Building a platform company is about much more than just opening up a few APIs. HubSpot co-founder and CTO Dharmesh Shah shares with show host Avanish Sahai the tough decisions, conflict navigation, and focus on core values – being a joy to partner with, solving for the customer, openness and transparency – which enabled his company to become a leading customer relationship management (CRM) platform helping tens of thousands of customers all over the world to grow their businesses.
Having started out as a marketing applications company, HubSpot’s goal today is to be the number one platform for scaling companies. In this episode, co-founder and CTO Dharmesh Shah shares some of the most important lessons he has learned on the journey since HubSpot’s founding in 2006.
Guest: Dharmesh Shah
Dharmesh Shah is co-founder and CTO of HubSpot. Prior to founding HubSpot in 2006, Dharmesh was founder and CEO of Pyramid Digital Solutions, which was acquired by SunGard Data Systems in 2005. In addition to co-authoring “Inbound Marketing: Get Found Using Google, Social Media and Blogs”, Dharmesh founded and writes for OnStartups.com -- a top-ranking startup blog and community with more than 700,000 members. In 2013, Dharmesh published HubSpot’s Culture Code, which has garnered over five million views. Named an Inc. Founders 40 in 2016, he is an active member of the Boston-area entrepreneurial community, an angel investor in over 60 startups, and a frequent speaker on startups, inbound marketing, and company culture.
Host: Avanish Sahai
Avanish Sahai is a Tidemark Fellow and has served as a Board Member of Hubspot since April 2018. Previously, Avanish served as the vice president, ISV and Apps partner ecosystem of Google from 2019 until 2021. From 2016 to 2019, he served as the global vice president, ISV and Technology alliances at ServiceNow. From 2014 to 2015, he was the senior vice president and chief product officer at Demandbase. Prior to Demandbase, Avanish built and led the Appexchange platform ecosystem team at Salesforce, and was an executive at Oracle and McKinsey & Company, as well as various early-to-mid stage startups in Silicon Valley.
About Tidemark
Tidemark is a venture capital firm, foundation, and community built to serve category-leading technology companies as they scale. Tidemark was founded in 2021 by David Yuan, who has been investing, advising, and building technology companies for over 20 years. Learn more at www.tidemarkcap.com.
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You can find the full transcript here.
Avanish: Today we have a very special guest, and a friend, Dharmesh Shah, the co-founder and CTO of HubSpot. I am just absolutely thrilled that we have this chance to talk about this. I’ve been on the board of HubSpot for the last few years and that’s how I got to know Dharmesh better – and Brian, the other co-founder and former CEO. It’s been an amazing journey.
Today we’re going to discuss a bit about the strategy, and the platform and ecosystem approach. Obviously, nothing confidential, just some lessons learned that Dharmesh is going to share with us. So with that, Dharmesh, thanks for making the time.
Dharmesh: Thanks for having me. Hello, everyone.
Hubspot’s journey to becoming a CRM platform
Avanish: A lot of people know HubSpot. It’s an amazing success story. But just for this context, maybe just give us a little bit of history and background on the company first, please.
Dharmesh: Sure. HubSpot is about 15 years old now (time flies!) and we originally started as a marketing applications company. We had search engine tools, marketing automation, those kinds of things. Then, probably about five or six years later, we expanded to a suite of marketing applications. It became an all-in-one suite. Then we took the step into becoming a CRM platform.
Our aspiration now, for HubSpot, is to be the number one CRM platform for scaling companies. What we mean by that is, we’re focused squarely on the SMB space: companies from one employee up to 2000. We have conviction around that SMB space.
Avanish: Perfect. You already started alluding to this, but the CRM platform – What does that mean, from your point of view? From the company’s point of view? How have you defined it? How have you evangelized it internally to the organization, or with customers, and so on?
Dharmesh: We could have said we just want to be the number one CRM for scaling companies. We could have left the work platform out of the aspiration but, at least in my mind, there is no CRM that’s the “number one CRM” that's not a platform. It’s almost implied, at least in our industry. You can’t really have just a CRM application.
