20VC Hubspot CoFounder Brian Halligan on Leadership Lessons Scaling Hubspot to a $28BN Market Cap The Best Series A Investment in Venture History & What Makes Sequoia so Successful

Summary Notes


In this episode of "20 VC," host Harry Stebbings interviews Brian Halligan, the co-founder and Executive Chairman of HubSpot, a $28 billion company that defied VC skepticism to successfully serve the SMB market. Halligan shares his journey from HubSpot's early fundraising challenges and scaling insights to his current focus on Propeller Ventures, a $100 million climate tech venture fund specializing in ocean innovation. He offers candid reflections on leadership evolution, the importance of aligning team vectors, and the value of MBAs and VCs with operational experience. Additionally, Halligan discusses the impact of Sequoia's investment in HubSpot, the nuances of secondary sales, and the venture capital landscape's shift towards larger funds and longer deal processes post-Figma. Throughout the conversation, Halligan emphasizes the significance of culture, the balance between mission-driven and mercenary employees, and the personal goal of eventually marrying.

Summary Notes

Series A Round and Venture Capital Experience

  • Brian Halligan discusses the specifics of HubSpot's Series A funding round.
  • He describes the company's valuation and the percentage of ownership sold.
  • Halligan shares an anecdote about meeting Jim Goetz from Sequoia Capital and how he was ready to make a deal.

"When we did our series A, it was a $5 million round on a $6 million premoney valuation. So we sold 40 cent to 70% of our company on series A."

This quote details the financial terms of HubSpot's Series A round, indicating the amount raised and the company's valuation at that time.

"Our last meeting was a guy named Jim gets. Jim gets is kind of a legendary vc at Sequoia, sitting in a conference room and I was nervous. And Jim walks in and as I'm shaking his hand, like my hand is moving up and down like this, he says to me, hey, Brian, what's it going to take for Sequoia to own a piece of HubSpot? And I said, really not much. Give me a term sheet. I'm ready to go. I had no other options."

This anecdote illustrates Halligan's encounter with a prominent venture capitalist and his willingness to secure funding despite limited options.

Harry Stebbings' Introduction and HubSpot's Success

  • Harry Stebbings introduces Brian Halligan and highlights HubSpot's success, particularly in selling to small and medium-sized businesses (SMBs).
  • Stebbings notes Halligan's role in coining the term "inbound marketing" and his involvement in climate tech venture funding.

"This guest today went against all odds and built a $28 billion juggernaut selling purely to SMBs HubSpot."

Stebbings emphasizes Halligan's success in building HubSpot into a multi-billion-dollar company by focusing on a market segment often considered challenging.

"Brian led the business as CEO for 15 years, from day one to a $30 billion public company with 7000 employees."

This quote summarizes Halligan's tenure as CEO of HubSpot, indicating the growth and scale achieved during his leadership.

"Brian is also famed for coining the term inbound marketing following a horrific skiing accident, which we do discuss in the show. Brian stepped down as CEO of HubSpot and today is the cofounder of Propeller Ventures, a 100 million dollar climate tech venture fund specializing in ocean innovation investments."

Stebbings provides context on Halligan's career, including his contribution to marketing terminology and his current focus on climate technology investments.

Early Career and the Importance of Connections

  • Halligan recounts his first job as a paperboy and how connections made during that time influenced his career.
  • He shares the story of the Harrisons, a successful family on his paper route, and how one of their sons later gave him his first job after college.

"Richard Harrison, Pat Harrison's oldest son, gave me my first real job out of college, and it turned out to be a really good spot to start my career."

This quote connects Halligan's early job as a paperboy to his professional career, illustrating the long-term benefits of early connections.

"It wasn't just the paper route. It was my mom. So Mrs. Harrison was very, very close friends with my mom."

Halligan credits his mother's friendship with Mrs. Harrison as a pivotal factor in securing his first job, highlighting the role of personal relationships in career opportunities.

Luck vs. Skill in Career Success

  • Halligan discusses the role of luck and preparation in his career, citing Louis Pasteur's quote about luck favoring the prepared.
  • He reflects on his first job at a rapidly growing company and how being well-prepared led to being in the right place at the right time.

