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The Official SaaStr Podcast: SaaS | Founders | Investors
SaaStr 783: HubSpot Co-Founder and Chairman Brian Halligan on SaaS Markets and AI (Part 1)
00:44:30
SaaStr 783: HubSpot Co-Founder and Chairman Brian Halligan on SaaS Markets and AI (Part 1) SaaStr CEO and Founder Jason Lemkin recently sat down with Chairman and co-founder , who shared valuable insights on the current state of...
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- [00:01]
Jason Lemkin
Welcome to the official Saster podcast where you can hear some of the best Saster speakers. This is where the cloud meets up. Today on the Saster podcast.
- [00:12]
Brian Halligan
SaaS was in a downturn. I don't know when it started, but I think it ended in Q3. If you look at the SaaS company's numbers, see it through Sequoia, see it through all my HubSpot dashboards where I see our customers. It felt like we came out of the recession in Q3 of 2024. And I also just think it's like the universe like slammed SAS down and then splashed it way up and then slammed it down again and it's flashing back up. I think we're in a different place in Q4 of this year than we were in Q4 of last year. Economically, SASS people overbought. People had too many employees and the downgrades were high. The gross retention for people were low. And I think we're just getting back into a better spot.
- [00:57]
Jason Lemkin
Hey everybody. Thanks to the 10,000 of you who came out to Saster Annual this year. We had a blast and big news. We'll be back in May of 2025 or in May of next year. That's right. SAS train will be a bit earlier next year. The 13th to 15th of May 2025. We'll still be back at the same venue in the SFBA in our 40 acre San Mateo County Event center campus. And tickets are never cheaper than right now. So grab your tickets@saster annual.com with my code Jason50 for an extra discount on our very, very best pricing. That's jason50@saannual.com. see you next May at Saster 2025. Hello Saster. We are here with one of our old time friends and favorites, Brian Halligan, Co founder, Chairman of HubSpot OG SaaS executive thought through all the things we've thought through over the years. Been to Sasser Annual several Times Now Wearing three hats, right? Three hats. Chairman of HubSpot, Sequoia Growth and Propeller V.C. fun wearing three hats in. In Mountain 2. Are you on Mountain 1 or Mountain 2? Do you know?
- [02:12]
Brian Halligan
I don't know, but nice. I would just say nice to see you. It's funny to be someone describing me as og. That's funny. I don't think there were people describing G before. I. I'll take it that way.
- [02:27]
Jason Lemkin
I don't know where the, where's the line? I, I used to think it was like Mark Benioff and Larry Ellison, right? But now that maybe that's o I. I don't know.
- [02:38]
Brian Halligan
We started in 2006. It feels like. It feels like yesterday.
- [02:42]
Jason Lemkin
Yeah, it's crazy. Salesforce is now worth 340 billion. Um, Larry Ellison, I don't know. He may be worth 340 billion himself. I don't know. I have to look it up. This. You do it right and really laugh. You've been doing this since 2006. HubSpot. But in some ways it's just getting good, huh?
- [03:02]
Brian Halligan
Yeah. We had a very ambitious vision and it's like a big giant painting and it's starting to get good, but it's field early. There's so much more work to do and this is a platform shift afoot that we're very well positioned for. Yeah, these SaaS companies, they. Laughs. You look at Adobe and Salesforce, both worth. I don't know, they haven't looked recent. But three, look all three or 50 billion. Oracle, you got to take your hat off to them was like, oh, they're going to die. They're going to slide. Rose from the dead. The last I checked, they were like 500 billion. So, yeah, these SaaS companies, they last.
- [03:44]
Jason Lemkin
Yeah, it's, it's. It is funny when I, I was briefly at Adobe when my. My last company was acquired and that now this is dating myself, but it was 2012 and it was just before things came back and there was malaise. I don't. I think only shot New believed it. Right. He turned out to be an incredible executive. But to be honest, on the management team, I don't think that many people believed it. They really thought that you couldn't go forever, that growth had plateaued. Even that Cloud wouldn't. We could laugh that they didn't believe in cloud. I did because I was a cloud CEO. But it's not lit. It's hard to see it sometimes, isn't it? Did you always know that HubSpot.
- [04:22]
Brian Halligan
Honestly, I didn't think it would get I. We did when we started HubSpot. I'll tell you a funny story about HubSpot. I remember the day of the IPO. We're on the floor.
- [04:32]
Jason Lemkin
Yes.
- [04:33]
Brian Halligan
And ringing the bell on the whole thing. Really good. Everyone's fired up. And my co founder Dharmes ran over with his phone and picked the phone up and he had the stock app and he look, Housedron's worth a billion dollars. And I remember I said, take a screenshot and never see that again. I would also just say when we were starting It Back in 2006, we were classmates. You know, what were the odds would create a company worth 30 something billion dollars? I would have put the odds very low. And a lot of stuff had to go right to get there.
- [05:11]
Jason Lemkin
Yeah.
- [05:12]
Brian Halligan
And the industry really came together. I don't know what Salesforce market cap was in 2006 was nowhere close.