Now, having said that, there is no individual company that’s going to be able to meet the needs of all customers. Our motivation for making the HubSpot platform is to recognize that there are things that we’re going to do that we’re good at, that we think are core, but there are also things that we’re not going to do. We weren’t going to try and do all the things a customer will ever want and have everything come from us; we’d be closed off. We didn’t think that was in the interests of customers, and we didn’t think that was a practical approach. We made that high-order decision ever since we got into the CRM space.
Defining and measuring success as a platform
Dharmesh: It’s easy to say that you’re a platform. It’s easy to say you published some APIs and people can access parts of the system. But a platform, in my mind, just definitionally, is about the value you help others create. Do you open up things? Yes. It’s about access to the system. But the real measure of the success of a platform is whether others are actually building on it or not, and gaining value as a result of that.
Avanish: I think that’s a very thoughtful way of thinking about it? It’s creating more of a win-win. I would even argue it’s a win-win-win. Win for the customer, win for HubSpot as the platform provider, and certainly a win for the partner as well.
With that background, and those definitions, where do you think HubSpot is on that journey?
Dharmesh: This is a little bit of a HubSpot-ism here: Every question you will ask us around “Where are you on the journey of X?” – whether it's a platform or anything – will always get the response that we’re very early in the journey. The reason we say that is because, yes, we’ve done some things, but the road ahead is much, much longer than the road we’ve already traveled. Right? So it still feels early. Now, having said that, we just crossed the thousand-partner mark for the number of app integrations that we have in our app marketplace, and we’ve been at the platform game for a long time. We’ve traveled the road a fair amount, but we still have work to do in developer experience and increasing the overall vibrancy and ecosystem connectedness. There are parts of the system I still want to open up. I want to make more things possible within the HubSpot platform itself.
Avanish: Congratulations on that milestone. I think that is always an important milestone, to prove both the notion and the framework of the platform. It also shows that there is a network effect that starts to kick in that proves this is a meaningful approach. Huge kudos to the team on that.
Striking the balance between established vs new native customers
Avanish: You mentioned earlier that a single company can’t do everything or solve all the problems. From a customer angle, or maybe a partner angle, what are some examples of how you’ve thought about getting around that? What’s the value the platform ecosystem is bringing to the customer?
Dharmesh: I’ll give you two examples that kind of represent the spectrum. One: there’s a category of partners that are existing software companies. They already have a product with some degree of popularity, and they decide to integrate that product with HubSpot so the two products can work together. That’s a common use case. An example in that category would be Typeform, a very popular web-based forms application. They built integration that allows you to take the data that someone types into a form and create one or more objects in the HubSpot CRM. That’s a classic partnership and app integration.
On the other end, there’s a company called OrgChartHub. What they built is the ability to create an organizational chart for a company. Let’s say you’re targeting IBM as a potential customer. You can build out, with your sales team, what the overall org you’re dealing with looks like and represent that inside the CRM. The reason I say they’re at the other end of the spectrum is because OrgChartHub was natively and exclusively built for HubSpot. The company did not exist. There was no existing product. They said, “Oh, here’s a platform. It’s got some number of customers. Here are the APIs and here are the kinds of things we can do.” The product does not exist outside the scope of HubSpot itself, so they take full advantage of the platform. They live inside of the platform.
Now, as excited as we are about things like OrgChartHub – and we want to make more of those kinds of companies possible because we think it creates opportunity for lots of entrepreneurs to build cool, interesting things for our customers – we have to balance it. Because the customer demand is almost always around the first category of applications. Like, oh, I already use X, Y, and Z. I want to use HubSpot as my CRM, and so I need it to integrate with those applications. It’s about striking that balance between existing, established software companies connecting with us and new companies that really leverage and deeply integrate the platform and are built exclusively for us.
Importance of culture and being a joy to partner with
Avanish: Can we dive into OrgChartHub as an example? What do you think the motivation was for someone like OrgChartHub to come to HubSpot and say they want to build this for HubSpot? What’s the hook?
