How I’m Building My Second Billion Dollar Business
Other than learning a lot and paying our bills, my 2003 startup was a failed attempt at what people later called a Software as a Service (SaaS) business. When I joined HubSpot as employee #15 in 2007, I had no idea the Company would become as successful as it is. When I started HubSpot’s channel sales program, I had no idea I could grow it to $100M+ in annual revenue.
But, with those experiences under my belt, I have a pretty good idea about how I can do it again. So, in January 2017, I joined an early-stage startup, Databox, as CEO. Databox just hit a milestone — in the past year we went from just a few customers to 400. We’re still a few years away from a billion dollar valuation, but I feel confident that we’re making the right decisions to get us there.
To build a big business, I’ve learned, it’s critical to make decisions for the long-term. Below are five we’ve made that I believe will prove to be key. How do I know? Well, each of them were inspired by a similar decision made at HubSpot, that I’ve detailed below too.
Hopefully the stories help you as you make decisions of your own.
1. Cast a Wide Net
If HubSpot has done any one thing better than most (if not all) B2B companies, it’s built a big wide net. Dharmesh Shah, HubSpot’s cofounder, tells startups to build an audience before building a product.
In the early days of HubSpot, we had more blog posts than customers. Today, blog posts written years ago help HubSpot attract new customers every month, “90% of the leads are generated from posts we wrote months ago, years ago” according to Pamela Vaughan, Principal Marketing Manager at HubSpot.
That doesn’t mean they’re slowing down, though. Matt Barby, HubSpot’s Head of Growth said they publish 250–300 posts per month because every post helps HubSpot cast a wider net.
It’s working — according to Alexa, HubSpot is the 273rd most visited website in the United States.
Building a big audience on day one is not realistic for most marketers, of course — Databox included, although we’re making progress.
So, most experts will tell you to focus on a niche when you’re a startup. Those that know me, know that I agree.
However, the groundwork for much of Databox’s recent success was laid before I joined. Before I joined, Databox spent years building a tool that could be used by almost anyone to view their key performance indicators. The product integrates with tools as diverse as HubSpot, Google Analytics, Mixpanel, Mailchimp, Salesforce, MySQL and Quickbooks — to name a few, and makes it easy to view key data from those systems in one spot and on any device.
It’s an ambitious product the team has been building since 2012. It’s now used by product teams, sales leaders, developers, and marketers alike. Unfortunately, on the marketing and sales side, they hadn’t committed to marketing to any of them. So, they made little traction.
But now that we’ve managed to grow our signup volume to thousands per month, the 60+ integrations (and the ability for developers to push data into the system) come in really handy for many of our users.
As a result of our wide net, our users and customers are very diverse; I would have trouble putting more than half of our customers into a common bucket. Of course, there is no way we can market to each of these groups right now given our limited resources. But, as we invest more in marketing, we’ll have no shortages of new markets we can start to target.
To build a billion dollar business, it’s important to cast a wide net.
But…
2. Focus on One Market at a Time
At HubSpot, there was always a debate on whether the focus should be on Owner Ollie (ie a small business owner) or Marketer Mary (ie an in-house marketer at a mid-market company). In the early days, we were actually selling quite frequently to very small businesses with less than 10 employees.
These smaller firms, who were very underserved and often-hoodwinked by other marketing service providers, were quickly convinced of HubSpot’s value.
Later on, HubSpot moved upstream to focus on a different persona: Mary. But, we straddled the two persons for a long time. Here’s Brian Halligan, HubSpot’s CEO, sharing his regrets for trying to serve both personas for so long:
“It turns out the product requirements, support requirements, pricing, and everything were different for Ollie and Mary and by not deciding, we made one uninspired compromise after another and never nailed either one. In 2012, we ripped the Band-Aid off and just picked Mary.”
At Databox, I wasted no time making a decision about market focus. From day one, even when it was just me doing sales, marketing and onboarding, our proactive efforts have been very focused on one market as our beachhead market: HubSpot agency partners. Agencies make up a bit less than 50% of our paying customers and 65% of them are HubSpot partners.
