How I Built a $100M+ Sales Channel By Challenging the Status Quo
Today will be my last day at HubSpot after 9 years, 2 months, and 2 days. When I started at HubSpot, there were 15 of us. Today there are 1500+. I remember the 100th customer party –we celebrated with pizza and a case of Natural Light. As of our last earnings release, HubSpot has 21,500 customers.
This is me celebrating on the day of our IPO.
Tomorrow, I join Databox, another early stage startup hoping to do it all over again, this time as CEO.
My HubSpot story is an unconventional one.
I started as a sales rep and after just a few days, Brian Halligan, HubSpot’s CEO, told Mark Roberge, HubSpot’s first VP Sales and later Chief Revenue Officer, that he didn’t think I’d make it more than a month. Our selling approaches were, at least on the surface, very different. But, I leave as a Sales VP, being the first ever (and one of only 2 people in sales) to be promoted from rep to manager to director to VP.
A big part of this success came from my willingness to challenge the status quo.
HubSpot was designed from the beginning to be a direct selling organization. Against the wishes of the executive team, I started turning marketing agencies into referral sources.
With early success, the executive team relented and I scaled HubSpot’s partner program for marketing agencies up past $100M in annual revenue. As of our last earnings call, channel sales represents 40% of revenue. We have 3,400+ partners servicing thousands of HubSpot customers, helping them get better results, month in and month out.
The following are a few of the things we did (and you can do too) to build a big business from a modest start. And it starts with a willingness to challenge the status quo.
Stand for something even if it scares off many prospects.
I wasn’t the only challenger at HubSpot. At HubSpot, I found a home amidst a team full of them.
We were all attracted to the idea that the internet was changing the way companies should market. There weren’t many examples back then of traditional companies scaling revenue primarily through internet marketing, but we had seen enough evidence to believe it would enable massive growth for millions of companies.
Today, of course, the power of internet marketing is rarely questioned. It’s not that controversial to suggest inbound marketing is more effective than outbound. HubSpot has the data that shows it works and plenty of companies have grown to be big businesses, in large part, due to their commitment to inbound marketing and sales. HubSpot being the poster boy.
But back in 2007, when we started preaching this, it pissed a lot of people off. In fact, it alienated marketers who could have been our customers. By publishing early posts like Is PR Dead? and 23 Reasons Inbound Marketing is Better than Outbound, we publicly picked a fight with marketers and agencies who built their careers (and paid their bills) with traditional methods. We railed against trade shows, direct mail, television, print advertising, and cold calling– techniques that had worked for many companies for decades.
Clearly, this approach worked out for us. Why, though?
Here’s what I think: by being brave enough to take a then-controversial stand, we ultimately attracted throngs of people who agreed with us.
We could have softened the message, but we would have lost the magnetic power of differentiation. At the beginning this meant we likely repelled more marketers than we attracted. But, over time, more marketers, frustrated with the increasingly poor performance of traditional channels, joined the “Inbound Movement.” And when they did, these people largely gave us credit for the idea.
Our marketing partners were key in evangelizing the movement right alongside us. Agencies like Kuno Creative, Smart Bug Media, Lynton Web, Square 2 Marketing and Impact Branding helped us demonstrate to the world how this inbound marketing thing worked. Our first partner firm, lead by Paul Roetzer, literally wrote the book on inbound marketing for agencies.
In your business, think deeply about what you stand for that’s different, and then take a public stance. It might be unpopular to start. It might feel risky to you. Trust me, we had arguments. Many times, we had to to temper our enthusiasm, especially on sales calls. But if you can accept the fact that not every company will be your customer any time soon, you’ll recognize that the riskiest thing a new business can do is be forgettable. If you have evidence that you can eventually win the battle, take the leap now.
When you’re doing something unique, ignore conventional wisdom.
My natural tendency is to question authority. Most people are afraid to speak truth to power for fear of consequences. I’m not one of them.
After HubSpot’s IPO, I sent a note to my father telling him that he was largely responsible for my personal success. My willingness — no eagerness — to challenge the status quo, was something I learned from watching him. He told me he learned it from my grandfather, Peter Caputa Jr. I hope to pass it on to my son, Peter V, and you when you apply these lessons.
When I petitioned to start HubSpot’s partner program, I received push back from almost everyone. At the time, HubSpot was in the middle of raising funding and it was absolutely critical for us to exceed our revenue targets. Therefore, focus was critical and the executives were worried about the distraction a partner program would bring. By just working with a few agencies, I was already unintentionally causing some challenges for a few other teams.
