JD Sherman shares HubSpot's key growth factors and the future of AI | Avidly Talks: Marketing | Ep 124

As President and COO of HubSpot, JD Sherman helped take the company from 200 to 4,000 employees and helped millions of organisations grow better.

In this conversation, Joakim Fagerbakk interviews JD Sherman, the former president and COO of HubSpot. They discuss the evolution of HubSpot from a small startup to a major player in the marketing and sales technology space and much more besides.

Listen on Spotify

They delve into the importance of a company having a clear mission, the balance between focus and autonomy within a growing organization, and the cultural shifts that come with leadership changes.

JD Sherman shares insights on building a platform based on customer feedback, navigating challenges through partnerships, and identifying opportunities in the mid-market. The discussion also touches on the future of tech ecosystems and the impact of AI on business strategies.

Did you know?

JD Sherman joined the Avidly team as an Advisory Board Member in 2024. You can read more about why here.

Takeaways from this episode

• It's always scary to do something that nobody else has done.
• A clear mission helps guide a company's direction. Every year, HubSpot would reaffirm their mission and adjust their plays.
• Omissions help maintain focus on core objectives. Repetition and autonomy are key to communicating the mission.
• Cultural shifts are necessary for growth and adaptation.
• Listening to customers is crucial for product development. Finding the right clients is essential for success.
• AI is a disruptive technology that solves real problems. The tech ecosystem will continue to converge over time and this includes AI.

Chapters in the full episode

00:00 The Evolution of HubSpot: A Journey from Startup to Success
02:46 Defining a Mission: The Heart of HubSpot's Strategy
06:10 Focus and Autonomy: Balancing Direction and Freedom
09:00 Cultural Shifts: From CFO to Growth Leader
11:45 Building a Platform: The Importance of Customer Feedback
14:57 Navigating Challenges: The Role of Partners and Ecosystems
18:05 Identifying Blue Oceans: The Mid-Market Opportunity
20:52 The Future of Tech Ecosystems: Convergence and AI

Full video transcript

JD (00:00.142)
always scary to do something that nobody else has And when we sort of decided we were going to go wide, not deep, and focus on the mid-market, it was like, wow, can we really build a business like that because nobody else has done it.

Joakim(00:22.504)
Welcome to this special edition of Avidly Talks, which is mostly about marketing, sales and HubSpot Focus podcast. Every week we're drawing different topics that helps you to better the way you work and also try to make you smile along the way. That's the idea of this podcast. But today we have a little bit of a special guest joining us and that's I'm super, super, super honored to have him on board. My name myself is Joakim Fagerback. I'm part of the board of directors of Avidly. Pleased to say that I've also joined here now when we're sitting in Boston with the previous president and CEO of

HubSpot and now also an advisory board member of Avidly and no one else than JD Sherman. Very much welcome. Nice to be here. think you've been here actually all day. You actually do not live in Boston anymore, so you're a little bit outside. It's good to come back and run into all the people I used to work with and partners and the employees at HubSpot. It's lot of fun. I was happy to hear that I can make you commute two hours in the morning at 6 a.m. to join us.

I was really happy about that. So when you've been here now, I think there's been around 14,000-15,000 people here today, as I've told, which is a pretty big number. What's your sort of feeling of this ecosystem given when you started and how it's developed? It's really, it's actually humbling and remarkable. I started when the company was 200 employees and less than $20 million in revenue, and now it's obviously $2.5 billion in revenue.

Most impressively, I think the first year we had inbound, when I started with the company, we had thousand people in a smaller venue. And now, don't know what the number is, let's say 20,000 plus. It's really kind of indicative of the HubSpot ecosystem. And one of the things I was talking with somebody about earlier today is the great thing about HubSpot is that there's a lot of people invested in it. Customers, partners, app partners.

And so when HubSpot wins, a lot of people win. And to me, that's the way to set up a company and an ecosystem. It's like kind of you want win, win, win type situations. And I think HubSpot's been able to do that. Also, were you part when you actually created that mission? Because it's a super clear mission. It is, for me to say, helping millions of organizations to grow better. Another thing I'm really proud of is, yeah, that mission, how durable it is. And it's one of the things to think about.

