All Segments
Zigging vs. zagging: How HubSpot built a $30B company | Dharmesh Shah (co-founder/CTO)
52 segments available
Dharmesh Shah is the co-founder and CTO of HubSpot (currently valued at $30 billion) and one of the most fascinating founders I’ve ever met. Dharmesh is the keeper of HubSpot’s Culture Code, built ChatSpot (an AI chatbot built on top of HubSpot CRM) and a game called WordPlay (which grew to 16 million users), and also founded and writes for OnStartups, a top-ranking startup blog and community with more than 1M members. He’s also invested in 100+ startups including OpenAI, AngelList, Coinbase, and Dropbox. In our conversation, we discuss: • The biggest lessons he has learned from building HubSpot • The importance of leaning into your strengths • Dharmesh’s data-oriented approach to public speaking • How he developed HubSpot’s culture code • The decision-making process at HubSpot • His contrarian approach to building products • Why founders and product teams are all fighting the second law of thermodynamics • How “flash tags” can save your teams time • How to decide what ideas are worth investing in — Brought to you by: • Explo—Embed customer-facing analytics in your product: https://explo.co/lenny • Vanta—Automate compliance. Simplify security: https://vanta.com/lenny • LinkedIn Ads—Reach professionals and drive results for your business: https://www.linkedin.com/podlenny Find the full transcript at: https://www.lennysnewsletter.com/p/lessons-from-30-years-of-building Where to find Dharmesh Shah: • X: https://twitter.com/dharmesh • LinkedIn: https://www.linkedin.com/in/dharmesh/ • Website: https://dharmesh.com/ Where to find Lenny: • Newsletter: https://www.lennysnewsletter.com • X: https://twitter.com/lennysan • LinkedIn: https://www.linkedin.com/in/lennyrachitsky/ In this episode, we cover: (00:00) Dharmesh’s background (04:20) Fun facts about Dharmesh (06:31) His data-oriented approach to public speaking (11:45) Advice for adding humor to your presentations (15:28) Why he has no direct reports (18:46) You can shape the universe to your liking (20:02) Lessons from building HubSpot (23:43) Contrarian ways of running a company (37:26) Fighting the second law of thermodynamics (40:29) The importance of simplicity in running a business (45:22) Succeeding in the SMB market (50:29) Zigging when others are zagging (54:17) When it makes sense to go “wide and deep” (57:33) Using flashtags to communicate opinions (01:02:44) HubSpot’s decision-making process (01:09:41) Deciding what ideas to invest in (01:15:26) Defining and maintaining company culture (01:30:46) The potential of AI (01:37:03) Practical advice for learning AI (01:40:07) Where to find Dharmesh Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com. Lenny may be an investor in the companies discussed.
Segments Timeline
The Zigzag Philosophy
Dharmesh Shah shares his contrarian approach to startup advice, emphasizing the importance of focusing on multiple strengths rather than just one. He reflects on how HubSpot's early strategy was to zig when others zagged, setting the foundation for their unique culture and success.
"some of the best startup advice I've heard is startups should focus on one thing and be really really exceptionally worldclass at that one thing and one of our early zigs is we are going to do exactly..."
Defining HubSpot's Culture
Dharmesh discusses the process of defining HubSpot's culture, highlighting his initial reluctance and the unexpected journey that led him to embrace this critical aspect of the company. He emphasizes the importance of culture in a growing organization.
"direct reports and I don't believe you've ever had Direct reports at hpot I could become passively okay at management with some training with some coaching I don't want to spend n years of my life bec..."
Comedy and Public Speaking
Exploring his passion for comedy, Dharmesh reveals how he applies humor to public speaking. He introduces the concept of 'laughs per minute' (LPM) as a metric to enhance audience engagement and shares his unique approach to preparing for talks.
"define the culture my co-founder and I were having one of our Founders meetings and he said oh dares I hear this culture thing is really important by the way can you go do that I'm like okay Brian all..."
