was a double helix shape for their DNAs. We focused in on it. Very surprising. We really had to focus in on it. It wasn't shaped like double helix at all. It had a very different shape. Their DNA was round and spinning. It was a perfect flywheel shape.
Okay. If you were here last year when we talked about the flywheel, could you clap for me? Oh, boy. Thank you for coming back. For those of you who weren't there, we collectively here at INBOUND 18, we retired ye olde funnel. The funnel just doesn't understand us like it used to. The funnel, it gave us credit for our marketing channel, gives us credit for our sales channel, but it gives us no credit for our most important channel, our customer channel. No credit for that. I also like that the flywheel spins. The faster it spins, the faster you grow, you want to get friction out of that flywheel in a modern company, and you want to track that. I'm a big flywheel fan. That brings me to the second adaptation.
If I look at all the incumbents, their flywheels are full of friction. The experience disruptors, very different. They're very good at pulling the friction out of their flywheel and getting that thing to really spin. Let me give you an example of what I'm talking about. It's a company called Atlassian. If you haven't heard of Atlassian, it's a great company. They make B2B collaboration software like Jira, Confluence, Trello. Terrific products. Really great products. By the way, this company is not a small experience disruptor. It's not a startup. It's been around a while. It's a large company growing very fast, very profitable. Its market cap's $32 billion. These guys are friction-fighting superheroes, really good at it. We had a chance to sit down with Jay Simons, their longtime president, and he schooled us on fighting friction.
The first thing he started talking about is he likened the process of buying B2B software to the process of buying a car. He actually called it cringe-worthy. That kind of hurt. When he started talking about his marketing department, and he talked about his sales department, and then he talked about his contracts, and he talked about pulling friction out of these three things. That was super valuable. I'm just going to walk you through what he talked about. His marketing department looks less like a traditional B2B marketing department. He's a B2B company, but his marketing department looks just like a B2C marketing department. His marketing department looks less like, let's say, SAP's marketing department and more like Stitch Fix's marketing department. They focus less on generating leads and more on generating active users.
They focus less on trying to sell the CIO and more on trying to get that CIO to buy from them. All of the B2B experience disruptors are playing this new playbook. When you look at the marketing departments, they're B2B companies, but they're B2C marketing departments, and they're all getting really good at this. What's interesting to me about this is the whole B2B marketing world, this world itself is going through another major interesting disruption. Jay and his crew is really good at pulling friction out in marketing. Most of the other B2B experience disruptors, they do a really nice job of marrying their B2C style marketing that's very low friction with a slightly heavier friction traditional enterprise sales model. They're really good at getting that going. I said most of them because Jay doesn't do this.
What impresses me about Jay and Atlassian, they do multi-million dollar deals, no sales rep, no sales force at all, no commission-based sales force. Just a few years ago, you'd buy a toothbrush or a comb online. Now people are buying multi-million dollar pieces of software. Really, really interesting to me. One more. Jay talked about the contracting process. Fascinating to me how he thought about it. What I want to do is kind of role-play with all of you. Let's pretend that I'm a potential buyer of your company's products, okay? You're a salesperson for your company, and we're going to do a little role-play. I go to your website, I Google you, find you on your website. I love your website, by the way. It's terrific. Nice job. The design's great. SEO is great. I subscribe to your blog. I follow you on social.
I dig deep. I do the same thing with your competitors. I'm coming along. I'm pretty interested. I say, "I'd like to talk to a salesperson and learn more." You do a fabulous job. You engage me. You solution sell me. You really understand my pain. You do a fabulous job. Over the course of a couple of months, I'm building up trust in you. I'm building up goodwill in you over time. You're doing such a good job, congratulations. I'm ready to buy. Tell you I'm ready to buy, all that trust, all that goodwill, all of that goodness goes down the tubes when we go through a brutal negotiation over the course of weeks and months. Really don't like this. Jay doesn't like this either. What Jay said was, "Basta. Enough. No more negotiations. I'm not giving discounts to anyone.
I don't care if it's my sister, no discounts. What Jay wants to do is for us, he wants to keep the goodwill between us. He doesn't want to destroy it. He wants to keep that trust between us. He doesn't want to destroy it. He doesn't want an adversarial relationship while we negotiate. He wants to keep that partnership going. Really clever stuff. Now, Atlassian's kind of here on the friction side. I'm going to guess your companies are closer to here. It's going to be hard to get all the way there, but I think you can get partway there. One more thing I love about Atlassian. I pulled down the investor deck that they did, so the slides they use for investors, and this is one of the slides in it. You know what I like about that slide? The flywheel right on there. Right?
They're a flywheel business. They're a low-friction flywheel model. They get terrific products. Great products are necessary but insufficient for that $32 billion market cap. How they sell, that's why they win. It's a terrific company. What's the third genetic adaptation? The incumbents. When you're prospecting a customer, it's a relatively anonymous experience with them. The experience disruptors, it's a very personalized flywheel experience. One of the things that surprised me in our research project, when we talked to the founders of these companies, they didn't sound like tech people. I'm sort of a tech person. They didn't sound like they came from Oracle or Cisco. When you talk to them, the language they use, they sounded more like executives from The Ritz-Carlton or the Four Seasons. They sounded like they're in the hospitality business. Very different mindset.
All these companies, I wouldn't describe them as tech companies. I describe them as ultra-modern hospitality companies. They're really good at this stuff. Now, it shouldn't surprise me because a lot of the founders came through the hospitality industry. They worked in the hospitality industry at some point in their career. One, in particular, caught my fancy, and that's Jeff Bezos. Jeff Bezos, I don't know if you know this, but he started his career as a line cook at McDonald's. It's kind of interesting to think about what would have happened if Jeff stayed at McDonald's. He went from line cook, store manager, regional manager. What if Jeff were CEO of McDonald's today? What features might we have? Okay. The granddaddy of personalization isn't Jeff Bezos. It's actually this guy, Reed Hastings. He's the founder of Netflix.
We tried to get a meeting with him. We had a hard time getting a meeting. We wanted to do some work on him, so we did deep research on Netflix. Deep research. Some people might call it binge-watching. He used this funny expression. He said, "We avoid psychographics." He's a really smart guy, and when I was listening to a podcast with him, I had to Google like 20 things. This is one of the things I Googled. Psychographics is a very fancy word for persona. Many of you are familiar with personas in this room. What he talked about was replacing the persona with a segment of one. See, inside of Netflix's database, every one of us, we have a fingerprint inside of there. The more we use their product, the better that personalization gets. This is one of their real secrets of success.
How they sell is why they win. Netflix isn't the only company moving away from personas and using data to be much more prescriptive about personalization. This is also happening at Stitch Fix. Katrina Lake, a really great entrepreneur, she dropped a handful of handcrafted personas in favor of dozens of data-crafted clusters. Same type of idea. Same thing with Daniel Ek, the CEO of Spotify. He's talking about moving away from personas to use cases. Honestly, this one kind of bummed me out. I've done handcrafted personas. Clap if you've done handcrafted personas. You made a persona. Okay. They're hard. They're really hard. These guys, they had only had two personas, and they were perfect. They captured sort of the energy of so many consumers. I thought they were really good. First one.
Their second one I thought captured the other half of you because maybe, obviously, this didn't connect with you. The second one was he did replace them with use cases or mixes, and some of the mixes were pretty good. I listen, of course, to the Deadhead dance mix, but the really good one is they have a new mix out there. When I play it, Romeo goes nuts. It's a doodle dance mix. Love the doodle dance mix. All these folks, it's kind of the same game they're playing. They use data, lots and lots of data, to highly personalize your experience with them. Very interesting how they do it. How they sell is why they win. Now, you can over-personalize. I want to tell you a little bit of a story from my summer vacation.
In between the arm break and the spider bite, I was on tour with the Grateful Dead. People still do that. Any John Mayer fans out there? Yeah. Me too. I'm a John Mayer fan, and I got an opportunity to meet him backstage. I had three minutes with him, so a very quick thing. I was super nervous. I was really nervous to meet him. I thought, "What am I going to talk to him about?" I got it. I'm going to tell him the spider story. Tell him the spider story. He's super interested. Tell him about the spider. He likes spiders. I walk out, and we finish the thing. He goes on stage. I walk to the concert. I look at my phone, and the first thing I see on my phone is an ad for Spider Away. Was it listening to me?
What the flock? Clap if this ever happens to you. Okay. With great data comes great power, and with great power comes great responsibility. Be careful with your data. You can over-personalize. Okay, let's do number 4. It's a good one. It's the fourth genetic adaptation we've noticed about our species. The incumbents, well, they're very good at selling to their customers. The experienced disruptors, well, they're very good at selling through their customers. One of my favorite entrepreneurs, I'm giving a couple examples of this, one of my favorites is Emily Weiss of Glossier. Emily came to INBOUND last year and spoke. We got to know her. She was terrific, and she told her story. In case you missed it, she started Glossier as a blog.
She's a fabulous content creator, and the blog's called Into The Gloss, and it was blowing up with beauty tips, and then she started developing beauty products and did a fantastic job with the beauty products, and she's a bonafide experienced disruptor now. Where she's next level is she's really good at not just creating her own content, but encouraging and enabling her customers to create content, too. There's hundreds of thousands of pieces of content out there about her products created by her customers. This one in particular, it actually wasn't that rare. It's a video. This is not a Glossier employee. This is one of her customers. Over 1 million views on it. She's not just selling to her customers, she's selling through her customers. I'll give you another one. We met Neil, the founder of Warby Parker, also at INBOUND a couple years ago.
He's a classic experienced disruptor. He thinks of the process of buying glasses as also super cringe-worthy, and it is. The old process of buying glasses was a pain. You had to schedule going down to the store. The scheduling was a bear because you had to bring your most judgy friend with you. It's true. He said, "I'm going to rethink that. What I'm going to do is I'm going to mail you the glasses. You try them on, you post them on Instagram, and you ask all your judgy friends for their opinion." I like number one. How they sell is why they win. Of course. What's the last one? I like this one a lot. The incumbents, they're business model followers. The experienced disruptors, they're business model busters. You see, what's going on inside most of our businesses is we all live inside an oligopoly.
Each of our companies probably has between five and 10 competitors. When you unpack the business models, you look at the pricing and the packaging and the warranty and all the terms and conditions, they're nearly identical within this oligopoly. One of the things that really surprised me about these experienced disruptors is they rethought those terms and conditions in ways that were much more customer-friendly. I was surprised at how powerful this play was. By rewriting those terms, they were able to bust through those oligopolies in really effective ways. Most of them are dominating their industry. I'm not sure if you noticed, almost all these industries, they're kind of winner take all, and they're starting to really beat up on the competition. I want to give you an example of one of these.
The example I talked about earlier is Romeo's favorite experienced disruptor, and I ordered a medium shirt for Romeo. He's always taken a medium, and I put the shirt on and the poor dog could barely breathe. It was too tight. Too many chicken lollipops. I called Chewy, and I said, "I'd like to return my medium for a large." The woman said, "No, no, no. That's not how we do it." "Okay. How do you do it?" She said, "Give your medium to a friend of yours, and we'll send you a large for free." Really? This worked out great for me. I didn't have to do the return, didn't have to do any paperwork. Fantastic. Worked out great for Romeo. It worked out really well for his friend Woodford.
Aw.
What I like about this is their cost to acquire Woodford was very low, right? I got Woodford for them. They didn't have to really spend any money to do it. Their total lifetime value of Romeo is very high. Why is that? Well, they have such a great return policy that Romeo's been buying all kinds of stuff now. These experienced disruptors really are a different species. They think differently. I learned a lot in this project. The founders have a healthy disdain for conventional wisdom. They all embrace unconventional wisdom. The founders, they don't spend nearly any of their energy extracting value from their customers. They spend all their energy thinking, "How do I add value to my customers?" They're really good at this stuff. I am really impressed with these companies. Help me out here. How they sell is?
How they return.
You got it. Okay. Now, while we're on the topic of returns, I want to tell you about a trip I had after college. After college, I went to Europe with five of my good buddies. We had one of those trips that was 16 countries in eight weeks. We had a ball. About halfway through the trip, we were in Prague, and I walked into this great little shop in Prague, and I saw these two beautiful vases. I thought to myself, "I'm going to be a good son. I'm going to buy those vases for my mom. It'll be a nice present." Get back to my youth hostel, I show it to my friends. My friend's like, "Wow. Hashtag son of the year. Amazing." I thought I was absolutely brilliant until the next morning when I was packing.
I walked around Europe with these two things clanking on my back. Eight countries with those things clanking back there. I get home, and I'm excited to see my mom. I haven't seen her in two months. I had a nice present for her. Mom, great to see you. I have these beautiful vases for you. Those are nice. Underwhelming response. I forgot about it. She did rear me. Couple of weeks go by. I had to come home. Laundry day. I walk into the laundry room. The damn vases are in the laundry room. Mom, they'd look great in the family room. How about the kitchen? The colors match perfectly. It's a good idea. Let me think about that. For 30 years, those damn vases stayed in the laundry room.
Christmas comes along this year. Under the tree, there's two beautifully wrapped big boxes from mom to Brian. I open the boxes. Mom returned the vases. With all due respect to chewy.com, I got one hell of a return policy. Okay. Enough about me. Let's talk about you. Talk about your superpowers. We started this presentation out today talking about my nightly routine. Routines can be good. Routines can hold you back, though. All of you probably have routines. On Monday, you're going to go back to the office. You've got a choice. You can get back to your office and do your normal routine, drag the spreadsheet on your career, drag the spreadsheet on your company, or you can embrace these new five experience disruptor plays and harness your inner superhero.
If you want to harness your superhero, and if you like these plays, I'm going to summarize them for you. Okay? Just going to go through all of them for you. The first one is. Don't obsess completely about product market fit. Somebody in your company is obsessed with that. This is a sales marketing service type conference. It's probably not you. You probably should obsess about experience market fit. Okay? Embrace your inner Carvana. 2, dollars flow where the friction is low. The dollars flow where the friction is low. Meniscally remove friction, automate like the superheroes at Atlassian. 3, automation without personalization, that's what people call spam. Personalize. Think like Netflix and fingerprints. 4, don't just sell to your customers, sell through your customers like our friends at Glossier. Really effective tool. 5, rethink ye olde business model. Rethink it from scratch.
Look at your terms and conditions. Look at your pricing, packaging. Look at your competitors. Rethink that whole thing. Now, my favorite thing about this list, nowhere on here does it say blockchain. Right? Nowhere on here does it say artificial intelligence. Mere mortals like me, we can do this. Mere mortals like you can do this. When you get back to your office on Monday, try to get out of your routine and embrace these plays. If you do that, how you sell is how you'll win. I want to thank you all for being a fabulous audience today. I really appreciate it. Thank you. Thank you very much. Thank you.
Please welcome HubSpot Co-Founder and CTO, Dharmesh Shah.
