HubSpot is a company that needs little introduction. Founded 12 years ago by Brian Halligan and Dharmesh Shah, the US-based software company offers a suite of marketing tools and helped to popularise inbound marketing, a strategy that helps companies attract customers organically by creating quality and valuable content and experiences.
Today, HubSpot is a global tech player with offices across the US, Europe and Asia, serving enterprise companies such as NEC.
HubSpot is a public company, having listed on the New York Stock Exchange in 2014. In 2017, the company recorded US$375.6 million in revenue, a 39 per cent jump from the year before.
HubSpot’s constant and brisk growth can be attributed to the company’s strong set of culture code that embraces employee autonomy, customer-centric mindset, flat hierarchy and more.
It is this focus on both employees and customers that has allowed HubSpot to attract so much talent worldwide. JD Sherman, the company’s President and COO, said that even as the company continues to scale exponentially, retaining the culture that made it great when it was still small, is key to growing the company effectively.
Sherman joined HubSpot in 2012, after serving as a key executive at several major tech companies including 3Com, IBM, and Akami Technologies. Back then, HubSpot only had 200 employees (which is still fairly substantial for a tech startup), but under his stewardship, the company grew its staff count to 2,500.
Sherman spoke to e27 on the sidelines of a HubSpot conference in Singapore last month. In the interview, using HubSpot as a frame of reference, he shared valuable tips on how to grow and scale a company, as well as what he sees as important traits of an effective leader.
Here is the interview, edited for clarity:
On how to scale, and localise a company abroad
Sherman: We have about almost 40 per cent of our revenue coming from overseas now. but we didn’t really make an investment to go overseas until 2013 — when we were a six or seven-year-old company.
In the first two or three years in the company, we definitely did not have a global-first mindset. That probably was ok because what we were doing is iterating really fast; trying to find product/market fit.
At that point in time, it is probably difficult to have any other kind of mindset other than just finding product/market fit.
At some point, you going to want to take that product — if it is already successful — broadly geographically and broadly to different types of customers. As you think about the problem that your product is solving, as you think about the infrastructure you are creating for that product — it needs to be scalable and localisable.
We are in the process now of actually taking the final step of that which is customise the product and the go-to-market strategy for markets that are not like the US at all, such as emerging markets. This is where you have to have a different customer acquisition strategy. where your custom acquisition cost has to be lower because the LTV of those customers is going to be lower too.
Those customers are probably going to have different use cases than a business in a more traditional market.
In Asia, we are starting to really focus on India. A big part of our strategy there is changing our go-to-market model instead of a traditional model, which involved a salesperson talking to somebody on the phone and then convincing them HubSpot was a good fit for them; then selling them the product and helping set it up — which is a fairly costly approach.
We now have a freemium model; we built a Free CRM. We are getting great adoption for the free CRM and we are getting great tools for lots of businesses to get started with, and it costs us nothing to get that engagement. And the other good news is those customers are getting value from HubSpot before we are trying to extract value.
And that model works well for an emerging market like India because the customer reach is great and the cost of acquiring customers goes down.
On scaling a company from 10 to 100, then to 500 and beyond
In the 10 to 100 stage, what you want to do is you want to look around and make sure almost everybody that you hire and almost everyone on your team has a customer focus. To me that means is that they are either building the product or selling or servicing the product and helping the customer do that.
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As you get beyond a hundred plus, you ask yourself questions like: “where can I bring in people and talent that can do a role that will leverage the rest of the company?” There is not much value in a HR department when you have 50 employees, a HR department can only add so much value to those 50.
If you have 200 or 500 employees, there’s a ton of value in that [HR]. This is the same with having an operations-focused team. Again, when it was 40 or 50 people, you can gather everybody together to make quick decisions. As you start to scale, you really need people [focussed on operations]. The leverage becomes really apparent because it will make your entire 500 person team more effective.
Managing cross team functions and getting that alignment right, that’s one of the hardest things to do as you grow. Every mistake that HubSpot has ever made is when we got one team out of alignment with another; for example, when the marketing team is out of alignment with sales or when the product team is out of alignment with services.
On which leadership works best: autocratic or democratic?
Sherman: To me, what you have to be is really decisive and clear, but that’s not the same thing as autocratic. You have to be able to make really clear decisions but you also have to be willing to listen broadly to the team and explain not only the ‘what’ but also the ‘why’ of those decisions.
In the case of HubSpot’s culture, we like to give folks a lot of autonomy to do their jobs. And the only way that is going to be effective at scale is if they really understand the decisions that are made and why they are made.
And a big part of that is being able to say no to things. A board member said to me one time: “startups are more likely to die of overeating than they are of starvation.” What she was saying was that you are going to have to decide what to do and focus on those things and make sure that the company stays focussed on those things.
So in my view, you have to have a decisive leadership style but it can’t be autocratic. Autocratic doesn’t scale because the further away people get from you, the less likely they are to get the context of the decisions they are going to make.
On why a properly-defined company culture code is important
Sherman: When I was in brought in in 2012, the company realised that it had a product/ market fit but didn’t have a business model that could scale and bring the product to lots of market and customers — and HubSpot had about 200 employees then.
That was the point at which we decided to invest in capabilities that would help us become a bigger company.
The challenge was that we wanted to do it not in a traditional way, where we introduce hierarchy and ‘over-process’ the situation; what we wanted to do was to retain what made HubSpot great in those early days even at scale.
The big realisation there that what we had to retain was really the company culture. So we invested heavily in defining that culture, describing it, we published a culture code, describing the kind of company we want to be. And we have held true to that even as we have grown to 2,500 employees.
On how to prevent stagnation in a company
Sherman: We’ve been fortunate that HubSpot changes so rapidly that if an individual is stagnating it would be surprising, because there are plenty of opportunities to grow in your role.
One of the things we help employees understand is that even if you are in the same role, in one or two years, that role is totally going to be different than two years ago because we are at a totally different scale.
For example, we have customer success managers who work with their customers to make sure that they are adopting the product and make sure they are going to renew their contracts. That job was one thing in 2015 when we had a marketing product; it is now another thing when we have a full suite of front office software to help our customers grow better. So you are constantly growing in those roles.
Then as we have grown from 200 to 2,500 employees, the number of senior roles like director-level positions has grown from a handful to about 200, so there’s plenty of opportunities for promotion.
On how to help junior staff rise up the ranks
Sherman: I like to mentor folks a lot. The best leaders come from the ranks of the individual contributors. But something happens to those contributors that makes them a great leader.
What happens is that there is a switch that flips and they become less passionate about their personal success and more passionate about their team’s success. And some people can never flip that switch, and just aim to get the job done or put points on the board, if you will.
Others flip the switch and then they become truly great leaders. It’s the true way to scale because if you think about it because you can only work so many hours a day; you can accomplish so much.
But as you start to grow or build a team, as you start to get rewarded by the success the team has had. That’s when you really pull it off. For me, having worked for 30 years now, that’s my reward now: to really see the success of the team.
Scaling a fast-paced company is an operation that becomes more complex and fragmented as the staff count grows exponentially and across different markets. But as long as employees are attuned to a single ideology that embraces empowerment and autonomy, and as long as there are opportunities for career development, it is safe to say that the company is on the right track.
Correction: An earlier version of this article stated that HubSpot’s headcount was 25,000. That is incorrect. It’s actually 2,500.