JD (02:46.606)
for anybody who's thinking about their company's mission is like every word matters. And you can break down help millions of organizations grow better. Help is really important. What it means is it's not just about software. It's about helping. It's about people. Millions of organizations says we're not doing this for one specific type of company. We're really a broad focus. And grow better means not just grow, but to do it the right way, to do it a healthy way, a sustainable way.

a human way and you know so no matter what tactics HubSpot takes underneath that, that mission is really durable. think that's really powerful. That's actually really interesting. So when you set up and when you guys sort of started to build HubSpot together and you started to have these discussions on the sort of the mission of the company to take those lines and break it down into tactics that can be quite sort of powerful to really direct to say this we can avoid this we're going to do this. Yes, yes.

We, you know, every year we would look at that mission and we'd reaffirm it. And then we'd think about what the plays were. We called them plays that need to be, that need to happen for us to continue on that mission. The plays change quite often every year, every six months. And that's the way it should be. But the mission always stays the same. The other thing that was really important to HubSpot and I think is still today is we spent a lot of time thinking about what we called omissions, things we're not going to do.

It really helps you stay focused. You don't know if you're focused or not unless you can say, here are the things that we really could do, but we're not going to do. And it's really important to be able to test your focus by saying, these are the things I'm going to very explicitly omit doing. It would be really interesting to hear a real life example. What type of a mission would you look on? Well, I can go back to the very beginning of the modern HubSpot.

where we talked about what are we going to do and we talked about being a broader platform, going wide we called it instead of deep. In other words, instead of taking the marketing product that we had that we thought was very good and making it better and better and better and focusing it on a specific problem that the customers had, we decided to go wide and build a platform that would be really valuable to millions of organizations. And therefore the omission was we're not going to go

JD (05:12.034)
very deep on the marketing product, for example. We're not going to go after that enterprise player. We're also not going to enter different markets like e-commerce or something like that. We're really explicit about that because there are great ideas. People would come to us and say, what if we just built this small thing? We'd be really successful in e-commerce. And the right answer for that is that's a great idea. We're not doing it because it doesn't meet our focus for this year. And maybe it doesn't say you're never going to do it.

but it says you're not going to do it right now because you're going to stay focused on the plays that are going to drive your mission. think that's really quite powerful when you build it up and how do you make sure that that sort of cadences down into the organization that people are sort of aware of this is our mission, this is why we're not doing this and why we're doing this. That's another very interesting question because when you're a small company, 200 employees like it was when I started is the way you do that is you basically talk to everybody.

It gets harder when you're 8,000 employees or whatever, wherever Huff Spot is now, or 5,000 when I left. And I think there's sort of two real key things there. One is repetition. Like we're always talking about that mission. You never start a meeting or anything without talking about that mission. And then the other is what I like to call autonomy, which is like if you can set goals and guardrails for your team,

Then you give them autonomy and let them go off and run with it. If you try to manage that all the way down to every action in the company, you're going to lose your agility, but you're also going to lose track of what your real focus is. That piece, I remember, think it was Darmesh who once, I think he related back to a dinner he had where he asked Elon Musk, do you make things work? he said, you get all the vectors aligned. Yeah, vectors aligned. Which means that you get everyone...

going in the same direction then you don't need to micromanage. People know where we're going so they're going to take decisions in the right... It sounds easy. I don't know what that means in practice and how we actually make that happen. I don't know too much about Elon Musk but that's a very mathematical calculation of human beings. I think one of things that HubSpot got right was we thought about the culture as a group of human beings who have emotions and all this other kind of stuff. And so that's where again the mission becomes really important because you want people to be bought in on that.

JD (07:37.24)
them to feel like they have a purpose and drive towards that purpose and I think that has been a real key to our success. But alignment is really key too. Another thing is like how you make decisions really sets the tone for how the company operates. I always used to say I really hate making decisions. Obviously I'm gonna have to make decisions but when I do there's sort of two things I ask myself. One is

was that a good decision? And the way I tested was it a good decision was, is somebody mad? Because if nobody's mad about it, I probably did an uninspired compromise. Like I just solved for the lowest common denominator. Everybody's gonna be happy and I can move on and go have a coffee or something. If somebody's mad, then we made a hard decision. And we can go work with the person who's mad and make them understand and get them bought in and everything like that. The second question I always asked was, why did I have to make that decision?