Thank you. Hello, everyone. Brian and I started HubSpot over 13 years ago, and I've learned a lot in that time. Today, I'm going to share with you some lessons, both personal and professional, from my journey to try and grow better. I'm going to share some mistakes I've made that I think are worth avoiding, and some things we've gotten right that I think are worth replicating. Brian's mentioned some of his fears, so I think it's only fair if I talk about some of mine. We all have fears, local fears, global fears, present fears, future fears, personal fears, and professional fears. Since we're at INBOUND, if it's easier for you can think of those as B2C fears versus B2B fears. For me, there are a few things that scare the life out of me. The first one is terrifying.
I can't understand why everyone doesn't have this fear. It's just, I dread it. It's the low battery warning. I hate that thing. It makes my heart rate go up, and not in a good way where you get credit on your fitness tracker. Not in a good way. Why the dread? Without battery life, our devices die, and without devices, all we have is each other. People. The horror. It's because of this fear that when I got this message from a colleague of mine, Christopher O'Donnell, who's the head of product at HubSpot, I was shocked. Not shocked at the valuation for monday.com. Great company, great product, more power to them. Shocked because if you look in the upper right, he's got a low battery warning. What's more, is there's no lightning bolt in that battery warning thing. The phone is not charging.
Yet he has the presence of mind to send me a screenshot, send me a message while living on the edge. What was even more shocking, it is 6:53 A.M. Who uses up their battery life by 6:53 A.M.? Personal fear number 2, I hate making eye contact. Thank you. I know some of you are thinking, "Well, he is making eye contact with us right now." No. I am not. I am looking at your foreheads. You all have lovely foreheads, by the way. Nicely done. If I am not looking at your foreheads, I am looking at the floor. I have built a great rapport with the floor of this convention center. We are BFFs, all 18 miles. Here is someone who also has a lovely forehead. This is my wife, Kirsten. She is in the audience right there. Hi, sweetie. She and I met 27 years ago. I made eye contact 25 years ago.
Thank you. I was proud of myself, too. Thank you. Now, when we first met, Kirsten talked to me about the GRE, the Graduate Record Examination. It's like the SAT, with less acne. Kirsten says, "I'm thinking about going to grad school, so I'm planning on taking the GRE." I'm like, "Well, that's serendipitous. I'm planning on taking the GRE." I was not planning on taking the GRE. It wasn't a total lie. By the time I had said those words, I was now planning on taking the GRE. Our first date was a study date. Some of you might be questioning, does a study date really count as a date? Yes. It does. Study date. It's got the word "date" right in there. We plan our date. I'm not outdoorsy. Kirsten digs the outdoors. I dig Kirsten.
We're outdoors for our first date. This is a photo of us outdoors with our GRE book in hand. Now, I apologize for the graininess of this photo. This was back when you had to get photos developed like a caveman. We have a son, by the way. He's eight now, Sohan. He likes to joke that Mommy and Daddy met in the late 1900s. I'm like, "You're not wrong, but I would tread lightly." "Mommy brought you into this world. She can take you out." "Daddy got you onto the internet. He can take you off." Last fear. I know many of you are wondering, why is Dharmesh fearful of yoga splits? He doesn't seem like the type that would do yoga or splits. This is actually a fear of water. I have a very rational fear of water because I can't swim.
Just never learned. You see a photo like this, and many of you are thinking, "Oh, that's a nice, tranquil pool." The thing that goes through my head when I see this, danger, death awaits. I can't help but think I did not plan properly to die today. Now, my life has turned out okay. I've mostly avoided water my whole life, beaches, water parks. Cruises are okay because cruise ships are practically a small continent, like Australia. Sure, I've missed out on a few things. Overall, I'm fine. I tell myself late at night, "I'm fine." Now I have a son. His name is Sohan, and he's afraid of the water too. When he was in his late sixes, he wouldn't put a foot in the shallow end of the pool. Not even a toe wouldn't go near it.
That night in Maine, I was listening to the sounds of the forest, or it might've been someone's Spotify playlist, Sounds the Forest, playing too loudly, I don't know. The point is, I was overcome with guilt. I thought, "Is fear of water genetic? Did I pass this down to my son? What have I done to my son? I have failed as a father. Aquaman's son would not have this issue." I felt so guilty. I talk to Kirsten, who's not neurotic like I am, and she says, "Genetics? Maybe. Or maybe he just needs to learn how to swim." "Brilliant thesis," I thought. We try that. Put Sohan in swim class. Lo and behold, the boy can swim like he were the son of Aquaman. It's awesome. This is Sohan at that exact same pool that he would not put a toe into.
This is him cannonballing into the deep end of that pool. Thank you. Yeah. This is awesome. Did my heart so much good to see him in the water. He turns to me and he says, "Daddy, why are you afraid of the water?" No parent wants to look scared in front of their kid. How we face our fears is what defines our destiny. Often, how we overcome them involves not just one thing, but multiple things coming together. If there's one person that understands the combination of things, it's this dude. Now, you probably don't know who this dude is because most dudes in the 1800s looked like this. Actually, 200 years later, lots of dudes still look like that. Back to this dude. I'll give you a hint as to who this is. Yeah, I know. This is John Venn.
He was a mathematician from Cambridge, U.K. I hear they have a Cambridge there too. He invented the Venn diagram. It's a part of math that's called set theory. You probably learned about Venn diagrams in high school, or if you're from India like me, first grade. Here is an example of a Venn diagram. You have Paul Simon, gifted musician, singer, songwriter. You have Art Garfunkel, who has the name Garfunkel. Just hunt me a better example. You have animated characters that love carrots, like Bugs Bunny. You have animated characters that are loyal friends, like Donkey from Shrek. By the way, it's not The Donkey. The name of the character is Donkey. I just saved you some Googling time. You have animated characters that love carrots and are loyal friends. This is what I like to call a Sven diagram. I know.
You have to take the good with the bad, folks. You've got a dad on stage wearing dad jeans. You have to expect dubious dad jokes. That's how it goes. For those of you in the audience feeling left out, a little bit of FOMO because you didn't get that joke, just let it go. Many of you are wondering, why is Dharmesh talking to us about Venn diagrams? It's because facing your fears involves the intersection of different but complementary things. A couple of weeks ago, I posted this to LinkedIn. It got some resonance in the community, so I thought I'd share it with you. As a startup, at first, you fight death. Next, you fight stagnation. You fight complexity. Before moving forward on the path to growing better, you should know what fears you might encounter along the way.
Brian talked about five genetic adaptations of the new breed of experience disruptors. I'm going to share with you the five fears that you're going to need to face on the path to growing better. Before we dig in on the fears, it's important to recognize not all fears are bad. Some are worth fearing. They're dangerous, scary. The important thing is you have to pick the right fears to pay attention to. That's what we're going to talk about. Fear number 1, a fear of commitment. This is a paradox for me. I'm exceptionally committed to things I commit to. Kirsten and I have been together for 27 years. Brian and I have been working together for 13 years. I've been wearing this T-shirt on stage for 10 years. When I commit, it tends to stick, apart from diets that don't include pizza.
I know that about myself, which is why I find it hard sometimes to commit, to make a decision, because I mistakenly assume when I make the decision, it's going to last forever. The result is uninspired compromises. Instead of committing to one path or another, I avoid a decision altogether, and I think many people have the same challenge. We made one of our first uninspired compromises early on at HubSpot. We were unable to decide exactly what customer base we were going to focus on. Here's a photo from the first year of HubSpot. We're having an animated debate over email. Anything else would have required eye contact. Now, you can't tell from this photo, we are mid compromise right here. Now, I want to pause and make a few observations on this photo. I know this looks like a Fortnite marathon for dads. It's not.
It's a room at the Marriott across the street from the HubSpot office. You're wondering, "Well, why are you working out of a Marriott across the street?" The answer is because HubSpot was on fire. Literally on fire. There was an electrical blowout. By the way, don't you hate when people use the word literally when they actually mean figuratively? It's like, "My heart literally broke into 1,000 pieces when I heard Ed Sheeran was no longer touring." I'm sad about that, too, but really, did your heart break? Did you count those pieces? When I say HubSpot was on fire, and literally on fire, there were literal flames. It was on fire. What was not on fire was my fashion sense. That sweater and those shoes, still own, still wear. Almost wore them today.
Kirsten suggested I might not want to do that. In this photo, Brian, as always, is ahead of his time. This is him working while standing before standing desks were a thing. You can think of it as a hunching desk. Last observation. Both Brian and I are using PCs back then. We both have subsequently switched to Macs. Brian, because he loves Apple. I switched because of a free U2 album. Back to our compromise. We couldn't commit to exactly who our target customer base was going to be. We kept having these animated debates, weeks, months, years. It was so painful. What we learned along the way was that what we needed was the combination of a market that's big enough to support the growth you want and need right now, but that's small enough that you can focus and delight your customers.
You need the intersection of those two things. When you narrow your focus instead of trying to broaden your market, it's easier to grow and it's easier to delight your customers. Delighted customers are important. A lack of delighted customers is not the quickest way to kill growth, but it's the most reliable. To get delighted customers, you need to pick a very specific market and commit to it. Many of us have a fear of making commitments, of making sharp, incisive decisions, not hedging. What we should really fear is uninspired compromises. Those are the quiet killers over time. Fear number 2, the fear of differences. We're going to go back in time, way back in time. This is me, five years old. Many of you are thinking, well, back then, you were able to have intense eye contact. You're making intense eye contact.
No. I'm not. I'm looking at the photographer's forehead. By the way, I'm wearing a tie back then because I had not yet discovered that one could just start a company and wear logo T-shirts the rest of your life, including on stage. It's one of the privileges. This is me, version 1.0. I'm out of beta. I'm in my early 20s, Indian accent, super geeky. I've kept that consistent over the years. I take standardized tests for fun or to meet the love of my life. I'm originally from the state of Gujarat in India. Shout out to the folks from Gujarat. My family. I moved to Alabama from India, and I'm Alabamian for 10 years. That's where I met Kirsten. At the time, I desperately wanted to fit in. Not so easy in Alabama, I tried. This is me 2.0.
This is the result of what Brian might call some mutations or adaptations. I went clean-shaven, hoping it would help me fit in. I worked on losing my accent, hoping it would help me fit in. I even changed my name from Dharmesh to David, true story, hoping it would help me fit in and make my life easier at Starbucks. This is me 3.0. Still keeping it consistent, still geeky. Shift back to my original branding, Dharmesh. I use just my first name, not because I'm cool like Madonna or Adele. I'm not cool. I do it because most of the time, Dharmesh is sufficiently unambiguous, and because it's my name. There's that. Me 3.0 went to graduate school at MIT in Cambridge, across the river from here in Boston. There, I really fit in. It was awesome. MIT is teeming with geeks like me.
Zero eye contact. Even on study dates. While I was there, I met another grad student named Brian. I thought, "This guy seems pretty clueful." We're similar in ways, different in ways, but I'm a startup guy. He's a startup guy. He's more SoulCycle. I'm more no cycle. Maybe we could work together someday. There was one problem with Brian, and it was not that he was running around campus with a PowerPoint clicker in his hand, advocating for a disruption in academics while playing John Mayer on repeat, dressed up as Spider-Man. That was a problem. It wasn't the problem. The problem was that Brian was in business school, so he was going to be an MBA. Now, don't get me wrong, nothing wrong with MBAs. I love MBAs. Two out of three of my friends are MBAs, and I don't mean two-thirds.
I mean I have three friends. Two of them have MBAs. Yes, one of them is Brian. Sure, the other one might be Kirsten, a non-MBA. The issue was that I was in business school, too, and if you have too many MBAs running around, they start using words like disruption and causation and correlation. It's very disrupting, ironically. By the way, I often used to make the mistake of assuming causation when it was really correlation. Since business school, I make that mistake much less frequently. Did they teach me that at MIT? It's hard to know for sure. Thank you. Thank you. Brian and I did end up starting a company together. This is what the early team at HubSpot looked like. We had half a dozen MBAs. We should've gotten a bulk discount. A programmatic discount. No negotiating discounts.
Brian and I don't believe in that. MBAs are business geeks, and if you're building an experience disruptor, they're just as important as technology geeks. Six MBAs on the early team wasn't really an issue, but we did have a big problem. The issue was that they were all dudes, all from MIT, all with a similar background. What little diversity there was on the team, you're looking at them right now. Focusing so little on diversity was one of the biggest mistakes we made in our early days at HubSpot. I think I had spent so much time trying to fit in the years earlier, that it didn't occur to me that maybe other people were having a hard time fitting in with us at HubSpot.
If I had a DeLorean that could travel back in time, I'd have HubSpot prioritize diversity early, and maybe also that series finale of "Game of Thrones," but mostly the diversity thing. Sorry, I know it's too soon. Too soon, I know. I get it. The best possible time to start being mindful about diversity is time t equals 0, when you're just starting a new company, starting a new team, starting a new project. The next best time is now. The data on the benefits of diverse teams is overwhelming, but there's a very fundamental, basic reason why diverse teams are better for you and better for your customers. When YouTube launched their mobile app for the first time, the team observed a strange phenomenon. Many users were uploading videos upside down.
Yes, I know you're thinking, "Well, that looks a lot like Brian." I assure you it's not Brian. As evidence, I submit this actual video of Brian on the INBOUND 2013 stage. I love many things about my co-founder. One of the things I love the most is that he doesn't take himself too seriously. Love that guy. Sorry for the PDFA, public display of founder affection. It's not usually how I roll. All right. Back to the curious incident of the upside-down videos. It wasn't a small number of videos. It was about 10% of the videos that were upside down. The YouTube team racked their big brains trying to figure out, "Why would people do this? This is crazy." As it turns out, the answer was very simple. It's because 10% of the population is left-handed, and so they hold their phones like this.
They hold it differently. Not wrong, differently. They were uploading videos upside down from their perspective. You would think this is a relatively obvious, simple thing. Why didn't the YouTube team catch this? It's because no one on that early team happened to be left-handed. They just lacked that perspective. Magic happens when different but complementary people intersect. We build better relationships, build better companies. Someday, I hope all companies will care more about the values we each hold, the value we can each add to the team, and will embrace our differences and our quirks. Many companies don't hire for diversity. They often hire for personality fit. They use personality assessments, like the Myers-Briggs test. By the way, I am a classic INTJ. I stands for introverted, NT stands for not talkative, and J stands for judgy. Yes, I'm that friend.
You don't need Myers-Briggs to figure out whether you're an introvert or an extrovert. I have a very quick test we're going to do right now. In about five seconds, I'm going to ask you to turn around a little bit and introduce yourself to the person behind you. Just kidding. Just kidding. By the way, if right now you can feel your heartbeat in your face, you're probably an introvert. I have a real test. Here's a real test. I would like you to think of a sentence that contains the word network. Don't overthink it. Whatever pops into your head, a sentence that uses the word network. Okay, here we go. If the sentence in your head used the word network as a verb, as in, "I went to that party so I could network," chances are you're an extrovert.