The Art of Measuring Humor
Dharmesh elaborates on his custom software that tracks audience laughter during his presentations. He explains how this data-driven approach helps him refine his public speaking skills and improve the overall effectiveness of his talks.
"and keynote prep it comes down to this metric that standup comedians use called LPM laughs per minute I have custom software that I've written that will say okay here are the points at which the audie..."
Lessons from a Public Company Exec
Reflecting on his decade-long experience as a public company executive, Dharmesh shares key lessons learned while maintaining his startup mentality. He discusses the balance between innovation and operational excellence in a growing company.
"HubSpot and also one of the most fascinating and first principled thinkers I've ever met in our conversation we cover a lot of ground dar's hilarious and ingenious approach to putting together a talk ..."
Zigging vs. Zagging
Dharmesh explains the significance of zigging when others are zagging in business strategy. He emphasizes the value of embracing unique approaches and how this mindset has contributed to HubSpot's success in a competitive market.
"for over 10 years now especially while being a startup guy at heart how he approached creating and scaling the culture of HubSpot which you'll find both hilarious and inspiring why Founders and produc..."
The Importance of Strengths
Discussing his personal philosophy, Dharmesh highlights the importance of leaning into one's strengths. He shares insights on how this principle has guided his leadership style and decision-making at HubSpot.
"into his strengths including never having a single direct report during his 18 years of running HubSpot and so much more this episode is so fun and will expand your mind in many ways with that I bring..."
No Direct Reports: A Unique Leadership Style
Dharmesh reveals his unconventional leadership style of having no direct reports throughout his tenure at HubSpot. He discusses the implications of this approach on company culture and personal productivity.
"podcasting app or YouTube it's the best way to avoid missing future episodes and it helps the podcast tremendously this episode is brought to you by explow a game changer for customer facing analytics..."
Building a Culture of Innovation
Delving into HubSpot's culture, Dharmesh explains how fostering an environment of innovation and creativity has been pivotal to the company's growth. He shares anecdotes that illustrate the impact of this culture on employee engagement.
"your product are you tired of trying to build it yourself as a product leader you probably have these requests in your road map but the struggle to prioritize them is real building analytics from scra..."
The Role of Humor in Business
Dharmesh discusses the role of humor in business communication and presentations. He shares practical tips on how to effectively incorporate humor to enhance audience connection and retention.
"analytic solution designed entirely with your user in mind getting started is easy explo connects to any relational database or warehouse and with its low code functionality you can build and style da..."
The Journey of a Startup Founder
Reflecting on his journey as a startup founder, Dharmesh shares insights on the challenges and rewards of building HubSpot. He emphasizes the importance of resilience and adaptability in the entrepreneurial landscape.
"code snippet the best part your end users can use explos AI features for their own report and dashboard generation eliminating customer data dat requests for your support team build and embed a fully ..."
Solo Weare: Building for One
Dharmesh Shah introduces the concept of 'Solo Weare,' software designed for individual use, reflecting his philosophy of creating tools that serve personal needs. He explains how this approach allows for a streamlined user experience without the complexities of catering to multiple users, emphasizing the freedom to innovate without the pressure of external expectations.
"entire podcast could just be this one thread but I need to move on to other topics uh one quick question so you said a deal apps per minute is two to three-ish is that what you said uh yeah two plus i..."
Leaning into Strengths
Dharmesh discusses his decision to have no direct reports at HubSpot, highlighting the importance of focusing on personal strengths rather than trying to excel in areas where one may not be naturally skilled. He shares a pivotal moment from HubSpot's founding where he recognized his limitations in management and chose to prioritize his strengths, leading to greater satisfaction and productivity.
"versus if you have users even 10 users and you put it out there and then people would be disappointed if you took it down for whatever reason uh that's kind of hard so anyway so that's the calculus I ..."
Shaping Your Company Culture
In this segment, Dharmesh emphasizes the power of founders to design their companies according to their values and preferences. He shares practical examples, such as setting meeting times that align with personal productivity, illustrating how intentional choices can foster a positive work environment and enhance overall company culture.
