Kevin Hale is a Partner at YC and cofounder of Wufoo.
00:00 - Brian's an introvert that likes to work from home. He also runs a publiccompany. How does he do both?
1:45 - How does he manage his calendar as an introvert?
3:45 - How Brian met his cofounder Dharmesh
5:45 - The first project they worked on together
7:00 - What was their unique insight when starting HubSpot?
8:25 - Pricing in the early days
9:00 - How would he have priced HubSpot differently knowing what he knows now?
10:00 - HubSpot's first customer
12:00 - Important early features
14:20 - At what point did they shift entirely away from consulting?
15:05 - Providing advice as content vs in the product
16:00 - SEO is underrated
16:45 - Trends in B2B and marketing
21:30 - Inbound marketing and audience building advice
26:25 - How did Brian know that his cofounder was right for him?
27:45 - The internet disproportionately benefiting small businesses over bigones
28:45 - Keeping your company hungry when you're big
29:15 - Building assets for your company
30:20 - Freemium
34:00 - Structural pieces of HubSpot Brian would have changed if he did it again
37:00 - Creating the voice of your company
39:30 - Early metrics they tracked
40:05 - Having a coach and reviews
41:30 - How Brian's changed as a CEO from the beginning
42:24 - What was the hardest thing to give up as CEO?
43:30 - Humility
Craig Cannon [00:00] - Hey, how's it going? This is Craig Cannon, and you're listening to YCombinator's podcast. Today's episode is with Brian Halligan and Kevin Hale. Kevin's a partner at YC and co-founder of Wufoo. Brian's the CEO and co-founder of HubSpot. HubSpot builds software for marketing, sales, and customer service. You can try it out at hubspot.com. Brian is on Twitter @bhalligan, and Kevin is @ilikevests. All right, here we go. Brian, I've listened to a few of your podcasts, and on one of them, you described yourself as an introvert who likes to work from home. That being said, you manage a public company. How do you mesh those two things together?
Brian Halligan [00:40] - That's a good question. I am an introvert, and I just try to manage it as best I can. It's hard to be an introvert as a CEO. I'll tell you one thing that's interesting about HubSpot, is both founders are introverted, but one is far more introverted than the other. I'm kind of introverted, and one of you has to be the front man to the band, basically, and Dharmesh, my co-founder, does not want to be that, so I kind of have to play the frontman to the band. I have to manage my introversion a little bit more carefully than he does.
Craig Cannon [01:07] - What practices do you put into place?
Brian Halligan [01:10] - Well, I have to manage my energy, because people drain energy from me. A couple hacks that I have, every Wednesday I work from home, all by myself, just my dog and I. No meetings, no calls, no Zooms, no nothing, I just work on projects, try to get caught up and recharge my batteries, that helps a lot. I tend to take a nap pretty much every day, around this time actually.
Kevin Hale [01:34] - Awesome. Thanks for sacrificing for us.
Brian Halligan [01:36] - I take a little snooze, and we have a nap room at HubSpot. I kind of think of a nap as your brain is just running around and lots of things are going on in your brain, and it's a time for your brain to just kind of settle down, and I picture these little mini men with, like, brooms going around, sweeping up all the stuff and organizing it, and everything gets settled down in my brain, and then back to work a half hour later. That works like a charm for me.
Kevin Hale [02:00] - How does that affect your calendar management? Normal CEOs are nonstop barrage of meetings and people you need to interact with. How does that affect you, or how do you handle your calendar differently when you're an introvert?
Brian Halligan [02:14] - I basically just block all that day Wednesday so no one can book a meeting there. I have an admin that manages my calendar and she'll typically manage little breaks in the afternoon, maybe at two, or three, or four, which she'll know, if I have a packed day, I'll need a little breathing room to kind of catch my breath, take a nap, catch up on some emails, and kind of go back at it.
Craig Cannon [02:32] - On a daily schedule basis, do you leave in blocks for solid, focused work, or do you just leave it open to like, "Okay, I can interact with everyone every 15 minutes," that maker schedule, manager schedule?
Brian Halligan [02:45] - I typically leave in blocks of time where I can recharge and think and catch up on email and do some of that stuff.
Craig Cannon [02:52] - That's always the part I struggle with, the required socializing. As someone who's introverted, it's part of the job, but I don't like to recognize it.
Brian Halligan [02:59] - I can see that.
Kevin Hale [03:01] - At what point did you realize you were going to have to do something differently to make that work for you? When you guys both got started.
Brian Halligan [03:09] - When we both got started, there was a, we were in a, it was called CIC in Cambridge, Mass., it was sort of like, pre-WeWork. There was a couch outside our, just having a big couch outside our office, and every day I took a nap, and everyone would give me crap for it. But, I don't know, it just worked for me. I think what helped a lot of introverts, I don't know about you guys, is when that lady wrote that, what was her name, wrote that book.
Craig Cannon [03:31] - Susan Cain?
Brian Halligan [03:32] - Susan Cain wrote that book, it's like, "Oh, I'm not as strange as I thought I was. Lots of people are like this." They didn't feel as badly about wanting to take this time away, didn't feel as badly with saying, "I've been in meetings all day, I know we're supposed to have dinner tonight, can we push it to tomorrow night? I'm just out of gas right now." A lot more introverts felt comfortable doing that after that book came out.
Craig Cannon [03:52] - I think labels can also be a crutch.
Brian Halligan [03:55] - Yep.
Craig Cannon [03:56] - I felt that after that book came out. It's like, "Sorry, I'm an introvert, I don't do this stuff."
Brian Halligan [04:00] - I use that crutch a little bit. I use it a little bit. My co-founder uses it even more than I do. But, yeah. But, life goes on, you can be an introvert and CEO of a public company.
Craig Cannon [04:08] - Yeah, absolutely. And so you guys met in business school?
Brian Halligan [04:12] - We did. I'll tell you how we met.
Craig Cannon [04:14] - Great.