If, on the other hand, you used the word network as a noun, "I didn't go to the party because the network was down," chances are you're an introvert, and the only parties you're going to are LAN parties. For all of you that did not awkwardly laugh at LAN parties, you're extroverts. On a more serious note. Today it's popular for companies to hire for culture. There's a fine line between hiring for culture fit and hiring someone that's a clone of you. I can understand totally why you would want to hire a clone of you. You're awesome. What you need is a mix of personalities and backgrounds. You need people that reflect who your customers are. You need people that are different.
You might be wondering, okay, how can I tell if I'm hiring for a culture or if I'm just hiring convenient clones? First of all, your goal should not be to hire people that just fit your culture. It should be to hire people that add to your culture, move it forward. They'll be additive, not just because of skills, but because of a different perspective that they bring. To truly hire for culture, you need to know what your culture is. Write it down. It may be scary because you're thinking, oh, my culture's going to change over time. That's okay. HubSpot wrote its culture down years ago in a slide deck called "The Culture Code." It changes all the time. It's aspirational. It evolves as we evolve. While facing differences are scary, I think surrendering to sameness is much scarier.
That's the fear we should actually have. Fear number 3, fear of change. I'm not just referring to my wardrobe. Many people and companies fear change. Why? One day things are finally working. You have an offering, you have experience, market fit, you have customers. Finally, you're not worried about dying every day. It's just every other day. You're worried that if you change something, you might revert back. Change is hard, and there's been a big change for the top CEOs in the country. Big news. It was covered in all the major publications, covered in "The New York Times," "The Wall Street Journal," "The Onion." Here's the news. There's an organization called the Business Roundtable. It was created in 1972, or as someone might say, the mid-1900s.
It's a group of over 200 CEOs from some of the biggest companies in the U.S., including Amazon, Best Buy, CVS, Deloitte. In fact, a company for every letter in the alphabet except Y. Yes, I checked. I'm quirky that way. For decades, this group's definition for what the purpose of a corporation was to deliver shareholder value. In other words, to drive profit. This definition for the corporation stood for decades until two weeks ago. Those 200 CEOs signed off on a new declaration two weeks ago, changing their position. They say the purpose of the corporation, the top two things, yes, shareholder value is on the list, the top two things, delivering value to customers and investing in employees. I love this news. This is awesome because one thing we figured out at HubSpot is that companies are actually building two products.
You have the product you're building for customers, which feels natural, and you have the product you're building for your employees, which can feel unnatural. Just like you want to attract and retain the best customers, you want to attract and retain the best people. What's one of the most valuable features people look for in this product, in this culture? Flexibility. The future of work is all about flexibility. That's what people want. Geographic flexibility, work where they want. Schedule flexibility, work the hours they want. Method flexibility, do the work how they want, as long as creating customer value. This may seem a bit extreme, and it's uncomfortable. It was for me, too. There's an imbalance between the supply and demand of star talent, and if you want to attract that star talent, you have to make changes that are in high demand.
There's some symmetry here between what customers want from the companies they do business with and what people want for the companies they work for. Let's double-click on this where part, otherwise known as remote work. It's a biggie. It's one that HubSpot has been adopting in a big way. A lot of remote work can be scary. You worry about communication, culture, and the chemistry for great teams. It's scary, but achievable. We've been evolving our remote work policy at HubSpot for the last several years. I'll admit it hasn't been easy, and we still have a long way to go, but we're making progress. At the end of last quarter, we have over 200 full-time remote employees. Remote is the second most searched for word on the jobs website for HubSpot. It's a sought-after feature.
If we combined all the people that work remotely full-time or sometimes work remotely, put them all in a single place, the living room would be the biggest HubSpot office. Here's a chart showing the growth in remote employees at HubSpot. We expect those numbers to continue to rise because we're doubling down on a more distributed team. Remember that remote people are people. Treat them with the same care that you do anyone else on the team, and you can dramatically open up the pool of possible talent that you have access to just by letting the best people do their best work. Often their best work is done when they're in their pajamas. Speaking of pajamas, here's a Venn diagram showing how my happiness is correlated to pajama time, or dare I say, caused by pajama time.
I've taken this and broadened it to a new business principle. This is the first time I'm sharing it. I call it the Pajama Principle. It's simple. It states that your success is proportional to the degree to which you let people stay in their pajamas. Thank you. I live by the Pajama Principle, both as a beneficiary and as an implementer. Many of us are afraid of embracing change, by refusing to adapt, we're actually accepting stagnation, that is much scarier. Fear number 4, the fear of disappointing. Sometimes you have to make changes that disappoint some so that you may better serve others. Take chocolate and peanut butter. Two great things that go great together, just like CRM and email marketing.
Woo!
Two things I love, just like email marketing and CRM. When you combine those two things, you get the magic in the middle, the magical peanut butter cup. This is the OG PBC. By the way, OG PBC would be a great band name. When you bought this classic package, you got two peanut butter cups. They were identical, you got two of them. People said, "We want more cups." Reese's responded, "Sure. Here's a king size with four cups. You're sure to win an Olympic medal. Go forth and prosper." People said, "Actually, we want one ginormous cup because sometimes we're having one of those days." For some of us, we call them weekdays. Reese's responded, "Sure. Here's a Reese's Big Cup. Knock yourself out." People said, "Actually, we really like M&M's. Can you make Reese's like M&M's?" Reese's responded, "Sure. Here's the Reese's Pieces.
They taste like Reese's, but they have ugly 1970s colors. No, no. Wait, we've got it. We've got it. Take the Reese's Pieces and put them inside a Reese's cup. Reese's was, "This is getting kind of ridiculous, but fine. We heard you like Reese's, so we put Reese's in your Reese's. Enjoy." They kept going and going and going until one day, Steve Jobs said, "Stop. This is crazy." Steve Jobs did say that, but he didn't say it about Reese's. He said it about Apple. He had just come back as the interim CEO in 1997 of Apple. His title was iCEO, which I think is kind of cool. It's a little thing. When he got back to Apple had hundreds of products because they were listening to retailers, and everybody wanted their own thing versus listening to customers.
Apple was losing money, by all predictions, was going to go bankrupt within 90 days. Apple said, "Stop the madness." He decided to cut the product line down by 70%, and he said every Apple product has to fit in one of these 4 categories. Did he disappoint some people? Absolutely. A year later, Apple turned profitable, and they did it by better listening to customers and simplifying. Because too much choice is friction. I go to Baskin-Robbins, I see 31 flavors, my heart rate goes up, and not in a good way that you get credit for on your fitness tracker. So much pressure. Just give me one scoop of vanilla and just let me go. I know. It's kind of scary to disappoint people, but the fear you should have is not disappointing a few, but not delighting the many. That's the actual fear.
Last fear number 5, the fear of inferiority. Many companies have an insecurity about their product or service. It's not good enough. Instead of making it better, they take the easier path and focus on the short-term bottom line. What's worse, they try to fool us. Take this lovely product. It's the 150 Mega Marker Activity Basket. It's fun, and it's washable. Parents love washable things. It's partly why we love our kids. It's because they're washable. If you look at the top of that basket, here's what it looks like. If you open up the basket, here's what it looks like inside. I know I'm hearing some groans, some gasps. Same here. Pretty sneaky, right? I mean, yes, the label says 150 pieces, not 150 markers, but you try explaining that to my five-year-old niece. Where they placed that label was diabolical. It's just not right.
They had every right to do it, and we have every right to dislike and distrust them for it. Today, trust is scarce. As a result, those companies that can genuinely provide it succeed. To build trust, we should do two things: do the things we want and expect. If we sign up for a social network, we should be able to upload photos of our cats, track down long-lost classmates, but mostly cats. What we're not expecting is for our data to be shared with others that are not solving for our interests. I think every business should take this oath, the oath of experience. We will deliver the experience, the whole experience, and this is the important part, nothing but the experience. Because you'll always have competition. They might beat you to market. They may have extra features.
You can always aspire to be the most trustworthy and provide the best experience. Remember this pool? This summer, Kirsten, Sohan, and I went back to the same pool. Only this time, Sohan wants me to get into the water. I'm reluctant, to put it mildly. Sohan has his mom's determination and his mom's I'm-not-backing-down-off-of-this look. He talks me into getting into the pool. I'm grabbing onto the side of the pool for dear life, even though it's only five feet deep. I can literally stand in the pool, like literally. Note the correct use of the word literally. I'm like, "Sohan, you need to be patient with me. It's not going to be easy for me to learn how to swim." Sohan said one of the most profound things he's ever said. Now, kids say profound things all the time.
This one stuck with me. He said, "Dad, you're not learning how to swim. You're just learning how to dunk your head in the water." I'm like, "Okay." He's like, "Do it." "Right now?" Like, "Yep, do it." Wow. Was that two minutes, three minutes? "Dad, that was one second. All right. Do it again, but don't hold your nose. Do it again, but keep your eyes open." "How did you know my eyes were closed?" "I know, Dad." "Do it again. Do it again. Do it again. Now do it, but flail around in the water trying to move in some general direction." I do that with all the grace of a drunken swan. Here's me in the shallow end of that pool. Thank you.
Along with wearing far too many clothes, I'm also wearing my Apple Watch because what kind of idiot makes all that movement without getting credit on their fitness tracker? Then here's where I'm panicking. It's like, this is one of those infinity pools. There's no wall. This goes on forever. It's like, no, that's not how infinity pools work, Dharmesh. It's going to be okay. The wall's coming, the wall's coming, the wall's coming. Okay. I have my Michael Phelps moment. What did I learn? Besides that it's okay to be a dad that's scared. I've learned that seemingly overwhelming fears can be managed by taking small steps. You don't have to overcome your fear overnight. Just dunk your head. Listen to one piece of customer feedback. Fix one point of friction. Make one person on the team feel more included.
Do it again, do it again, do it again. It gets easier and easier. Magic happens when you face your fears and combine different but complementary things. Facing my fear of eye contact brought Kirsten and me together, resulting in Sohan. Facing my fear of being different resulted in me and Brian joining together to create HubSpot. Facing my fear of public speaking has given me the honor and the thrill to intersect with all of you folks today. I am immensely grateful. Thank you. Enjoy the rest of INBOUND. Go out there, face your fears, and network.
Yeah.
Up next, Christopher O'Donnell. That Christopher O'Donnell, after a break. Thank you so much.
Good afternoon. HubSpot's Product Spotlight is up next. We will begin promptly at 4:30 P.M. Thank you.
As a business, you know what it means to grow bigger. More revenue, more office space, and more employees. What does it mean to grow better? Growing better means doing what's right for your customers. Sure, it can be the more challenging path, but it's the only one that can lead you to build the company you've always wanted. To create a place where employees are more passionate about the purpose than the perks, and where customers stick around not just because of what you sell, but how you sell it. Today, I'm sitting down with Christina Fagan, the founder of a high-end knitwear company with a name so edgy we can't even say it on camera, to talk to her about her approach to growing better. Let's get to it.
I'm Christina Fagan. I'm the founder of That I Knit. Oh, I can't say that, right?
Right.
I'm Christina Fagan. I'm the founder of STIK. We're based here in Boston, we sell high-end hand-knit accessories that are all made in Lima, Peru.
How did you get started?
I started when I was 10. My mom taught me how to knit while we were summering up in Cape Breton, Nova Scotia, where there's not a lot to do except look at each other and knit. I loved knitting as a hobby all the way through middle school, high school, and college. In college, my sisters were making fun of me for knitting a lot, and as one might.
Rude.
Shocking. Yeah, so rude. They told me that I should start this website called, That I Knit.
Yeah.
I did, obviously, and it was a really unpopular blog that no one read, which was great, but it was a fun way for me to take photos of things that I had knit and share them with my friends.
Yeah.
Whoever that may be. When I graduated from college and started the real world, it was always my fun fact. "Hi, I'm Christina, I'm 22, and I have this website called That I Knit." That always got a good laugh from people, and I love making people laugh. I started selling things that I had knit for, to my friends and family, basically. Actually decided to apply for this market in Boston called SoWa, in the South End. Have you ever been to that?
Yeah.
Yeah.
Oh, yes.
Yeah.
Oh, yes.
Very nervously applied for that market, but I had a full-time job. Got in for the last two weekends in October, which I figured would be cold enough to sell hand-knit accessories.
Yeah.
In August, that probably wasn't going to work so well.
Yes.
Applied for that, got in, and got a sign from Vistaprint and a pop tent, and my mom and I knit all summer long.
Wow.
Worked up an inventory, and we went to this market, and it went really well. That's where it sort of went from being just me and my bad blog and a fledgling Instagram, and turned into actually selling things we had actually knit. From there, it was just really hard to keep up with demand.
Yeah.
We had not crazy amount of demand, but for me, it was a lot. We had stores wanting to carry our line and people wanting to buy for holiday, and it just wasn't possible for me to knit. You're a knitter, you know.
Right. Yeah.
It takes a long time.
Yeah. Oh, yeah. I couldn't imagine doing more than a scarf in a year.
Yeah.
Yeah
lose your social life and your mobility of your hands.
Yeah.
We started thinking about how we could actually sort of scale this thing in a small way. I Instagrammed one night that I was growing my team.
You could join me and knit products for me and my mom. I figured it would be mostly, either no one would apply. That's really what I figured, is no one would want to do it. It might be 65-year-old women who love to knit and just wanted to get involved with something, but it turned out to be all women in their 20s and 30s.
who love to knit and watch Netflix, knit on their way to work, knit with friends.
Yeah
airplane or whatever. We actually had a team of women in Boston for our first season who would take the yarn from my apartment.
Yeah
while they watched Netflix, and knit like five hats at a time.
That's amazing.
test.
Yeah.
That's when I quit my job, because it was such a promising endeavor.
Big move.
It was a big move. I cried. It was just a little overwhelming, and my parents thought I was insane, but I moved home and figured I'd give it a year. We did a Kickstarter, which was great.
as a way to fund our first season, and we knit all summer long, worked up a big inventory, and yeah.
our first season.
Yeah. Why were you so surprised that the first people who reached out to you were younger women?
I don't know. I just sort of figured that it would be an older set, and it was like the DIY market was back in-
2014, not to say that that was early on the DIY game.
Yeah
I don't know, I figured it would be an older group of people.
Yeah.
It was truly all women in their 20s and 30s.
Yeah.
One guy.
There you go.
He was actually the best. Joe. I don't know where he is now, but he was really good.
Well, something that I've noticed, being new to knitting, is that there is a huge online community of makers.
Yes.
They have surprised me as well, that they're much younger than I would've expected.
Right.
I think that's what's amazing about companies like yours, where it's things that are unexpected.
Yeah
with an unexpected audience, but an audience that fuels a lot of your promotion as well, through social.
Yeah
shares a lot of the different things they wear. Could you go into some of the different activations you've done on social?
Yeah. Well, we always do a Stick in the Wild feature on Instagram. We feature people who have worn our hats in the wild. Posting selfies or photos with their families.
Yeah.