Moreover, investors told us that it was premature to build a channel sales program until we proved a bigger market existed. They said we’d have trouble recruiting resellers if we couldn’t show them the market opportunity.
Some venture capitalists even said it didn’t make sense at all since software as a service (SaaS) companies didn’t sell through partners. They reasoned that SaaS didn’t require much implementation work — there was no hardware to set up and no software to install or configure. It made even less sense to them since we were selling to small businesses.
We were also finding great success building out our direct inside sales organization.
So, most of the HubSpot executives were less than enthused about launching a formal program, even though I was performing exceptionally well as a sales rep because of the deals a few agencies were bringing me. But, I kept trying to convince them. Finally, after a few presentations, Halligan relented at the end of a long meeting, saying, “Fine. You can start the program. Just hit your goals and don’t distract anyone.”
I relished the challenge.
As a challenger, I’m motivated by proving other people wrong more than almost anything else.
And given my experience running a small marketing agency and my daily conversations with agencies, I knew there was an opportunity.
If you’re doing something unique, conventional wisdom doesn’t always apply. If your firsthand experience tells you there’s an opportunity and your tests prove efficacy, you should ignore people who say it can’t or shouldn’t be done.
Encourage debate over false harmony.
Our go-to-market strategy wasn’t the only thing I questioned at HubSpot. I questioned pricing decisions, product focus, headcount planning, marketing strategy, services investments, quotas — the list is too long for just one blog post.
I am surprised that Brian Halligan and other HubSpot executives put up with my questioning for so long. I probably would have fired me a long time ago for insubordination — or just out of sheer exhaustion. But HubSpot has always been intentional about nurturing challengers.
HubSpot has consistently taken the approach of encouraging debate amongst all its employees where most companies follow a top-down, command-and-control management approach.
In order to enable this culture, HubSpot executives practice radical transparency. In good times and challenging times, HubSpot sticks to sharing board meeting notes, executive meeting notes, departmental decisions and activities, and company financials — all on the wiki. The theory is that informed employees can better contribute to decision making, solutions to challenges, and identification of new opportunities. So, employees are encouraged to share their ideas, concerns, projects, and rants — all on the wiki.
As an individual contributor in our early days, I was frequently the one starting a debate on the wiki, in a meeting, or in the hallway. In fact, when Halligan granted me a stock option award at a company meeting as a reward for getting the HubSpot partner program to a point where it drove a significant percentage of HubSpot’s revenue, he called me “HubSpot’s favorite a**hole”. (I took it as the compliment it was meant to be.)
At HubSpot, no one takes themselves too seriously, including the executives. We operate under the principle that anyone could be right and everyone’s input is valued. We let hard work and data choose the winners, not opinions and rank.
Later, as an executive leading a large sales team and our channel sales program, I encouraged the same behavior amongst my team.
In your business, give your employees the space to speak up. Whether it’s via a wiki or some other means, encourage them to question and challenge assumptions and decisions.
Allow employees to start experiments without the red tape.
In the early days of HubSpot, there was a lot to figure out. We had ambitions to build a big company fast, and we needed all hands on deck. This meant our front line employees, especially the ones who chose to lead projects, were the ones to figure out most of what we do today.
But, choosing to lead an experiment was entirely up to employees. Only caveat? Experiments were done on nights and weekends. Once we proved enough traction, we were invited to present our findings, our plan, and make our case for additional resources. Once I proved the partner program could be a key growth lever for HubSpot, I was “fired” from my day job and got to focus 100% on building this program. You can read more about the story and HubSpot’s experimentation process in an article Halligan penned for inc. magazine the first time we made the list.
Regardless of your resources, encourage employees to identify opportunities and propose experiments to capitalize on them. You might ask employees to dedicate time after they complete their tasks for the week, allow them to work on their project as part of their role, or ask them to prove it out on their own time.
Serve unserved markets even when everyone else is ignoring them.
This headline should probably have quotes around it. It is a central tenet in Clayton Christensen’s theory on disruption:
Disrupters start by appealing to low-end or unserved consumers and then migrate to the mainstream market.
HubSpot is a perfect example of starting with an unserved market and moving upstream to disrupt incumbents. From the early days of HubSpot, we were focused on the SMB market. In reality, many of our early customers were very small businesses with less than 10 employees.
We discovered that these very small companies were not only unserved, they were frequently scammed by SEO consultants. These SEO consultants would commonly sell a $500-$1000/mo service that could be fulfilled with just an hour or so of work. The majority of that work involved changing a few things on the client’s website and sending them a purposefully-obfuscated monthly report. Many small business owners suspected their SEO consultant wasn’t doing much of anything, but were afraid of missing out on search traffic if they fired them.