Brian Halligan [04:15] - It was the night before business school, at a cocktail get-together at the Marriott hotel. And I was on my second Sam Adams, that's what we drank back there in Boston, and a woman comes up to me, a blond woman, and she started chatting with me. I just assumed she was a student, but she asked me a lot of questions, like, really pounded me with, like, an interview almost. Nice enough conversation, it goes away. And I just thought she was a student. But what was going on there was Dharmesh was there with his wife, that was his wife. What Dharmesh does, my co-founder, is he hides behind the plant in the corner of the cocktail party, sends his wife out to interview potential people that he might want to talk to.
Kevin Hale [04:52] - Wow.
Brian Halligan [04:53] - And then goes and chats with them, and the scouting report on me was, you'll never like him. You two will never hit it off. He's into the Red Sox, he's into the Grateful Dead. You don't even know who the Grateful Dead is, and you don't even own a pair of red socks. It's never going to work. That's how the two of us met.
Craig Cannon [05:09] - What convinced him to go over to you?
Brian Halligan [05:12] - We didn't actually chat that day based on the scouting report. There was a class we took, we both went to Sloan together, and we sat next to each other in the class, and the teacher assigned a project on stock option pricing or something like that. He said, "Well, why don't we work together on the project," and we went out for Indian food that day. And we discovered we had a lot in common. We both like doing business with startups and with small business owners and trying to turn small businesses into big businesses. Back then we were into something that's passe now, but it's called Web 2.0. Sort of a old meme that we were really into. And we were both very entrepreneurial. He had started a couple companies and I had worked in a couple of startups and done pretty well, so, we kind of started on the journey on that project we did together at Sloan.
Kevin Hale [05:55] - What was that project?
Brian Halligan [05:56] - Project was about how to price and value stock options in a company.
Kevin Hale [06:01] - Oh, fascinating.
Brian Halligan [06:02] - Yeah, kind of.
Kevin Hale [06:05] - What I'm trying to think of is like, after that, what was the first little project that you guys worked on together that was outside of school, that made you sort of realize, like, "Oh, we're the right ones to be working together."
Brian Halligan [06:15] - Yeah, we started talking about HubSpot at lunch that day, it was something called LegalSpot, not HubSpot, which was going to be a suite of applications to help you manage your law firm. We tinkered with it all through business school. We put it in the business plan competition, the $50,000, now it's $100,000, business plan competition. We worked on it in a class called New Enterprises. We tinkered with the project for a while. Then when I graduated, a year before he did, actually, he was on a different track than I was, and I spent about nine months in a little venture firm as a EIR, and we tinkered with it. We'd meet once or twice a week, and work on the idea, and pitch it to law firms. We kind of zigged and zagged a couple times. Then during that time, we decided, well, it's not about building a suite of applications for a law firm. One of the applications we were talking about was a marketing application, was how do you get found on the Internet, how do you get found in Google and social, how do you get found in the blogosphere? How do you grow a business? And all the law firms are interested in that. And so we pivoted, instead of being a vertically specific application for law firms, we were going to build a marketing application for everyone.
Craig Cannon [07:21] - What do you think your unique insight was at that point, your like, marketing whatever. At the time, I'm sure there were way fewer companies doing internet marketing.
Brian Halligan [07:30] - Oh, there were 17. Now there's 6,000. We were pretty good at framing it as to, everything in HubSpot is rooted in user behavior. Normal human beings, how are they changing the way they live, how are they changing the way they work, how they shop and they how they buy stuff? What does that mean for marketers? And at the time, there was a sea change going on. There were two sea changes. One, humans were changing they way they work. They were living in Google, living in social, living in the blogosphere. There's a big shift there. The second shift that was going on was humans were becoming very good at blocking marketing out. Caller ID, spam protection, AdBlocker, all that kind of stuff. We came up with the idea that marketers needed to turn their playbook on their head. Instead of doing outbound old-school stuff, how they'd poll people and then match the way they market with the way they shop and buy, that was the basic insight. Then we pulled it together in a suite of applications for mere mortals who would want to do this
Brian Halligan [08:26] - that didn't have a bunch of developers running around. They could do it and grow their business. Part of it was we framed it as this inbound thing versus outbound, the versus really works on the internet, and the other thing that worked was pulling it all together and building something not for technologists, but for mere mortals. There's a lot more mere mortals out there than technologists.
Craig Cannon [08:45] - How did you guys contextualize yourselves and figure out pricing in the beginning? What was your pitch even like?
Brian Halligan [08:52] - Pricing, we had no idea how to price it. I remember I came back from one of my meetings and I said to Dharmesh, I said, "You know what? I actually think this guy wants to buy something from us, so he asked me how much it costs." And he said, "What'd you say?" I said, "I don't know! Let's talk about it, what do you think," and we went back and forth, and we randomly came up with, very scientifically came up with $250 a month back then. I went back, got the credit card layer that afternoon for $250 a month. HubSpot was $250 a month for the first six years of HubSpot. We didn't change it at all. Then we got more sophisticated with our pricing, and now there's a lot of different products and price points.
Kevin Hale [09:30] - What would you do differently now? If you were to start over again and think about pricing. Knowing what you know now, how would you have thought about pricing?
Brian Halligan [09:38] - I would have flipped it on its head. We had designed HubSpot to be a model where you sell it through inside sales, you use inbound to pull lots of leads in, hand them to inside sales reps, have them sell it. The most recent version of HubSpot, these days, half our leads come through that. The other half really come through our freemium model, where people can try it, use it, bang on it, and then they, just like consumer software, they will, and I think this will happen and all B2B enterprise software will turn in consumer software, where they'll come over a tripwire and they'll buy the software in a much more natural way. Sales reps can call on customers, versus on prospects. I would have started with freemium.
Craig Cannon [10:12] - In what degree, what was HubSpot, the first customer? Did you have any software ready?
Brian Halligan [10:19] - It was rough.
Craig Cannon [10:24] - Yeah, well, because this was pre-AWS as well, right?
Brian Halligan [10:27] - Way pre-AWS. We built it on DotNetNuke and hosted it on a server under our desk.