Of course, this decision wasn’t a hard one to make. Given my personal relationships with many of HubSpot’s top agency partners, it wasn’t hard for me to get them to try us. Now that we have many of the top HubSpot partners onboard, it’s not hard to get others to give us a shot.
But, to make it even easier, we also focused our product development, pricing strategy, integration efforts, marketing content and our sales process on them too:
- We have built many new features to help agencies automate their client reporting and easily monitor key numbers for all clients on one screen.
- We launched a generous free version of our product available only to agencies.
- We offer a very high commission to agencies if they standardize on our product for all their clients.
- We’ve invested 1,000s of hours developing our integration with HubSpot’s software.
- We’ve built integrations with many of the most popular products that integrate with HubSpot and that are commonly used by HubSpot partners.
- On our blog, we write content about HubSpot’s software and inbound marketing, most of which is written for agencies, by agencies or with contributions from agencies.
To Halligan’s point (in the quote above), by focusing on one market, we can align all our resources towards serving them really well. Just like when HubSpot decided to make decisions to support the mid-market (aka Mary), deciding to focus on marketing agencies has allowed us to make the decisions that enabled our progress so far.
3. Start Price at Zero
It took HubSpot a little while to figure this one out. To be fair, there weren’t many freemium success stories back in 2007. But, now that the software-as-a-service market has matured, there are plenty. Companies like Dropbox, Mailchimp, Survey Monkey, Evernote, Slack, and Hootsuite have shown that freemium can help a SaaS business get big quickly by keeping customer acquisition cost low.
Fast forward to today and HubSpot has embraced the freemium model. A few years ago, they launched a free CRM that’s disrupting the CRM market, a sales product that starts at zero, and a free marketing product that introduces their massive audience to their paid marketing plans. How’s it going? Halligan shared the progress in their Q2 2017 earnings call.
“So how’s HubSpot’s freemium play growing? Well, you can see some of the momentum as our total customers are growing north of 40%. At our scale, that sort of customer growth is pretty remarkable. Interestingly enough, the growth we’ve seen in total customers isn’t coming through our traditional funnel where lead downloads a white paper then fills out a form, speaks to a sales rep and then purchase the product over a 30-day sales cycle.
Increasingly, customers start by using and getting value out of one of our free products and then upgrade into a paid version. We’ve seen evidence of this trend, that’s about 1/3 of our new marketing customers since 2016 begin actively using our CRM product before purchasing the Basic, professional and Enterprise versions of our marketing product.”
When I joined Databox, one of the first things I did was simplify the pricing and packaging. The most important change was making the free version of the product better. We made all but one feature available in the free version. We also increased the usage limits so that free users are now more likely to become daily users.
Mid-way through last year, we launched a free version of the product for marketing agencies that gives them higher limits in their own account and the ability to create free accounts for their clients too. In addition to having 200+ agencies leveraging a paid plan for their clients, we now have 1000s of agencies leveraging our free version to better monitor and report their clients’ key metrics.
Now, when agencies get on calls with us, they are often already set up. One call I took the other day literally started with the agency owner saying, “I love Databox. I’m now rolling it out to my clients.” That was the first personal interaction we had with him.
The next time you’re launching something new, think about how you can make it free.
In software, product teams are the new marketers, marketers are the new salespeople and salespeople are the new customer service professionals. Free makes marketers lives easier and uncaps sales productivity.
4. Don’t Do it Alone
The internet has leveled the playing field for businesses. Now, any business can compete. But, that also means that most businesses have more competition now.
“Back in 2006, the battle was for inches on a four foot shelf. In 2016, it is a battle for millimetres on the infinite shelf of the internet. That is great for your prospects, but bad for vendors.” said Brian Halligan at INBOUND16.
It’s really difficult to market a new business alone and from scratch. To build a big business today, you must have a smart partnership strategy.
When I joined Databox, given limited resources, I knew it would be important to go to market with partners. We couldn’t “increase our shelf space on the internet” without help from others.
