← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Hubspot CEO on Where Value Accrues in SaaS AI | How Hubspot Competes Against Salesforce | Why B2B Is Not a Winner Take All Market | How to Go From SMB to Enterprise an Win | How SEO Dying Changes Hubspot's Business with Yamini Rangan
00:55:12
Yamini Rangan is the CEO at HubSpot. The $32BN juggernaut that has revenues of $2.6BN, over 247,000 customers and 8,200 employees. Prior to Hubspot, Yamini served as Chief Customer Officer at Dropbox, and before Dropbox, she was VP of Sales Strategy...
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- [00:00]
Yamini Rangan
When you are in a wartime or a hard time, you are optimizing for speed of execution. When you are in peacetime, you are optimizing for getting a consensus around what you're trying to do. You got to be good at both and many other modes of operating. B2B apps are not winner take all markets. Whether you look at hr, finance, CRM, they all have multiple players. The best competitors make you better. I think Salesforce does a really good job of.
- [00:34]
Harry Stabbings
This is 20 VC with me Harry Stabbings and today we focus on HubSpot. HubSpot is one of the category defining companies of our time. Before HubSpot, no one believed that you could build a monster business focused on SMBs. No one also believed that you could come in and compete with Salesforce in the most competitive software space of all. Well, they did both and now they have a market cap of $31 billion and revenues of 2.6 billion. Joining me today we have HubSpot's CEO Yamini Rangan, who joined us in the studio in London. But before we dive in today, turning your back of a napkin idea into a billion dollar startup requires countless hours of collaboration and teamwork. It can be really difficult to build a team that's aligned on everything from values to workflow, but that's exactly what Coda was made to do. Coda is an all in one collab workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. Now at 20 VC, we've used Coda to bring structure to our content planning and episode prep, and it's made a huge difference. Instead of bouncing between different tools, we can keep everything from guest research to scheduling and notes all in one place, which saves us so much time. With Kodi, you get the flexibility of docs, the structure of spreadsheets, and the power of applications, all built for enterprise. And it's got the intelligence of AI, which makes it even more awesome. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda iO20VC today and get six free months of the team plan. For startups, that's Coda iO20VC. To get started for free and get six free months of the team plan. Now that your team is aligned and collaborating, let's tackle those messy expense reports. You know, those receipts that seem to multiply like rabbits in your wallet. The endless Email chains asking, can you approve this? Don't even get me started on a month end Panic when you realize you have to reconcile it all. Well, Pleo offers smart company cards, physical, virtual and vendor specific so teams can buy what they need while finance stays in control. Automate your expense reports, process invoices seamlessly, and manage reimbursements effortlessly all in one platform. With integrations to tools like Xero, QuickBooks and Netsuite, Pleo fits right into your workflo, saving time and giving you full visibility over every entity, payment and subscription. Join over 37,000 companies already using Pleo to streamline their finances. Try Pleo today. It's like magic, but with fewer rabbits. Find out more at PLEO IO 20 VC. Don't forget to secure trust with your customers. Trust isn't just earned, though, it's demanded. That's why over 9,000 companies, including Atlassian, CORA and Factory, rely on Vanta to automate their security compliance. So Vanta help businesses achieve certifications like SoC2 and ISO 27001, turning months of tedious work into this beautifully fast and straightforward process. Their platform automates compliance across over 35 frameworks. It centralizes workflows and it proactively manages risk, all while saving you time with automation and AI. So whether you're just starting or scaling your security program, Vanta connects you with auditors and experts to get audit ready quickly and build trust with your customers. Get $1,000 off your first year by visiting vant forward/20vc. That's v a n t a dot com forward slash20vc.
- [04:13]
Unknown
You have now arrived at your destination. Yeah, listen, I spoke to Brian, I spoke to Pat, I spoke to Jay Simons, Claire Hughes Johnson. I mean, I stalked the shit out of you bluntly before this show. I know, terrifying. But thank you so much for joining me.
- [04:28]
Yamini Rangan
Thank you for having me, Harry. It's been a long time. I've been long time listener, first time talker to you there.
- [04:34]
Unknown
That is fantastic. I want to start with the movement into the role of CEO. It's a $31 billion public company. I mean, the size of HubSpot is incredible. The question that I want to start with is the founders are still fairly involved. What's it like being CEO where the founders are still fairly involved?
- [04:52]
Yamini Rangan
It is a privilege and honor to take over from a founder and it's hard and tough work to make it work. I think for me, I'd been at the company for about a year. I always looked at the decisions that Brian and Dharmesh made in starting and scaling the company. Deep conviction in SMB. Deep conviction in building a platform and crafting the platform. Deep conviction in having culture as a product. Those are decisions that I loved and I completely believed in. So I think that is the easier part and that's the pro of working with founders who know the company, who have taken it from very small startup to scaling it to a public company and beyond. I think on the flip side, it's a lot of work when the transition happens. You have to think about a lot of things during the transition and throughout after. What's the cadence? Do you want to send 20 emails a day or two emails? And what's the altitude? Do you want to talk about the strategy and the product or do you want to talk about the whole business? And if it's one or the other, you really need to make sure that you're covering the bases across all of those conversations. And then what do you do when something bad happens? Which something will happen, Right. If you hit a pothole or if you make a bet that does not work, what happens? How are you going to make it work? Right. So there's a lot of work that you need to put in and just like any relationship that you have, right. First of all, you have to commit to it and then you got to put the work in order to make it function. And so yeah, there's a lot of work.