- [05:18]
Jason Lemkin
I don't know what it was.
- [05:19]
Brian Halligan
What was it?
- [05:19]
Jason Lemkin
Because it was in my investor deck when I raised my seed round. Two billion.
- [05:22]
Brian Halligan
Yeah.
- [05:23]
Jason Lemkin
I wrote my comps on my comp slide. My comps are Efax, which is now a different company, 800 million and Salesforce 2 billion. I said we could do almost as good as Salesforce and we could certainly do any signature. We could do better than a fax service. So I said this is my VC pitch. $2 billion. Hard to imagine HubSpot could be worth more right back then if your comp is 2 billion. Right.
- [05:43]
Brian Halligan
Okay, let me answer. I know this is a podcast. Supposed to be interviewing me, but you regret selling your company.
- [05:51]
Jason Lemkin
Boy, it's funny. I regretted it almost every day until about a year ago.
- [05:58]
Brian Halligan
Why?
- [06:01]
Jason Lemkin
There's probably two questions. Why do you regret it and why did it finally stop after like more than a decade? I regretted it for quite regretted it.
- [06:08]
Brian Halligan
Because it was worth a lot more money over time.
- [06:12]
Jason Lemkin
That's 50% of it. But you know what? The bigger mistake I. I made. I didn't realize the team wasn't remotely done. Our revenue team went on to be the CROs of Brex rippling gong. So many leaders. The others like 10 of them. And like that we had this monster team. And I missed. I didn't. What I didn't know was how good I had it in some areas. I knew how bad I had it because I didn't have enough folks. I didn't have enough folks to emulate. This is why we started Sasser. I didn't have enough lessons to learn from. I thought we were a C, B tier, B minus tier. Right. But I didn't realize we were not S tier but we were a tier. That was my met. So that's what I regretted. And then there's certainly a financial aspect like it would, you know, be nice to be a billionaire today. It wouldn't change my total life. But that there is. So the only thing that changed is and maybe this will change again as the markets have come back in force. Right. The last couple months. But now I've seen the effects on some folks that said no to M and A and I'm seeing, man, sometimes I. This might be the Worst advice I've given in 12 years was always say no if you have something good.
- [07:21]
Brian Halligan
Oh, I see.
- [07:23]
Jason Lemkin
It might have been wrong about the.
- [07:25]
Brian Halligan
People said no in 2021 when things were on fire.
- [07:28]
Jason Lemkin
Yeah, I mean I have one and one. I think if you're not and, and not literally this week I have an investment I made where the companies the markets are back. A startup, a great company. They're at 25 million. They have an offer for a billion dollars on the table right now. A billion dollars. Now this is a very good. It wouldn't be there. This is not. This is an elite level company. Right. And I, but I asked the CEO and the, the VCs that are bigger, I'll go for it. Billion. That's nothing. We'll build. We'll be bigger than HubSpot. No one's literally said that. But that was. And I was like. And here was my question the founders and you could tell me yours. I'm like, here's the question. You've obviously built something great. Okay. You're growing triple digits at 25 million. Obviously in a year in theory, you'll be bigger and better. Do you want to be a public company CEO?
- [08:20]
Brian Halligan
And did he.
- [08:22]
Jason Lemkin
That's what that, that got them to take the meeting. They didn't want to do the meeting. I'm like, be honest. Like, you don't have to decide this and you can tell me when you decided. It's interesting. But I'm like, you don't have to know at 25 million if you want to be a public company CEO. But maybe at 50 or 60 you got to know. You got to know. And I think it's. I wish I'd done that, but I don't think it's for everybody. Some people really want to just live. This is why a lot of folks want to delay going public. They don't want the scrutiny. They don't want to live that life. Right. They don't want to spend a third of their life meeting with public company investors and then another third of their life doing the public and only a third of their company doing the company stuff. And then they're supposed to grow 38% and they grow 37% and they get crushed. And they just don't want to live. Most folks I spend. So that was. If you want to do it right, do it right. But that's just the one thing to think about. That was my. If you have an off ramp and the offers hard to match. Right. A billion dollars today with Del. Let's say it takes you another seven years to IPO and you suffer and you're capital efficient, but you have two more rounds and then 6% dilution a year. That billion today is like two and a half billion. Seven years down the road probably, isn't it?
- [09:34]
Brian Halligan
Yeah, I would say I want on my life list. I wanted to make company public. I don't know why.
- [09:40]
Jason Lemkin
There you go.
- [09:41]
Brian Halligan
It's like it was the capitalist super bowl. And I. Yeah, I was focused on that. Here's the other thing. Like, a lot of companies aren't going public now. And for a lot while, the market was closed. Our is pretty open right now. And you can do. You don't have to, because you can sell. Your employees can sell their shares without being public.
- [10:05]
Jason Lemkin
The best ones.