We also even bring that into real life. I chase people down the street with a card that says Stick in the Wild on it. They're like, "Who are you?" We have that on Instagram. We also have done photo contests. We've done Bikinis and Beanies.
Yeah.
A couple of years ago, there was a huge snowstorm in Boston, and I was sitting at home and was like, "I don't know. I'll see if I can get some photos out of this." I put on there that if you posted a photo in your bathing suit and your hat out in the snow and got outside and did something creative, the best photo would win a hat. We ended up getting around 50 people to go out.
Wow
in the snow, jump around, got their kids involved, got their husbands involved. One guy even wore a bikini for his wife because she was working. She's a nurse. He got out there, which is really sweet. That was really fun and a really long day for me on Instagram.
That's amazing.
like a crazy person, but yeah.
That's like a tall ask, too.
Yeah.
Study a Boston snowstorm.
I know. I really didn't think-
Yeah
anyone would do it.
That's amazing.
yeah, within a couple of minutes it was.
Yeah.
Yeah.
You guys also knit hats for the Make Way for Ducklings.
Yes.
I know I've seen that on the local news.
Yeah. It's cute.
Yeah. It's so cute. Are there other kind of fun, quirky things like that you just come up with a great idea and go?
We always do the ducklings, so it's usually just me knitting little hats and then running out at 5:00 A.M. and putting them on so no one will see me. People usually end up finding out that it was me who did it. Last year, we also made a giant hat for the Arthur Fiedler bust. We worked with the Esplanade Association, and it was hard because I only had two weeks to make it.
Oh, my gosh.
the world premiere.
It's like a very big sculpture.
It's very large.
It is a big hat.
Yeah. It was huge. I couldn't find the right yarn to knit something of that scale.
Oh, wow.
You know how thin yarn is.
Yeah.
I wanted to arm knit it, and I wanted to arm knit it in coils and then stitch it together kind of like a sculpture. I couldn't find the yarn anywhere, so I went to Michaels and found this blue fleece.
Oh, wow.
into long strips and then tied them together and then arm knit it.
Man.
It took a long time.
Getting stuff done, though.
Yeah.
Stuff done, gee.
Not other stuff.
Yeah.
it was like two weeks of this, and really hurting your back cutting fleece along the ground.
Oh, my gosh.
It ended up looking really good, and it was fun.
Yeah. How do you come up with different fun, quirky activations? Your brand does feel, well, I consider it a little more high-end. It's still very quirky and fun.
and personable. How do you come up with some of those things?
I don't know, just being weird. Yeah, just going for it. I think through starting this business and being through all the ups and downs in the past four or so years, failure is just a part of the game. Just going for it and trying. Going into putting that hat on the Arthur Fiedler bust, was not sure it was going to fit. All these people were watching us, putting it up, holding this big ugly blue fleece knit hat and just being like, "Well, whatever. If it doesn't work, it doesn't work.
Give it a shot. Yeah.
Did you have that mentality of just give it a shot, see if it works? Is that a piece of what helped you grow from being you and your mom now to having such a large group of makers and a team and such a great business?
Yeah. When I started, I told myself, and I told my parents, that I would give myself a year.
Right.
One year, I'll know by then if this is working. Looking back, like really? Like was it working in a year? I don't know. It felt like it was going in the right direction.
Yeah.
Yeah, I guess just not being afraid to fail, because I'd rather give it a shot than regret it. I think that that mentality has, as the team grows, we have a new saying here called No Bad Ideas.
That's a big part of our culture, where you just throw it out there.
Yeah.
Sometimes it's a bad idea. It's okay. Yeah.
As the business grew, and you started to realize that there's a real audience for this, you knew what you were doing, it seems like a mission really started to come together, and at some point, you started to employ women in Peru.
Yeah.
Would you mind talking about that?
Yeah. The team in Boston was great and really cute and a fun way to try scaling, but it really wasn't scalable. I started Googling some things and found this great group of women in Lima, Peru. It's where we were getting all of our merino wool, so it made sense from a carbon footprint to have everything made down there anyway, and Peru has a very long-standing tradition with knitting. On top of that, I always felt really strongly about using this company and this platform as a way to do good. It made more sense to me. Plenty of people gave me the advice, "Why don't you go have this made by a machine in China?" Like, that's totally possible, but I'd rather lose a couple of dollars on our margin employing people who need the income.
It felt really right working with this team. Going down to visit them, it's even more cemented in my mind how important it is.
Yeah.
These women can stay close to their families, knit from home, take care of their kids, and bring in a real income, where they can even send their kids to college on the money that they're making from knitting. Many of them are making more money than their husbands. It's really cool. They're entrepreneurs. That's a big piece of our business now is.
Yeah
no matter what product we're making, we're making it the right way, and it's sustainable and good for the world.
Something that my team at HubSpot has encountered when we've done paid promotion on Facebook or Instagram is that Facebook won't actually allow you to promote content that has cursing or swears in it.
Yeah.
How has that impacted your business, if at all?
It has been challenging. We've definitely gotten creative in the way that we phrase the name of our business. Going more with HEART, which is an acronym for our company. That's working pretty well. To be honest, it's not really a main focus for us. It's not the way we've grown our business yet. While it is definitely a great resource, the way we've grown our following and grown our customer base has been through more organic social media, whether it's collaborating with another business, using influencer marketing, getting our product into the hands of people who have huge followings and people really listen to them, doing pop-ups and getting in front of people in a physical location, or doing grassroots, guerrilla-style marketing, like putting hats on a duckling or on the Arthur Fiedler bust.
We find that, or at least with our followers and the way that we've grown our brand, that user-generated content and seeing real people wearing our hats in the real world is the most effective for engagement for us. We have so many people posting photos of themselves in their hats, whether they're on a ski vacation or walking their dog or a selfie on their way to work in their Instagram story, whatever it is. That's where we get a lot of our content and repost it. Yeah.
Well, some of those actual people are quite well-known.
We've had celebrities like Sarah Jessica Parker, Katie Couric, Kristin Cavallari, Hilaria Baldwin, Mikaela Shiffrin, Hannah Teter. Some pretty influential, pretty awesome women wearing our hats and loving them and loving our story, and when they share that on social media, it is insane.
For other small businesses who would be trying to grow their business, what kind of tips would you give them?
Using tools available to you that can help you streamline processes and systems. Obviously, we love using HubSpot for our email marketing and our CRM. We really work in Asana, especially with our team in Peru, to do project management. Of course, Canva, I think is probably our favorite tool, where we can really easily create marketing materials without a degree in Photoshop. For social media, I would say be patient. I think we've had a lot of conversations here about this topic and obviously not buying followers or buying likes. That's a really short-term band-aid that doesn't work out in the long run. If you're promoting your things to bots, no one's going to buy anything. The user-generated content we've been able to gather from our following has been really big in not only content creation, but also word-of-mouth marketing, even though it's through Instagram.
Yeah.
People posting about our company and our hats, our wraps, whatever it is, that's what I attribute most of our growth to.
What do you wish you had known when you got started?
Don't do it. I mean, I love doing it, but it's been cool to see how it's changed other people's lives, too. I think that everyone who works here is an entrepreneur because everyone, whatever department they're in, they're leading the way and figuring out all the problems and solutions as they go, the same way an entrepreneur would. I think inspiring these women in Peru and giving them the tools to create their own businesses is so important.
From the beginning, we've always wanted to be approachable. We answer the phone, answer every email, and we try and respond as quick as possible. They're coming to us because they want to talk to the people who made the bike. That's where we gain trust. They just know that Santa Cruz Bicycles has their back more than most other companies would.
The quality of the bikes, the warranty, and just the reputation of the brand. They just always take care of their customers.
The customer experience is everything.
Customers dictate the future of the company.
I deal with a lot of our Santa Cruz warranty situations. Work with guys like Willie and Steve pretty closely.
There are a few guys who are pretty legendary here, and they were definitely at capacity, and we had to figure out how can we make it so that the stuff they do that's super personal can be done without it seeming artificial. It's important for us to figure out how do we make it so we can answer more people in the same amount of time. To do that, you've got to have a shared platform where everybody can tap in. The way HubSpot approaches automation, it really is about enabling the human touch and not removing it.
We explored a few other options, HubSpot Service Hub easily stood out as the best option. The reporting feature was extremely easy to work with and had countless options compared to the other services that we were using.
The most complaints you hear about companies is they don't get back to you. During busy season, it's insane.
Dealing with warranties was definitely a little more of a hassle a couple years ago.
Now with HubSpot Service Hub, we can have a team of people viewing the exact same page, and if there is a customer that needs help that day, we know that they're going to get taken care of.
Efficiency definitely went up because we know that about it. I can give an example. Yesterday, someone came in with a frame with a possible failure, and we had an answer yesterday afternoon using the form. That would've probably been a week at least before.
Our time to respond has definitely improved. When you scale up, it's harder to get that feedback to the right places, HubSpot's making that easier for us.
Before HubSpot, it was email from around the world, and emails get lost.
Prior to having HubSpot Service Hub, there was real no way to log warranty claims or inquiries from all the different customers that we had. Now that we have HubSpot and HubSpot Service Hub, we can actually look at the history of those individuals, and we can take care of them once and not have to keep going back to them.
With HubSpot now, you can make sure we're not have multiple people chasing the same customers. That's huge. Having everything centralized helps kind of make that a little more cohesive.
Everything we do is to grow smarter. When we look at what tools we're using and how we use HubSpot, what we need is something that's flexible and grow with us. We're bringing things together, like this whole 360 view.
Word of mouth is huge here at Santa Cruz Bicycles. Our reputation for customer service and warranty, people talk about it around the world. That's what I'm most proud of.
We make great bikes. We have fun doing it, and that's not just a slogan. That's actually what we do every day.
It's just cool knowing that there's a company that supports your kind of community. I'm friends with a good amount of them. They're all shredders.
It's not a marketing ploy. We're not doing it just to say, "Look at what we're doing." No, that's bullshit. We'll just do it because that's what we truly believe in.
We call them our customers, but they all have a story. Like the one who traded her corner office for one in her basement, his back shed, her grandmother's living room. You sell to the expert of light and color, and the one with an eye for detail, the engineer, a marketer, an SVP. You sell to the stay-at-home dad who never clocks out, and the person whose dream job starts after 5:00 P.M. Those who can break anything down, and those who build things up. The person who emptied his savings account, borrowed as much as the bank would allow, the one who keeps to herself, and the one who needs to be seen. The PhD, and the person working nights to earn his GED. The beginner, the experienced, and the leader. Your customers are diverse. Is your sales team?
Email and CRM go together like chocolate and peanut butter.
Like summer and country music. Like avocado and toast.
They're like baseball games and hot dogs.
Like good weather and a long weekend.
Like a long run and jumping into a cool lake.
They're like podcasts and commutes.
Like tennis balls and puppies.
They're like Mac and cheese.
They're like campfires and guitars.
They're like coffee shops and.
Like online shopping and free shipping.
Like a road trip and a great playlist.
Like a cup of tea and a great book.
Like rooftops and summer nights.
They're like sunshine and a cool breeze.
Like pigtails and beacons.
Like meeting invites and lunch included.
Like birthday parties and pinatas. Like laptops and stickers.
Email and CRM go together like up and to the right.
Now email is available for free in HubSpot.
Free in HubSpot.
Free in HubSpot.
Free in HubSpot. It's free in HubSpot. Woo.
Hi, my name is Flora.
My name is Nir.
I'm Lindsay.
I'm Pat.
Now that we're acquainted, please don't fall out of your chair.
Let's do it.
Which social media platform was founded first, Friendster or Myspace?
I don't even know what Friendster is. Is it the precursor to Facebook? It's the pre-precursor. Oh. Like granddaddy. I used Myspace. I went with that. What did you put? I put Friendster. Oh, are you right? I don't know. Yeah.
This company could be called the Uber for grocery delivery.
I know this. I know this. I'm pretty sure I know. I don't actually know. Instacart? I also put Instacart. Hey, I think you're right.
Feel like I'm writing a lot more than you did.
Yeah, you're writing an essay over there. I don't know what you're doing. Well, outside the city in the suburbs, we use Stop & Shop Peapod.
In which city did food ordering and delivery platform Grubhub get its start?
The true hub of America, San Francisco. What about Toronto?
Hot dog delivery, right? That was, I think, how it started.
It's been called The Everything Store.
It's actually Target.
Maybe it's Costco. Amazon.
I said Amazon too. Couple ways I could've gone on that.
This company got its name from an experience staying at someone else's house on an air mattress.
It's got to be Netflix. Yeah, duh. Mattresful of air. Airbnb? Airbnb. Airbnb just bought a HotelTonight . How much did they buy it for? $1.8 billion. Why didn't they buy it for $100 a night?
This feels like a layup.
You can use the services offered by the company Seamless to deliver what product?
Is that actually what you put? Books? Maybe they're e-books because they don't have stains.
I'm going to guess, I'm going to say some sort of content delivery. You didn't give me air quotes for the capitalization. There is no way. Obviously, when I say content delivery, I'm talking about cheeseburgers.
All the companies we've been talking about have one thing in common. What is it?
I got it. Why are you taking so long? Yeah.
I could spell through the slow-mo like it's reality TV.
What's a platform anyway? Great question.
I'll tell you exactly what a platform is. Better yet, I'll show you. A platform company is a business that creates value by connecting one or more groups of users deemed producers with one or more other groups of users deemed consumers. A good example here would be Grubhub. It serves as a marketplace where hungry people, consumers, can get connected with good restaurants, producers, and even have it delivered by a third party of drivers. Time for the true false plating round, where you will decide whether this company is a platform or not.
True. Oh, yeah, I guess that can be more efficient. I think I'm going to wait until you put your answer down. I'll put it down. What is that? The water. Water. Evian, you'd have to be naive to think it's a platform.
Efficiency queen right here.
True. It's a tasty platform, it's not a platform.
Not a platform.
in the true sense.
Answer carefully.
Yep, fooled you. Once a platform company provides value to their customer, seems like all these companies just continue to provide more and more value to help you grow better.
This is a piece of customer feedback. It's three sentences, 39 words, 156 characters long. Some pieces of feedback are longer and some are shorter. Some might be urgent, and others can probably wait. Anyone who has ever written feedback wonders, does anyone actually read it? On its own, a piece of feedback is easy to ignore, but the customer who wrote it spent weeks, months, and sometimes even years thinking about ways to improve your company and products. At HubSpot, we think that deserves our attention. That's why we read all of our feedback. It starts when your feedback reaches our team, and we mean our entire team. Product experts, customer success managers, marketers, and more can discuss the issue. We compare this single piece of feedback with hundreds of other tweets, emails, chats, and calls, and the problem starts to become clear.
We all come together to scope out the project, build the feature, test it with users, and refine based on results. Finally, the feature is released to you. That single piece of feedback helped us create a better product and customer experience than we ever imagined. To anyone who has ever tweeted at us after a long day troubleshooting, thank you. To those of you that emailed your concerns after combing through countless articles, thank you. To everyone who has ever called, chatted, or submitted a survey, thank you, thank you, and thank you. We see you. We hear you. We value every character, word, or sentence that you type. You help us grow better.
