So there are so many interesting things everyone selling to SMBs can learn from HubSpot.  We were able to dive into this a bit when co-founders Brian Halligan and Dharmesh Shah joined us at 2022 SaaStr Annual.  That A+ session here:

We did run out of time to talk about so many interesting things about HubSpot as it approaches $2 Billion in ARR.

Let’s dig in on 5+ Interesting Things about HubSpot at $1.7 Billion in ARR … growing a stunning 41% year-over-year.

#1.  HubSpot is accelerating as it approaches $2 Billion in ARR — growing far faster than at $1B in ARR.  At $1B in ARR, HubSpot was growing 32%.  Today, as it comes up on $2B in ARR, it’s growing 41% year-over-year.  That’s pretty incredible acceleration, and we’ll dig in below on why that is.  Going multiproduct was a big part.

#2.  5 Material Products Now.  As you can see below, if HubSpot had “merely” stayed a marketing automation solution, it still would be $1.1B in ARR growing 30% — not bad.  But it’s expanding into Sales, Service, CMS and Ops that has fueled the second wave of growth at almost $2B in ARR.   Sales was a long-term investment, starting Free and limited.  But years later, it’s at $450m ARR growing more than 50%.  That would be a monster IPO on its own.  And its 3 other products, while earlier, all make material contributions to growth.

#3.  International Customers Are > 50% of Business.  We’ve discussed this many times on SaaStr, but going global early can be a great accelerant to growth.  Especially if you are a B2B app not limited by regulations like a lot of fintech and others are.  So localize early, especially if you see even a small concentration of customers in a geography!  Today, 54% of HubSpot’s customers are International.

#4.  Solution Partners, i.e. the Channel, drive 43% of Revenue.  This is just so important to understand if you sell anything like HubSpot — or Shopify, for that matter.  Both HubSpot and Shopify sell a massive amount through their solutions partners, the ones deploying the app.   Brian Halligan did a deep dive as part of this discussion here:

A lot of us don’t know a lot about channel sales.  And a lot of folks think “channel sales” is really something more enterprise than SMB.  Learn.

If you get this right, you can run the tables here, because the top solutions partners and agencies typically standard on one app per need to deploy to their clients.  E.g, a HubSpot shop or a HubSpot + Shopify shop will try to get its clients to really just use those apps.  If you’re in a space where this strategy can work, and you mainly sell directly, you’ll really miss out.

#5.  50% of revenue from new customers, 50% from installed base.  A good reminder of the “golden ratio” here in SaaS.  Ideally, in a high NRR environment, at least 33% of your revenue comes from new customers.  50% is even better to presage long-term growth.

And a few other interesting learnings:

#6.  110% NRR from SMBs — finally.   It took HubSpot a long time to get to 100% NRR, and then a longer time to get to 110% NRR.  But it’s finally here.  The key has been going multiproduct.

#7. 60% of its Customers Start off Trying a Free Product.  A great insight.  HubSpot was later to Freemium than some, but has embraced it at scale.  Many SaaS companies later cut back on free at scale, but not HubSpot.  They’ve seen even more customers start off with Free in 2022 than in 2018.

#8. 50% of New Upmarket Customers Use 2+ Products.  Another way to look at how key it is to get multiproduct as you scale. 🙂

#9.  Strong Cash Flow, But On Gradual Pace to 20%+ Operating Margins.  Getting to 20%+ operating margins is the end state for public SaaS companies — Wall Street expects and indeed demands you get there eventually.  Some get there earlier, like Zoom.  Some never really do.  It’s hard to balance growth and high operating margins and profits.  HubSpot is being deliberate.   They’ve increased operating margins to 8% today, on the long-term path to 20%.  But they haven’t rushed it.  In fact, both R&D and sales and marketing investments have stayed consistent, with only G&A declining:

Wow, what a story.

Be inspired, especially if you sell to SMBs.  Challenge yourself, that yes, you can go from 75% NRR to 110% NRR selling to SMBs.  Challenge yourself to really learn about “the channel” and what it can do for you.  And remember how critical going multi-product is.  Where are you on that journey?

And a great deep dive with CEO Yamini Rangan here:



Related Posts

Pin It on Pinterest

Share This