Like what problem was in our operating system that that decision had to boil up to me? Sometimes the answer was it's a big decision. It has to boil up to me and Brian and the leadership. Other times there was a misalignment. Like the support team had a different perspective on the problem than the sales team had. And so then I had to go fix that. You know, almost like, like when we had a tough decision like that, it's like I registered as a bug in our operating system. And I went and...

tried to fix that bug so that people could feel more autonomous and make decisions on their own. Being from the outside, mean one of the things that came across very strongly, which is a little bit odd being at that time I think you were the CFO of the company, that you were a big sort of culture barrier. Yeah. At least what it looked was never the CFO to be clear. I was a CFO before I joined HubSpot. Maybe that, sorry. Talk about a cultural shift from being the CFO, the guy who's in charge of almost like...

I guess you'd say the CFO is really in charge of the guardrails. You can have a really strong CFO that's an enabling thing or you can have a CFO where that can be a blocking thing. I've always felt like we've had CFOs that's been an enabling thing. But it is a very big cultural shift to shift your mind from being the finance guy to the growth guy. It's really a big change. It's almost like two different personalities. You have to change your personality very dramatically. In fact, a lot of people...

JD (09:56.748)
I was the CFO of company here in Boston called Akamai. And if you went and talked to my colleagues at Akamai and introduced them to my colleagues at HubSpot, they'd say, are we talking about the same person? Because I really had to change a lot. I can imagine. But I also think everyone you talk about JD Sherman within the ecosystem, I only hear good words. And also it's...

the guy that makes things happen. That's pretty much how it was sort of recognized and then I can just sign under on that one since I was part of that ecosystem. I'm glad to hear that. But the truth is all I did was enable everybody else to get their job done and that's the right way to think about the problem. Yeah, I like that. Now if you look on the tech side when HubSpot started it started off with sort of app, market automation app pretty much that then it made into more of a hub and then sort of suite and then a full platform. What sort of...

tech market did you sort of envision why was this the move, the right move for HubSpot to go that route? it total addressable market would be bigger for you to swallow or was it some specific? I think we thought about it from the customer end. Another thing that HubSpot does really well is it listens very closely to customers. And so we listened to how our customers operated and we knew that we had to help them

change the way they operate to respond to the way the market was changing. our customers were largely in the mid-market, small and medium businesses. They didn't have the sophistication that some customers had that it could take lots and lots of different software packages and applications and tie them all together. And so we needed to build the all-in-one platform that would enable them to grow better, to sell and market the way that the market was.

going to require in the future. And so we tried to stay a step ahead of that and we tried to build the software that enabled that from a platform. Exactly. And one of the other things that was interesting that you early on were very open to add on partners like app partners also to make sure that for the client is going to be sort of a seamless feeling even though you might have various products. Yeah. I give Darmesh most of the credit for that to be honest with you. Darmesh sort of recognized. Darmesh has a great

JD (12:14.944)
ability to see into the future. It's amazing. And he recognized that if we're ever really going to be a useful, helpful, at scale platform, you're going to need app partners. And so we kind of with that even before we were a really big company and had lots and lots of customers. It's hard to get that machine going, right? Because if you're an app builder,

why would you work with HubSpot? You'd only work with HubSpot if there were lots and lots of customers, right? If you're thinking about using HubSpot as a customer, you want to see that there's a lot of apps. So it's hard to break that log game. We invested a lot in that. We hired somebody who's Scott Brinker was his name, real expert in that area. And we just invested in it and over-invested in it. And now you can see it's really paid off.

mantra saying also when you sort of launch a new business that you sort of it's a lot of push for the first two market percent penetration percenters it's like you have a Channel that needs to be fed and they want to have enough business out there So all of a sudden when that shifts it becomes a pull and that's sort of when you normally see these hockey stick Yeah, you know we took the flywheel analogy for the way we think about marketing and sales too, but the flywheel analogy

applies there too. A flywheel is something that's really hard to get started. But once you get it started, it's a really powerful physical force. And so we thought about that exact analogy for the way we built our partner network as well as our app network. I like the flywheel. We use something we call the merry-go-round. It's similar. When you push when you were a kid, it takes a little bit of time in the beginning. When it's up and running, it just goes.

That's right. And that's when you start to see that a lot of the motions you started are just running on its own. And we've used that analogy, obviously we talked about it with our customers for marketing sales, but that force and friction analogy we use to analyze our own businesses. where are we having to apply a lot of force? What do we do about that? Where are we finding a lot of friction? And how do we eliminate that friction? Because those are the two parts of anything, of any fit mechanical system, but also any business that you need to look at.