Please welcome HubSpot's SVP of Product, Christopher O'Donnell.
Welcome. Welcome. We see you. We hear you. Thank you. Thank you for every character, every word, every sentence, also for every rant, your praise, and the moments of delight that we build together. At HubSpot, our mission is to help you grow better. To do that, we need to know from you what that's going to take. We spend our time listening to customers and learning from companies that do the same. We just heard Brian mention some products, really cool products, that have totally changed his perspective. We saw how his perspective has changed. Some of these I relate to because I'm a daily user of them, like, Lyft and Chewy. I have a little, black lab. She's 10 years old. DoorDash. Some of these companies I relate to just because they're so freaking cool, like Millennial Pink level cool. Emily Sorry.
Brian mentioned Emily Weiss and Glossier. I want to dig a little bit deeper there. I could say that I'm not a user of Glossier's products, but I think my dewy glow gives it away. What I admire about them is how they really listen to customers. They're really super driven by customers. Check this out. This is the product that Glossier's built. It's called the Milky Jelly Cleanser. What a name. Wow, what a product. It's award-winning and all that, but the best proof is in what customers are saying about them and how fast customers are reordering. "The best skincare product on the planet." "Magic." "Must-have." "Perfect." Wow. Over 1,300 five-star reviews. See, by developing products centered on their customers, Glossier grew to over $100 million in revenue last year. How on earth did these folks pull this off?
Well, how do you develop a face wash? I've never done it. I can imagine a product manager putting on his or her standard issue black T-shirt and doing the incremental stuff. Maybe make a face wash that's a little bit scrubbier or a little bit bubblier. Maybe make it a little more expensive, get a better margin. That's not how you make a great face wash. A people-powered ecosystem. That's how they did it. You see, in 2015, Glossier's product team set out to build a face wash completely driven by customer feedback. They used their blogs, their social media, email. They engaged thousands of readers to come and give them feedback. What they heard drew them to a path that they likely never would have taken without that kind of input. We saw how well it worked out for Glossier.
Shouldn't HubSpot do the same? Yes. We decided not to get up here this year and announce a whole new hub. We took a year to obsess only on the feedback and let that guide our roadmap. You see, Brian and Dharmesh have created this customer-obsessed culture, and we live in it every day in a bunch of different places. Let me give you a peek what it's like to be on our team. laptop. This is where I hang out every day, along with about 1,000 other HubSpotters. It's a Slack channel, and in this Slack channel, we see every single survey response, every single piece of customer feedback that comes through. Nothing warms my heart like seeing a support rep and a product manager, a customer service manager, maybe even a founder chiming in on a piece of feedback.
It's this magical aligning experience when we're all reading and discussing real feedback in real time. NPS is just the beginning. We have to have one place where the whole community can vent and brainstorm and build off each other's ideas, and that for us is the HubSpot Ideas Forum. There are some terrific ideas here. We watch this really closely. I promise that we'll get into some serious stuff, first, let's have a little bit of fun. There was a customer who remarked that we had done everything that they had asked us to do, they threw this up on the Ideas Forum just to see what we would do. In case you can't read that, it says, "I want a pony." It got 220 up votes, all these people piling on in the comments.
We said, "Let's do it." Then the post office turned us away, so we figured a real pony was not going to make it all the way to this customer in New York. We did what any good product team would do, and we sent them this little guy, a stuffed pony named Douglas, to Manhattan. I'm told Douglas enjoys everything bagels with a nice schmear of cream cheese and sharp, spicy yellow mustard on his hot dogs. Ponies aside, there are a ton of ideas on this forum, and we have the vast majority of them either delivered or currently under construction. We're going to see a bunch today. As you can see, it's a super active community.
I'll be honest, what we're not good at is closing the loop and reaching out and telling each one of you when we've done the thing that you cared about, that you voted for. We learned that's a full-time job for someone. We've made it someone's full-time job. Look for us to do better there, and thank you for the feedback on that. Now I want to prove it to you. Across tens of thousands of conversations with you this year, there were three central themes to your feedback, three ways that you challenged us to grow and grow better. The first was pretty simple. "Dear HubSpot, I just need this to be easier." We saw from Brian's talk and the products he discussed that ease of use is no longer a nice to have. It's a must-have, especially for your overworked and scaling growing businesses.
We didn't have to look very far for this first make it easier for me feature. It was the number one idea in our Ideas Forum. In fact, this problem is so old across our entire industry, I swear this is true, researchers found this painted on a cave wall in what is modern day France. Totally true. Since the dawn of man managing, I should say, customer relationships, that data has been messy, and the single biggest source of that messiness has been duplicate contact data. Tens of thousands of years later, you all still have duplicate contact in your CRM. Dupe data makes marketing tracking less effective and less accurate. It creates more friction for your sales reps in the selling process. The process of addressing this, the process of finding, merging, deleting duplicate contacts has been enormously difficult. Why? It's been manual. Not anymore.
We're thrilled to launch a new contact deduplication tool powered by artificial intelligence. It makes it a breeze to keep your whole database clean. No other CRM in the market has such a powerful feature built into it. We stand alone. Clean data gives you your freedom back, and nothing says freedom like the open road. Let's take a look at how Harley-Davidson is using Contact Dedupe.
We have a lot of people that'll come in, never ridden before. Once they get on a motorcycle, they're really hooked, and then they get out on the road and they kind of understand when we talk about personal freedom and things like that. Our relationships with our customers are really a key ingredient to our business. When guests enter our store, you can see their eyes light up when they walk in the showroom and see all of the motorcycles, and then they understand that this is an experience that's a lot different than other stores that they walk into. Our guests are very unique. What we try to do is tailor a unique experience for each one of those guests. HubSpot really helps us with our customer experience. It helps us speak to our guests and understand what they're looking for in their journey.
People are so passionate about it that it doesn't take a lot for me to really put in to get them excited. I just feed on that excitement and I push it right back, and we share that with each other. My job is to help get them excited and to bring them in. I import leads daily. Harley doesn't always give us an email address. It'll create new contacts very, very frequently. We do have a lot of duplicates in the system. We have over 34,000 contacts in our system. We do have a lot of data that we need to sift through to really organize.
We have duplicates in the system, sometimes with a different email, is that the same customer will get the same email two, three times, depending on how often they're in the system, or product specialist A is going to reach out, product specialist B also reach out because they don't know that A is reaching out. It's a bad experience, HubSpot has really helped us
Take that out and just really customize our communication to better suit our customers. The way the de-duplicating feature works, basically people that have either the same first name, last name, or same address or phone number, it finds them so that I can decide, is this the same person or not? A lot of times we'll have people by a nickname like Rob, but maybe it's also Robert, so it really helps minimize that. I was blown away. I was like, "This is amazing. Where was this?" It was awesome. I love it. There's a lot of ways HubSpot has really helped with efficiency, and it helps us customize and really make the customer feel special. I really wanted to introduce HubSpot to Oakland Harley-Davidson because it helps us bring our customer experience to the forefront.
It lets our sales and marketing teams work together to be able to provide the experience that customers want. Harley-Davidson is really about riding motorcycles or using motorcycles to exhibit who you are and your style and where you want to go and what you want to do in life. It's using a motorcycle to get somewhere and express who you are.
Thank you, Carolyn, and the whole team at Harley-Davidson of Oakland. I'm so psyched to see you having this level of success with HubSpot. You guys absolutely rock. De-duplication wasn't the only thing we did to make HubSpot easier, and not even the only thing around contacts. Here's a big idea that many of you mentioned in feedback and that we really wanted for ourselves. We use HubSpot CRM exclusively inside HubSpot. Speed. Speed makes a product easier to use. This is very true. Our platform needs to feel lightning fast. This year we spent an enormous amount of energy speeding up wide swaths of the platform, and this is my favorite example. This is one of the toughest problems we had. You see, this is called the contact detail page.
This layout gets loaded millions of times a day. It's a mission critical thing for sales reps and for marketers and service folks. There's such an enormous amount of data on this page, there's a ton of heavy lifting that has to happen. It's a very, very hard page to load quickly. Let's take a look at how it loaded this time last year when we were in this room together. Okay. Now let's race without motorcycles. On the left is the new version, and on the right is the old version. Let's see how they stack up. Wow. Fast feels easy. What do you guys think of that? We also redesigned this critical page to have a lot more information in it while still having a very approachable, clean UI. That was something you guys pushed us for, and we delivered on that.
We've gotten great feedback on that. That's not all. Let's see what else you were asking us for. contact deduplication was the number one most requested feature. What we're going to talk about next is the number two most requested feature. Workflows are hard to manage without foldering. Steven Franklin here was hardly alone. 450 customers asked for this. There were 10 pages of comments, and frankly, our marketing team really needed this as well. Done.
Whoo!
All right. Folders and workflows. Now you can keep your HubSpot account organized, and you can assign folders by team, by geography, whatever fits your business best. Sometimes feedback is easy to understand, but it takes a while to get to. We were really glad to get this one done for all of you who voted for it. People wanted to link branches of workflows together. In fact, lots of you needed this critical feature. It saves time, and it also keeps your workflow design clean and elegant. We heard you. Today, I'm happy to introduce merging workflow branches. Here's an example. Let's say you're building an onboarding experience with email. You may want each person to have a very tailored experience up until the end, where you want everybody to get the same email. Now, that's very easy.
You can do it in HubSpot with just a click. Merging branches is available today in companies, tickets, deals, quotes, and it's coming very soon to contacts, which I know you're all excited about. All right. Customers should be able to just click a link and buy. How can we make the last mile of the sales process as frictionless as possible? You've all heard of e-commerce. We think the future is B-Commerce, digital B2B commerce. I'm going to admit, the next slide is the most self-serving of the entire presentation. By self-serving, I mean it's literally self-serving. It's your customers serving themselves. These guys are excited. Who's excited for this? This is as cool as it seems, I'll tell you. I know some of you are actually already using this.
I saw examples this morning of agency partners selling courses and all sorts of stuff off their website, and that's easy to do. You can put a link on your website. You can sell services, courses, whatever you want. You can put a CTA in your email signature. You can send links through chat. Very, very cool. Rule number one of sales, if a customer is ready to buy, let them. Dear customer, we heard you. We've made it easier for you to do the things that you need to do in HubSpot. Here's a snapshot of some of the other related improvements we didn't get to today. Let me ask, for all of you who needed HubSpot to be easier, who's excited about all this new stuff?
The second theme of your feedback was, "Dear HubSpot, I need more." With apologies to Christopher Walken and Will Ferrell, you are not asking for more cowbell. You're asking HubSpot for more enterprise-level functionality and more integrations, just to be sure that you'll never outgrow us. Makes a lot of sense. Let's start by meeting a unicorn company here in Boston who continues to grow better through our vibrant developer ecosystem.
We are a cybersecurity company. We help large enterprise businesses keep their employees and their data safe from breaches and hackers. One of the first things that we did as a team was step back and take a look at all the tools that we had in place and make sure that we were using things that were not only going to help us grow, but also would grow with us. When we looked at the platform that we had in place, it did not represent a central hub where we could plug lots of things in and expand our go to market.
It was a mess. We were managing multiple tools, multiple logins, and reporting was a nightmare, and we made the decision to consolidate and go all on one platform with HubSpot.
We have over a dozen apps integrated with HubSpot that are helping us grow and scale globally. That's why we love the HubSpot app marketplace. It's a central hub, an easy place to discover new tools and for our team to connect with just in one.
It's almost like downloading an app on your phone. It's a click to configure. You're not relying on IT. I'm confident that I can set up a new integration through a couple of clicks.
In one specific instance, we identified a marketer, a goal, and a budget on Monday, and we had results showing up on Friday.
I really see it as my job to enable the team members to be able to execute on their jobs on a day-to-day basis in the most seamless and efficient way possible. Some of the integrations that help make that possible, things like Google Search Console, SurveyMonkey, Hotjar, Perfect Audience, and Eventbrite.
Eventbrite allows us to measure the effectiveness of those events, but also share the information back with the sales team in a quick and timely fashion. GoToWebinar helps us effectively track who's attending what and share that back with the various teams that need to know. Using HubSpot as our one central hub connected to these different integrations allows us to track how our events, how our webinars, and how our other campaigns impact the bottom line.
HubSpot has enabled Cybereason to grow. We've run 250 road shows across the United States and Europe, and that's all been executed directly through HubSpot. HubSpot certainly makes life easier from a marketer's perspective. More importantly, HubSpot's making a better experience for our customers.
It's helping us improve the user experience on our website. It's helping us improve how people consume our content and how we interact with people at events.
If we didn't have HubSpot, Cybereason wouldn't be able to move as fast as it does.
Life without HubSpot would be chaotic. There's no other way to put it. Deciding to go with HubSpot was one of the best decisions that we've made.
HubSpot is a platform and a teammate.
It's really great to be able to see a team work so efficiently. The tool benefits me, it benefits the marketers, and it benefits our customers.
All right. Let's hear it for Cybereason. I'll tell you, it's amazing to see the growth that they've had, and it's been a huge privilege for us to be along for some small part of the journey. Let's take a deeper look at the app marketplace they're talking about. It's a totally redesigned and rewritten app marketplace with hundreds more apps and extensions than last year. It's growing, frankly, faster than we expected. This all-new marketplace makes it easy to find a curated set of over 300 apps and extensions. You can plug them into your HubSpot account with just one click, and that gives you the power to connect all the tools that you use easily into one place. Cybereason's Director of Customer Success has gotten into the fun too.
Her name is Jean. She told us, "Our NPS score went up significantly this year because of our new engagement model, all of which would not have been possible without HubSpot." Jean's department was able to turbocharge the flywheel by bringing all of their applications into one place. Very, very cool. Great work, Jean. Let's see some more feedback. Paul Taylor at Sourceability told us they needed to easily assign permissions across groups. Makes sense. You need the right people to have the right access to the right tools at the right time. Whether that be the content for a team's region or a sales pipeline for a given sales team, you need to be able to manage this easily and manage it over time at scale. Let's do it.
Today, we're happy to introduce new permission sets across all HubSpot Enterprise products to help your growing company stay organized. It's a centralized tool for admins to manage permissions for groups of users, so you can spend less time organizing your team, less time administrating, and more time on the fun stuff, actually helping customers. CJ at Complete Payroll Solutions asked, "How can customers share on our behalf?" What a cool idea. Take your customers and transform them into your best salespeople. This is what the flywheel is all about. How could we do some work. Set it up and have it work magically forever. I love this next one because it shows the power that our newer products have, because they were built on the unified HubSpot platform. By using this massive existing powers of workflows, you can automate to leverage your own customer NPS feedback.