- [10:06]
Brian Halligan
Yeah. But I think what people underestimate is the joy it brings. Like, probably the happiest day of my life was the ipo. And I remember the day, like, Dharmesh and I drove up in our. We got a car and we had dropped around the corner from the stock exchange. And as we rounded the corner, the stock exchange, I forgot that this happened, but they wrapped the New York Stock Exchange in, like, orange and our colors and our logo. And I just remember I stopped and I turned around because I didn't want Dharmesh to see me crying. And it just grabbed me. And then we got whisked into the giant, like, conference room down in the basement of New York Stock Exchange. And the head of the stock exchange is there. It's just very formal and nice, and people are saying nice words again, like fighting back the tears or on the platform or ringing the bell. And just to see the joy in the faces of our teammates as we went through all that. And then the next day, we had a terrific party at the Museum of Science in Boston. And just the joy and so many tears from so many people who worked so hard. I think that's underrated. And, yeah, it's hard to find that someplace else.
- [11:24]
Jason Lemkin
I've only been through it once. It is a magical day, right? The weird thing. And I'm dating my. The weird thing, when I went through it once, and it wasn't as a founder, it was an executive. The weird thing was the next day everyone was back to work. And it was a weird day. The party was so fun. I remember standing up on the desks in the office and cheering and explaining to people how it would work. And it is so special, right? The next day was weird. Everyone's looking at each other at their desks.
- [11:50]
Brian Halligan
That's it.
- [11:51]
Jason Lemkin
Like, well, the stock price went down like a dollar, like from 80 to 79. And people were despondent. You know, they were so distracted for a week because I think the stock went from like 20 to 80 and then down to 60. And then people in a day felt like they were. Then they felt impoverished, even though it had actually tripled overall. Yeah, it was so distracting.
- [12:14]
Brian Halligan
So I'm the Boston guy and I think one of the big advantages and one of the biggest disadvantages of south there is that, is that we were in Boston. We were Silicon Valley company based in Boston. And most of the companies that have gone public in Boston or of the previous generation, they went public and then their stock just stayed flat for like ever. And it was like, Boston IPO is the finish line. It's Silicon Valley. It's the starting line. And I must have said that line a million times. Anytime someone brought up the stock price or looking at the stock price on their phone or their watch rate, I'd be like, why? Than the stock price, it's going to go up and down. Look at it once a quarter. And you know, we tried to frame it that way and try not to get too obsessed about it, but it was a very joyous day. I also just think if people who haven't been CEO of a public company, there's no way they would know this. But it's not as bad as people think. You're switching a bunch of venture capitalists who are misaligned in a lot of ways and quirky in a lot of ways. Yeah, there are a bunch of public investors who are misaligned in a bunch of ways and quirky in a bunch of ways. And so it's your trading. There's like a year where you have both, which is uncomfortable. But the public investors I find to be quite rational. If you tell them the truth and you paint a vision of the future. If you bake your numbers and you're obviously you're conservative on your numbers. Yeah, I find them to be much more rational than they deserve credit for. There's two types of investors, they call them long only. The fidelities and the Wellingtons and the durables and material priced. They tend to. They come, they come in and out, but they tend to hold. And then there's hedge funds who will take a short position or come in and out much more rapidly. In most IPOs, the hedge funds are a very small slice and the long onlys hold most of it anyway. My experience has been very good on the Public side. And by the way, our stock has run up and run, down and run. It's been volatile and I've still been pretty happy with the whole thing.
- [14:24]
Jason Lemkin
Yeah. It's funny, I remember I was at an. I was at an event with Michelle Zaitlin from Cloudflare right after maybe a year after that IPO'd and she said the strangest thing was they realized they'd have to spend more time with investors after the ipo. Yep. They thought the days of having to spend time with investors were behind them. But that was the most ever.
- [14:42]
Brian Halligan
Yeah. And people think you have to spend a ton of time with them. Okay. So we would do our earnings calls. I think people piece of it. We would do calls. You have to practice the earnings call. And after the earnings call you have one on one call with all your big investors and all the analysts. Then that goes late to the night, early in the night, morning sometimes. I didn't, I never did those like our CFO or investor relationship person did it. And then once a quarter I'd do a conference and I'd speak at a conference and have a bunch of meetings at conference. So all in maybe maximum two days a quarter. Thinking about public.
- [15:16]
Jason Lemkin
Well that's not much.
- [15:17]
Brian Halligan
It was. It's not as bad as people think. And they're much more rational than people think and they want you to succeed.
- [15:25]
Jason Lemkin
It's a good insight. It's almost reassuring to have just very rational investors. Like they may. Your stock may go up and down as. As variables happen, where you stand all the time. It's very, very versus VCs. So many different goals, so many different human level. It's complicated.
- [15:41]
Brian Halligan
Very. I'll tell you another thing I've been thinking about. None of this is probably on your bingo card. That's had a home board meeting yesterday. That's a. They're two day phone. We've been doing the same board format for about a hundred years and it just got a little rote. And honestly I get a little bored in the board meetings and I think a lot of the board members did. So I was having like conversations with some board members and some people started complaining about us. You're right. We need to rethink it. And so we changed the format up on this recent board meeting and we have the best board meeting we've ever had. And the changes were very simple. Typically the board meetings are 90% main course, 10% signed dish. And the main course is the presentation from the executives overseeing a certain part of the business.