JD (14:28.481)
figure out how you're going to be successful. Where do I put my force and how do I reduce the friction? I think that's actually quite powerful because I remember now it makes more sense because there were a lot of meetings where we participated and they were talking about friction of course, they flywheel, but also the way presentations were made. You talk about accelerators and brakes, same sort of analogy to try to sort of identify.

I one of the most difficult days of my career at HubSpot, Brian, our CEO, we had started to do a product-led growth motion start free and upgrade. Well, he decided he was going to be a customer and do that. And he took us all through the process he had and all the friction in that process. To become a customer. God, it was so painful. It was so painful. Like we all went out of that meeting groaning.

But by the way, another thing that we used to do, every time we'd have a management meeting, we'd start it with a customer. And we would have the customer tell us the good and the bad. And there was a lot of bad, we would all, you could, one of the great things about HubSpot was we could, like, the physical pain of hearing a customer talk about how difficult it was to use HubSpot, like we would all, we needed a break after that. And then we'd go solve the problems. And so it really focused us on the right things, you know, listening to the customer.

Now when you have a process like that, that you sort of take in customer opinions all across, you also have to there be a little bit delicate of course, because it's always easy to have a long wish list. yeah, totally. And at the end you need to follow certain metrics and you need to see what actually is something that creates traction, something that we can see we can sort of duplicate and has make sense for a lot more than just one client. Yeah, that's exactly right. You have to be careful about that. You know, actually another big decision we made was to not

When I first joined, one of the first decisions I made and mistakes I made was I hired from my prior company a real enterprise sales leader. And he started bringing us into clients where we had no business being in. Larger clients. The product was not ready at all. And so I spent a lot of time on airplanes going to big clients listening to all the things that were wrong about the product.

JD (16:53.395)
And I was like, you know what, you're right. You know what else? We're not going to do that. And so what we realized was we had found the wrong set of clients for where the company was. And so you have to definitely be careful about that. But what you need to do is find really great clients who care about the company and care about the product and want you to win and listen to them. Another thing I think was super interesting with HubSort is that you

a little bit identify that sort of blue ocean where there was sort of space open for sort of you could say sort of the simplicity to help small organization to automate a lot of things. What's the sort of feeling you get when you realize we have actually identified a space here that actually is not taken?

How do you sort of make sure that you try to let's guard this, let's make sure we are taking the number one position here? I tell you, it's scary. And by the way, I give Brian Halligan most of the credit for this. He was the real strategic driver of that. But you know, usually when you find that, one of the aspects of that is nobody else has done it. It's always scary to do something that nobody else has

And when we sort of decided we were going to go wide, not deep, and focus on the mid-market where there was a big blue ocean, as you say, it's like, wow, can we really build a business like that because nobody else has done it? We had to have a lot of fortitude around that. And Brian led the league in fortitude on that to the point where when we were going public as a company, one of the things you do when you're going public is you talk to all these investors who are potentially going to buy your stock and you have to answer their questions.

question that we had was, well how can you build a really big business in the mid-market? And like what examples of companies are there that build big businesses in the mid-market? And there weren't a lot. We were able to, I think, to point to a couple things that made a ton of sense to investors. One was that we had the reach into the mid-market because of our own inbound marketing, the way it was working. But the other was we had this big partner network.

JD (19:04.653)
that was able to pull us in. I think one thing that I think was super interesting is that you actually HubSpot actually created the word inbound, right? Yeah. It was sort of, that's how you started the whole. Totally. By the way, my boat is named inbound by the way. Really? Yeah. That's the name of my boat, inbound. It's a perfect name for a boat as well as a conference and as well as a marketing strategy. But would you think that still makes sense now given where HubSpot is today as a product?

to call a conference like this inbound. Well, you we talked a lot about that. Even when I was there. think the conference as a brand has built its own sort of momentum. And so I don't know where the company is on that. Certainly I wouldn't be a vote for changing it. think inbound is a great name for the conference. And at least those who are in the space, everyone sort of recognizes love that we don't call it something about HubSpot or We. I still say We because I just love this company so much.