Craig Cannon [10:32] - There you go.
Brian Halligan [10:32] - It was janky. I would tell you the early days of HubSpot, the software didn't do much until customers would ask us for help. We made up for the inefficiencies in the software by giving them good advice on how to optimize their website, and how to get going in social. What we didn't want to fall into was the trap of building something that was a consulting company. We said, all of the stuff that we're consulting on, how to set your website on, how to get links into your site, how to set up your, and it wasn't even Twitter and Facebook, it was Digg and Reddit back then, how to get everything set up appropriately so you can grow. How do we take all that stuff we know and build software to do it to automate it? That was basically the model in the early days. And I remember, I had an early customer, the name of the company was CEO Dad, it was a professional comedian.
Craig Cannon [11:19] - Wait, what?
Brian Halligan [11:20] - CEO Dad. Ceodad.com
Craig Cannon [11:21] - And he's a comedian?
Brian Halligan [11:22] - He's a comedian, yeah. A dad, professional dad jokes.
Craig Cannon [11:24] - Oh, okay.
Brian Halligan [11:25] - And he was setting up his site and our first sales guy, Mark Roberge, sold him on HubSpot. And he said, "Yeah, our co-founder, he's going to get you all set up in the software, and he'll help you with anything you want." And I said, "Okay, that's interesting," so I got the account. And I helped him set up his blog, and I remember he wrote his first blog article. And he said, "Can you set this up and get it on the Interwebs?" I said, "Well, why don't I teach you how to do that?" And so I got him on the phone, I was setting it up. He said, "What do you think of my article?" I said, "I haven't read it yet." And so I read it, and I read through it, and read the whole thing, and he said, "Well, stop!" He said, "Start reading it over again." He said, "I want you to read it out loud." And I'm reading through the article and the thing out loud. And he said, "Stop!" I said, "What?" He said, "You're not laughing." I said, "I know, it's not funny!" That was the early days of HubSpot, not only helping people set their blog up, but actually posting it and editing it.
Craig Cannon [12:25] - Punching up jokes.
Brian Halligan [12:27] - Yes.
Kevin Hale [12:29] - Was there any feature that you guys developed in the early days that ended up being this killer feature that all of a sudden changed the direction?
Brian Halligan [12:35] - The SEO stuff we built was pretty cool in the early days, and we built a tool called websitegrader.com that's very popular still. That was an unbelievable tool, you go to our website, websitegrader.com, and you type your URL in, and you type your competitor's URL, and it gives you a score on how inbound-y your site is. How good are you at attracting links, how good are you at getting found in Google, how's your social media setup, how many followers do you have, all that kind of stuff.
Kevin Hale [13:02] - Was the competitor check the actual big thing that helped make it really drive people to actually want to change?
Brian Halligan [13:08] - It was one of them. It was one of them. Because you put yours in, then you put your competitor's in, then you taunt them. Or, what I would do is show up at a sales call, and I'd put your company and Y Combinator, and then put in, whatever, 500 startups, MassChallenge, and I would use that as information. That was really motivating to get people to move.
Kevin Hale [13:25] - Wow.
Brian Halligan [13:26] - It gave us a lot of credibility. I think about selling, in modern selling, it's about helping people understand that they have a problem. And really making that problem real to them. In the early days of HubSpot, that was a tool to really point out, boy, you're falling behind the competition, there's a lot of low-hanging fruit here, you're falling behind all these other folks, what are you going to do? Oh, you need some help with that? Well, let me show you a demo of our software.
Craig Cannon [13:49] - Right.
Brian Halligan [13:50] - That was sort of how we thought of it.
Kevin Hale [13:52] - I think another really cool thing that you guys do is that you eat a lot of your own dog food. You guys kind of try to practice as much as you preach. Is there anything that you guys initially had a hypothesis around that didn't work out? That you're like, "Oh, we think this would be sort of a good thing to do," and then, when you put it out there, it was like, "Oh, that didn't work out so well?"
Brian Halligan [14:11] - The one thing that we thought for sure, we were right about a lot, the one thing we were dead wrong about is we thought the whole world, we thought this idea of people having customized, gorgeous websites, and bespoke websites, was just a foolish idea. I don't have a custom car, for example. There can be a thousand templates out there, that's enough for the world to have. But it turns out everybody wants their own custom website. For the longest time, we were like, stop worrying about the design. Use our template, put your blog out and put your site, you're going to be happy. We lost that battle. We fought that battle for years.
Craig Cannon [14:42] - At what point did it feel like you really shifted to a startup from a consulting company? Because in the beginning, you're spending all these extra hours doing things that you definitely can't do forever.
Brian Halligan [14:52] - It was gradual. A year in, a year and a half in, we were probably almost all software.
Craig Cannon [14:57] - Okay, and at that point were you profitable or had you raised money?
Brian Halligan [15:01] - We had raised. We raised a million of angel in Boston pretty early on. Then we did a Series A, back then it was a big Series A. It was five million bucks, now a small Series A.
Kevin Hale [15:15] - What was the split between, you talked a bit about in the beginning it felt like consultants, you're giving all this advice... You said, you eventually turned that into software. I imagine some of it was just turned into content that's sitting on your site. What was the split between actual software features, versus content you had on the site to just help people get going, like documentation, et cetera?
Brian Halligan [15:34] - We were trying to get as much of it in the software as we possibly could. Some of it's hard to put in software. We also created a university, HubSpot Academy, and we made really high-quality, really nice videos to teach people about this stuff. We were a content machine, and I still think of HubSpot as a little bit of, like, it's code, there's software, there's content, all that content out there, and there's a community around it. That's sort of how HubSpot works underdeath the covers.
Craig Cannon [16:00] - It makes sense with a website competitor comparison, what is it called again, just so I get it right?
Brian Halligan [16:07] - Websitegrader.com.
Craig Cannon [16:07] - Websitegrader.com. SEO is such this, like, vague, murky term.
Brian Halligan [16:13] - It's the most underrated marketing thing there is.