Dharmesh: It’s interesting, and it’s going to be an unconventional answer. It’s the culture of HubSpot that drew them. The entrepreneurs have been out there; I think they’ve done some kind of service work in and around their customers. But HubSpot has always had this philosophy that, from a platform perspective, it should be a joy to build on. That part is developer-focused. Are the APIs clean and consistent? Are there examples, and support, and all that?
We also want HubSpot to be a joy to partner with, not just to be a joy to build on. We’ve tried to, as best we can, stay true to that. I think that’s what drew them. It’s the feeling that they can trust that HubSpot, if they go build a business exclusively on them, will treat them fairly. It’s a tricky balance. That’s one of the hardest things about building a platform: figuring out what partners do versus what you do, and what happens when the landscape changes.
I think that’s why [partners choose us]. They like the company, they like our philosophy, they like our culture, and they saw the growth. They see that this is an opportunity to build something. It wasn’t a huge team; it was just two founders, but they’ve grown. They’ve built more products within the HubSpot platform.
Avanish: You did say you would have an unconventional answer, and you delivered! The words joy and love and trust don’t always show up in why a partner works. But I think just how you framed it, I think that alone is a really interesting lesson for those thinking about such strategies.
Solving for the customer
Avanish: Back to that win-win-win. How do you bring additional dimensions that are not always measurable to that dialogue? Since you went down that pathway, Dharmesh, it is complex. It takes a multifaceted approach to figure this out. It’s got product implications, marketing, sales, it’s about how you engage with the community as a whole, both customers and partners. What’s that experience been like at HubSpot? How has that evolved across the various functions?
Dharmesh: I think it all kind of stems back to the fundamental cultural value at HubSpot: this notion we call “solving for the customer.” It’s going to sound clichéd, but everything traces back to that. When we’re making decisions, our guidance to the team is to always lean towards something that benefits the overall customer community.
When we launched the platform, we had that same sensibility. We think of partners as the customer in this case because we’re providing them a service. We are up front with our partners, so we’re not going to have tension and conflict as the relationship evolves and as both companies and their products mature.
We will do the things that we think are right for the customer. Obviously, we have the platform, but we also have our own applications that we sell on top of the platform. If someone builds a better product, we don’t disadvantage them. We don’t tell them they’re now competing with us just because we sell this application over here that competes with theirs over there. We let the customer decide. If it’s better for customers for their particular use cases, that’s just fine. Similarly, if we have a partner on the platform but we think there’s a particular need we can fill that would better serve customers, we don’t say we’ll never build it. If there’s an unmet need that a certain group of our customers – or even the majority of our customers – really want, we will consider it. And once again, it comes back to solve for the customer. May the best product, or the best fit product, win over time.
Avanish: Amazing way of thinking. But I think it also instills that customer-first mindset, and the platform is a part of that element.
It’s ok to have conflict and competition
Avanish: So we talked a bit about the journey. We talked a bit about how things are evolving. It’s not all good smells and roses, right? What are some of the challenges? Where have you found yourself, or some of your teammates, saying, hmm, this is a bigger challenge than we had expected?
Dharmesh: There’s a couple dimensions. One that we’ve talked about, but that we can dig into a little bit further, is deciding what you do and what you don’t do – what you partner on. It’s okay, I think, to have conflict and competition, as long as it’s healthy and it’s solving for the customer. But the number one thing – and it’s hard to execute on – is full transparency and openness. If you’re building something for an industry vertical, the likelihood that we’re going to compete is relatively low. We’re about serving broad, 80% use cases for a vast majority of customers. So we have honest conversations with our partners. And there are times where we may end up competing.
A good example is our product feature in HubSpot called Conversation Intelligence. This feature is in a category of software where the number one player in that category is Gong, who’s an exceptionally good partner of HubSpot. So we had conversations with them and let them know that “Hey, we think this is absolutely fantastic functionality. You’re a great partner. But you’re very much focused on the enterprise customers, and your price points just don’t fit for a vast majority of HubSpot’s customers. We want to democratize that feature and make it available.” And so we built a subset of that functionality and made it available to all of our customers.