"Lot of luck. So my first job was at a company called PTC. It was a cad software company. And I was employee number 201. Hundred years ago, 1990. And I stayed for ten years. And by the time I left. There were 5000 employees."

Halligan acknowledges the role of luck in joining a company that experienced significant growth, which contributed to his career development.

"I think it was Louis Pasteur who said, luck favors the prepared. And if I were to do sort of a correlation of prepared versus luck, the r squared on that is quite high."

By quoting Pasteur, Halligan emphasizes the importance of being prepared to capitalize on opportunities that may appear as luck.

Choosing the Right Job and Career Path

  • Halligan shares his decision-making process when choosing his first job, opting for a lower-paying position at a company with more upside.
  • He agrees with Sheryl Sandberg's advice about joining a rocket ship and how it paid off in his career.

"I chose the lowest paying job with the company that had the most upside and with somebody in there that I thought just might champion my career in this guy, Richard Harrison, that really paid off."

This quote explains Halligan's strategic choice to prioritize potential career growth over immediate financial gain when selecting his first job.

"I don't think Cheryl [Sandberg] is far off in that hop on the rocket ship quote."

Halligan concurs with Sandberg's perspective on the benefits of joining a fast-growing company for career advancement.

Reflections on Personal Happiness and the Role of Money

  • Halligan discusses his pursuit of happiness and the enjoyment of life's journey, referencing a song by James Taylor.
  • He reflects on how money has provided convenience in his life, such as hiring help for household tasks.

"The secret of life is about enjoying the passage of time. I don't think he's totally wrong about that. And I'm trying to enjoy the passage of time as I look forward over my next 20-30 years."

Halligan shares his philosophy on life, emphasizing the importance of finding joy in the everyday experiences rather than solely focusing on achievements.

"I don't think. I'm quite sure money doesn't buy you happiness. I have a bunch of it now. I never had it. And I'm no happier or less happy than I was."

He expresses his belief that wealth does not fundamentally change one's level of happiness, although it can provide the means to eliminate certain stressors and inconveniences.

Early Entrepreneurial Spirit

  • Halligan and Stebbings discuss the common trait among successful founders of engaging in entrepreneurial activities from a young age.
  • They agree that early experiences in making money often indicate a natural inclination towards entrepreneurship.

"Every great founder did a paper route, started building websites. They sold clothes at school. They did Beanie Babes on eBay, something. Entrepreneurialism always starts early for the truly exceptional people."

Stebbings shares his observation that many successful founders have a history of entrepreneurial endeavors dating back to their youth, which Halligan affirms.

Decision to Step Down as CEO of HubSpot

  • Halligan shares his decision to step down as CEO of HubSpot following a serious snowmobile accident, during which he reflected on his life and career.
  • He realized that he did not enjoy the work of a big company CEO and felt he was not well-suited for the next phase of HubSpot's growth.

"I don't think I'm necessarily well suited for the next phase. From 7000 to 70,000 or whatever it is. From 20 billion market cap to 200 billion market cap. I didn't necessarily enjoy the work at that size as much as I enjoyed it at an order of magnitude smaller."

This quote captures Halligan's introspection about his fit for the role of CEO as the company scaled beyond his preferred size and complexity.

"I like it earlier, smaller team where I know people. I'm really viscerally in touch with the product and the customers."

Halligan explains his preference for working in a smaller, more intimate company environment where he can have a direct impact on the product and customer experience.

Theme: Team Composition and Success Formula

  • The Boston Red Sox's success was attributed to a blend of homegrown talent and experienced free agents.
  • This mix of internal development and external hiring is seen as an effective strategy.
  • Brian Halligan applies a similar philosophy at HubSpot, combining internally grown employees with external hires.

"Like the Boston Red Sox didn't win a world championship for 84 years. Very frustrating. And they've won four in the last 20. And when I look at the teams that won, they were a nice combination of people they drafted out of high school and kind of came up through their system and really got it mixed with some free agents who are a little more expensive from other teams who had seen success before."

