At the Crossroads: Can HubSpot Become the Next Salesforce?
Happy companies create happy customers. This is one of the themes that comes through when you visit HubSpot. That, and the fact that they measure everything and are particularly open – from their office environment, to the financials they post (as a private company), to the way they share a lot of content about their sales process, culture etc. Which is not surprising given that HubSpot is a company about using content to attract customers, and has done about as good a job ‘walking the walk’ as any company I’ve seen in 20 years of watching the software space.
Yet, HubSpot is in an interesting spot. It’s not a start-up anymore. It needs to grow beyond inbound marketing to both scale up and out to capture a greater share of the front office budget. The company did over $50 million in sales last year, and is now up to 450 employees, but it’s still not clear what it wants to be when it grows up: An enterprise software company? A small business online marketplace? A data provider?
In a way HubSpot is all of the above, and very much run by smart folks who seem to be genuinely interested in sharing what they are learning. Case in point, Dharmesh Shah’s Culture Code exercise and framework that the company has posted up on SlideShare has already attracted over half-million views.
Creating an open, social, and customer-focused culture is clearly an essential part of what makes HubSpot tick. What’s even more interesting is that the company seems to want to export this culture, and fundamentally change the way marketers think about lead generation. And then, step in and provide marketers a suite of tools that address everything from managing their online presence and SEO, to email and social outreach.
This approach has clearly played well with the SMB crowd that frequently needs both tools and know-how. But will it scale to enterprises, which are harder to change and have lots of tools already? And inside the company, as HubSpot scales, will it lose the personality and practicality (and fun) that made its offerings appealing to marketers in the first place?
HubSpot vs. Salesforce
The ultimate benchmark is of course Saleforce.com (a HubSpot investor and partner), which at $2.27B in sales is approximately 44 times the size of HubSpot but nevertheless provides a blueprint for growing a highly successful SaaS front-office software business. Just by the numbers, both companies had similar early growth rates, and if you look at revenues per customer for HubSpot today (about $6000 per each of its 8,700 customers) vs. Salesforce when it had similar sales back in 2003 (about $9,000 per customer), there’s a number of parallels.
Of course, today Salesforce has doubled to about $18,000 in annual revenues per customer. Which is clearly why HubSpot looks to broaden its product suite and also needs to go upmarket.
So what’s next for HubSpot? During the company’s recent open house the executive team seemed interested, but not overly eager, to jump into the public market. Also, the company showed off its new Social Inbox product which has a lot of potential and pushes the company more into Social CRM, and even the small data arena. The company also hinted it might add its own full-on contact database, which would compete more squarely in the CRM space – and bring the company into competition with Salesforce and even the larger CRM players.
So, HubSpot is doing a lot of things well. But one could argue it’s also at a crossroads, as Cindy Lauper sang at the company’s Inbound user summit last August. Does it want to be the next Salesforce or SAP, or evolve into an advertising-supported marketplace-type model for marketers like Spiceworks is for SMB IT pros? Can it build out real enterprise-level channel partners or will it continue with a network of smaller, more specialty agencies?
The ultimate question is: Can the company continue to grow into a $1B+ player like Salesforce? To do so, the company needs to focus on (at least) the following areas:
- Develop enterprise positioning – the company has great brand recognition thanks to its own use of inbound techniques and rich media, but does HubSpot’s story translate to enterprise CMOs, CIOs and influencers? How will its selling proposition need to be tweaked as the company increasingly bumps into the Oracles and SAPs of the world? These are critical questions in my opinion.
- Make inbound a big-company imperative – the Inbound movement continues to spread and broaden, but its traction to-date is mostly among small business owners and marketers.
- Expand channels – today, the company gets 35% of its revenues through partners, yet many of these are small agencies and consultants, not enterprise service providers.
- Diversify leadership team – HubSpot’s senior team is smart and data-driven, but it’s also male-dominated and East coast tech-focused. I’d love to see some new perspectives added.
- Don’t be too pleased with success – the company is on a nice trajectory but needs to continue to execute, look at new ways to monetize its customer base, and move quickly to finish/build out its new social CRM and content marketing capabilities.
Agree? Disagree? Let me know what you think.