For software businesses like HubSpot and Databox, it’s imperative to partner with service providers and other software companies. Having partners like these is a win-win-win-win for all. It benefits customers because more software is interoperable and because more talent is available to help them leverage it. It benefits service providers because it allows them to create, market and sell service packages that can be sold and delivered efficiently. Software companies benefit by partnering because it provides a new market for each of them to tap.
Databox is a perfect business to market with partners. Our 60+ software integrations give us plenty of software partners to work with, including HubSpot, where we are their 7th largest software partner. We have also established 200 mutually-beneficial agency partnerships, where they use our software to demonstrate their value to clients
Having a thriving ecosystem of partners benefits our customers too. Not only can our agency partners help our users set up KPI tracking with our product, they can provide services that actually help our customers improve their numbers.
Because it’s a win-win-win-win, at Databox, we’ve made co-marketing with our partners a top priority, helping each other generate traffic and new business.
For example, agencies can get listed in our directory and submit report templates to our KPI dashboard directory. The report templates are branded by the agency and agencies get notified in an email when a user downloads one. Additionally, our partners can submit as many guest posts for our blog as they want, and we frequently ask our partners to contribute to posts we’re writing.
As a result of all of the free promotion we provide to partners, some of them generate more leads from our website than their own.
Like the lessons I learned above, I learned about the value of co-marketing at HubSpot too. IMPACT Branding, a HubSpot Diamond partner, literally landed their first five retainers because of a single guest post on the HubSpot blog. Today, HubSpot has a popular directory which helps HubSpot customers find and hire agencies. As a result, HubSpot’s partners get lots of business directly from HubSpot.
And partners reciprocated for HubSpot. Whenever HubSpot launches a new product, it’s covered on 100s of agency blogs. Most HubSpot blog posts are shared on social by many of HubSpot’s partners right after publication. Many put their HubSpot Certified partner badges on their site — even their home pages. Agencies even compete quite aggressively to win HubSpot’s Impact awards.
5. Share Your Story Transparently
“Power is now gained by sharing knowledge, not hoarding it.”
- Dharmesh Shah, HubSpot’s Culture Code Deck
Building any business has its ups and downs. After years of consistent growth at HubSpot, and a decade since I called the final shots at a startup, I sorta forgot about the ups and downs of running one.
Through those ups and downs, it helps to have true friends who are willing to help. Sometimes, just as a sounding board. Sometimes, by helping out more directly.
I’ll be forever appreciative to the individuals who invested their time to help us. People like Brendon Macdonald from Yello Veedub that spent more than 80 hours helping us improve our Facebook Ads Connector and then shared his whole process with all our other customers; Eric Pratt and his team at Revenue River who volunteered to be our first case study; and Bob Ruffolo at IMPACT Branding whose team produced, promoted and hosted a webinar to tell other companies and agencies how they use our product to hit aggressive marketing goals for themselves and their clients.
They are all truly part of our team.
I won’t pretend to know exactly what motivates each of them to help. The product certainly helps them. I’ve certainly helped them over the years. They certainly receive benefit by showing their clients that they’re forward thinking.
But, I think another big reason they’ve helped us — is that they feel like they’re part of our team. To create that kind of feeling, transparency is key. Chris Duprey from IMPACT Branding sums up the cause and effect between transparency and commitment in a blog post about why they are transparent with employees.
“Transparency is not simply sharing the fun stuff or overwhelming the team with documents and meeting minutes. Other than personal employee matters, we share everything with the team.
This not only allows us to collect feedback and input before making key decisions, it shows our team they have a future with us, and they have a say in what that future looks like.”
At Databox, we strive to be this transparent with our entire community. We’ve shared business updates on our blog. I’ve shared our Company’s stats on our podcast, and we all have personal conversations with many of our partners about our complete strategy. We’ll do more sharing in 2018 and beyond — just like this Medium post where I’ve shared our actual business results. I’m confident people will feel a part of our team if they know what our “future looks like” and how important they are to it.
Hopefully, this level of sharing will also inspire others to think bigger about their business too.
Are you building a billion dollar business? If not and you want to, what do you plan to do differently?