The quote explains the Red Sox's strategy of mixing homegrown players with experienced free agents, which led to their success after a long drought. Brian Halligan relates this strategy to HubSpot's approach to building a team.

Theme: CEO Identity and Company Representation

  • Brian Halligan reflects on feedback that he embodies HubSpot, influencing his actions and decisions.
  • The CEO and the company's identities often merge, especially as the company scales.
  • Brian remains involved with HubSpot as chairperson, which helps with the transition from his former CEO role.

"I remember looking at my review maybe five, six, seven years in and seeing comments in my review about how Brian doesn't understand that he actually is HubSpot. It's embodied in him, and that every action he takes and every decision he takes is really HubSpot."

This quote highlights the realization Brian Halligan had about how closely his identity was intertwined with HubSpot, impacting his awareness of the influence his actions and decisions had on the company.

Theme: Importance of Feedback and Self-Improvement

  • Dharmesh, Brian's co-founder, conducts a 360-degree review using a Net Promoter Survey.
  • Feedback from various stakeholders is synthesized, revealing both strengths and weaknesses.
  • Brian uses this feedback to improve or hire around his weaknesses and to amplify his strengths.

"One of the best things my co-founder Dharmesh, has done. He owned doing my annual 360-degree review, and he did it in a remarkable way."

The quote emphasizes the value of the 360-degree review process in providing comprehensive feedback for self-improvement, as practiced by Brian Halligan's co-founder.

Theme: Founder Control and Leadership Evolution

  • Founder control is beneficial in the startup phase but can become a hindrance as the company scales.
  • Brian Halligan acknowledges the need to delegate and evolve from control freakedness to empower others.
  • He accepts that some weaknesses are inherent and focuses on hiring to complement them.

"The biggest one that just, I couldn't put to bed and would come up year after year after year was my thinking is the control freakedness of founders is an amazing strength in startup mode."

This quote discusses the common trait among founders to be control-oriented, which Brian Halligan identifies as a strength that can become a weakness as a company grows.

Theme: Unconventional CEO Styles and Feedback Methods

  • Brian Halligan mentions Jensen Huang and Elon Musk as CEOs with unique leadership styles.
  • Public criticism and direct feedback are discussed, with Brian reflecting on his approach to feedback.
  • The importance of being diplomatic and the weight of a CEO's words are highlighted.

"I've been reading about Jensen Huang and Elon because they've got such unusual CEO styles that completely fly in the face of everything that any CEO coach or anything you read about being the CEO will teach you."

This quote introduces the topic of unique and unconventional CEO styles, which Brian Halligan finds noteworthy and considers in the context of his own leadership and feedback methods.

Theme: Detail Orientation and System Thinking

  • Elon Musk's detail orientation, especially in systems thinking, is recognized.
  • Brian Halligan shares insights from Elon Musk on organizational alignment and vector theory.
  • The balance between sweating the details and not being overly controlling is discussed.

"I will tell you the one thing I learned from Elon. So Sequoia has an annual. I call it a glamping event. Dharmesh. And I would describe us as indoorsy, not outdoorsy. And so they invited us to the glamping event."

In the quote, Brian Halligan recounts attending an event where Elon Musk spoke, leading to a key learning about aligning organizational efforts, which he likens to vectors pointing in the same direction.

Theme: Authentic Leadership and Embracing Quirks

  • Brian Halligan encourages embracing one's quirks and authentic self in leadership.
  • He reflects on the diversity of CEO styles and the importance of not trying to fit a particular mold.
  • Brian shares a personal anecdote about learning from other quirky and successful founder CEOs.

"I still don't. Harry. Yeah. One thing I've learned about ceos, they're all very different. And there isn't one model or one formula or one background."

This quote captures Brian Halligan's view that there is no single successful CEO archetype and that leaders should embrace their individuality.