- [16:43]
Jason Lemkin
Yeah. And the signed course, the classic format. Right. Goals, diff the whole.
- [16:47]
Brian Halligan
Yeah. In the science, every leader discussion of the topic du jour. And oftentimes around that time, you never even did the side course. Let's switch that and let's try to make the side course the main course and make course the site course. So we made very simple search. A lot of people have done. But we said, just write a memo with any data you have. Put it in the memo, we'll read it. I promise we'll read it. And everything about it. We read it.
- [17:11]
Jason Lemkin
And then at the end of the.
- [17:12]
Brian Halligan
Memo, put three questions you want to top. And so that was the first change. The second change. And so that happened. 90% of the discussion with side dish was the discussion. 10% of what's the. Here's what was in the memo. The other change we made was we didn't want it to be readouts from the. We had three pillars. We have the product pillar, we have the go to market pillar, and we have the OS pillar. Call it. Yeah, we usually did. We're like, let's not do readouts. This isn't a qvr. It's or meeting. What are the tough topics that might cut across or whatever. We don't want those readouts. And that was interesting. Third change we made is in a typical board meeting, 90% of the words that come out of people's mouths are coming out of the CEO and the management team's mouth. And 10% for board members. We have some really smart board members that work hard to recruit and they're happy and they have contacts. It's not like they're clueless. They're great. I said I want 50% of the words to be out of the board's mouth in 50% of the words of. Mm. Anyway, we put those. Jason Bus. It was really good. And normally you run like way over and we skip lunch, we skip the breaks, and then we go to the bathroom. Like we finished early and we covered everything. It was a terrific board meeting. Yeah, I, I don't know why I get on that, but I'm, I'm still on a little bit of a high of our new format.
- [18:36]
Jason Lemkin
Let me ask you two questions about that one. Flipping around now, as the executive chairman, Was it worth two days of Yamini's time? Two days of the CEO's time? I get that there's a lot to do, but she has a big job.
- [18:52]
Brian Halligan
See, I would have argued historically, a lot of a board's job is compliance, Right? Yeah. And a lot of what a board does is make sure you don't back up over a cliff. And what I want the board to add more value. The board's given a lot of context and a lot of experience. Can the board help us navigate a little bit?
- [19:13]
Jason Lemkin
Yes.
- [19:13]
Brian Halligan
And so historically it's been a lot of readout and it's been a little bit of okay, so I'll give you a little inside baseball. One of the management team members criticized the board meeting and said the board meeting, Brian doesn't isn't CEO anymore, so he doesn't get a qbr. It's basically Brian's qbr. And so we said, let's move from Brian's QBR to an actual board meeting. And I think it was mostly compliance and for the board. And this board meeting was much more for the management team. I'll tell you one other change that we're working on is we do annual 360 reviews of the board members and whatnot. And they're really good, they're really effective and I recommend everyone do that. But one of the board members said was, I care what my fellow board members think, but what I really care is what Yamini and the CMO and all those people think of the feedback they're getting in the help. So let's flip it around and have have it be much more of a management view of how we're doing and adding value versus how we think of each other. That's another nice change that we're putting in place now.
- [20:12]
Jason Lemkin
Yeah, that's good. The one thing just for founders and others, I the and obviously HubSpot is a public company. In some ways it's different. But so many founders like this idea of doing a memo based board meeting. Okay, I'm tired of reading the slides. Read the slides ahead of time. Zoom me if you want to talk. Let's talk about the real issues that are on my plate and let's talk about the issues that are in yours. And especially if you have a somewhat engaged board, People love it, right? This memo style board meeting, my only counsel to founders when I see it is, listen, I know it's what the COs want and the board likes it. What I see time and time again is accountability from the management team is lost in that format. And maybe it doesn't matter at HubSpot scale because the accountability is crystal clear. But when the CRO doesn't have to get up there and sweat about why there was a commit to hitting 10 million this quarter and it was really 9, 4 and it's just a pass. I. The CO loses their helper. The helper in the room.
- [21:14]
Brian Halligan
That's. That's. He might be right. I would. I know for a fact that Y holds people very accountable. It is, I have no doubt, much tougher than she looks. And so I'm not worried about that at all actually. Maybe, maybe in an early stage company that, that probably makes sense.
- [21:30]
Jason Lemkin
I just. For startups, sometimes as CEOs, especially if you're likable like you are, you're likable. It actually, it's confusing to bring down the hammer. You can't beat people up every week. Right. And how do you manage that? And sometimes I find it helpful for the board to be the Hampshire, to be the tough room. Even if they don't say anything. Just having to walk in every 60 or 90 days and say, Gee, I didn't deliver my SQLs. I didn't, I didn't. The. We slipped the release like. And how often can Brian or Yamini. Earlier stage, maybe. How often can you yell at the team even if you're not? I think you can yell once a year.