They don't call it something about HubSpot because it's not, it's a HubSpot conference in that Yamini will get up and give a talk for an hour and half, but it's really a conference about the community that's been built around the ecosystem that we built as a company. I truly believe that that ecosystem is another success factor. Also talking about sort of the partner systems, the channel partners that you set up, solution partners and the app partners. But also the way that

sort of the whole inbound methodology that you sort of, the product was based on. You used it yourselves and proved the point because I think if you look on the metrics, what HubSpot managed to do in terms of marketing through their own inbound market is pretty amazing. Now, when you go out with a SaaS product like you do, which is sort of a transactional business model, and then you're gonna work.

upmarket which has happened lately and when you go upmarket you need to cooperate with solution partners that have more of a consultative business model and how what sort of friction can you see there and what you think could be sort of potential way to create a good motion in that space? That's a little more challenging question. Well it's a good question I do think that you know HubSpot as a product and as a company has evolved where

JD (21:22.465)
you know there's a it's still

easy to use, it's still powerful, all that kind of stuff. There are a lot of situations where getting the implementation right is super important. And I do think HubSpot has an ecosystem to lean on that, because of the investments that we made that Darmish pushes to do, will, it will help HubSpot be successful in that. I think as HubSpot thinks about the future, nurturing that

type of partner, the avidly type of partner, as you and I have talked about, is going to be really, really important. Building that aspect, that facet of the ecosystem is going to become more more important as HubSpot grows its market presence in the mid-market and above.

So now if you move outside of HubSpot, so since you left, also got engaged in, well, you're still partly in the ecosystem, but also invested in and participated in board in adjacent technologies, you can say. What sort of viewpoint, when you look into that, what's sort of your view going forward with these sort of ecosystems? Will they converge together more and more? it be sort Well, you know, as you think about the evolution of every sort of tech

you know segment, it always converges. You think about the HR segment, the finance segment, you have all these companies that start with an app or something like that and they converge towards a platform. I think that continues to happen for the go-to-market segment. I think there are a lot of really powerful tools out there. I think how they all come together and work together is really the magic around how companies can

JD (23:13.519)
leverage these tools to drive their go to market. thought some of stuff that Yamini talked about today is sort of right on. It's about how you leverage all these technologies to really enrich the...

the connection, the relationship you have with your prospects and customers. And that takes some strategic thinking, takes some cobbling together of stuff. And I think there are some folks like Avali's of the world that can help do a great job of that and make it really work, make it seamless. Well, since you mentioned new technology, then have to touch upon AI, which has been on the talk. So of course HubSpot has chosen one route.

to put that into their product and give it away as part of their sort of packaging. Other ones choose to have it as a separated entity and some people sort of have actually had it for many years, just not talked about with AI. So it's sort of a little bit of a, what's your take on that one? I'll say a few things. One is,

I think AI is for real. You always hear like your Web 3.0 and all this other kind of stuff. I think AI is a real disruptive technology. That's first thing I'd say. Second thing is I think when people think about AI as a product, that's the wrong way to think about it. Like anybody who's got an AI product. Certainly you have these big LLMs and I think you're going to end up in a world where there are two or three of these big standard ones. I guess you can call that an AI product. But I really think it's about the problem that you're using AI to solve.

In fact, we were just talking with some of the engineers at HubSpot that, you from my old days and one of them said to me, he's like, I can't wait till we stop talking about AI and start talking about the problems that we're using it to solve. I think that's a super important point. he kind of it. That's actually very, very true. Yeah. And I really, I mean, honestly, I think this is so helpful. I'm so happy that you are actually joining Aveli, but I also must say that you're one of the most talented people I come across, know, seriously, business wise.

Joakim (25:17.391)
first meeting we had was actually you and Brian. We talked about this sort growth fund and you were...

very switched on and Brian was all over with both hands I think on a whiteboard going on at the same time. If Brian doesn't have a whiteboard he may not be able to commute, I don't know. But it was pretty impressive and also that you it was so engaging and it really smithens that sort of energy and that sort of competence. So I just want to thank you. my pleasure. For participating. It's a lot of fun. We do get passionate about this kind of stuff. It makes it lot fun when you're passionate about it. totally, it's exciting.

Alright, so by that I just want to thank you very much. My pleasure, absolutely. Let's keep talking. Absolutely, let's do it. Hey, did you enjoy this episode? Then be sure to leave us a comment, a review and hit that follow button. See you next episode!