Our approach was to explain keyword research and how to write content with those keywords in it, then demonstrate how our software would allow them to do it themselves. We de-mystified SEO in a 30 minute phone call. Plus, we saved them money. We’d charge them a one-time $500 training fee and $250/mo for our software. Our only competition at the time were more expensive snake oil “SEO Consultants.” These very small companies were our first toe-hold in the market.
Over time, we moved upstream to serve the upper-end of the mid-market. With the formal launch of HubSpot’s freemium products this year and HubSpot’s startup program, the software serves the needs of very small, small, and mid-market companies alike.
Guess what was another unserved market back then? You guessed it: marketing agencies. Back then, the only legitimate marketing software company that worked with agencies was Constant Contact. (In fact, I was a Constant Contact partner when I ran my own small firm before joining HubSpot.) But, Constant Contact was just an email marketing tool then.
While Seth Godin’s, Permission Marketing, educated the marketing world about the value of email marketing, there was no one helping agencies learn the newer stuff. Most small marketing agencies were ignorant when it came to things marketers consider basic now: keyword research, on page search engine optimization, the value of blogging, using calls-to-action to drive conversions.
My eureka moment was when I realized I could teach these unserved agencies how to bundle these services into a retainer agreement. At the time, most small agencies were selling web design projects, low value email newsletter services, and short term SEO agreements.
We taught them how to bundle a handful of services and sell them based on the value they could provide to clients: month-over-month increases in traffic, leads, and sales. This helped these agencies generate consistent, predictable cash flow, which allowed them to invest in growing their agencies. Many of the agencies who started with us as just five person firms and single digit recurring revenue streams, now employ tens of employees and generate the majority of their revenue from long-term client contracts.
What underserved market would benefit from your product? They might not look attractive to you, but challenge your team to serve the unserved at a price point and approach that works for them. You’ll be forced to find efficient paths to market, and when you eventually move into more established markets, you’ll know how to sell bigger deals at a lower cost than entrenched competitors.
Always over-perform, but not at the expense of others.
The selfish, personal reason I started HubSpot’s partner program is because I thought it would help me close more business. HubSpot reps, of which I was one when I started the program, had a quota of x. I believed I could do 2x with the help of resellers. After a year of effort, I consistently did 3x. Once I established over-performance was possible, I had a green light to expand the program, hire more reps, invest more in marketing, build out a services organization, etc.
As we grew the program and the team, we kept over performing, with very few months under 100% of goal. One of my fondest memories at HubSpot was when, after 2 years of consecutive monthly over-performance, the team shaved my head. I had offered it as a small additional incentive.
As HubSpot grew, though, not every sales team was successful all of the time. A few years back, channel sales conflict emerged between the different parts of our sales organization. Channel conflict is when a direct sales organization and indirect sales organization compete for the same deal(s).
We had to step back and evaluate our structure and lead and opportunity management systems and rules. And while I lost a few arguments in that process, the sales organization and company emerged much stronger with clear guidelines for which sales organization would get credit for which deals. Over several years, we improved that process tremendously, so that it’s fair to both teams.
I learned an important lesson in building a big business: always over perform, but make sure you’re first and foremost optimizing for the entire company’s success.
Join a company with experienced, ambitious people.
When I joined HubSpot, I shutdown my own startup after my partners and I put six years of effort into it. We were in our early twenties when we started it and had a lot to prove, but little experience building scalable businesses. While we had built marketing software and our goal was to sell our software, we mostly generated revenue through marketing services.
When I met with Brian Halligan and Dharmesh Shah for my final interview, they pitched me the origin story of HubSpot, a bit about their backgrounds, and their ambition of building a big, important company. Halligan asked me, “What do you think?” I said, “Sounds more exciting than what I’m working on now.” Little did he know I had already made up my mind for two reasons.
- HubSpot represented steadier pay than what I was used to making.
- I was sold on joining them because of their resume. Halligan was an early team member at another successful software company, Parametric Technologies Corporation (PTC), and Shah had sold his previous startup to SunGard. I was also eager to learn from Mark Roberge, Mike Volpe, and Dan Tyre–three people who I followed, admired, and knew had more successful careers than me.
I know I wouldn’t have been nearly as successful if their experience and the experience of many others at HubSpot wasn’t guiding me. Fact is, the partner program would have not been successful if it weren’t for amazing investors and an amazing management team (too many to name, past and present), and all of the other things their teams have done exceptionally well: product, demand generation, customer support, financial management, corporate strategy, operations, culture, etc.