- [22:11]
Brian Halligan
Yeah.
- [22:11]
Jason Lemkin
You yell more than once a year. And it's tough, right? It's tough. Yeah.
- [22:18]
Brian Halligan
I would say I yelled very infrequently, but I was grinding people all the time. Yeah, the grinder. And I think Yamri is a grinder. And I think people are accountable to the CEO. They're accountable to themselves and they're accountable to their peers. Hopefully if they're adults and they've got some experience that they're deeply troubled by those numbers. And they also have to sit through their own management team meetings and present all those numbers. Yeah, a lot of accountability in that management team meeting. Like I was the head of sales a long time before Co pub spot. Every frigging Monday morning I had a staff meeting for my whole life, by the way, which was a forecast update. Some were tough. And you just dreaded that Monday morning meeting. I didn't necessarily have to do that again for the board.
- [23:02]
Jason Lemkin
I hear you. And we can move up. I think it's. If they dread the Monday morning meeting, then I think you have the CEOs helper right. Is dreading the Monday morning. If the team doesn't dread the Monday morning, sometimes I find the board meeting is the helper. If they dread the board, if they're sweating. Your manager team is like getting hives for a week before the board meeting. I actually think that's great because then the CEO doesn't have to doesn't have to do it. I have an external force where they're gonna. Yeah. You don't want them work. You want them working on their slides for 20 minutes, not a week. But if they're sweating it. I don't know. I just don't. I think I'm a good guy, but I don't mind being a bad guy. The bad guy if it helps the CO to not have to be the bad guy. Right. Sometimes you need. He needs someone else to be the tough. The tough one. It can't always be you. Right.
- [23:45]
Brian Halligan
I think it's a good point. I think it's a good point.
- [23:48]
Jason Lemkin
Okay, let's. Should we dive into some of these meta learnings? I'll tailor them to our convo.
- [23:55]
Brian Halligan
Couldn't be a bigger fan of Stasser or Jaden Lus. I'm here for you.
- [23:58]
Jason Lemkin
I love it. Okay. Let's do two things. And you were kind enough to pre answer them. But I just like to do a vibe check these days because it's. I think the vibe has been so volatile the last 24 months since last. Right. A negative from folks thinking we're in the greatest downturn since the Tulip Crash to exuberance and AI like this just. It's a whiplash time. So you're. You've seen it all. You're chairman of HubSpot. You're at Sequoia. You're seeing an entirely different category. Right. In clean tech. So are we. Were we in a downturn? Are we in a downturn? What's the vibe check as we talk today?
- [24:33]
Brian Halligan
I think SaaS was in a downturn. There's a SaaS and it start. I don't know when it started, but I think it ended in Q3. If you look at the SaaS company's numbers, see it through Sequoia, See it through all my HubSpot dashboards where I see our customers. It felt like we came out of the recession in Q3 of 2024. And I also just think it's like the universe, like flam sounds down and then splashed it way up and then slammed it down again. And it's flashing back up and it's like the sine wave that's working through. And I think the size of the sine wave will go down over time. But I think we're in a different place in Q4 of this year than we were in Q4 of last year. Economically, Southwest people overbought. People had too many employees.
- [25:19]
Jason Lemkin
Yeah.
- [25:20]
Brian Halligan
And the downgrades were high the growth retention for people were low and I think we're just getting back into a better spot.
- [25:28]
Jason Lemkin
That's what I think it wasn't. They're just one of the frustrating things. There's so many like zurp. It's interest rates. I think people just bought too much during a generational pandemic. They bought too much software and so they dialed it back, maybe too much. Because that's what we do. And we're through that. Right. We're through the over buying cycle for the most part. I think it's that simple, isn't it?
- [25:48]
Brian Halligan
I think it's that simple.
- [25:49]
Jason Lemkin
Yeah. And we're seeing it.
- [25:52]
Brian Halligan
So you're listening and you get a shitty Q3 and Q4 is not looking good. It's not the market.
- [25:59]
Jason Lemkin
That's the message. I try to say you can't blame the market anymore if you got a pass in 2022 or 2023. Like you gotta be honest.
- [26:07]
Brian Halligan
Yeah. Even Q1, Q2, I think we're still tight as Q3. It finally loosened up.
- [26:12]
Jason Lemkin
Yeah. And look, this is a. This is. This may be a question where there's no good answer. But especially as you're looking at stuff in Sequoia, if someone isn't seeing any rebound at all now and let's say growth is weak, let's say it was great in 2021. Okay, it was 100% and now it's 22%. Or what's your advice? Is there any advice? Not if, if it's fallen from 100 to 80, it's one thing. But if you have fallen far and look there's a lot of companies north of 100 million in ARR where growth is in the teens now or lower. Right. Any meta advice that you see yourself or at Sequoia, any ideas for that tough position?