You can create triggers for tasks and deals, quotes, reviews, emails, and you can do it all from within the workflow engine that you already know and use and love. See, building a process around your feedback is the single key to growing better if you ask me. With advocacy automation, it makes that an easy 10 out of 10. I see no reason why we shouldn't be able to test multiple variations in A/B testing. Now, we all know marketers absolutely love experimentation, and experimentation is about trying big, big, crazy things. Why should we limit A/B testing to just A versus B? This year, we set out to make experimentation a whole new level of powerful. This uses the same artificial intelligence that we use for contact deduplication. We've made adaptive page testing very, very easy, and I'm telling you this is really cool.
You can now test up to five variations. My favorite part is that as you go about the rest of your day, HubSpot will sniff out the winning variation and start to incrementally point more traffic in that direction. It's all machine learning and AI behind the scenes. Super cool. Kirsten from CIAT wrote in, "Ultimately, we want to help where students are chatting with us." Customer feedback comes through a variety of channels. It comes through social media. It comes through email, forums, all over the place. That's true for us. We know it's true for you. A big place customers want to be engaging with you today is Facebook Messenger. I absolutely love this release. Over a billion people use Facebook Messenger.
With HubSpot, you can create these seamless Messenger experiences across your Facebook business pages and then manage them within HubSpot in a unified inbox. Super cool. That lets you have more personalized conversations, build stronger relationships by meeting your customers where they are in the way that they want from you. Look, here's the thing. Sometimes feedback can be tough to translate from the words we're hearing into actionable steps in the product. It can be hard to squint and kind of read the tea leaves. For example, with reporting, we've been getting a lot of customer feedback saying vague things like, "I need to be able to drill down into reports and add drill downs into reports." We've been scratching our head. We don't know what to do with that. Over time, we started to piece together a trend.
These are actual support issues filed for our reporting tool. We finally got it. You want to be able to drill down into reports. We've added drill downs into all reports at HubSpot. Who's excited about that? Before, admittedly, you had to navigate through the product to find exactly what you were looking for, and now any report you see, you can click through and get the information you need to make better decisions with just that one click. That's not all we have for reporting. What I'm going to share next is the number one most requested feature for marketers. First, I want to try something here. I'm going to ask you all a question. I want to take your temperature here. Who feels like their marketing department doesn't get enough credit? It's the truth.
Despite everything you do, despite all the leads you generate, all the demand, all the awareness, sometimes marketers can feel invisible. What can we do to respond to this? What you've asked us for is you've asked us for proof, the ROI of everything that you do. Just look at this. The most intuitive, the most exhaustive, the most powerful multi-touch attribution reporting available on the market. Who's excited for this? This is it. This is the key to showing how all the pieces fit together, and in the immortal words of the great philosopher, Jonathan Van Ness, "You are strong. You are a Kelly Clarkson song. You've got this." He's kind of my hero, and he's totally right. You've got this. You've got, with our new multi-touch attribution reporting, the power of HubSpot to create amazing reports that give you the proof you need.
You can now see all the way, for example, from a website first touch all the way through to closed deal. It will also show you how the individual assets you're creating lead directly to revenue across email, blog, landing pages, you name it, across entire campaigns. It's time to show what's working and get some credit for your hard work. We heard you. We're making sure our tools have what you need as your business grows, from the new app marketplace to advocacy and automation, multiple lead scores. Didn't even get to that today. A lot of other stuff, attribution reporting. For everyone who needed HubSpot to do more, who's excited for everything we just saw? Let's talk about founders. Let's talk about founders for a second.
A lot of people think of startup founders as jet setters in cashmere sweatsuits, driving brand-new Teslas, in their penthouses, sipping imported matcha tea, looking out across the desert thinking big, deep thoughts. The reality of being a founder is sleeping under your desk. It's making ramen in a coffee pot. It's booking a room at the Marriott when your office literally catches fire. For founders, this next section is just for you. Thomas Barry from Picmonic said it best, "As a startup, we're always looking for new tools that will help us grow and to make an impact on a smaller budget." We believe that growth, especially when you're starting out, shouldn't break the bank. When we made our CRM free five years ago, we thought it was the right thing to do. You see, to us, growing better means building businesses in a sustainable way.
We wanted to continue to invest here. Investing in building tools that can help small businesses, early-stage startups thrive and grow, especially in those extra lean early times. Let's meet one. Let's meet Honeycomb, an early-stage startup from right here in Boston.
With Honeycomb, any brand or community or organization can launch their own custom social network. I think what's beautiful about how we approach social networks is that it's about real human things. It's about shared values, a shared experience, a shared belief as opposed to just casual friends and followers.
We're definitely a startup. We've grown a lot. We've worked with Lady Gaga. She's actually one of our first clients. HubSpot has helped us a lot while working on marketing and sales because we've been able to utilize and take advantage of your free product as well as the paid platform.
Our relationship with HubSpot started with a free CRM and being able to track the leads that we were nurturing through the sales process.
HubSpot has become our daily Bible database center. Everything that we do day to day revolves around HubSpot and the data that we're getting from it.
Email marketing is a new free tool for us. We were extremely happy to see that come. A lot of the email marketing tools out there are extremely expensive. To market new products that we've put into the platform to existing customers has become a lot easier for us, and a lot more economical, and it produces really beautiful emails.
One of the things that I actually watch on the daily is the chatbot, because that's our first touch with the customer. Just being able to see naturally what are people looking for and what are they expecting on the platform, that's been very big, not only on the sales side, but for engineering, because we get to see what are people really looking for and how can we help them best.
Honeycomb uses the ad connector really to understand where everything started, what that first touch point for that customer was.
Just using all of those tools all together has helped us create the most bang for our marketing dollar.
We want to have hands-on experience to understand how is this product going to affect our company. The free tool really helps us do that because we can put it into the system and see how it works instead of making a decision based on a sales pitch.
HubSpot is offering a powerful marketing, sales, and success platform for small companies like mine, Honeycomb shares that same value that we can offer something really powerful and beautiful that really helps people at minimal cost.
Let's give it up for Honeycomb.
Woo!
Cool team, cool product. They're doing great stuff. We're psyched to be part of their story from the very first chapter. In working with these early-stage startups like Honeycomb, we knew that investing in our CRM was going to help companies of all sizes grow. We've seen that today. When we thought about which tools to make free, we decided to go right for the core. Let's make the core stuff that every business needs to do, make it free. You can see where I'm going with this. We mentioned this in the video. Two borderline insane additions to our free suite of CRM tools. The first one, we've moved ads into the free CRM. Now you can do cross-network advertising, and you can track the performance all from one place. You can do it for free. That's not all. This is a biggie.
Been at this a while. I never thought that I would see this day. Free email from HubSpot, right in our free CRM. Check this out. It's so beautiful, too. Honestly, it's just gorgeous. Our all-new drag and drop email editor is super intuitive, built from the ground up. Whether it's your first marketing email ever or your first of the day, you're in great shape. Email deliverability also is sky high, 98.21%. If you're curious whether that's something to be excited about, I'll let you Google it on your own time. It certainly is. With HubSpot's free tools, you can now do everything from engaging with a contact on website or email. You can live chat. You can schedule meetings. You can create help desk tickets. That's just the tip of the iceberg. Look at everything you can do for free in HubSpot today.
That's just remarkable, isn't it?
Woo!
I saw all the iPhones and Androids come up to take a picture. You should take a picture of this. We're very proud of it. All right. We've covered a ton of ground here today, but I could only scratch the surface. I encourage everyone in the room to spend time with our general managers. This is my team I get to work with very closely on a day-to-day basis. It's our product leaders for Marketing Hub, Sales Hub, Service Hub, and our ecosystem, our entire platform. Tomorrow they're each going to do a deep dive on their part of the product. We're going to geek out. If you're an extrovert, you can go shake their hand and put a face to the name. I know they would love to meet you. They've worked really hard on these presentations. Go check these out. Okay.
For everyone, not just the folks here today at INBOUND, but also the folks on the livestream, you can head to hubspot.com/new to see everything we talked about today and a lot more we didn't have time to get to. Thank you for being a great audience. We've made a lot of progress this year. I'm excited to see what happens. See you next year, and have a great INBOUND.
We've been getting in our recent investments. I'm going to talk a little bit about how we're thinking through investments for the future. One note before I dive in, I will be sharing a number of metrics today that I hope can provide a bit of additional insight into the business. You should not expect that we're going to provide these metrics on a normal quarterly basis. I'm sure that's not shocking to most of you. All right. We did try this three times just before we got up here. Okay, I'm going to go to plan B.
It's working now.
All right, here we go. Hold on one second. All right, let's start with a high-level view of the business. HubSpot is a pretty good business. We continue to deliver strong, consistent top-line growth. Over the past four years, our revenue has grown at a compound annual growth rate of 35%. At the same time, we've expanded our operating margins by 13 points, which is better than the framework for growth and profitability that we have shared with you in the past. We deliver this growth by engaging with millions of visitors to our web properties and converting them into active users and customers. At the end of Q2, we had over 400,000 weekly active free users of our CRM, growing 45% in the last year. We had almost 65,000 paying customers, growing at 35%, and we had more than 24,000 multi-product customers, growing about 75% year-over-year.
Notably, we're not dependent on any single source to drive this growth. We now operate nine offices globally, and we generate about 40% of our revenue outside the U.S. With the growth we've seen from our Sales Hub product over the last few years and the successful introduction of our Service Hub, those products are fast approaching 20% of our install base. Our partner channel has continued to represent 40% of revenue. Importantly, the strong growth and profitability has translated into strong free cash flow generation that continues to strengthen our balance sheet. HubSpot ended the first half of 2019 with nearly $1 billion in cash that we'll continue to invest organically in the business and will provide us with a lot of flexibility to evaluate inorganic opportunities. Okay. Let's take a step back and look at the impact of our investments in the suite.
As you heard from JD this morning, the big effort in 2018 was completing the north-south and east-west expansion of the suite. Under the covers, there are two complementary forces that are driving our business. First, we're getting lots of customers through our freemium motion that tend to have lower ASP. Second, we are growing these customers over time through upsell and cross-sell motions. Let's see how these individual motions are performing. At the low end of the portfolio, we've taken a ton of friction out of the customer buying experience. It's allowed us to attract a large and growing base of starter customers that come with a customer acquisition cost that's a fraction of our traditional sales model. How's that motion going? I'd say it's going pretty well. We're approaching 25,000 starter customers, which is up 150% year-over-year. Marketing Starter has been fueling this growth.
Marketing Starter customers have grown an impressive 400% since the relaunch of the product last July. Our expanding free and starter customer base is also key to growing the flywheel within HubSpot. We like this freemium motion because we're adding value by allowing our customers to use our software before extracting value, which is a better experience for our customers and makes them more likely to stay and grow with HubSpot. It's also a more efficient go-to-market model. We estimate that the cost to acquire a customer through this motion is approximately a tenth of the cost of our traditional inbound sales motion. Secondly, our starter customers are more likely to buy more HubSpot products over time than our traditional leads. Over the last year, our starter customer upgrades have increased 150%.
If you look at the growth of just the upgrade to Professional and Enterprise editions from those Starter customers, the growth is even higher. We've also been investing to remove the friction and demonstrate the value of the entire HubSpot suite of products. That motion has also gone quite well. Customer adoption of multiple products has continued a steady climb, and we're now approaching 40% of HubSpot's customer base using two or more products. We also have a small but fast-growing number of customers who are adopting the full suite. These complementary forces have introduced some quarter-to-quarter noise in our traditional KPIs. While our customer count growth has remained strong, the net result has been a more muted growth of ASRPC than we would have traditionally expected. On the right-hand side, we've isolated the ASRPC of our Sales Hub and of our Marketing Hub ex Starter.
As you can see, these ASRPCs have continued to expand nicely. Now let's talk about our portfolio of products. We'll start with Marketing Hub. At the end of Q2, Marketing Hub was a $530 million ARR business growing in the mid to low 20s. Marketing Hub is our most mature product, and we're focused on getting the freemium motion and Marketing Hub really cranking. In mid-June, we introduced free email and free ads. We had 26,000 free email sign-ups in July alone. We're also adding robust functionality at the high end, like drill downs and multi-factor attribution reporting so our enterprise customers can stay and grow with HubSpot longer. Our Sales Hub business has doubled from $50 million in ARR a year ago to over $100 million in ARR at the end of Q2. It continues to grow about 100% annually.
Sales Hub is a product where we are still adding a lot of new features. You just heard Christopher talk about many of them. We know what's on the road map, and we're executing against it. With all the improvements we've made in Sales Hub, we are increasing the price of Sales Professional. Beginning on November 1st, the price of Sales Hub Pro is increasing to $500 or $100 per seat. We launched Service Hub last year, and it grew faster than any of our other products. At the end of Q2, Service Hub was a $14 million ARR business with more than 5,000 customers, and it's still growing really fast. When we launched it, Service Hub was a great fit for our existing customers who needed a solution to manage tickets. The majority of our Service Hub customers are multi-product customers.
What we're doing now is investing in Service Hub to make it a robust product that can stand on its own. We're doing this because we think that Service Hub can be as big or bigger of an opportunity than marketing or sales. Okay. Now let's look at the investments we're making to set up HubSpot for strong, durable growth. As you heard from both Brian and JD, 2019 has been a year we've focused on investments in areas that are really bringing value to our customers. Many of these investments are not designed to optimize near-term financial performance, but we believe that solving for the customer is entirely aligned with solving for the shareholder over the long term. I'll give you an example. The investments we're making in our main sail initiatives have likely resulted in fewer new product introductions in 2019.
That said, we believe these investments will enable us to increase the efficiency and the effectiveness of our R&D efforts and allow us to speed up innovation and create a better customer experience over time. Likewise, the investments in our freemium go-to market are probably causing some cannibalization in our professional and enterprise editions as customers start at lower ASPs. It removes a ton of friction in getting started with HubSpot, and it creates a much more modern buying experience. It takes time and investment to build the ecosystem scale that we believe that will enable us to monetize our platform over time, and we think this is the right solution for HubSpot and for our customers. We feel good about these trade-offs because we fundamentally believe the opportunity for growth in the mid-market is really big.
While we're super happy with our 65,000 customers, as you can see, that's just the tip of the iceberg. We'll tackle the opportunity by continuing to sell our existing hubs, by entering new markets, by launching new hubs, and by growing the ecosystem of products and services built around HubSpot. As we think about the opportunity ahead, we try to ground ourselves in our long-term financial model. A few thoughts here. First, I want you to think about the long-term targets as just that, long-term. You saw in the opening video today that we are trying to build a big, successful company, and we're focused on investing for the long term. Second, you can see that we're sitting at the high end of the range of R&D spending as a % of revenue. In the near term, I actually think that number will go up a bit.
We continue to drive innovation in the product, we think that's the right decision for us to drive sustainable growth for HubSpot. Lastly, we've made steady progress towards our long-term profitability over the past few years. We doubled operating profits in the first half of 2019 versus the prior year. On our Q2 call, you heard both Brian and I say that this expansion was more than we would have hoped, and we also shared that this is primarily because we got behind on hiring during the first half of 2019. We continue to expect that we're going to catch up on hiring in the back half of the year. This will position us well to execute in 2020, it will create a headwind to profitability.