A) It was important to have that conversation. B) I think that having done that actually elevates that category. Now we have a bunch of our customers having been exposed to conversation intelligence. Some percentage of those are going to think, “I really like it. But it’s nowhere near enough of the functionality that I actually want. I’m going to go out and buy Gong.” Which we think is awesome; we think, once again, it’s a win-win. But if you had not treated the situation with openness and candor, it could be taken as HubSpot trying to crush a partner that happens to compete a little bit.
Investing in the core vs opening up the platform
Dharmesh: The other hard trade-off is because with software companies, it’s always about resource allocation. How do you drive your engineering resources and product resources? The challenge is how much you invest in the core applications, because resources are a zero-sum game. We have X number of engineers and product managers that can do this – and how much do you invest in opening up the platform?
As an organization, we have to be willing to acknowledge that we sell these application hubs, and we’re going to have a list of customer requests and market demands that are eight miles long. But we have to continue to invest in the platform, continue to add APIs, and continue to make the experience better. We have to kind of carve that bandwidth off and protect it. That’s not always easy, especially because organizations always go through these cycles. For example, we might have this massive market opportunity, so we’re going to take all the resources off of X and put them on Y over here. It’s easy to starve your platform efforts and easy to rationalize. I think it takes discipline and rigor to not do that.
Avanish: Are there any frameworks within the product owners and the GMs that you’ve adopted that said hey, here’s some things we’re going to use as part of our planning or budgeting, resource allocation cycle, that kind of continues this journey without making this a choppy process?
Dharmesh: I wouldn’t elevate it to the level of being a framework, but one thing we do to assure ourselves that resources will be allocated to the platform is create a story around our platform and ecosystem during our strategic planning process every year, where we lay out what our roadmap is going to be for the ensuing 12-18 months. We can choose what it is – Are we going to work on APIs? Are we going to work on opening up the UI more? – and where we allocate can vary. But the fact that there’s going to be some engineering resource is going to be a story on the list of top 10-15 priorities. We’re not going to go into any given year and have nothing related to the platform on the list of the organizational priorities. Then we can have debates around how we allocate those – what the specific story should be.
Avanish: So if I were just to interpret that in a slightly different way: One, there is a protection that says this is something you are going to allocate a certain amount of resources to, no matter what. Two – which I think probably is one of the most critical points – if it’s made it into the overall priority list, there is messaging to both the organization internally and to the world at large that this is something you’re focused on. It’s not a pet project. It’s not a side bar. It is something that’s core.
Dharmesh: Yeah. Signaling is actually a really big piece of it, right? This is where I think founders and CEOs and executive leadership are crucial. You have to have conviction that platform is a real thing and not just checking a box to say you’re going to have N% APIs.
And we’d push. For instance, making the overall organizational aspiration to be the number one CRM platform: even though the word platform itself may be redundant, the motivation for saying it is not just to tell the market that we’re a CRM platform, but to tell ourselves. It’s then an easy thing to get aligned around the fact that the platform is important. Then we can allow the autonomies because at least they know now that it’s important.
Avanish: That’s huge.
So, Dharmesh, you’ve sprinkled a lot of terrific learnings throughout the last few minutes. But let’s say you’re on a plane and you’re sitting next to someone who is at another software company who’s thinking about the same things. As you look back, what are some other lessons learned that you would impart?
Dharmesh: I think the number one thing is, you have to really have a clear answer around why you’re making an investment in the platform. What’s the motivation? It can’t just be, well, everybody’s a platform, so I’m going to do that too. Whatever it is, there has to be a business reason and a rationale for why platform.
Thing number two – and this is what I think has worked really well for us, and what I would unequivocally recommend to anyone doing a platform – is to get strong alignment around how you’re going to deal with conflict and “coopetition” and things like that, because they are literally inevitable. It’s just a matter of time. And those issues don’t get easier over time; they get harder. In the early meetings, you should decide what kind of guidance you would give your partners, or potential partners, as to what things you’re likely to do or not do. You want clarity, and then openness and transparency with your partners and would-be partners.
