Building HubSpot to a Unicorn: Dharmesh Shah’s Amazing Entrepreneurial Journey (Part 3)

Sramana Mitra: Let’s go to your third chapter. What was the genesis of HubSpot? What was going on in the industry and in your life that led to HubSpot?

Dharmesh Shah: HubSpot was not supposed to happen. When I sold my first company, I promised my wife that I’m not going to do startups anymore. My plan was to get my Ph.D. and teach. While in grad school, I met my Co-Founder Brian Halligan, and we both had a shared passion for SMBs. We both came from tech. He came from a sales and marketing background. I came from product and engineering.

While we were in class at MIT, a thesis was emerging that marketing was broken. All the marketing methods have been fine for decades but, over time, they have become less and less effective. This is outbound marketing. It’s less effective because humans got better and better at blocking marketing messages. We don’t open spam emails anymore. We don’t answer random calls without looking at the caller ID. We are immune to classic marketing.

Our thesis is that now that the internet is here, there is a better way for companies to market that’s not based on how much money you have. It’s based on how creative and value-adding you are. Start a blog, put a video out there, and help your prospective customers learn the things they need to learn. This is called inbound marketing. The idea is we take that same budget and instead of blasting the world with your message, spend it on creating value for your customers. That’s a much more effective and sustainable way to grow a business.

As it turns out, we were right about that. The products needed to execute on that existed for big companies, but didn’t exist for smaller companies. If you’re a 30-person law firm or a 50-person manufacturing firm, you didn’t likely have the wherewithal to say, “I’m going to put WordPress as a blog and connect it to analytics.” There were great tools but no one had pulled them all together. That was the genesis of HubSpot. Can we make it easy for small and medium-sized businesses to get on the internet? That was the idea behind it.

Sramana Mitra: Put this in a timeline for us. Let’s brainstorm a little bit about what was happening in the outer universe while you were hatching this. 

Dharmesh Shah: It was around 2005. The big turn back then was Web 2.0. In Web 1.0, people were putting simple websites out there. Web 2.0 was essentially the interactive web. Instead of static content, you actually have applications on the web and can do things. Salesforce was still a relatively young company. WordPress existed. Back in 2005, blogging was a relatively new thing. 

Sramana Mitra: You were already blogging in 2005?

Dharmesh Shah: Yes.

Sramana Mitra: Me too. There weren’t that many people blogging. I started blogging right when I found out about blogging. Part of the inbound marketing thesis was that you were doing content marketing. Blogging leads us to that concept.

Dharmesh Shah: It does. There’s an interesting story in between. Brian and I had this idea that marketing was broken, and needed to shift from outbound to inbound marketing. Brian graduated a year ahead of me. He graduated in 2005. His first job after graduation was as an entrepreneur-in-residence at a venture capital firm. His job was to help these portfolio companies grow. He and I would meet weekly and just talk about general ideas.

Here’s the thing that struck us both. He would look at the traffic that I’m getting on my blog. He said, “What are you doing on your blog that’s getting all this traffic? I have these venture-backed rich people that have VP’s of Marketing and yet you are getting 10x the traffic on your blog.” My response was, “There’s this discipline called SEO. There are these new social media sites.” He wanted to do it in his portfolio companies. I’m like, “Put up a WordPress. Put a Google Analytics ad.” He’s like, “That’s a science project. They don’t have time for that.”

That was the proverbial spark. We identified that this was a business issue. Some of the best entrepreneurial advice I’ve given and heard is to do one thing really well. HubSpot, at its genesis, did the exact opposite. We built a lot of tools. The whole reason for HubSpot to exist is that there weren’t these tools out there; the problem is the tools are just too hard. In order for us to make it easy, we’re going to have to build all of it in an integrated way the same way Apple did.

In order to have consumers consuming, the iPod didn’t hold more GB’s or any of that. In order to enjoy digital technology at that time, you had to know about technology to get the music on your device. Apple said, “We’re going to give you a device. We also have iTunes. We’re also going to have content partnerships with all the music studios.” It’s not like they invented the MP3 player; they just made it accessible. 

This segment is part 3 in the series : Building HubSpot to a Unicorn: Dharmesh Shah’s Amazing Entrepreneurial Journey
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