Zigging vs. zagging: How HubSpot built a $30B company | Dharmesh Shah (co-founder/CTO)

Zigging vs. zagging: How HubSpot built a $30B company | Dharmesh Shah (co-founder/CTO)

Dharmesh’s background (00:00:00)

  • Focuses on one thing and becomes exceptionally world-class at it.
  • Opts not to have direct reports and avoids management responsibilities.
  • Dislikes being around people for extended periods.
  • Obsessed with comedy and keynote preparation.
  • Uses a custom software to measure laughs per minute (LPM) in his presentations.
  • Believes in zigging while others zag, going against conventional wisdom.
  • Leans into his strengths and avoids areas where he is weak.
  • Never had a single direct report in his 18 years at HubSpot.
  • Focuses on creating a strong company culture and empowering employees.
  • HubSpot's culture is based on transparency, autonomy, and a sense of ownership.
  • Encourages employees to take risks and learn from their mistakes.
  • Believes in hiring people who are passionate about the company's mission and values.
  • Uses a "culture code" to define and communicate the company's values and expectations.

Fun facts about Dharmesh (00:04:20)

  • Dharmesh Shah, co-founder and CTO of HubSpot, has no direct reports and has never had any throughout HubSpot's history, despite the company having over 7,000 employees.
  • He doesn't conduct one-on-one meetings as a result of not having any direct reports.
  • Dharmesh built several website projects at HubSpot, including a product called WordPlay, which generated $90,000 per month and had 16 million users.
  • He purchased chad.com for $10 million and sold it two months later for over $15 million, making a profit.
  • Dharmesh donated some of the proceeds from the sale of chad.com to charity, fulfilling promises he made on LinkedIn.
  • He is a billionaire.
  • Dharmesh was born in a village in India without paved streets, traffic lights, or hospitals.
  • Before HubSpot, he founded two companies.
  • Despite promising his wife not to start another company, he co-founded HubSpot after meeting his co-founder in graduate school.

His data-oriented approach to public speaking (00:06:31)

  • Dharmesh Shah, co-founder and CTO of HubSpot, believes that public speaking is a skill that can be acquired through practice and measurement.
  • He identified humor as a key subskill and developed custom software to measure the effectiveness of his humor by calculating laughs per minute (LPM).
  • HubSpot focused on improving the LPM ratio in their marketing content to increase audience engagement.
  • Shah emphasizes that anyone can learn just about anything through practice, measurement, and incremental improvement.

Advice for adding humor to your presentations (00:11:45)

  • When telling a story, the funny parts should be the last words of that segment.
  • Pause after delivering the punchline to give the audience time to react and laugh.
  • Have multiple funny bits or punchlines in a story to leverage the investment made in setting up the context.
  • Aim for a Laughs Per Minute (LPM) rate of above 1.25 to be in the top percentile of non-professional talks.
  • Solo Weare is software built for exactly one person, in this case, Dharmesh Shah himself.
  • The UI is designed for a single user, eliminating the need for extensive testing.
  • If the software stops providing utility, it can be easily turned off without disappointing users.
  • The decision to make software solo Weare or not depends on whether it is useful enough to enough people to justify the effort of making it non-solo Weare.

Why he has no direct reports (00:15:28)

  • Dharmesh Shah, co-founder and CTO of HubSpot, has never had any direct reports.
  • He realized that he is not good at managing people and does not want to spend time becoming passively okay at it.
  • He prefers to focus on his strengths and the things he enjoys, which are highly correlated.
  • His co-founder, Brian, agreed to this arrangement and promised not to make him manage people even temporarily.
  • This decision has been beneficial for both Dharmesh and HubSpot, allowing him to enjoy the benefits of scale without the downsides of managing people.
  • Dharmesh Shah discusses the concept of "zigging vs. zagging" in business.
  • Zigging refers to following the conventional wisdom or industry trends, while zagging refers to taking a different approach.
  • HubSpot has often taken the zagging approach, which has led to its success.
  • Examples of HubSpot's zagging include:
    • Focusing on inbound marketing when everyone else was focused on outbound marketing.
    • Creating a free CRM when everyone else was charging for CRM software.
    • Building a company culture that values happiness and autonomy.
  • HubSpot's zagging approach has allowed it to differentiate itself from its competitors and achieve rapid growth.