Theme: Hiring Practices and Talent Retention

  • Brian Halligan discusses the challenges of hiring and the inherent uncertainty in the process.
  • He shares his experience that a 50% retention rate is common in scale-up mode.
  • The concept of hiring individuals who are just ahead in experience rather than far beyond is advocated.

"One of my biggest lessons is that's about right. I used to beat myself up when we turn someone over, but I think most scale ups aren't that good at hiring, and I think there's a fair amount of luck involved."

The quote reflects Brian Halligan's realization that turnover is a natural part of scaling up and that perfect hiring is challenging, if not impossible, for most companies.

Hiring Philosophy and Team Composition

  • Brian Halligan discusses the pitfalls of hiring practices, particularly in scale-ups and with founders.
  • He suggests that a mix of strengths and weaknesses is beneficial and that teams should be composed of individuals with different "spikes" or strong points.
  • The concept of "lowest common denominator" hiring is discouraged in favor of embracing diverse skill sets.

"Scale ups fall down on hiring, and founders fall down on hiring is you've got a panel of people who are interviewing a VP of whatever, of product, and you've got eight people interview them."

This quote highlights the common mistake of having too many people involved in the hiring process, leading to a diluted sense of what is needed in a candidate.

"You always hire the Jane. That just always happens. You always hire the Jane. I think you're better off with the Mary, and you want kind of spiky team with some people who have great strengths and great weaknesses, and you want to spike in different directions."

Brian is emphasizing the value of hiring individuals who may not be perfect across the board but have specific strong points, creating a "spiky team."

Importance of Response Time in Communication

  • Brian Halligan considers the speed of email response as an indicator of a person's efficiency and flags slow responses as a red flag.
  • He believes that quick responses are a feature to look for in potential hires or partners.

"I do think it's a signal of people take three days to respond to your email. I think that's always been a big red flag for me."

Brian indicates that taking too long to respond to emails is generally a negative sign about a person's professional conduct.

Quarterly Planning and Prioritization

  • Brian Halligan shares his personal approach to productivity through quarterly planning, which helps him focus on priorities and avoid being reactive to others' demands.
  • He admits that if a task is not on his priority list, it might take him longer to respond, but he is quick to engage with topics that are on his quarterly plan.
  • He believes that too many people allow their schedules to be dictated by external demands like emails and Slack messages.

"And so you're really just spending your whole time working on everyone's dues and you have to do some of that, of course. And people just don't spend enough time, like, well, what am I trying to get done this month or this quarter, whatever it is, and have their list."

This quote emphasizes the importance of setting personal goals and working towards them, rather than being solely reactive to external requests.

Personal Goals and Health

  • Brian Halligan talks about his personal goals, including getting married and focusing on his health.
  • He uses the analogy of renovating the worst room in a house to describe his approach to improving his back health, which he is currently prioritizing.

"I want to get married. I've never been married. I'm tired of being single and I want a life partner. I think it will make me happier."

Brian expresses his personal desire for marriage and a life partner, reflecting on his personal life goals beyond his professional achievements.

"I absolutely crushed my back last quarter moving a couch. It was like I had a knife stuck in my back. And I don't want to do that again. And so I go to PT. I'm doing yoga. Like, I'm obsessed now with my back."

Brian shares a specific health goal related to improving his back health, indicating a proactive approach to personal well-being.

Talent Management and Firing Practices

  • Brian Halligan discusses the challenges of scaling up in terms of talent management and the common issue of employees optimizing for their team rather than the enterprise.
  • He shares insights into the process of letting people go, emphasizing the need for empathy and speed in the process, and the importance of not surprising the employee.

"The most frequent reason I let someone go, and the most common failure condition is I kind of think of this equation of are people solving for themselves, for their team, or for the enterprise in the failure condition, for people scaling up in their careers."

Brian identifies a key failure condition in employees, which is when they prioritize their team's needs over the needs of the entire enterprise.

"Once they've lost their team, they almost never can get that team back."

This quote acknowledges the difficulty of recovering an employee's standing once they have lost the trust or support of their team.