If you’re joining a company and want to build something big, make sure the people around you have experiences you can learn from.
Hire people with something to prove.
In addition to joining a top notch team, I had the privilege of building one too. In most cases, I hired for ambition, drive, desire, and commitment.
Those who have known me long enough, know I am driven by my personal goals. In high school, I wrote down in my yearbook that I wanted to make a certain amount of money by a certain age, so that I could buy a farm. I’ve shared that goal with many others in an effort to inspire them to write down and share their own goals. My goals have changed some since high school, but HubSpot has helped me buy some land and start my “large garden,” among many other things.
Whenever I hired people, I looked for similar drive.
- My business partner in my previous startup, Jeetu Mahtani, fits the bill. He joined my team at HubSpot early on as a sales rep and now manages all of HubSpot’s international operations. He and a small team of my other initial hires extended HubSpot’s partner program all around the globe, building partnerships in 69 countries.
- Corey Beale, who joined my team as my second manager, and documented all of our initial internal processes now leads up operations globally for HubSpot.
- Danielle Herzberg, now a Stanford MBA student, was a brand new salesperson who became rookie of the year on my sales team, rep of the year in her second year and later became my third sales manager before she was asked to lead our partner program for software companies.
- Katie Ng-Mak, an early rep who later became a manager on my team now leads the entire channel sales team in North America.
- Outside of sales, Kate Walsh ran our services organization from nothing to supporting 3400 partners. Patrick Shea has lead marketing and partner enablement almost from inception as well. Both started as individual contributors and had the drive to build a big business alongside me.
These and many other people — too many to name — are the ones who built the program. It was their ambition and commitment who made it happen.
Hire people who are every bit as ambitious and committed as you are.
Build repeatable processes.
As we enter 2017, 100s of people support our partners across all of the functions of the company.
In the beginning, it was just me and an intern. I was able to wing it for the most part. I didn’t need to write anything down as I could remember what I did from one day to the next.
As I started hiring people, I realized I had drastically underestimated the amount of process creation, process documentation, software systems development, and training required to build and scale a team and program this big.
I wrote about a few of these processes, but for every one I’ve written about, there’s probably 20 that I haven’t. And my extremely capable successor to lead the partner program, David McNeil, has already created many more. McNeill has ‘business scaling’ skills that I didn’t value at the start.
If you have ambitions to build a big business, get good at creating, documenting, and building systems and processes. It doesn’t sound like a wildly exciting way to end this article. But, you’ll understand soon enough.
Even after you’ve achieved your goals, set new goals that challenge yourself and others around you.
At HubSpot, the conventional way of doing things was rarely the first thing we tried. We built the inbound movement by pitting it against the multi-billion dollar ad business. We bet on inside sales long before it was de rigeur. We focused on SMBs even though VC after VC said “go upstream”. We built a large channel program, a rarity amongst Software-as- a-Services businesses despite lots of people telling us not to bother. This year, I spent a good amount of my time helping HubSpot challenge salespeople to be more buyer focused.
Even at scale, HubSpot is a challenger company. HubSpot isn’t resting on its laurels and still has lots to prove. As HubSpot’s fearless leader, Brian Halligan, likes to say, “It’s early innings.” He still has that drive to be bigger, do more for partners, customer, and employees, and to be better every day.
Even though I’m leaving for a new challenge, I strongly believe HubSpot, and HubSpot’s partner program, is still just getting started. It’s been an honor and a pleasure to be a part of the first inning. Going forward, as they continue to challenge everyone around them, I’m excited to watch it grow from “outside the bullpen.”
And I’ll be attempting to duplicate the success at my new company. A few years back when Halligan addressed the sales team at our annual kickoff, he put up a list of top executives at other successful companies and asked the team what we thought these people had in common. The answer: they were all former employees at PTC, the company Halligan spent ten years helping to build, before he started HubSpot.
Many HubSpotters have already gone on to start their own business or join others as senior executives. I’m certainly not the first, but by following in Halligan’s footsteps, I hope to be at the top of his list a few years from now when he starts building the list of successful companies lead by former HubSpotters.
If you read this far looking for inspiration and a bit of a roadmap for building a big business (or channel) of your own, hopefully I’ve given it to you. If not, and you want to give me another chance at it, you can follow me on my next adventure via Twitter. I’ll be implementing many of the lessons I learned at HubSpot over the next ten years in my role at Databox.