You can shape the universe to your liking (00:18:46)

  • Founders can design their companies the way they want, rather than following conventional methods.
  • HubSpot co-founders, being night people, implemented a rule of no meetings before 11:00 a.m. to accommodate their work preferences.
  • This rule allowed them to create deep work time in the mornings.

Lessons from building HubSpot (00:20:02)

  • Dharmesh Shah, co-founder and CTO of HubSpot, shares his experience and advice on building a successful company.
  • He believes that founders should not be apprehensive about going public as it provides several benefits, including a clear market valuation and the opportunity for a wider range of investors to participate in the company's growth.

Advice for founders (00:20:02)

  • Founders should not overthink the IPO process and should focus on creating value for their company.
  • The market valuation of a publicly traded company will oscillate around its actual value over time.
  • Going public allows more people, including customers, partners, and well-wishers, to participate in the company's growth.

Contrarian ways of running a company (00:23:43)

  • HubSpot's success is attributed to its ability to embrace new challenges and maintain excitement and motivation.
  • Transparency is a core value at HubSpot, with all information shared equally among employees, except for legally restricted data and individual salaries.
  • HubSpot challenged the norm by designating all employees as Insiders upon going public, ensuring transparency without legal limitations.
  • HubSpot embraces contrarian thinking and uses the concept of "first principles" based on universal truths to challenge conventional wisdom and find innovative solutions.
  • HubSpot's decision to focus on the SMB market was a high conviction, low consensus bet that required strong conviction due to its low consensus.
  • HubSpot initially had a flat organizational structure with no titles but later introduced classic titles to provide benchmarks for career progression and external recognition.
  • HubSpot implemented a policy of providing all employees with access to all files from the beginning to ensure simplicity and transparency.
  • HubSpot started with a small office with four tables and used a lottery system to assign seats, promoting fairness and a flat organizational structure.
  • HubSpot's approach of starting with the simplest possible solutions and adding complexity as needed proved effective and scalable, even as the company grew to hundreds of employees.
  • HubSpot implemented a seating algorithm that avoided politics and unnecessary conflicts by ensuring different groups, such as engineers and salespeople, were not placed next to each other, considering their preferences for quiet time.
  • HubSpot co-founder Dharmesh Shah emphasizes the value of simplicity and the n+1 approach, which involves continuing until something goes wrong.

Fighting the second law of thermodynamics (00:37:26)

  • The second law of thermodynamics states that within a closed system, entropy (disorder and randomness) increases over time.
  • This law applies to companies as well, leading to complexity and eventual decline if not managed.
  • In the early stages of a company, the focus is on survival, then avoiding stagnation, and finally fighting complexity.
  • Complexity can manifest in various ways, such as increased management layers, headcount, and overall difficulty in operations, leading to slower decline.
  • Simplicity is crucial for long-term success and should be ingrained in the company culture.
  • Fighting for simplicity requires constant effort as the natural tendency is towards complexity.
  • Simplicity is worth fighting for and requires continuous effort.
  • The universe and well-intentioned people introduce complexity naturally, making it a constant battle.
  • Examples of complexity include adding pricing tiers, unnecessary product features, and various knobs and dials.
  • The second law of thermodynamics leads to entropy and disorder, which must be actively combatted to maintain simplicity.

The importance of simplicity in running a business (00:40:29)

  • HubSpot's success is attributed to its focus on simplicity and avoiding unnecessary complexity.
  • In the early stages of product development, HubSpot implemented a rule where for every new feature added, one had to be removed, ensuring a net decrease in complexity.
  • The cost of a feature should consider implementation, maintenance, and the long-term impact on business complexity.
  • HubSpot's early constraints, such as building for small businesses and offering a free product, forced them to keep things simple and avoid excessive complexity.
  • Systematic ways and mechanisms, such as guardrails and constraints, are more effective than relying solely on cultural beliefs and meetings to instill values within a company.
  • A well-designed system outperforms other mechanisms in promoting and sustaining desired behaviors and values within an organization.