Company Culture and Growth

  • Brian Halligan reflects on the challenges HubSpot faced when it grew to around 100 employees, a common breaking point for company culture.
  • He emphasizes the shift from a flat, close-knit structure to one with more layers and the introduction of "mercenaries" alongside "missionaries."
  • HubSpot became serious about defining and embedding its culture within the company at this point.

"It broke around 100 people. At 100 people. You go from knowing everyone in the organization, knowing a bit about their background. You interviewed everyone to, gosh, you just don't know some of the people."

Brian describes the cultural shift that often happens when a company reaches around 100 employees, where personal connections and familiarity begin to diminish.

"I think missionary and companies have unfair advantages in that they're able to attract better talent, retain better talent."

He suggests that companies with a strong mission can attract and retain better talent, giving them a competitive advantage.

Sequoia Capital's Impact on HubSpot

  • Brian Halligan talks about the transformative impact that Sequoia Capital had on HubSpot, from the initial investment to the strategic guidance they provided.
  • He shares his personal experience with Sequoia partners, highlighting their hands-on approach and the value of their network.

"Sequoia was a big help to help. So we're a Boston based company, and Boston based company is like, no one gave us a mean."

Brian credits Sequoia with being a significant help to HubSpot, especially as a Boston-based company seeking recognition and support.

"They were kind of huge for us."

This quote summarizes the overall positive impact Sequoia had on HubSpot, indicating their importance in the company's growth and success.

Venture Capital Success Factors

  • Brian Halligan discusses the success factors of venture capital firms, particularly Sequoia Capital.
  • He attributes their success to a combination of their established network, brand value, and a culture of hard work and continuous improvement.

"They work much harder than any other vcs I've come across, and they're absolutely paranoid that they're going to lose it."

Brian highlights the work ethic and paranoia of Sequoia partners as key to their sustained success.

Reflections on Personal Stock Sales

  • Brian Halligan reflects on his decision to sell some of his shares during a funding round and how it seemed like the right decision at the time despite the company's later growth in valuation.

"Give me a term sheet. I'm ready to go. I had no other options."

Brian recalls his eagerness to secure Sequoia's investment, indicating the urgency and limited options at that time.

"It was very much a life changing."

He acknowledges that while in hindsight the shares sold at a $250 million valuation would be worth much more now, the decision was life-changing and significant at that moment.

Time Value of Money and Venture Capital Decisions

  • The concept of time value of money is redefined by personal value.
  • Early investments can be more valuable to founders and venture capital firms.
  • Sequoia Capital's strategy aligned their long-term vision with HubSpot's growth.
  • A significant investment can provide a company with a strong foundation and extend its planning horizon.

"A million dollars then was so much more valuable to me than today, let's say." "It was very valuable to me, it was very valuable to Sequoia."

These quotes highlight the subjective value of money at different times for both the speaker and Sequoia, emphasizing the importance of the timing of investments.

Advice for Founders on Selling Secondaries

  • Selling secondaries can provide personal financial security for founders.
  • Aligns founder incentives with venture capital investors.
  • HubSpot chose to build independently rather than on Salesforce's platform, aiming for long-term standalone success.

"I would do it for exactly those reasons. It's going to give you a little personal cushion, which is useful."

The quote suggests selling secondaries as a strategic move for founders to gain financial stability and align interests with investors.

Temptations and Opportunities to Sell

  • HubSpot had minimal interest in selling and never received an acquisition offer.
  • The lack of interest in acquisition was unexpected by the speaker.

"There weren't. There really weren't. We had very little interest."

This quote underscores that despite expectations, HubSpot did not encounter significant acquisition interest, which influenced their path.

Importance of VC Experience as Former CEOs or Operators

  • Startups often prefer VCs with CEO experience, but it's not always possible.
  • Pat Grady of Sequoia added value in unique ways without CEO experience.
  • The speaker values both operational experience and the ability to contribute in other areas.

"We wanted VCs who had been CEOs... Pat had not... But Pat figured out ways to add value that were super useful."

The quote reflects on the desire for VC experience but recognizes the contributions that can come from a variety of backgrounds.