"productive for hub spot and good for me I love that this is an example of how you can build a company the way that you want to build it you don't have to do it the way everybody else has done I imagin..."
The Benefits of Going Public
Dharmesh addresses common misconceptions about the IPO process, arguing that going public can provide significant advantages, including market visibility and the ability for a broader audience to participate in a company's growth. He reflects on HubSpot's journey from a billion-dollar valuation to thirty billion, highlighting the inclusivity of public markets.
"beginnings of the day love that okay so you talked about you're a startup guy at the same time hpot is approaching its 10 years of being a public company and I think 18 years since founding I'm curiou..."
Transparency as a Core Value
Dharmesh shares HubSpot's commitment to transparency, detailing how the company maintains open access to information for all employees, even after going public. He recounts a pivotal decision to designate every employee as a 'designated insider,' ensuring that everyone has access to critical financial information, which reinforces trust and engagement within the organization.
"okay well you believe in your company there's lots of people that believed in HubSpot um it's nice to let them kind of participate our customers our partners our wellwishers and they can sort of now h..."
First Principles Thinking
In this segment, Dharmesh critiques the common misapplication of 'first principles' thinking in business. He emphasizes that true first principles should be based on universal truths rather than subjective beliefs, advocating for a scientific approach to problem-solving and innovation within companies.
"this day right even at 7,000 people um everybody's Insider so so we can still share all the financials with everyone all the time you have many contrarian opinions is what I'm getting from this conver..."
Contrarian Leadership Principles
In this segment, Dharmesh explores the concept of first principles in business, arguing that many interpretations are often misapplied. He shares how HubSpot's commitment to transparency is a founding principle rather than a first principle, and discusses the importance of making high conviction, low consensus decisions in leadership.
"very long time and that kind of helps you make other bets um that are secondary but but you don't want to reinvent everything so I'll give you an example of something that we had in the early years of..."
Simplicity Over Complexity
Dharmesh reflects on the early days of HubSpot, where they initially operated without job titles. He explains how this decision was rooted in simplicity and how they later adapted to include titles to meet employee needs. This segment highlights the importance of simplicity in organizational structure and decision-making.
"much to this let's just try think differently okay that didn't work let okay it's fine we're just going to do what everyone else is doing here and then often you discover a thing that okay this is act..."
Fighting Entropy in Business
Dharmesh introduces the concept of entropy in business, likening it to the second law of thermodynamics. He explains how companies naturally tend toward complexity and disorder over time, and emphasizes the need for leaders to actively fight for simplicity to maintain efficiency and growth.
"going to work at 15 20 people it's not going to work at 50 worked at 25 worked at 50 worked at 100 worked at 200 we updated the algorithm we did some local optimizations which we said oh there are som..."
Simplicity in Product Development
In this segment, Dharmesh shares HubSpot's product development philosophy, which mandates that for every new feature added, an existing one must be removed. This approach ensures that the product remains user-friendly and avoids unnecessary complexity, reflecting their commitment to simplicity.
"that Simplicity because everything even well-intentioned people will introduce complexity because that's the Natural Way of the world uh we want more tiers in our pricing we want these knobs and dials..."
Understanding Dimensional Complexity
Dharmesh explains the concept of dimensional complexity in business, illustrating how adding new products increases the complexity of decision-making and operations. He stresses the need for companies to be mindful of the long-term costs associated with this complexity as they grow.
"like it just at least forces you to think about it right it's like versus the because the other mistake I think people make in product all the time but um is that we measure the cost of a feature base..."
Operationalizing Simplicity
Dharmesh shares insights on how HubSpot operationalizes the principle of simplicity within its culture. He discusses the importance of imposing constraints and creating systematic approaches to ensure that the organization remains focused on simplicity amidst growth pressures.
"course you need that can make the case that you need to build product number two and product number n n plus one over time uh but you should be mindful about the cost of that complexity is there somet..."
The Challenge of SMB Markets
In this segment, Dharmesh addresses the unique challenges of targeting small and medium-sized businesses (SMBs). He shares his perspective on why entering the SMB market can be difficult but ultimately rewarding, encouraging founders to embrace the complexities involved.