Succeeding in the SMB market (00:45:22)

  • Small and medium-sized businesses (SMBs) are challenging to target due to their limited scalability, but they offer a balance between enterprise and consumer markets with measurable growth and control over product roadmap.
  • Enterprise software companies face long sales cycles, feedback loops, and revenue concentration issues, while consumer startups have binary outcomes of either massive success or failure.
  • HubSpot's initial success in the SMB market was difficult due to a lack of precedent and investment skepticism, but the company's focus on SMBs, rather than competing in the enterprise software space, ultimately led to its success.
  • Targeting the SMB market is challenging but more sustainable and enjoyable in the long run, and successful SMB software companies often move towards the enterprise market over time.

Zigging when others are zagging (00:50:29)

  • Focus on high conviction, low consensus bets.
  • Consider alternative paths, even if they seem unconventional.
  • Don't be afraid to go against the grain and challenge the status quo.
  • HubSpot decided to build an all-in-one marketing platform, even though there were already great products in each of the categories they were entering.
  • Their reasoning was that customers needed a solution that integrated all of these tools and solved their actual problem, rather than a bunch of disconnected tools.
  • They measured each individual product category to ensure they were not over-investing in any one area and compromising their value proposition of an integrated platform.

When it makes sense to go “wide and deep” (00:54:17)

  • Founders often fall in love with the solution instead of the problem.
  • It's important to understand and define the problem you're solving.
  • HubSpot didn't immediately jump into building an all-in-one platform.
  • They understood the problem deeply and realized they needed to do more than one thing.
  • They forced themselves to have the discipline to go broad but not kill themselves.
  • You can't have the best of both worlds and be the best at everything.

Using flashtags to communicate opinions (00:57:33)

  • HubSpot uses flash tags to communicate the importance or urgency of suggestions or requests.
  • There are four levels of flash tags: #FYI (for information only), #suggestion, #recommendation, and #plea.
  • Flash tags are self-descriptive, searchable, and widely accepted within the company.
  • HubSpot values autonomy and trusts its employees to make decisions, so there are no mandates.
  • The #plea tag is used to express a strong recommendation without issuing a mandate.
  • HubSpot's success is attributed to its ability to take a different approach to problem-solving and innovation.
  • Dharmesh Shah, co-founder and CTO of HubSpot, emphasizes the importance of considering whether a disagreement is worth fighting for and the potential consequences of imposing one's will.
  • Shah recommends the blog post "flashtags.org" for more information on how to use flash tags.

HubSpot’s decision-making process (01:02:44)

  • HubSpot's decision-making process has evolved to prioritize data-informed choices with a designated decision-maker.
  • To ensure alignment, HubSpot follows the "debate, decide, unite" principle, emphasizing open debate, commitment, and unity around decisions.
  • Dharmesh Shah, HubSpot's co-founder and CTO, takes a systematic approach to decisions, identifying and prioritizing relevant factors without assigning exact weights.
  • The default position on most matters should be "no" to avoid indiscriminate acceptance.
  • When considering saying yes, evaluate what must be removed from one's schedule or life to accommodate the new commitment.

Deciding what ideas to invest in (01:09:41)

  • When evaluating startup ideas, consider the potential outcome, probability of success, and unique advantages.
  • Potential outcome should be considered first to avoid filtering out valuable ideas with lower chances of success.
  • Passion is often ambiguous and not a reliable indicator of success.
  • Many successful companies were founded on identified opportunities rather than initial passions.
  • Founders, especially first-time founders, may not yet know their true passions due to limited life experiences.