- [26:50]
Brian Halligan
I'm worried about that whole cohort of companies that's 120 million in revenue growing 18% and raise the crazy round, the crazy price in 2021. I don't know what happens to all those. I just don't know. Maybe they combine with each other. Maybe they just continue to look along for a long time. I Also just think SaaS in general, there's too many companies. If you look at those charts, it's got breaker and you probably make them too. Where the marketing automation see the logos anymore like the 100 marketing automation companies.
- [27:24]
Jason Lemkin
And I think there's a thousand.
- [27:26]
Brian Halligan
Yeah. And yeah, I think that people are going to be in it. I don't know. Tough spot. They can Grind it up. But yeah, if you're over a hundred growing 18%, I think you got to be creative. You're not going public. You're not going public. Maybe PE starts buying a lot of them that.
- [27:47]
Jason Lemkin
I hope so. Right. I was with one of these CEOs when in our London event. Great founder. Right. And he's. Yeah. We've just decided that 20% is the new acceptable growth at nine figures in revenue. Right. And I. I could. I can't challenge him. You've done much better than I have. But you can't IPO in the teens. So I don't know what I think we're all trying to work. It's a quiet topic, but I bet it's Sequoia and others. It's discussed. What are we going to do with these companies right there? These are real. Com but they're never will PE buy them? I hope so. I hope that's the answer. I just don't know. We'll know in a year.
- [28:25]
Brian Halligan
I do think the thing was changed the positive. So in the like venture growth venture world, where these companies would live.
- [28:36]
Jason Lemkin
Yeah.
- [28:37]
Brian Halligan
In 2021 there was a real bubble in privates, but there was a bubble in publics.
- [28:44]
Jason Lemkin
Yeah. I think they matched.
- [28:45]
Brian Halligan
I think they did too. If I look at like the beginning of this year, first half of this year, still a bubble in private, at least in the. Anything that rhymed with AI. And the publics were. It was tight and I think they match again. The publics have really rallied recently.
- [29:08]
Jason Lemkin
Just recently. Right?
- [29:09]
Brian Halligan
Just recently. So yeah, this. I don't know. Ball's the right word, but at least there's some hole. And I think the IPO window will open and I think the PE window will open and I think the M and A when the window will open, it's going to be easier to sell companies going forward. Yeah. It may be an interesting time over the next few years.
- [29:33]
Jason Lemkin
Yeah, it's. I thought. I really thought the beginning the first half of 2024 was much crazier than 2021. Because we forget in 2021 if Snowflake's trading at 80x or 100x ARR. If you're investing in the next Snowflake. Like those uniform unicorn valuations weren't so crazy. Right. The AI ones are. They're a. Hoping they're. The growth rates are incredible for some of them. But there's no public comp with 200 or 400x ARR trading. Right there. There isn't one of them. Right. So it was the highest spread ever. Right.
- [30:04]
Brian Halligan
The IPO window was closed. And then if you think of a company that's that gets to a valuation of 5 or 10 billion, it's expensive for a PE firm to buy it, it's too small to go public. And then I don't know it. Salesforce is by a company worth 10 billion. It's definitely going to get a look from regulators in the US and Europe. So there's a little bit of no man's land around that 10 billion. And I think the world's feeling, I'm feeling better about those ones than that. As long as they're growing nicely, I think that they're going to have a good home either through an acquisition, which will get easier, or the ipo, which needs to be easier, or pe. I think PE is going to start raising a bunch of money and going.
- [30:45]
Jason Lemkin
That's my hope. All right, let's talk related. Okay, let's talk because now you've, you're seeing this at HubSpot and it's point others about AI and who wins. I've thought about this a lot, two elements to it, but I don't think it's obvious who wins or comments and startups. It's obvious. There's a thousand startups, there's a thousand flowers. But what's your nuance? Learning from HubSpot + sequoia on who wins and in B2B who wins in AI, who benefits the most or who benefits the most is maybe a better way to put the question right.
- [31:18]
Brian Halligan
I think that the age old it's the startups are innovating and they're racing to get distribution and the bigger companies have distribution and they're racing innovate. The twist this time is the, the data is very hard to acquire for a startup. So it's not just the innovation but you need a proprietary set of data to do something cool with AI. And I think of HubSpot for example, we've got the zoom data, we've got the calling data, we've got the email data, we've got a lot of the unstructured stuff and then we have all this structured stuff too. And if you're a startup breaking in and you want to do some amazing AI work, it's tricky with all that. And so I think it buys Salesforce, HubSpot, the bigger companies, a little time. The other thing I think is a little bit different about this than other platform shifts is it feels like everyone has read and learned the lessons of Clay Christensen and the innovator's dilemma. And the incumbents seem to be moving very quickly. Whether it's Microsoft or HubSpot or Salesforce, you name it, no one seems to be sitting on their hands in this one. So I liked as I play on both sides of this but in this particular case, I think the incumbents have a little bit more of an advantage than in most platform shifts.