"it's like oh we believe in Simplicity we fight for this and you can have meetings and you can kind of get up in all hands meetings and kind of reinforce that which I encourage you to do uh but like a ..."
The Allure of SMB Success
Dharmesh discusses the advantages of focusing on the SMB market, highlighting how it offers a balance between enterprise and consumer software. He explains the concept of 'reverse gravity' in the software market, where successful SMB companies often evolve into enterprise-focused businesses over time.
"amazing great a because it's hard and we'll talk about that um but B okay so I'll I'll tell you this quick story in terms of how we um chose and chose FNB and so this you my co-founder I met in in gra..."
Zigging When Others Zag
Dharmesh reflects on HubSpot's contrarian approach to product development, where they chose to build a comprehensive suite of tools for SMBs instead of focusing on a single product. He emphasizes the importance of solving real customer problems and the need for startups to consider alternative paths in their strategies.
"when HubSpot started SMB it was literally like a hundred times harder to succeed in SMB right and we could not raise Capital like it was so hard because mean the common argument was like there literal..."
When to Go Wide vs. Deep
Dharmesh shares advice for founders on when it makes sense to adopt a broad approach versus a focused one. He stresses the importance of falling in love with the problem rather than the solution, encouraging entrepreneurs to deeply understand the issues they are addressing before deciding on their product strategy.
"I I would argue that most of the categories we play in we are as uh you the surveys would tell you we're in the top three in each of those categories now right but at the time uh when we were very ver..."
The Discipline of Broadness
This segment delves into the discipline required when adopting a broad product strategy. Dharmesh discusses the necessity of self-imposed constraints to ensure that a wide approach does not dilute the company's effectiveness. He emphasizes the importance of understanding the problem deeply to justify a broader offering.
"forces you to kind of understand and at least label and Define what problem you're solving because often times we can describe our product whatever but we struggle sometimes as Founders to describe th..."
The Power of Flash Tags
Dharmesh introduces the concept of Flash Tags, a system he developed to clarify the intent behind his feedback. He explains how these tags help manage expectations and improve communication within teams, allowing for more effective collaboration and decision-making.
"best you can say we we we solve this particular problem the best but we're not going to have the best product in along those any of those Dimensions amazing I love this advice imagine a place where yo..."
Decision-Making at HubSpot
In this segment, Dharmesh outlines HubSpot's approach to decision-making, emphasizing the importance of data-informed decisions while recognizing that people ultimately make the choices. He discusses the significance of designating decision-makers and the value of aligning the team around decisions made.
"drive results with targeting and measurement tools built specifically for B2B in Tech LinkedIn generated a 2 to 5x higher return on ad spend than any other social media platforms audiences on LinkedIn..."
Debate, Decide, Unite
Dharmesh elaborates on HubSpot's decision-making culture, introducing the phrase 'debate, decide, unite' as a framework for effective collaboration. He contrasts this with Amazon's 'disagree and commit' approach, highlighting the importance of open debate and team alignment after decisions are made.
"like by the way like the number of times that happens is like I can count on the fingers of like one hand and still have fingers left over right like that almost never gets to that um because either I..."
The Power of Saying No
In this segment, Dharmesh reflects on the importance of saying no to new opportunities to maintain focus. He explains how every yes comes with a no to something else, advocating for a disciplined approach to time management and decision-making.
"things I try to apply to my life is like okay like my geeky nature wants me to go uh n m Zep and you know you know start writing code and do this thing or whatever but I I found that that one simple t..."
Evaluating Ideas for Investment
Shah outlines a framework for evaluating startup ideas based on potential outcomes, probability of success, passion, and unique advantages. He emphasizes the importance of assessing potential before probability to avoid prematurely dismissing valuable ideas.
"this is goes back to one other first principles is a times with a few kind of constants right like the so every time you say yes to something by definition you're saying no to something else and so th..."