Craig Cannon [16:15] - Still?
Brian Halligan [16:16] - Yes.
Craig Cannon [16:17] - Why?
Brian Halligan [16:17] - We get 10 million visitors a month through SEO. It's fantastic for us, fantastic.
Kevin Hale [16:22] - Why do you call it underrated, because I feel like a lot of people know. Do you think it's just people turn their attention away from it, or just seems so old?
Brian Halligan [16:27] - I think they turn their attention away from it. People are really focused on ads, and ads have gotten a lot better over time, and people perceive that SEO has gotten harder over time. People have lost focus on it, and it's, if you do it right, it is a gold mine.
Craig Cannon [16:41] - That was a huge motivator for us to do YouTube versus just a podcast. Because YouTube is just like, there's not a lot of good content out there. You've done some videos, but even once you get to the second page when you search your name, it falls off pretty quick.
Brian Halligan [16:55] - Yep.
Craig Cannon [16:56] - You can just do it for anyone. I want to kind of get back to the beginning stuff, but we're going in the direction of trends, and I want to talk about that stuff, too. In terms of the future of marketing, where do you see the big trends happening?
Brian Halligan [17:10] - Yep, if I thought there was, the arbitrage opportunity when we started HubSpot in 2006 was generating leads online. I don't think that's the arbitrage, there's still an arbitrage opportunity there now, but there's a new one. I'd like to describe the new one with my morning routine. I get up every morning, on my Casper mattress. I put on my Warby Parker glasses, I take my phone and I turn on Spotify, and then I shave with my Dollar Shave Club razor, and I put on my Trunk Club outfit, and I take a Lyft to work. What's fascinating to me about my mornings is those six startups, and they are startups, are all very much part of my life and have completely disrupted the incumbents in those space. They've done it with much lighter go-to-market models and a gorgeous end-to-end customer experience. I feel like all those industries are being disrupted dramatically by people who are just better at customer experience, a step function better. I think that's coming to B2B in a big way. If you haven't already figured that out in B2C, you're kind of screwed. In B2B, this coming, I think, in a big way.
Craig Cannon [18:14] - What's a good example of that?
Brian Halligan [18:15] - I think freemium is coming out, I think it with the way Atlassian sells, the way Zoom sells, that's the future. You look at the metrics behind the Zoom IPO that just came out the other day. Holy crap, did they have virality right, freemium right. Same with Atlassian, their model's fantastic. I think there's a new breed of software companies that have much, not only better go-to-markets, lighter go-to-markets, but it really matches the way people want to buy. People don't want to have to wait for your sales rep to book a sales call. People don't want to have to do that stuff anymore. They want to go to your website, they want to be able to chat with someone, use the free product. Oh, they get confused? Chat a little bit more, buy it, "Oh, you want to talk to our CIO and spread it?" Great, let's have a conversation then. This transformation in the customer experience is coming to B2B, and it's an arbitrage opportunity today.
Craig Cannon [18:58] - It's the same people that are using Instagram on their phone are using your Enterprise software.
Brian Halligan [19:03] - Yes. I think the way people buy Spotify is the way people are going to buy Enterprise software in the future. All the new models are end user driven. The Zoom thing is fantastic. Their S1, it's an unbelievable company, I couldn't believe the numbers on it. Atlassian is another one that I think has it exactly right.
Craig Cannon [19:19] - Interesting. When it comes to actual outbound or inbound marketing trends, what other stuff do you see?
Brian Halligan [19:23] - I think outbound is largely just dead. I don't think cold calls work at all. In fact, I think they're negative. You cold call into someone, and they don't answer the phone, so you leave them a message, and then you follow the methodology that's out there and you cold call them again three days later, and then they tell you to cold call them again three days later, and all you've done is just ruin your brand. You really pissed that person off. And so I don't think that outbound works, I think inbound, I just stretch the definition of inbound, of really creating a lovely end-to-end experience that matches the way people actually want to buy today. I also just think in the world today, the other thing that's changed is supply and demand has really changed, along every dimension. It used to be really hard to start a company. Back in 2006, it was hard. It was expensive, you need to get an office space for a year, you didn't have AWS, the startup costs were amazing. Now, the startup costs are incredibly low. You go to Y Combinator, you go to, you name it. Everything is cheap or almost free. That's great. It's never been a better time to start a company.
Brian Halligan [20:26] - The downside of that is it's never been a harder time to scale a company. Really hard to scale, really hard to break out. You guys see it more than anyone, I'm sure. Very, very hard to break out in today's day and age. It used to be, how did you break out? Well, you need to have a better product. Your product has to be 10 times better than the competition. Today, the way you break out, it's hard to do that on the product side. You get in front of your competition a little bit, "Wow, they catch up quickly!" The way you get ahead of the competition is create a go-to-market experience that's 10 times better than the competition. That's the way I see companies winning today. That's how Zoom does it, that's how Atlassian does it, frankly, it's how HubSpot does it. This is kind of the future, I think, in B2B. I think it's almost the past of B2C, people have figured this out already.
Craig Cannon [21:07] - How do you apply these ideas to startups with little or no funding?
Brian Halligan [21:11] - I don't think you need a ton of money today to build a great customer experience. It's not something that costs a lot of money. Creating word of mouth doesn't cost a lot of money. Your success these days is much more about the width of your brain than the width of your wallet. I don't think you need a ton of dough to grow your company. Ad dollars are not, that's the most expensive way to grow your company. It's not a good way to do it.
Kevin Hale [21:36] - There's an argument to be made that for a lot of young companies that like to do inbound right, it's actually a good long-term investment. But in terms of getting, short-term growth and getting results on a week-to-week basis, which, on times where we're working with our companies to do. It's really hard to have that investment and sort of hold off on outbound stuff. I'm just wondering, what are ways people can think about doing inbound that helps them get that sort of results that they need.
Brian Halligan [22:02] - Sure.
Kevin Hale [22:02] - To maintain momentum.