Changing Dynamics in Venture Capital

  • The speaker believes that VC experience as former CEOs may no longer be crucial due to generational and technological shifts.
  • The quality of the VC relationship and support is emphasized over operational experience.

"If you were a CEO before COVID very different approach to work, different generational thought process... It's fucking different."

This quote highlights the changing landscape of business and how past CEO experience may not be as relevant in the current environment.

The Role of Independents on the Board

  • Independents with relevant experience can provide valuable insights and balance.
  • Gail Goodman's role on HubSpot's board exemplifies the positive impact of an experienced independent director.
  • Some business fundamentals remain consistent despite changes in the business environment.

"Having a great independent is worth his weight in gold." "So much of it. So I don't think things are totally different from pre-Covid to Covid."

These quotes emphasize the value of independent board members with relevant experience and suggest that some business principles are timeless.

The Current State of the Venture Capital Market

  • The venture capital market is seen as healthy, with a small percentage of VCs being incredibly successful.
  • Early-stage VCs have more potential for high returns compared to larger firms.
  • The speaker has invested in a climate fund focused on ocean startups, identifying a unique niche.

"5% of the VCs are incredibly successful and 90% are meh." "I started a climate fund, investing in ocean startups."

These quotes reflect the speaker's perspective on the venture capital market's health and his personal investment strategy.

Reflections on HubSpot's Early Funding Rounds

  • HubSpot's Series A reflected standard terms at the time, with significant company dilution.
  • Current Series A rounds offer better terms for founders, with less dilution.
  • The speaker acknowledges the improvement in the venture product for founders over time.

"When we did our Series A, it was a $5 million round on a $6 million pre money valuation." "Even today you're doing a Series A, the product is much better."

These quotes provide a comparison of Series A funding terms over time, indicating more favorable conditions for founders today.

The Venture Capital Growth Incentive and Asset Management

  • The speaker criticizes the trend of venture capital firms growing their assets under management for management fees.
  • The competitive landscape for new VC firms is challenging.
  • The speaker's unique angle in investing is a climate fund focused on ocean technology.

"I think this tendency to grow the AUM... that's led to there's too many firms, there's too much money." "I have an angle... a climate fund, investing in ocean startups."

These quotes discuss the issues with VCs focusing on asset growth and offer insight into the speaker's investment focus and strategy.

Worst VC Meeting Experience

  • A negative experience with a VC firm in Boston where a founding partner fell asleep during the pitch.
  • The firm later provided a term sheet with an unusually large equity pool for hiring, hinting at replacing the CEO.

"He fell fucking sound asleep during my pitch... Just in case we need to replace the CEO."

The quote recounts a particularly challenging VC meeting and reveals the firm's intentions regarding leadership changes.

Quick-Fire Round: Opinions on MBAs, CEOs, and HubSpot's Challenges

  • The speaker believes top-tier MBA programs offer valuable knowledge, network, and pedigree.
  • CEOs are not born but can learn and evolve in their roles.
  • HubSpot's near-death experience was during the 2009 recession due to customer retention issues.
  • The company shifted focus from sales-driven to product-driven culture.

"I think it's worth it if you go to a top tier MBA program." "I think it's a craft, just like product's craft."

These quotes offer the speaker's views on the value of MBAs and the development of CEO skills.

Impact of Figma Deal on M&A Market

  • Figma's acquisition process highlights the lengthy regulatory approval time for large deals.
  • The speaker believes smaller M&A deals will continue to be prevalent.
  • The IPO market's openness is correlated with Nasdaq performance.

"I think you've got to think long and hard before doing a good size acquisition." "I think the IPO market will be wide open."

These quotes discuss the implications of the Figma deal on the M&A market and the speaker's optimism about the IPO market.

Brian's Future Involvement with Startups and Society

  • The speaker plans to mentor startup CEOs through their scale-up journeys.
  • He aims to help founders avoid mistakes and contribute positively to society.

"I like to spend time with founders, CEOs, startup CEOs that want to be scale-up CEOs."

This quote outlines the speaker's future aspirations to guide and assist the next generation of entrepreneurs.

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