- [32:39]
Jason Lemkin
Yeah. I advise founders. I think they get bigger. Big company. Maybe HubSpot's bigger, not big. Depending on how you think about it. I think they misunderstand agility. When there is a core priority and it's truly core, they move fast. Not quite as fast as a startup. But when they put 200 engineers on something, 300 engineers, it's a force of nature. What you get wrong is when they put 10, when they put 10, it's weird because they launch a really cool product. There were even in my little team at Adobe we had 10 extra engineers. Extra. You never have extra engineers at a startup. So you could build anything but you can't sell it and support it, you give up. Right. But when HubSpot says Dharmesh really early saying we're going all in, be careful. And Mark Benioff putting a thousand new sales folks like just you can still beat them. Don't get me wrong. Everyone beats somebody before them. But it's a force of nature. Isn't.
- [33:34]
Brian Halligan
Is.
- [33:34]
Jason Lemkin
I see it.
- [33:35]
Brian Halligan
We were early on it our missions early. Let's just say per thousand engineers. So if we make a bet with 20% of them.
- [33:43]
Jason Lemkin
Yeah.
- [33:44]
Brian Halligan
That's 600 engineers. With this unique proprietary data source, we're just hard to compete with. But it's hard.
- [33:54]
Jason Lemkin
Yeah. So I think we don't know we will. I think I certainly personally don't think incumbents lose that maybe just to be con. There's no reason a HubSpot in the in B2B. I don't think there's any reason HubSpot or even Salesforce, even with age, I don't think there's any reason they should lose. There's no reason to lose. There may be many winners, but I don't see any losers there.
- [34:14]
Brian Halligan
I agree. I think the tricky thing for HubSpot and Salesforce and the rest of the bigger players. Yeah, small computer Salesforce, but it's the business model disruption. Like instead of charging per seat or a subscription model, you're charging per, I don't know, per chat or you're charging instead of hiring that sales rep, you hired that agent. That's tricky. But I, I Even on that, I think up top, Salesforce, Microsoft, everyone's looking at those pricing models. But that's a harder thing almost for bigger companies to deal with the pricing and business model disruption.
- [34:52]
Jason Lemkin
Yeah, it's a good point. And I don't think it's like you.
- [34:55]
Brian Halligan
Think of C Bowling. You think Salesforce, like part of it was, oh yeah, it's much easier to set up, much easier using it. But the credit card and the subscription and like all that I do that made Salesforce work relative to Siebel.
- [35:08]
Jason Lemkin
Yeah, the pricing that can be hard on the bigger companies. Just thinking about it aloud, I don't. But if, if we're aligning and I think this pricing model is in. In flux because in some ways it's tied to a time when the hard cost of AI were high and they're plummeting so quickly. I. We'll see if it sticks. We'll see if $2 per resolution per action sticks. But if everyone does it, if Salesforce, it's right on Agent Force's website. I looked at HubSpot. I'm not sure exactly where it is, but right on Agent Mark's putting so much effort. It's two bucks. Okay. Fin for Intercom's one buck Zendesk is like a dollar and eleven cents. They almost line up to where they are in terms of gravitas. But if everyone does it, the big companies can thrive because it's understood. It's not cannibalistic. It's tough when you have to charge another a hundred bucks a month.
- [35:58]
Brian Halligan
We haven't charted, started charging. We're talking about it.
- [36:01]
Jason Lemkin
Maybe that's why I missed it. Yeah.
- [36:02]
Brian Halligan
Our philosophy has always been like, let's add a lot of value before we try to spend too much time figuring out how to extract a bunch of value. And so we're still, we're adding a lot of value. Like people are using HubSpot AI and doing some amazing stuff. But we'll probably do something later on that. But we haven't started charting by the way. I think that the conversation bird ticket is interesting. I think more interesting is instead of hiring, I just had lunch with Elias Torres who's the founder of agency and he's building something that helps the CSM do their job and it even replaces some of that CSM function over time. And like how would you charge that? Would you charge 10 bucks, 10,000 bucks a year? That kind of thing? Can CSM cost you 80,000 bucks a year? Do you charge 10,000 bucks a year? I don't think that the story's been completely written on the pricing models for AI and B2B.
- [37:01]
Jason Lemkin
I agree. Not only that, my advice is don't overanalyze it. Close the customer. Yeah, too much talk about pricing, not enough talk about, about, about great product. It'll figure itself out. And even if Elias is trying to figure out it doesn't. He can change his model in a year or two. Yeah, who cares?
- [37:23]
Brian Halligan
A lot of this stuff I'm seeing at Sequoia is growing fast, but has very high churn. And it's like the underlying platforms aren't quite there yet. The craft of building the AI applications isn't quite there yet. It is super, super early to be trying to extract too much value from this stuff. I do think a year from now the underlying platform's going to so much better, the crafting of the application is going to get so much better that we're just on a very steep, exciting curve.