The Importance of Passion and Prowess
In this segment, Dharmesh discusses the role of passion and expertise in pursuing startup ideas. He argues that while passion is important, it can develop over time as one engages with a problem, and highlights the significance of having unique advantages in the market.
"think about deciding what is worth investing in so imagine Excel spreadsheet again so let's say you're value an idea for a startup for a new product a new feature whatever it happens to be I think thi..."
Creating a Decision-Making Framework
Dharmesh elaborates on the need for a structured framework when considering new ideas. He suggests using a spreadsheet to quantify potential, probability, passion, and prowess, allowing for a clearer decision-making process.
"things and you come come up with What's called the expected value anyway so let's say we just look at two branches like oh there's a 50/50 chance that I'm going to make $10 million and she we'll take ..."
Understanding Company Culture
Shah transitions to discussing HubSpot's culture, explaining how he was tasked with defining it. He emphasizes that culture already exists within a company and that the goal is to articulate and describe it rather than create it from scratch.
"do you have some assets some something that makes you uniquely positioned uh either if you're building a new product you have existing lines of code that you can reuse you have a market that you alrea..."
The Culture Code Journey
In this segment, Dharmesh recounts the initial challenges he faced when trying to define HubSpot's culture. He shares his experience of receiving negative feedback from employees, highlighting the sensitivity surrounding the topic of company culture.
"and I have a an issue with passion uh as a were because it's ambiguous because we talk within uh startup circles it's like oh pursue your passion sure um but it's like you know what most of the compan..."
Defining Success Factors
Dharmesh explains how he developed a culture code by identifying the attributes that contribute to employee success at HubSpot. He discusses the importance of understanding what makes employees happy and how that shapes the company's culture.
"it great uh that's a tiny small fraction of people right like that's uh it doesn't happen and you may not even know what you're passion like especially if you're a first-time founder it's like okay we..."
The Culture Code Deck
Shah introduces the concept of the 'Culture Code Deck,' a presentation that outlines the key attributes defining HubSpot's culture. He emphasizes that this deck serves as a guide for understanding the company's values and the qualities that contribute to its success.
"ever um and this was how many how many years in uh this is I want say three or four years in uh I can check the records um because by the way even like Brian and I even back uh when people worked out ..."
Defining HubSpot's Culture Code
Dharmesh Shah shares the origins of HubSpot's Culture Code, explaining how he identified the attributes that define the company's culture. He emphasizes the importance of understanding what makes employees happy and how that contributes to a positive work environment. This segment highlights the iterative nature of culture, likening it to a product that must evolve with the needs of the team.
"know how overloaded that idea of culture was right and so then when you dig into it it's like oh because so many companies had done it so poorly uh and just didn't you know W the or whatever this this..."
Culture as a Product
In this segment, Dharmesh discusses the concept that culture is a product, just like the products HubSpot builds for its customers. He explains how the culture should be continuously iterated upon, similar to software development, and how feedback from employees is crucial for maintaining a healthy culture. This perspective shifts the focus from preserving culture to actively developing it.
"it's like the question I keep asking myself is if we could have an operating system that ran the company uh the Dy part of me not that you could do that but what would that look like right and so and ..."
The Role of Transparency in Culture
Dharmesh emphasizes the importance of transparency within HubSpot's culture. He explains how feedback from employees is treated similarly to product feedback, with a commitment to addressing concerns and making necessary changes. This segment illustrates how transparency fosters trust and engagement among team members, reinforcing the idea that culture is a living entity that requires attention and care.
"and there's so many other things that kind of fall so just like in a product you will get feedback from the customers like oh here are the bugs and we actually call them bugs it's like oh here are the..."
Aspirational Culture and Core Values
In this insightful segment, Dharmesh reflects on the balance between aspirational culture and core values. He shares how HubSpot's culture code includes aspirations that guide the company towards its ideal culture, even if they are not fully realized yet. This approach encourages employees to embody these values, creating a self-fulfilling prophecy that shapes the company's culture over time.