Brian Halligan [22:04] - It sort of depends on who you are, but I remember the early days of HubSpot. Dharmesh and I would write two blog articles a week, and we'd compete to see who could get more leads from the article. It was a very friendly competition, but we used to do that. We figured out, you have to write really good content, of course, that's table stakes. You have to have a great title, and we'd A/B test the titles a lot, and you've got to get, your selves had to have a large presence in the social media sphere, so you yourself could market it. Maybe you could do that through some of your friends as well. You could get it to go, and once a week or so, we would have a home run blog article, and that's how we really started the company.
Kevin Hale [22:44] - How long did it take before you got to be seen as experts in your sort of space so that people would listen to you and be like, "Oh, I should try their tool?" Because for us.
Brian Halligan [22:54] - Still working on it.
Kevin Hale [22:57] - It took us a couple years. We basically built our audience on a blog before we even started writing the first lines of code for our startup.
Brian Halligan [23:04] - You talking about Wufoo, or you talking about...
Kevin Hale [23:05] - Yeah, for Wufoo, we had started this blog called Particletree, and we literally didn't know what we were going to do, but we were like, we heard these guys at 37signals, they basically did their blog first before they ran Basecamp, and I was like, "Oh, man, that's a pretty good plan." That's what we said, was like, we could do that at the beginning.
Brian Halligan [23:21] - That's what we did.
Kevin Hale [23:22] - I feel like a lot of people do undervalue that like, do something to build an audience way ahead of time, they get very impatient, or think, "Oh, my first couple blog posts are just going to, like, be a home run." And usually, it takes a really long time. For you guys, how long did it take?
Brian Halligan [23:36] - It didn't take that long. You have to write really good stuff. It has to be timely.
Kevin Hale [23:39] - How did you know what was good? Bevause I think everyone's bar is so different.
Brian Halligan [23:47] - At the time we were writing, there was not much content out there about how do you market properly on the internet for mere mortals. What was also out there was, okay, I'm not a big Donald Trump fan, but what Donald Trump has mastered is the versus on the internet. He's used polarization to his advantage. Polarization works on the internet. Then we did the inbound versus outbound, worked very well.
Kevin Hale [24:14] - It made the argument very easy to understand.
Craig Cannon [24:15] - Well, now it's Basecamp to a T.
Kevin Hale [24:17] - Yes, so like, narrative generation in terms of you versus opposition. Understanding...
Brian Halligan [24:24] - As well as quantitative stuff, we did a lot of quant stuff that we posted online, we'd take analysis of those website grader reports and we'd post them online, they were very interesting. We did a fair amount of quant stuff. Today, if I were doing it, I might do the blog. I would be tempted to do a podcast. Podcasting, people spend time listening to podcasts. You got to match the way you market to the way people buy. I would be tempted to do something, a videocast, or your own YouTube once a week, something like that. I'd be all over Instagram, I'd be all over Twitter. I'd be all over the new stuff. I tell you what I wouldn't be all over, I wouldn't be all over ads. I think of it like this. What an ad is, let's say I want to put an ad on your, I wanted to buy ad on your podcast. It cost me whatever it would cost. I'm essentially renting space on your podcast. I rent it once a week, get the space.
Craig Cannon [25:08] - YC doesn't have to know, it's perfect.
Brian Halligan [25:12] - What I really want is I want to say, yeah your podcast is great, I want to create my own podcast, and I want to rent myself space on the podcast.
Craig Cannon [25:19] - Totally.
Brian Halligan [25:19] - That's the basic idea behind it. It used to be real expensive to start your own radio station, holy crap. I got to buy the whatever, the frequency, and I got to get a studio and all this stuff. Now it costs you nothing! I could start a radio station today. There's big a been disruption in the content creation industry. If you can create good stuff, man, it's a big arbitrage opportunity.
Craig Cannon [25:39] - When you guys got started, were you blogging for yourselves or for the company? Because this is a question I often get from founders like, "Should I come out here as Brian Halligan or should I just be on the HubSpot blog?"
Brian Halligan [25:51] - Company. You should do on the company's blog.
Craig Cannon [25:52] - Company's blog, why do you say that?
Brian Halligan [25:54] - Because you're building the company and you want the domain authority flowing into the company. You want all those links flowing into the company. You want to associate your brand with the company in a big way. You don't want a separate domain for your name building up all this domain authority. It doesn't help the company enough. I think the guys who are pretty good at this were Andreessen Horowitz. And they did it, I think they did a16z, slash the person's name.
Craig Cannon [26:18] - Oh, Pmarca had a blog.
Brian Halligan [26:20] - He did before.
Craig Cannon [26:21] - So did PG.
Brian Halligan [26:22] - And then they moved it.
Kevin Hale [26:24] - PG has not.
Brian Halligan [26:26] - They moved it over.
Craig Cannon [26:26] - PG's always been on his own.
Brian Halligan [26:28] - Which I thought was a good model. And those guys did a hell of a job in the early days on their blog. Really good stuff.
Kevin Hale [26:33] - Yeah, and they've stopped.
Craig Cannon [26:36] - Well, there's podcasting and YouTube now.
Brian Halligan [26:38] - I miss Andreessen's Twitter account too, he's really good.
Craig Cannon [26:41] - Do you have any other advice for startups with little to no money?
Brian Halligan [26:45] - Find a good co-founder.
Craig Cannon [26:47] - How did you know that your co-founder was right for you?
Brian Halligan [26:53] - I didn't know. I think what happens, I spent a lot of time at Sloan, and I just see that co-founders typically, they start the company with someone who has the exact same skill set, like two product developers, or two marketers, or two former McKinsey people. You're better off with someone who's really on the product side and somebody who's on the go-to-market side. They have a little overlap in the middle, and they have similar passions and goals. I think it gets dangerous when they have the same overlapping skills. We had a nice overlap there.
Craig Cannon [27:23] - Was that your story with your co-founders, Kevin?