While we're still in the very early stages of planning, and certainly anything can change, we currently do not anticipate incremental leverage next year as a result of our second-half hiring and the continued investment in R&D. We want to make sure that we're making the right decisions for the long-term benefit of the company. There's another important reason that we're not speeding toward our long-term financial targets. Our core unit economics remain very strong. We reviewed this last year, and our unit economics now are stronger than when the company went public. While the long-term opportunity that we see is going to drive the bigger decisions that we're making, our near-term investments are grounded in our unit economics, and they're delivering 5x LTV to CAC. Let's wrap up with a few takeaways before we open it up to Q&A.
HubSpot's financial performance continues to be both strong and consistent. Our customer-focused R&D is paying dividends across our portfolio. You should look for further suite innovation and ecosystem development to open up new opportunities for future growth. Finally, we believe that our healthy financial position will provide us with a lot of flexibility for both organic and inorganic growth opportunities. Thank you.
Brian, Joe, Oh, right here. Mark?
We can hear you. Oh, go ahead.
I don't know if the live stream can hear you, though. Is that working?
Try again. It'll light up.
Thank you. Mark Murphy with JPMorgan. Curious what would have to happen for Sales Hub to clock in again at 100% in the coming year. Kate, I wasn't sure, if you were alluding to that possibility, or maybe that is a little, outside the realm. Then as well, launching contact deduplication, some of the pricing is based upon contact volumes. Would you expect any possible impact from that as people wipe out some of the contacts in their database?
You want to start?
Sure, I can start. The second part of that question is, we do actually encourage our customers to keep their databases tidy. We've had that question before, like when GDPR came up, right. Are you guys going to see an impact on that? I don't think we'll see a significant impact on that. I think it's just part of the sort of overall hygiene of what our customers should do. That said, it does rhyme with some of the stuff that Kate talked about, which is we're not trying to figure out ways to stick it to our customer and charge them for contacts that aren't valuable. That's definitely not the long-term way to grow better. We're focused on enabling our customers to use the tool in powerful and easy and simple ways. That's where we're going to continue to invest there.
As far as, do you want to talk about sales?
I'll just start on the Sales Hub. The numbers that we showed in terms of growth rates are really reflective of the current growth rate of that hub. In order to continue to grow, at 100%, we'd obviously need to have really strong, ongoing new sales performance. I think it's not limited by opportunity. I think it will be limited really by the capacity that we have within our own sales and go-to-market organizations.
Yeah. Well, I think, there's two things with the Sales Hub that are both power. You saw that we have about 37% of our customers using multiple products. That should grow. That's an opportunity that I still think is there. The Sales Hub continues to be our primary driver of that sort of freemium touchless motion. I think both of those are healthy motions. Obviously, growth gets harder at larger numbers, that's a real big growth driver for us, and I think it'll continue to be one of our biggest growth drivers in 2020.
Hi, thanks. Samad Samana with Jefferies. Kate, obviously, I have to ask the question, if you're talking about flat margins for 2020, how should we think about that in the context of growth on the other side of that equation? Just a follow-up question.
Yeah, I think that's a backdoor question around 2020 guidance. We are obviously not going to share the top-line thoughts until we get to the appropriate point in time. That said, I think we wanted to be very upfront with you around the fact that we want to continue to grow this business for the long term, and we see the bow wave of hiring in the back half of the year and the pressure that it will put on 2020 margins. We wanted to make sure that this group is also aware of that phenomenon.
Great. Brian, maybe one for you in terms of monetizing the ecosystem that you've built. I think that that's really an interesting opportunity. We've seen it with other software companies, whether it's Salesforce, Shopify with their app ISV partners. I'm curious if maybe you could talk a little bit more about if you've started talking to partners about that path to monetization and how you see maybe the mutual benefit and maybe the models that you're thinking about.
Yeah. We're talking a lot about that. I think HubSpot's a really interesting company, obviously.
Great leadership, I've read.
We're on this path, on this suite, and we've got three hubs, and those three hubs are great. There's tons more work to do on all three. It's just still tons of opportunity, like the Sales Hub, the Sales Hub enterprise product, tons of stuff in our heads we're working on actively that will go in there. More opportunity there. There's opportunity for more hubs. I think our ecosystem is a major opportunity, and there's pieces of that. There's the agency ecosystem that's going great. Lots of opportunities there. There's the app ecosystem also going great. We do a nice job of monetizing the agency ecosystem. I think you'll see over time, we'll start monetizing the app ecosystem.
We want to get that flywheel really cranking fast. We don't want to put any unnecessary friction between you, let's say you're a potential app partner, you want to build some app for our CRM system. We want to make it so easy for you to jump on and start selling your app. We don't want to start taking margin now. Eventually, I think we'll get really good at that. We'll talk more in the future about that idea of ecosystem. We think of it more broadly than just agencies and application developers. There's more types of partners out there, more monetization opportunities. We're really bullish on that as a big wave of growth for us in the future.
Thanks. Brad Sills from BofA Securities. A lot of investments in more free with ads and the email. You already have this wide funnel already of 440,000 weekly active users in CRM, so the funnel should be widening, more velocity coming in. How are you guys managing the triggers for the upgrade? I know a lot of that is self-serve, but what are some of the things you look for, and what are some of the learnings you've had in the freemium channel? What's worked, and what are some of the things you're speculating forward?
Sure. Something we think a lot about is how do we make that free layer super powerful, pulling people in and then pulling people up through. We feel like it's still also quite early in that game. I was talking to someone over at Dropbox last week. They have 600 million active users, so we're a drop in the bucket, and CRM's not like a niche product. Everybody needs CRM. Maybe not as many people as would need a Dropbox, it's a huge opportunity. That's why we're investing. We're making that free CRM more powerful. We want to make it a standard system out there. The more users of that we get, the more upgrades we get, the more users of that we get, the more partners we get, and that flywheel starts spinning, too. We're excited about what's going on.
By no means do we feel like we have that figured out, the tripwires and whatnot. I talked in my comments about Atlassian. Atlassian's really good. They have this B2C style freemium models. Do we. If you look inside our marketing department, it looks more like Stitch Fix than SAP, and we're really focused on active users and getting that motion going. We're still early. We spend tons of time and energy making sure those tripwires are well thought out such that people can get lots and lots of value. If they're growing, they're a 30-person company, they're a legit company, how do we design it such that when they're getting more sophisticated, they need to trip into those products? Early, but making progress on it.
The one thing I'd add on that is that I showed you guys the chart earlier of the user growth, and if you really look at that closely, you see some interesting things. You see there are periods where it just takes off, and then the growth sort of levels out a little bit, and it takes off again. What you're seeing there is the experimentation that's happening on our team. What if we did pull this down? What if we made this change and everything? So it's really a sort of an incremental, I won't call it guessing game, but they're building the capabilities to drive this growth.
I think you just get better and better at it, and we look at companies like Atlassian or other companies that have this type of a model, and I think there's still a lot of improvement that we can make.
Hey, guys. Good afternoon. Stan Zlotsky, Morgan Stanley. Couple questions from my end on the partner ecosystem. Are you making any changes to partner tiers, or the kind of tiers that you have and what partners need to do to get into those tiers? I have a quick follow-up.
Yeah. You want me to answer that? Okay, lots changed for us. As you know, we used to have one product, a marketing product, sort of 1 agency type, a marketing agency. Now we have a suite, we're building a platform, it's about a broader partner ecosystem. We're making a bunch of changes associated with that. 1 is just really straightforward with tiers. We're recalibrating that's sort of like the north and south of partners, right? We're adding a new tier called the elite tier with higher requirements to achieve that tier and therefore more benefits. That axis, if you will, is how we figure out the partners' investment in us and then our investment in them back. That's what that tier is for. The other thing we're doing is sort of going in east and west parlance.
The east and west here is partners are going to need to be able to differentiate themselves based on not only their tiers, but on their capabilities. We're introducing certification or credentialing for partners who are specialists at advanced CRM implementation, partners who are specialists at CMS implementation on and on. We'll add that. You can think about the evolution of the partner ecosystem as sort of keeping up with the way the company is evolving and our offerings are evolving and our platform's evolving. You'll see that on a multi-step journey. This year we are making a few changes to the tiers in specific.
Are you adding any tiers at the low end of the partner?
What we've done is we've added a solution provider tier, which is sort of almost like a freemium version for partners. To date, when we had a marketing solution, the partners had to buy our marketing software and then get onboarded with our marketing onboarding. It was a bit of a commitment. They had to step up, and that made sense from the perspective of where we were. In this new model, there's ways for partners to get started at a much lower cost with our starter edition, with some basic onboarding, some less human touch. They start by being almost like a referral partner, and then from there, we can figure out, and they can figure out if it's a good fit and move them up into the sort of traditional solution provider part of the market.
Got it. Thank you. Just as a follow-up on the Connect platform, right, and the marketplace and everything you have. As we move forward, how are you thinking about potentially monetizing? We've all looked at software for a very long time, and you have companies like AppExchange, Salesforce AppExchange, right? They do take small take rates. Is that how you guys are thinking about it moving forward? Thank you.
You want me? Sure. I kind of answered that one before, but at some point I think we'll do that. What we don't want to do is slow down. It's like we have this big customer flywheel, and then there's another flywheel with gears on it that hook into the gears in the customer flywheel, and it's this app partner platform, and it's going well. Tonight, Dharmesh and I are hosting all of our top AppExchange app partners at our house, and it's going to be great. We want to keep that going. We want to make it really easy to join the program. We don't want to make it punitive. We want to keep that friction really low. For now, we're not going to charge, but you should expect that over the long haul, that's another revenue stream for us.
Just one quick note on that, too, is that one thing that's I think different about HubSpot, because we're focused kind of in the SMB space, there's 5,000-plus marketing and sales tech companies out there. We want that kind of a thousand flowers blooming model. Say everyone that's building software for our industry should be integrating into HubSpot, and we think there's more opportunity than just doing a directory of providing some sort of marketing assistance. Being a software company ourselves and having gone through is like, okay, can we use our platform and offer that up to these software companies that are sub 100 people and actually create value more than just the listing in a directory somewhere? We think there's opportunity to actually add value.
Hi, Jennifer Lowe from UBS. Thanks for doing this today. In JD's presentation, you talked about potentially having a few new Hubs over the next few years. Kate, you talked a lot about R&D as well, but there the focus in the near term seems a bit more around main sail and around platform investments, and then there's clearly incremental dollars, too. As we think about that weighting, you talked about main sail potentially pushing out some of the other new product innovation you might do. How do we sort of square that with the idea of having new Hubs in the future versus some of these more platform and infrastructure-centric investments being made today?
Go ahead.
I can. Well, I think the platform and infrastructure investments are actually enabling investments for us to keep building on top of our platform. I think as I mentioned in my talk, we had an outage early in the year, and it was a little bit of a wake-up call, and I think we learned that we have to have a rock-solid platform to build on. That's point number 1. Point number 2 is the way we build software is pretty interesting as well. We build sort of a framework that other products can get built on. That's great for the way we bring products to market. It's also great for our customers because once you've learned how to do workflows in HubSpot, you know how to do it across all the products.
Once you learn how to use the editor in HubSpot, you know how to do it across all the products. When we introduce additional hubs or other things, we use those building blocks, if you will, that framework, to deliver that software to the market. You get the benefit of a really solid, robust platform. You get the benefit of scale and efficiency across those frameworks, and you get the benefit of usability. I think this year was an important year to really set us up down that path.
Over here. It's Brent Bracelin with KeyBanc. A couple questions if I could. Let's start out with this idea of expanding beyond three hubs. I know this is a 3-5-year vision, but as we think about the three hubs today, I'll put it in that front office category, sales, marketing, service. What's the aspiration? Is the aspiration as bold as saying we're going to look at maybe back office functions for this environment? What's the scope of the opportunity you're looking at? Obviously, given the experience market fit focus that you have today, what are customers asking for? Obviously, you're not going to preannounce products, but just give us an idea for what are those hit lists of things that investors or customers are asking for.
Sure. I would echo what JD was saying earlier. The outage rattled us at the end of March. I think it appropriately rattled us, and we looked at our platform, we said, "What do we need to do to dramatically lower the likelihood of that ever happening again? And if it happens, how do we dramatically lower the blast radius of it?" We've taken a couple steps back so we could go two, three steps forward, and it's been a concerted effort on the dev team this year, and I sleep much better at night. I feel better about the long-term prospects of HubSpot. I feel better about the way we build products, and just working off a much more solid foundation. I'm in it for the long haul. I've been at it 13 years.
I'm in it for the very long haul, so it just makes perfect sense that we would have done that.
Having said that, I do think our foundation's getting pretty darn solid. Like JD said, down below the foundation are these set of shared foundational services, whether it's workflows or web pages or email or messaging, and we can weave those together in very creative ways to build more applications. When I think of HubSpot three, four years down the road, there's definitely more than one additional hub that'll come out. We have them in our heads. I would say over the next three, four years, at least what's in my mind is front office. We think there's plenty of wood left to chop in front office. We have a very small percentage of the overall installed base. Lots and lots of work left to do in front office there.
I doubt you'd see us take a jump into HR or accounting, something like that in the next few years.
Helpful. Just as a follow-up, building on that narrative, on one hand, you're signaling you're going to go above that 18% longer-term target R&D. On the other hand, you've also hinted at maybe evaluating inorganic ways to maybe accelerate new hires, all sorts of things. How do we balance that as you think about the build/buy strategy?
Yeah, I can take that one if you want.
Sure. Great.
Then you can debate me. We can have a debate right here. I actually think, honestly, I feel like we're more ready to consider inorganic strategies now than we ever were for a couple of reasons. One is the platform point that Brian was just making. As you have that platform, it starts to be easier to integrate applications, because that's what the platform does. It enables us to do with APIs, and we're building our products with that in mind. I think that was a big step forward. I think those opportunities opened for us now. To the part of your second question, it goes a little bit to this, like, what are our customers asking us to do? It's interesting.
We don't have a lot of customers, I've not encountered a customer that said, "Can you please rebuild my accounting system?" They all have accounting systems they like, what they're saying is, "Can you please integrate to my accounting system?" We're spending a lot of time and effort to that as well. We still think about, and this echoes exactly what Brian said, our mission as helping millions of organizations grow better, and that's largely in the front office. That integration piece is going to be important both to our customers and to some of our growth strategies going forward.
Great. Jonathan, Summit Insights Group. Really enjoyed your presentations, helpful. Two questions, one for Kate. Specifically, you're talking about the guidance in terms of operating margins for 2020. I guess directionally, I know you're not talking about giving guidance beyond that, but I guess what you have given before is the growth scenario where above 30%, 30% et cetera. Should we directionally be thinking about that's what you're targeting is more the higher growth, the directional part, or are these investments more just table stakes just to get the product, the platform up to snuff so you don't have any more of the Q1 outages? That's the first one.