In our case, for instance, we have said we are unlikely to build deep industry-specific applications. Not that we’ll never do it, but that’s not anywhere in our brains right now. We have said we’re not going to build deeply into specific functional areas. For example, we’re not going to build a deep search engine optimization tool or a deep social media tool. That’s an opportunity for a partner.
This is hard too, but you also have to have internal integrity and pushback. There will be times that the organization will kind of drift or stray. The way you build trust over time is you do the thing you said you were going to do. Even when it’s hard, you still do that thing, even though it’s twice as difficult.
Every founder or org that’s looking to build a platform almost invariably has worked on someone else’s platform before. The first thing they should ask is what the things were that really irritated them, or honestly were just bad for them, when they worked on other platforms before. And then promise that they’re not going to do those things. That will take you a far way along becoming a really good platform that’s deserving of someone building on you.
Avanish: That is an invaluable piece of advice. And I think the implicit message there also is that it’s not easy. These are big, complex decisions that involve a number of different participants. It requires a level of thoughtfulness and integrity that you’re describing.
The Platforms that Dharmesh admires
Avanish: Just a couple more questions, Dharmesh. You’re a very, very thorough student of the world of software and the trends and what’s coming next and so on. And you mentioned that people have worked in other platforms, have developed other platforms. When you look at the current landscape, who do you think has done this platform plus ecosystem play really well? And as you look to learn from them, who are the ones that you would hold high in your esteem?
Dharmesh: The OG platform that I think has and still does a good job is Microsoft. Early on, all through the ’80s and ’90s, they understood what it meant, and they had lots of internal conflict between the operating system, the platform, and the applications business (which was Microsoft Office, primarily). That’s a classic example.
A more modern example that’s closer to our industry is Shopify. Toby – that’s the founder and CEO of Shopify – is a brilliant technologist. He fundamentally understands what it means to be a platform. He’s an engineer himself. He gets it, and you see that come through in the developer experience. They’ve had some challenging times with some of their partners over the past several years, but overall, I think they do it really well.
And if you’re looking to learn the tactics around developer experience and that, you go to classic examples like Stripe. There’s no better platform that’s easier to get started for with developer experience, with great documentation, great examples, great ethos overall. That’s a good one to model the actual day-to-day blocking and tackling of how we actually build APIs.
Avanish: All great examples. And all, frankly, different starting points of what their platform journey entailed. Stripe I think is now the canonical example, along with Twilio perhaps, of companies that are just born as pure platforms. They may reserve the right, but they’re not going up the app stack.
Dharmesh: Yep.
Parting thoughts on monetization
Avanish: This again is super insightful as always. Any final thoughts?
Dharmesh: I’ll provide one, because this has been on our minds. As you’re getting into platform, the other thing to get clarity around is monetization: whether it’s going to be direct or indirect monetization. You don’t have to necessarily make a permanent decision as you get going, but it’s very helpful for the organization to understand what the high-order plan is. Companies can get tripped up on that. A) These things take time. B) Maybe you added monetization too early in the process and you didn’t get to critical mass. In the early days, you want to try to reduce friction. The goal is to get that flywheel spinning, get as many partners in as possible.
I’ll close on this note. You should always add value before you extract value from your partners. And by adding value I mean provide the APIs, provide the developer experience, provide access to your customer, provide them the distribution channel. Then, over time, after you’ve added value, you can say it’s fair to extract some of that value back in the form of royalties, commissions, whatever it is. Sometimes companies too quickly jump to how they can make money on the platform. You can, but I think that’s a little bit short-sighted and suboptimal.
Avanish: Thank you for bringing that up. I’m a hundred percent aligned with how you think about it. It is a complex part of the process.
Dharmesh, as always, hugely insightful. Love the recap of the journey, and the message about bringing joy and love. I wish I had talked to you years and years ago – I might have used that in some of my marketing!
Dharmesh: It’s been a pleasure being on.
Avanish: Thank you.
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