Kevin Hale [27:28] - All three of us coded, but all of us had different domain expertise. Ryan did a lot of the back-end stuff, some front-end stuff, I did all the design and coding work, and then Chris, basically, was willing to do whatever. He was a good soldier. He's like, "I will do all the shit work." He was like, "Payment integration, fine, I'll do it."
Brian Halligan [27:44] - I see.
Kevin Hale [27:45] - If it's a bunch of weird social media or paperwork, et cetera, he was, "I'll do it." He's one of these blessed founders to have, where he was just like, "I'll do anything that needs to be done to make the company successful."
Brian Halligan [27:56] - Was he non-technical?
Kevin Hale [27:57] - No, he could program.
Brian Halligan [27:58] - Oh, wow. That was like, kind of amazing. We were really lucky.
Craig Cannon [28:03] - That's super rare. Okay, so in another interview, you said the internet disproportionately benefits small business over big ones. Why is that?
Brian Halligan [28:12] - It's like that old New Yorker cartoon, where there's a dog typing on the computer. There's a dog looking over his shoulder, typing on the computer, and the dog on the internet says, "You know the great thing about the internet?" And the other dog said, "What's that? "e says, "Nobody knows you're a dog!" It's very true, you can get outsize marketing advantage on the Internet without a lot of money. You don't have to be rich to grow a big company, whereas back in the day, to get noticed, you had to buy ads. That was the only, really, way to get noticed. Or you had to cold call into people. You can now create content. If that content's really good, it'll spread. You can create a freemium application, like that website grader thing, or HubSpot CRM, or Zoom, or whatever you think, and that can spread much more easily and virally these days.
Craig Cannon [28:57] - Now that you guys are a big business and you can do those other things, how do you keep your company hungry to do those things that are kind of weird, but might have an outsized impact?
Brian Halligan [29:10] - In general, I think the hunger comes from... We've done all right, we've got a seven billion market cap, but who do we compete with? Well, we compete with Adobe, SalesForce, Microsoft, you know, those companies are hundreds of billions of dollars market cap. It's hard to get cocky when you're competing with those giants. In terms of continue to want to stick with the content stuff, and with the long-term stuff, I just see so much long-term value in it. If you look at where our customers come from today, they come from search engine optimization, they come from our freemium model. A very small percentage of them comes from ads we do on Facebook and Google. Those are assets that we built, we talked about assets before, whether I'm renting space on your asset or creating my own asset. Assets we created seven, eight, nine years ago are still generating leads for us today. They're permanent assets on the Internet. As a marketer, as a seller, you have an asset balance sheet, just like a CFO has, but on your asset balance sheet, links into your site, followers on social media, pages on your site, all that kind of stuff are assets. If you get a viral model, the number of users you have is an asset, as it will spread from there. You want to increase the number of assets you have and the return on them. I don't like the game of renting assets.
Craig Cannon [30:25] - Okay. And content, obviously, has been a core asset from the beginning.
Brian Halligan [30:30] - Yep, freemium has been a core asset over the last three, four years.
Kevin Hale [30:35] - What do you mean by freemium as an asset? Because I can understand content as an asset, but freemium as an asset seems like, it's more like a strategy or a tactic.
Brian Halligan [30:41] - It's probably more of a strategy, I just think of, I look at where our revenue comes in.
Kevin Hale [30:45] - I see.
Brian Halligan [30:46] - About half through content and half through freemium, I guess. But you're probably right.
Kevin Hale [30:50] - Then how do you think about from your perspective, you're able to understand freemium in a very different and numeric and quantitative way that's so different, because I feel like the experiments that you can run and the things that you can assume as a small startup is just, you're really in the dark. I feel a company of your size, you probably understand freemium in a very sophisticated way.
Brian Halligan [31:14] - That's true. We started our freemium business about three years ago. Our sales products, all freemium. It's kind of an interesting story. HubSpot started as a marketing application, I talked about it was $250 a month. It was kind of an inside sales model. We wanted to go into the sales CRM business. We said, "Well, there's a lot of competition there. Let's build a better product, but let's build a lighter go-to-market." We said, "Let's build a freemium, premium business." We kind of started as a separate business inside of HubSpot, separate part of the building. I moved to that part of the building, I had a co-founder, we worked on it in there. And back then, we were like an early stage company. We had a very lightweight, not very strong yet, CRM product. We started getting users in. We started to measure, "Okay, got that user, how many clicks did they go into the app, were they sticky, did they stay through what amount of time, how many other people did they invite?" We've just gotten better and better and better at it over time. You have to kind of start somewhere. And start with yourself, and your cousin, and your sister, and your brother. You can basically give them the application. Tell them to talk out loud as they're going through the application. Tell them where they get frustrated and just keep, it's a very iterative process and we're by no means done.
Kevin Hale [32:23] - One thing I've come to understand while working at YC is that freemium won't work for every company. Mostly because, like, what it requires is a very, very large market. For marketing software, I was lucky to be in one with forum software. Website creation, et cetera, the market's so huge. Like every company needs one of these things, and so therefore it's okay to give away the product. This inverse model of free samples, so that way that small conversion, you're still making money off it because the market's so huge. When a company is a little bit more specialized, or the market that they're going after is a little bit smaller, how do they rethink their pricing and model? Because you guys started off doing sales, which is what a lot of those companies will have to do. How do you guys think about it?
Brian Halligan [33:15] - If you're a very niche-y business, if you're in the business of, there's only 100 potential customers in the world, and they're the CIOs of car companies. You might make an argument that that's not the best way to market. But if those CIOs are making the decision based on how everybody's using your product internally and all the influencers coming out of them, it still might be a good fit, because, I don't know, almost every company I know, CIOs are making decisions, not anymore based on top-down decisions, but they're looking at who's using these applications, who's using those pieces of software, and who's lobbying them to make those decisions. All these decisions become bottoms up. Our CIO doesn't make any decisions unless somebody in some line of business is screaming at them, "Hey, we need to, we need to have this piece of software." It doesn't, also the CIO's lost a lot of power, it used to be you have to get approval to getting on their network. That doesn't have to happen anymore.