Yeah. I think that framework continues to be a helpful framework. I think that you should not look at it, though, in every single period and expect it to linearly match up. I started the conversation by saying we've added 13 points of leverage over the last three or four years, and it's above that framework. I think you should look at that framework over a couple of year period of time, and we will endeavor to continue, to keep within that framework, but maybe over just a little bit of a longer context.
Great. Can I just add to that?
Sure.
I think about it in short-term and long-term, and I hope this is okay. Short-term, we're growing really fast this year, and we kind of out-kicked our coverage to use a football metaphor. We didn't-
By the way, I have no idea what that means.
That means your punt is very long and your coverage team can't make it down there, and so they get a long run back. Anyway, we out-kicked it. We didn't hire as fast as we had expected, and it didn't keep up with the growth. Our margin expansion this year was greater than we thought, and I think as we catch up, our margin expansion next year will go the other way. The long-term, I thought it was a good question. I think Mark asked, or maybe it was Samad. There's a trade-off here because we think we're trading off and investing for long-term growth.
We won't give guidance for next quarter or next year or whatever, but I'm pretty confident based on the numbers and the data that we showed you guys, with the return we're seeing on our R&D, that by doing this, given the market size, given the momentum we have, we're going to, over the next three to five years, have a higher growth rate than we would have had we not sort of stepped back and made some of these investments.
All right. Second question is more high level. This is for Brian or Dharmesh or either of you. Entertaining presentations that both of you had. You talked about stuff that's happening, the disruption, companies. You listed examples of companies that, Brian, you're using now that replace companies, products you used before. I guess to say that you guys aren't forward thinkers. You guys are academics, you're forward-thinking, and you're early adopters , and it's going to take a long time for society, for the consumers, for the buying public to catch up. Dharmesh, it took you how many years to finally jump in the pool? Brian, how long did it take for you to convince people to even help them understand what inbound marketing was? That's a more high-level question for you guys. Thank you.
Go for it. I can answer it. I would say, yeah, we tend to be out front. That's the point of the presentation. We want to stimulate you to think a little bit, and what's the future look like? We're trying to predict the future. We've had some success at that. I wouldn't have done it today unless I thought I was largely right about that idea of so many of the disruptions I'm seeing happening, like product market fit, of course, you need to get there. If you get a little bit of a product advantage relative to your competition, the competition's really good at adding features. Really good at that. You just look at HubSpot. We're not wildly successful. We're a pretty successful company. Why are we successful?
We have a great product, but we have a killer channel, and we have killer SEO, and we have a freemium model. It's not just about what we sell, it's how we sell it, and we want to sell it even better in the future, and I just think that's the way to do it. I'm pounding any table that will be in front of me, trying to encourage our customers to do the same thing. I'm trying to build a platform that will enable our customers and our partners to pull that type of vision off, because I think that's how you win in the future.
Just one quick comment. Brian said, I think, lots of smart things, but I think one of the keenest insights is it's for mere mortals. This sounds like this is not AI, this is not blockchain, this is, you know what? Normal B2B companies, people are buying, are going to expect this kind of experience. They want to be able to self-service. They want to be able to put their website up. They want to be able to do these. This is not rocket science. This is not we're building things that's 20 years out. This is like they should already be doing it. Their customers would already appreciate it. We're just trying to make it easier so they can kind of get on board instead of waiting five or 10 years. We don't think it's that far out.
We think customer expectations today are ahead of where the market should be.
Peter Levine with Evercore. Several questions. You announced a number of new products or features for the freemium across sales, marketing, service. At what point is there a paywall where you want to entice your customers to obviously up-sell your partners but at what point do you make that debate internally?
It's a hot debate, as I was talking about before. There's sort of two ways to come at this problem. There's one is a usage type paywall. Like for example, with the free email, you can send 2,000 emails a month, and they're branded with HubSpot. Others are functionality paywalls, and we experiment with both. We try to figure out, the first thing is we want to make sure that that free product is actually adding value to our customers, that they can experience what it's going to be like, the power of the HubSpot platform. We want to make sure that the usage levels are right and the functionality is real, so that they don't hit that paywall right away. That's just a bad experience, right?
What we want to do is that's how we sort of figure out which customers are ready for more features, and we try to do that in a very light touch, product-driven way as well. We try to use their behavior in the app to figure out, oh, you're ready to try your first workflow. You're ready to set up sequences for your sales team, et cetera. In addition to those usage paywalls, we figure out where the functionality makes sense, and we go back and forth on a lot of that, and we run tests about that. It's a science, honestly. The folks that do this use a ton of data. They have control of the knobs and dials in the product, and we just keep cranking at it.
Just one quick note to kind of intersect the app ecosystem questions earlier. One of the nice things about the freemium model and having this large free user base, we've had the usage-based thing, we've had functionality-based thing. In the future, you can imagine an integrations-based thing as well that says, oh, you can use N integrations or these particular ones, but once you need these kinds, like you need more than three or more than four, that can be a trigger point that we haven't historically tapped into. As that number of integrations grows, our opportunity to kind of monetize through just getting more upgrades on the free product, I think would work because we've seen the patterns.
Hi, it's Drew Beja with Granahan. The hiring, just talk a little bit about the metrics you've seen, where you've underhired, if you will, just to kind of quantify that a bit. You're already growing at a dizzying rate in terms of count, and I'm just wondering what gives you the confidence in this sort of economy that you can accelerate that? Or is it just you got to pay up for engineers and your body count's not going up, it's just you're paying more for them? I can start. If you look at the headcount growth, it's far less than the revenue growth. We want it to be less, but we don't want it to be as far less. The interesting thing about the miss on headcount was it's not just engineering, it's sort of across the board.
We think about it as very, I liked Dharmesh's slide. It's like there's kind of two big flywheels. I know I'm a flywheel guy. There's two big flywheels inside of HubSpot. Customer flywheel, there's an employee flywheel. The employee flywheel is very much a function of how do we have an offering for employees that's kind of like we think about the product offering. How do we have a killer culture that they want to come to work here, that it's stimulating, that they learn a lot, that they're skilling up, that they like their manager, all that good stuff. We spend a lot of time on that, and we're good at a lot of stuff. We're not as good at other stuff. We're good at that. We're very good, I think, at culture. Our employee NPS scores are very high if you look at us on Glassdoor.
That I think is the hard part of recruiting, because if that's broken, then you're hiring crappy people. The good people won't come to you. We kind of screwed up, I think, the part that is solvable, that's just we need bodies out there, recruiters to do the hard, kind of grinding work of recruiting, and we fell behind on recruiters, we fell behind on recruiting. I'm actually pretty bullish, and Jamie may have some things to add. I'm pretty bullish on our ability to catch up. I think we have the base foundation in really good shape.
I think I can say as the chief operating officer, we just didn't operate well on our recruiting funnel, if you will, our recruiting flywheel, I guess we would call it. We've just picked it up. I think we're in good shape. The product is healthy. The product is great. We particularly find ourselves with a big home field advantage in Boston, I would argue. We have a pretty growing home field advantage in Dublin, which is our second-largest office. We're opening a brand-new office there. Dharmesh talked about in his talk about the remote work growing. I feel like we have all the pieces in place.
Are you getting paid by the football reference?
I wish because I'd be doing quite well.
Hey, Chris Merwin with Goldman Sachs. I just wanted to ask about the multi-product customers. Seems like there's been a lot of traction there, closing in on 40%. When you think about taking that even higher over time, maybe 50% plus, what are the main drivers of that? Is that just all the investments you're making in product? Is it just sales? I'm sure it's both, but just maybe diving a bit deeper on what the main drivers of that are. Specifically as it relates to Service Hub, I think Kate, you might have made a comment that that could be as big as marketing over time. It's a little bit more competitive there. Zendesk is certainly there, SMB even up to enterprise. How do you think about getting from point A to point B on that as well?
You want to take that? I'll take it. You start. Okay, I'll start. Okay, the interesting thing about getting 50%+ of our customers on the Growth Suite, our Growth Suite, using more than one product, is you have a humidifier, dehumidifier thing there. As fast as we get brand-new Starter customers using one of the products, that brings the average down. What we really want to do is we want to create sort of this river of customers who are starting with one product, and then we're upselling. We don't obsess too much about the percentage. I do think it's going to go up over time. What we want is we want to get that sort of great river running through our business where lots of customers are starting for free, they're upgrading to Starter, and then we cross-sell them.
That would be sort of the motion that we want to have there. On the second question on the Service Hub, as I mentioned in my remarks, the real power of that Service Hub offering when we launched it and why it grew so fast was it was just such a natural extension for our customers to, if they had one particular use case, which is, I need tickets, I need to be able to manage tickets inside of HubSpot for customers I've signed up through services. That's worked really well. I think as we grow that product line and it becomes a larger and larger opportunity, the magic is still going to be in that one plus one equals three. That's really where a lot of the power of our platform, the differentiation comes in.
As well as what Brian would talk about, it's like we want to sell. How we sell that is also how we're going to win. The other thing that I would add is, I think we figured out the playbooks for some of the cross-sell motions. JD talked about the cross-sell motion of the Service Hub, and I think that playbook is one that we just really know very well and we're executing. I think there are others that still have some work to do. In particular, I think there's lots of opportunity to cross-sell marketing into a bunch of the new Sales Hub customers, and that's something that we're going to be working on.
Thanks.
Hey, James Weatherford with Stephens. Thanks for taking the questions. First on pricing power, if I may. I know there's a small increase to the Pro level Service Hub this year, and then last year we had the enterprise price increase. Just get a sense of how you think about growth in terms of new customers versus price and how that will play out over long term.
I think traditionally. Well, I think when we raised the price of Marketing Hub Enterprise, a lot of the value of the increase, we didn't hear the pushback. I think that was a good move. We continued to sell Marketing Hub Enterprise. We were not getting pushback there, and we realized a bunch of the impact of the price increase on new customers. I think with the Sales Hub Professional, we've added tons and tons of features. We look at how that product compares in the market. We look at how that product is priced in the market, and we think we have a similar opportunity to really capitalize there. I think what we're going to want to keep doing with our pricing is kind of keep tilting that axis. Think about where we were five years ago. We basically had one $750 product.
Right.
What we've done is we've brought the prices down to get started and up as we've added functionality. I think there's still an opportunity for us to keep tilting that, capture the entire consumer surplus, if you will. I think there's still an opportunity for us to do that.
Okay. One follow-up, I'm sure that you've tested this, but with all of the new free features you're adding, is there any risk that customers may actually downgrade to free from their paid version now? I'm sure you've tested this, but I just kind of wanted to ask.
Yeah. Go ahead. Well, I think that the reality of the sort of world in which we live, and you hear this from the sort of front and center on the disruption thing, is, yes, we probably did disrupt our Pro and Enterprise business a bit when we introduced Starter. If we don't do it, somebody else will. I think we want to modernize ahead of the curve, not get caught flat-footed and have somebody else disrupt us. By the way, my second pricing and packaging philosophy discussion is about features, which is what's going to happen over time with any product line is that the features that used to be demanded only by enterprises, they start to be required by everybody.
You have to keep innovating so that you can put more and more features in your enterprise and keep pushing down the features, down the stack. Otherwise, you're going to get disrupted from below, in that way. The way we think about, in addition to sort of tilting the curve on pricing is we want to keep innovating and keep driving that functionality down that, folks, three years ago, only enterprises needed. Now every business is part of sort of standard issue. As we think about pricing and packaging going forward, that's going to be a big part of it too. I think we'll probably be having this discussion again next year. What other features did you push down into the starter tier and the free tier? It'll be matched with what other new things did we bring, to the top of that product stack.
We have time for two more questions.
How you doing? Joshua Bennett from Weatherbie Capital. I'm wondering if you can comment a little. I'm thinking about the idea of kind of rolling out new hubs over time and maybe using Service Hub as an example. Talk about what was the process by which you kind of came up with that new hub. How long did it take to develop it from a technical side? How long do you typically test these hubs before you kind of do the full rollout? Give us a sense so that we can get some kind of feel for how the rollout and development of new hubs goes. Thank you.
[Amir], go for it.
We've been thinking about Service Hub for a long time. When we started coming out with our Sales Hub and our free CRM, we were already thinking about Service Hub. The Service Hub, what I liked about it is it's a little bit like I talked about earlier. Underneath Service Hub are web pages, are search engine optimization, is conversations and chat, is email. You're kind of assembling Lego pieces, when you're building it. I don't remember how long it took. A year-ish, I'm not sure. It just sort of kind of flows out of that CRM is what happens. Then, yeah, we test it. We have a pretty aggressive beta program. We're getting better at that beta program. One of the great things about our agency partners is they make terrific beta testers of all our products.
You can imagine that for existing hubs, it's not like we have to think real hard about what would be additional hubs. We have them in our heads, more than one. They're relatively obvious. For the most part, they're heavily leaning on and leveraging the framework underneath HubSpot. Hopefully we have the same success. We built a marketing business, took us eight years and went really well. We built a sales business. That thing's gone great. It's over $100 million. We've come with a service business. What'd you say it was, $14 million? That's cranking. What I've noticed in the market when I talk to customers, I talk to tons of customers, and you saw it today in Christopher's presentation, his three companies that he referenced, at least two of the three were using Service Hub. They picked HubSpot.
They picked HubSpot as a platform, and then they assembled all the other apps around it. Maybe HubSpot Service Hub didn't have every feature that they needed, but it was close enough, and they understood the value of having it all in one. There's a lot of that going on. I think that people are going to pick a hub in the future, just like Dharmesh and I talked about in his presentation. We're both Apple people. We both have Macs. It's not like we go out and buy an Android phone. We buy an iPhone. I think it's kind of going to be the same thing in the CRM industry. That's part of why we're doing the platform initiative. We want lots and lots of these third-party applications to be able to plug in.
We want to have it be all in one, manage all that inside of HubSpot.
Hi, Ryan MacDonald with Needham over here. I guess just piggybacking off of the previous question, as you were expanding your hubs previously, you have not yet, I guess, fully built out this app ecosystem. As you sort of think about adding additional hubs, how do you do that without alienating the app marketplace or the ecosystem of your partners moving forward? Thanks.
Carefully.
Carefully is right. I think one of the opportunities we have at HubSpot is rethinking the relationship between app partners and the platform provider. Part of what we've communicated is that we will solve for the customer. Which is, we think choice is good, so we want as many integration partners building on top of the platform. We have not said, it's like, okay, we're going to carve out this territory, and we're not going to do that. We're not going to acquire into when we think of as the right thing for the customer, we'll do that. I think our app partners kind of trust us.
We've had these conversations with them, but we are very mindful, having been on both sides of that particular equation, of I think what it would take to kind of build a trust in the same brand that we have within our customer community and our agency community now. We think we can build a similar brand for HubSpot within that it's a good company to partner with. That's the hope, that's what we're building. With that. Thanks, everybody. Thank you. I want to thank everybody for coming. Thank you for your support and wish you safe travels home.