"the founders um wow what an amazing story you're definitely getting laughs per minute for me I think there's at least one laugh per minute so far in this podcast that's amazing and I think this point ..."
Lessons from Culture Code Feedback
Dharmesh recounts his experience with feedback on HubSpot's culture code, highlighting how initial aspirations became part of the company's reality. He discusses the importance of being honest about the current state of the culture while also encouraging growth. This segment underscores the dynamic nature of culture and the need for continuous reflection and adaptation.
"similar at HubSpot we have a core set of things that are kind of part of the culture part of the things like okay here's what we believe and then there are things that uh the individual groups so our ..."
Navigating Cultural Changes
In this segment, Dharmesh discusses the challenges of maintaining culture during growth and change. He compares cultural elements to federal and state laws, explaining how core values can remain constant while allowing for flexibility in implementation across different teams. This analogy illustrates the need for adaptability in culture as the organization evolves.
"learned uh so when I put the first version the public facing version of the culture code out there and I got you feedback from the team and like theyes like you say this in the culture code deck and i..."
The Impact of AI on Culture and Products
Dharmesh shares his excitement about AI and its potential to transform the way companies operate. He draws parallels between the rise of the internet and the current AI revolution, emphasizing that AI can enhance cognitive capabilities at scale. This segment highlights the opportunities for product builders to leverage AI in creating more intuitive and impactful products.
"to cut the lightning round so I hope that's okay totally fine okay I know AI is very top of by way that's this is my diabolical plan to have to skip the lightning round because that's the thing I'm no..."
The Impact of AI: Cognition at Scale
Dharmesh Shah discusses the transformative potential of AI, comparing it to the internet and early computers. He emphasizes that AI provides cognition at scale, allowing for a significant amplification of human capabilities. This segment highlights how AI can revolutionize product development and user interaction, making technology more intuitive.
"when the the web first came along in the in the mid to late 90s and I'm like oh like this literally like changes everything right it's like relevant to everything it's like literally everything is goi..."
From Imperative to Declarative: A New Model
In this segment, Dharmesh explains the shift from imperative models, where users give step-by-step instructions to computers, to declarative models that allow users to describe desired outcomes. He illustrates this with the analogy of SQL, showcasing how this change can simplify user interactions with software and enhance productivity.
"what AI gives us now um is is cognition at scale the ability to kind of literally amplify the human brain right like that's never been done before look not that we haven't been trying but now we have ..."
Eliminating the Translation Layer
Dharmesh Shah elaborates on the opportunity to remove the 'translation layer' in software interactions, making them more intuitive. He shares insights from his experience with Growth Bot, a chatbot he developed, and how advancements in AI now enable more seamless user experiences across various software applications.
"you describe the outcome you want not the steps to get there and the closest analogy that most people are familiar with um is SQL the creting language right so before SQL if you wanted to get data out..."
Learning in Public: Building and Sharing
Dharmesh emphasizes the importance of learning in public and building in the open. He encourages listeners to tackle real problems using AI tools and to share their learning experiences. This approach not only fosters personal growth but also invites valuable feedback from the community.
"like I had a chip on my shoulder particularly with that idea right uh but but I think um I'm not suggesting that you know web and mobile interfaces are going to go away but there are a class of use ca..."
Defining Success: Making Others Look Brilliant
In this reflective segment, Dharmesh shares his definition of success: making those who believed in you look brilliant. He discusses the importance of supporting customers, employees, and investors, and how this outward-facing perspective can drive meaningful achievements in business.
"talk so what's great about watching you because you you kind of built in public with this AI stuff that you're just you're doing it like your approach to learning about this is building and doing when..."
Connecting with Dharmesh: Where to Find Him
Dharmesh Shah wraps up the conversation by sharing how listeners can connect with him online. He encourages engagement through social media and invites feedback on his work. This segment serves as a call to action for the audience to reach out and continue the dialogue.
"beautiful deres you are wonderful thank you so much for doing this this has been a lot of fun I'm glad we were able to put it together same we covered so much CR we got through everything that I was h..."