Craig Cannon [34:06] - You saw it with GitHub. That was the first time I saw it, was like everyone was using GitHub by default.
Brian Halligan [34:11] - Gmail, Slack.
Craig Cannon [34:14] - Yeah, for better or worse.
Brian Halligan [34:14] - Atlassian, yep.
Craig Cannon [34:17] - In terms of other assets, I'm curious now that you guys have been around for 13 years, were there any things that you thought might have been assets, or basically foundational elements that weren't ideal 10 years later? Maybe it was a cultural thing. Things that you would have changed from the beginning.
Brian Halligan [34:37] - Yeah, one of the things I would have changed is I would have, I think CEOs are reflections of their founders for better and for worse. I'm not a product person, not a developer. I grew up in sales and marketing. If you look at HubSpot in the early days, holy, we had a hockey stick customer curve that we were really proud of, and we used to raise a lot of money, and we used to brag a lot, and used with our investors. But our churn rates were high. Our customers weren't happy enough, and we got very, very good at showing up and closing customers on the first call, but we weren't great at delighting them and making them be very happy. We used tools like longer contracts to lock them in. That's not the right way to lock them in. You got to actually make them happy and tell their friends. It took us, took me, a long, long time to figure out the way to build a great company isn't to get great at that, but at delighting these customers and getting the word of mouth to spread. Our DNA early on was too sales and marketing heavy, not customer product delight happy. We've really shifted it, and we wouldn't be sitting here unless we made that shift.
Kevin Hale [35:46] - What was the main thing you guys sort of implemented to help reduce that churn and to create that sort of delight?
Brian Halligan [35:51] - Just investing more in product. If you looked at our P&L in the early days, Kevin, it was a huge amount of our P&L was going into sales and marketing and a relatively small amount was going into R&D. And you just look it up over the last few years, we're increasing R&D spending by 50% a year, we're increasing sales and marketing spend by something else like that.
Kevin Hale [36:10] - Did you have to change it with, in terms of like, when you're talking to PMs, or talking to people about, like, "Hey, when we're designing new features and we want to solve this," did you put, "This is the number on the wall and we're rewarding people who are solving this sort of number?"
Brian Halligan [36:22] - Yes, one of the big things we talk a lot about is, I would specifically talk, and I would cringe for our sales people, about how we were moving from a sales and marketing company to a product-driven company. We're moving from a company that's obsessed with the company-prospect relationship to a company that's obsessed with the company-customer relationship. We sort of shifted our DNA there, and we changed all our company objectives around it. Our compensation plan for the executive teams around NPS, for example, things like that, and genetically we've changed. But it's been a hard change, and it's, I think we'd be much farther ahead if I had realized that earlier.
Kevin Hale [36:55] - Why was it a hard change? It seems like it'd make sense to do so. Is it because it was so sales and marketing led before?
Brian Halligan [37:01] - We were just, yes, the DNA, and the strength in the company, and the budget negotiations, it was so sales heavy. The input into the product development roadmap was very sales heavy, like, "Here are the things we need to do to win new customers," versus, talking to customers, "Here are the things you need to do to delight me." Those were big changes we had to make.
Kevin Hale [37:25] - Can I ask you about voice? When it comes to this content creation, sometimes what I think a lot of founders and companies have difficulty with is, "How do I create the voice of my company?" And then when I'm writing out this content, because there's all these different ways that you can sort of do this, and I feel like I've seen lots of companies do it incorrectly.
Brian Halligan [37:47] - Okay, no one's asked me that question before, it's an interesting one. The first year and a half of HubSpot, we had a relatively geeky voice. We had just graduated from business school, it appealed to a certain crowd. More business school geeks, let's just say that. We hired a marketing person who was good, and he started writing on the blog, and he shifted us to be more, I don't know how to say it, but more, just, basic stuff that everyone can understand.
Kevin Hale [38:17] - Like fundamentals.
Brian Halligan [38:18] - Yes, that mere, he would say, "We want mere mortal marketers to understand and spread this stuff. Not just your professors from friggin' business school."
Craig Cannon [38:25] - It was like technical or it was like quant stuff?
Brian Halligan [38:28] - Our stuff was quant and lots of stuff from, like, Michael Porter's Five Forces analysis of this, that, and the other thing. Shit like that that some people really liked. It's a little bit like Tomasz, I don't even know how to say his last name, the guy from Redpoint, his blog's really good. Stuff like that that we'd put in there. We got much more down to basics of, like, how to. How do you create a great blog article? How do you do SEO correctly? How do you, I don't know what it would be, but just very, very basic stuff. We shifted our voice. We're still pretty basic now, so we're trying to appeal to the mainstream of sales and marketing, sales and marketing ops people. We're not really trying to appeal to CEOs and whatnot.
Craig Cannon [39:12] - Did that shift happen overnight, so, you hire this marketing person, they say, "Hey, I want to switch up the voice." Was it immediate, because I think you see people...
Brian Halligan [39:20] - Took a while.
Craig Cannon [39:21] - Exactly.
Brian Halligan [39:22] - Took a while, took a while to convince us. And he kind of had to lean on us, and his articles were doing better than our articles, we're like, "All right, maybe he's right."
Craig Cannon [39:28] - Ultimately, you fell onto the numbers. And you're like, "Hey, this is what works."
Brian Halligan [39:31] - He was right, he was definitely right.
Craig Cannon [39:33] - Okay. What about the other shifts in the company? Because you were talking about, all right, we're shifting away from just being this pure sales approach. Say you're an early startup. You're going to have some metrics, but what are other ways to kind of have a mirror put in front of you and be like, "Oh, this is not working?"
Brian Halligan [39:50] - Yeah, we were very early on just trying to move visitors, leads, and customers. Those were the three things we looked at. And we looked at them quite often. We had a weekly meeting every Friday, and we'd go through those numbers. They would go through the list of customers and would say, "How are they doing? Happy or unhappy?" And way too many unhappies in the early days. But, yeah, very early, we looked at visitors, leads, customers. We didn't look at churn, we should have looked at churn. And then later, we really got obsessed with cost to acquire a customer, and total lifetime value of customer, and what's the return on that cost to acquire a customer. That's not very helpful in your first year of a startup, though.