Defining and maintaining company culture (01:15:26)

  • HubSpot's co-founder and CTO, Dharmesh Shah, initially focused on articulating the existing company culture rather than creating a new one.
  • To gauge the success of new hires, Shah conducted an internal survey, which initially faced resistance due to negative perceptions of culture from previous experiences.
  • HubSpot's culture is viewed as a product that evolves based on changing customer and employee needs, similar to how a product is iterated on.
  • Regular NPS surveys are conducted to assess the health of the culture, identify issues, and commit to addressing them transparently.
  • While not all issues can be immediately resolved, HubSpot acknowledges feedback and explains why certain aspects of the culture may need to remain unchanged.
  • Prioritizing customers and treating culture as a product has led to positive outcomes for HubSpot.
  • Core values are important, but not everything in a culture or product is a core value.
  • HubSpot's success can be attributed to strategic choices like prioritizing transparency, despite potential inefficiencies.
  • The company's culture has evolved over time, with aspirations stated in the culture code eventually becoming true due to their influence on new hires.
  • It's crucial to distinguish between aspirational statements and outright falsehoods when defining a company's culture, as exemplified by Airbnb's experience with their core values.

The potential of AI (01:30:46)

  • AI has the potential to revolutionize industries by amplifying human capabilities and enabling new possibilities and business models.
  • There is a mismatch between users' mental models and the actions they need to take in software products, creating an "impedance mismatch."
  • AI presents an opportunity to shift from imperative models to declarative models, making software more intuitive and user-friendly.
  • Dharmesh Shah, co-founder and CTO of HubSpot, discusses the evolution of user interfaces and how technology has enabled more intuitive software.
  • Newer interfaces allow users to express their desired actions in natural language, making software more user-friendly.
  • The technology to support natural language interfaces did not exist six and a half years ago when Shah built a chatbot called Growth Bot, which had limited functionality due to technological constraints.
  • There are opportunities to improve user experience by eliminating unnecessary translation layers and making software more intuitive.

Practical advice for learning AI (01:37:03)

  • Don't try to learn AI just because it's trendy.
  • Find a real problem you care about and try to solve it using AI.
  • Use the tools and APIs that are already available.
  • Iterate and learn in public.
  • Define success as making the people who believed in you look brilliant.
  • This includes employees, customers, investors, and anyone else who has supported you.
  • Do what you can to make them proud and reflect positively on their decision to believe in you.

Where to find Dharmesh (01:40:07)

  • Dharmesh Shah can be found online by searching for "daresh d h r m".
  • He is active on social media and encourages people to tell him where he can improve.
  • He also has a website (dar.com) that links to his other content.
  • He is most frequently found on LinkedIn.

Zigging vs. zagging: How HubSpot built a $30B company | Dharmesh Shah (co-founder/CTO) (00:00:00)

  • Dharmesh Shah, co-founder and CTO of HubSpot, shares his insights on how the company grew from a small startup to a $30 billion business.
  • He discusses the importance of zigging when others are zagging, and how HubSpot has consistently challenged conventional wisdom to achieve success.
  • HubSpot's success is largely attributed to their ability to identify and capitalize on market opportunities that others overlooked.
  • For example, when everyone else was focused on building social media platforms, HubSpot focused on inbound marketing and content creation.
  • This contrarian approach allowed HubSpot to differentiate itself from competitors and establish a strong market position.
  • Dharmesh emphasizes the significance of company culture and values in driving HubSpot's growth.
  • He believes that a strong culture attracts and retains top talent, fosters innovation, and creates a sense of purpose and belonging among employees.
  • HubSpot's culture is centered around values such as transparency, authenticity, and customer-centricity.
  • Dharmesh highlights the effectiveness of inbound marketing as a key growth driver for HubSpot.
  • Inbound marketing focuses on creating valuable content that attracts and engages customers, rather than relying on traditional advertising methods.
  • By providing helpful resources and building relationships with customers, HubSpot has been able to generate leads and drive revenue.
  • Dharmesh discusses the importance of technology and data in HubSpot's success.
  • HubSpot leverages technology to automate processes, personalize customer experiences, and gain insights from data.
  • This data-driven approach enables HubSpot to make informed decisions and continuously improve its products and services.
  • Dharmesh shares his vision for the future of HubSpot.
  • He believes that HubSpot will continue to grow and evolve, driven by its strong culture, focus on inbound marketing, and use of technology and data.
  • HubSpot aims to empower businesses of all sizes to grow better and achieve success.

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