- [37:56]
Jason Lemkin
And one other question on that and from Both Sequoia and HubSpot related to this is something I think a lot about, but I don't see discussed much. But it's really clear in the field is what is AI parity? And I did a thing the other day, I pulled together, I compared HubSpot was a little bit different but I compared Zendesk's claims for AI to intercoms to gorgeous which is just E commerce. We're on the on the board and a few others and the check the this point, everyone's claiming the same thing, the same type of resolutions, same percent outcome, same throughput. Now obviously not every everyone performs the same. We could talk about technology parody, but is there. Can customers even tell do that? Can I even tell if HubSpot's is better? And do I even care if I trust HubSpot? Are we going to have parity in B2B? In B2B, are we going to have parity in many ways?
- [38:51]
Brian Halligan
I think that's a really good question. I just think of that use case. So let's say a customer support use case.
- [38:55]
Jason Lemkin
Yes. So far ahead.
- [38:57]
Brian Halligan
Yeah. And that's the one that's working. It's also working for HubSpot customers. Okay, you've got your knowledge base inside of Zendesk or HubSpot or Intercom and that's the starting point. So when we look at our customers who are getting like 60, 70% resolution with the agent, it's because they had a really good knowledge base. Yeah, because you got to train it. And if you have an awesome knowledge base. It's well trained, it can answer it, but there's a lot to the craft. Like you've got to upload that knowledge base. You've got to you. It's got to get smart on that. Then you've got to have it listening to every support call that's going on, be able to turn it up and down on your best support reps over time and that'll get better. You have to connect it to your snowflake instance and your amplitude instance. You have to connect it to all your other systems. Then you need to connect it to Zoom and email. You need to be gathering all this information and making it better. And then you have to be able to build an avatar that's like engaging and human. Like in such a way that I'm with the adjacent or his avatar, I think quite dumb. Re Hoffman's avatar is pretty darn good. So I think we're still, even though that's a use case that's working, it's working for a whole bunch of vendors. I think there's still a long way to go to make that what it could be. And I don't think it's table stakes. You can build a support agent with just that knowledge base and it's pretty good. It's actually pretty good. But if you trade it on that knowledge base and then you have an editor going in, watching the responses that go, then editing those responses, post backfill, augmenting the responses, then you train it on your best support rep and then you create an avatar and train that. I still think it's quite early and the implementation really matters and the data really matters.
- [40:47]
Jason Lemkin
Yeah, I really. We're still all learning. I'm not a HubSpot support agent. In 2025, with all of the HubSpot data, I'm not convinced the best standalone AI agent can beat it. I am convinced they can build, they already can build better technology. And I went through this with a company where they graded AI agents from technology versus implementation and okay, we're not going to catch the one with standalone the technology, but when I'm implementing with all of our data and the training, it's like it's, it's better. Right? That's the meta question. Right? Can it. Right.
- [41:21]
Brian Halligan
And I just, I look at agency and what Elias is building for csms, it's really good if you can connect to the snowflake instance and the amplitude instance and he can connect to the knowledge base. And so the, you need access to the data. You got to train it. And by the way, out of all these functions like support and CSM, whatever, we're using his product inside of HubSpot and we're using it in the group where it's like very one. Each CFM has a thousand accounts, so it's hard to get a personal relationship with a thousand accounts. But like how much of that can you automate and make really good over time. That's I think a. That's a really good example. Really good use case for this kind of stuff.
- [42:09]
Jason Lemkin
Yeah, the law, the quality, subjectively, the quality of long tail interactions has just deteriorated over time. So I just ordered, I ordered for my son for the holidays, a gaming chair from Secret. It's like the cool gaming chairs and I, we put in the wrong address, right? And we tried to manually change it. It got there over the weekend and every day I get an email from Zendesk. The Zendesk implementation. It's not Zendesk's fault, but it's the implementation. We're still trying to track down your chair. I'm just watching this to see how it gets resolved. And nominally they have AI. They actually build their own support. They have Zendesk and then they have their own thing they built on OpenAI. But this cobbled together thing still doesn't know the chair was delivered. It still doesn't every day. I just got an email today and I don't mean to be mean. I don't want to get two chairs, but I want to see what happens because the data's there, right? But their AI plus Zendesk can't connect at all. They don't know that the chair was already delivered to the fixed address.
- [43:06]
Brian Halligan
The thing that's interesting about all this stuff, like I built my own clone.
- [43:11]
Jason Lemkin
I talked to it. It was good.
- [43:12]
Brian Halligan
Yeah, it's getting there. And some questions you ask it if the. Oh my God. That was. That's an answer way better than the real Brian Alligator ever would have given you. In other questions you like how did you whiff so hard on that question? It's just not completely there. It's amazing. Compared to what six months ago? I can't wait to see what's like much from now. But it's all just. It's early. Super early. Hey everybody.
- [43:45]
Jason Lemkin
Thanks to the 10,000 of you who came out to Saster Annual this year we had a blast and big news. We'll be back in May of 2025 or in May of next year. That's right. SAS train will be in earlier next year. The 13th to 15th of May 2025, we'll still be back at the same venue in the SF barrier in our 40 acre San Mateo County Event center campus. And tickets are never cheaper than right now. So grab your T tickets@saster annual.com with my code Jason50 for extra discount on our very very best pricing. That's Jason50@sastranual.com See you next May at Saster 2025.