Craig Cannon [40:27] - No.
Kevin Hale [40:27] - No.
Craig Cannon [40:29] - No, that's challenging. Have you ever had a coach?
Brian Halligan [40:31] - I have had a coach, yes.
Craig Cannon [40:34] - Okay, still?
Brian Halligan [40:35] - No, but I had one for a few years there that was really good. And he was part coach, part shrink. He's a professor at Columbia, really good guy, and we hired him to coach me and help me improve, and he was really good, really good. One thing we do that's helpful is every year we do, I would say, the most aggressive 360 reviews you can imagine. My review every year that it's done, it was 30 pages long this year. Dharmesh writes it after surveying lots and lots of people. And the first 16 pages are the things I'm doing well, right? These are your strengths, and I'd read the first 16 pages, and I'm confident I'm the best CEO in the world. I've got this.
Craig Cannon [41:18] - And then he tears you down.
Brian Halligan [41:19] - The last 14 pages are the bugs. He categorizes the bugs as new bugs, or this used to be a feature, now it's a bug, and it's incredibly helpful. I've got that every year. I been working hard on it, trying to get better. The coach helped me a lot with that. It's an unnatural act to run a company, I think, at all, and it's unnatural and unusual to move from early stage startup to... We're kind of a mid-stage scaleup, I'd call us right now. The company goes through lots of changes, and you have to change along with it. It's a challenge, and I've had a lot of help along the way.
Craig Cannon [41:48] - What have been the other challenges because even in this spectrum of time, from 2006 to now, now you're this public face who's tweeting thought pieces for the company, basically.
Brian Halligan [42:01] - Oh, I always did that shit.
Craig Cannon [42:02] - Okay. Before Twitter, yeah, yeah, yeah. What have the other changes been, that you've had to kind of will yourself to go through?
Brian Halligan [42:09] - Aaron Levie actually had a great quote, and I'm going to mess, or a great tweet, and I'm going to mess the tweet up, but, he said something to the effect of, "In the early days of the company, your success is dependent on your being really good at everything. And in scaleup mode, your success as a company is your getting the heck out of the way so other people can get really good at what they're doing." That's been a challenge. Your biggest strength as a founder is typically that you're a control freak. That greatest strength turns into your greatest weakness in scaleup mode. That desire to control decisions, desire to control the organization. Almost every founder, if you're a good founder, you're probably a control freak, you have to shake that somewhere along the line.
Kevin Hale [42:52] - At what point did, what was like the hardest thing that you had to give up?
Brian Halligan [42:59] - Okay, for a long time, I wanted to be the head of product at HubSpot. I was, and I made a lot of product design decisions, and a lot of product roadmap decisions, and ...
Kevin Hale [43:11] - Did you give it up because it's what HubSpot needed, or did you give it up because you realized you're needed elsewhere?
Brian Halligan [43:19] - I gave it up because I wasn't very good at it. In that 360 review process and lots of feedback, I was like, Brian, you're just, genetically, you're just not that good at, I'm the opposite of your background. I'm the exact opposite. I thought, I can figure it out. It can't be that hard, what Kevin does. It's extremely hard what Kevin does. The talent of Steve Jobs, you can read about it, you can watch the movie, but those are very rare talents that people have. Some of them are genetic, and I just didn't have them, so, getting out of that and getting someone who ran product that I really trusted, that was a big transition for the company and myself.
Kevin Hale [43:57] - How do you sort of develop that humility, sort of muscle, because I think a lot of people in charge have a really hard time in understanding that I need to be in a place where I realize that bringing on other people is really about me asking for help and being a little vulnerable for the company. I imagine part of coaching and part of doing all these things and doing a 360 review where you actually get honest feedback is about, like, "Oh, I understand that I'm not going to be perfect." Fo you do things or exercise or read anything that helps you develop that muscle? Because I know I have to work on it constantly.
Brian Halligan [44:37] - There's a humility gene inside of HubSpot. It's a humble company. I don't know how or why, I think there's always this feeling we're just getting started and there's so much more we can do. I just think it's been part of our DNA from the early on, so, I don't know. Yeah, we just feel like we're just...
Kevin Hale [44:54] - Is it one of your cultural values, when you guys hire or look for people?
Brian Halligan [44:58] - Yeah, humility is a big part of it. Yeah, humility's an interesting thing, like, I've been out here, I think I told you guys I've been out here in San Francisco for the last month. I do feel like in San Francisco, there's a sea change going on. The old guard people who ran companies that started, let's say, in the '90s, early 2000s, there's a certain personality there and it's very different today. I'm noticing the founders of this generation of companies, in my peers and younger, there's a lot of humility out there. I've been surprised at the humility. I met the CEO of Gainsight today for lunch, Nick Mehta. I met the CEO of Zoom last week, and they're just very humble. It's like there's been a personality change in the CEOs over the last 10 years. It's really interesting what's going on.
Kevin Hale [45:43] - Ben from Pinterest is my favorite.
Brian Halligan [45:45] - I have never met Ben from Pinterest.
Kevin Hale [45:47] - He's one of the most humble and down-to-earth people I've ever met, and he's someone I always aspire to.
Brian Halligan [45:52] - Oh, that's interesting.
Kevin Hale [45:52] - Because of his temperament.
Brian Halligan [45:53] - I've noticed it out here. All of the folks I've met have been wonderful, humble, down-to-earth people, and they're the exact opposite of the previous generation who were, you know, a my shit don't stink generation. You know, really cocky, and that's how you just got things done back then. It's changed, it's nice to see, actually.
Craig Cannon [46:10] - Yeah. We have mindfulness billboards now. Cool, man, all right, thanks so much for coming in.
Brian Halligan [46:17] - Thanks for having me.
Kevin Hale [46:18] - Thank you, Brian.