- [06:28]
Unknown
That's why I'm single now. I get it. You said about the deep conviction there across. I mean it's amazing when you look at the deep conviction to as you said, SMB, the gcm, doing CRM at all from nothing when it was such a mature space. Are you able to have such deep conviction as a public company CEO when the street does react very strongly to decisions?
- [06:52]
Yamini Rangan
Yeah, you have to have deep conviction in order to run a public company. If those decisions and the choices that you make are counterintuitive, even better. You got to forget that you're a public company and you got to start with the basics of what do you believe in. One of the things that I just came from talking to investors this whole day. We had a whole non deal roadshow today. We spent a lot of time talking to investors. They actually appreciate your conviction in your business. That's what they like to hear. And so when we talk to them about why we make these decisions, why we focus on the segments that we do, they get our story.
- [07:33]
Unknown
What do you think is the most counterintuitive decision that HubSpot is making today? That may not be obvious.
- [07:39]
Yamini Rangan
A couple of things come to mind. I would say pricing. When AI came on the scene in 2022, November, we fairly immediately moved into products, you know, product building. And we changed our roadmap. We actually stopped our roadmap, changed the roadmap and started building product. And since that day, they're like, how are you going to monetize it? You know, what are you going to do with monetization? And we have a deep conviction that there's one product which is an AI product. It's going to be inbuilt into every hub and every part of the platform. And that means monetization is the entire platform. And Harry, I can't tell you, every day I get asked this question about 10 times, how are you monetizing it? We're monetizing it with the current product and that's how we plan to build. And I think it's counterintuitive because today everybody has an AI sku. They slap a premium on that sku or they put a usage metric or they put an outcome metric. And there's just a lot of swirl about how you price products. But I think the first thing that you got to do when a big tech shift like this happens is to focus on customer value.
- [08:45]
Unknown
I'm a fan of making bold statements unsupported by data because I'm a venture capitalist.
- [08:49]
Yamini Rangan
Right.
- [08:49]
Unknown
So when you look at like outcome based pricing.
- [08:52]
Yamini Rangan
Yeah.
- [08:52]
Unknown
It is impossible unless it is completely non human in the loop because otherwise there's always going to be this continuous debate. Well, actually Yamini, I did 80% of the sale and your agent only did 20%. So I don't want to pay 100% for your outcome.
- [09:07]
Yamini Rangan
Yeah.
- [09:08]
Unknown
How do you think about how quickly we'll be able to move to outcome based pricing and whether that even is the solution for a next generation of.
- [09:15]
Yamini Rangan
AI, there's a lot of swirl, isn't there? Yeah, I mean I think there's a lot of swirl on. Is it seeds? Are seeds going to completely go away? Is it outcome? Is it some form of consumption credit?
- [09:27]
Unknown
But also if you're a horizontal based product like HubSpot is, you have some customers that will use you for LPs like I will do for a fund that's a very high ticket versus a florist which is a very low ticket. And so you can't just have the same outcome based pricing.
- [09:41]
Yamini Rangan
Yeah. We believe that in the fullness of time we will have hybrid pricing, we'll have some seed based pricing. And some usage based pricing. I think it's really hard to think about outcomes for exactly the same reason that you're talking about, which is how can you validate an outcome? And especially if you offer a platform which on one spot can resolve a ticket, on the other can help you set up a meeting on the other write a blog or a social post for you, the outcomes are so different. How are you going to like validate all of it? The simpler way, at least for SMB, our customer base to think about it is results and it's more of usage. Are you using a certain credit? Are you using something in our AI platform? It's a credit based mechanism rather than outcome based mechanism. So that's how I think it's going to evolve.
- [10:34]
Unknown
I do want to go back just before we move on to the leadership element where we mentioned obviously the transition. Some elements hard, some elements easier. Can you describe one thing that I thought was just a brilliant question? I can't say who it was from but it was great. Describe one thing you've changed at HubSpot, culturally or strategically since becoming CEO that might not have happened under Brian.
- [10:54]
Yamini Rangan
Look, I think we are going from a scale up to a grown up stage. And one of the things at HubSpot that I heard when I took on is that we don't like process. Process is a four letter bad word. We don't want to talk about process. And you need a certain amount of process as you grow and you become a bigger company, distributed company across multiple offices. So one of the things that I've done is really focused on tying strategy to priorities to outcome. And when you run a large grown up company, the clarity of what is important is really needed. So strategy is just that. What's the most important work that we do as an organization? Then the second part of it is priority off that strategy. What are you going to do this year that's a priority. And then the third part of it is what do you commit as outcomes based on the work that you're doing this year and are you accountable for that outcome? And this strategy to priority to outcome is something that I've obsessed about for the last couple of years just so.
- [12:00]
Unknown
I get an example of what strategy is.
- [12:02]
Yamini Rangan
So the strategy is threefold, Harry. Super simple. Focus and obsess on our customer. Everything starts with the customer. Second, make our product easy, fast and unified. And third is have a growth mindset and become grow getters ourselves. That structure of going from strategy to priorities to outcome is something that you need as you Scale and you become even bigger and distributed. I can't see. Brian is awesome. He probably would have done a lot of things. I don't know if you would have put a framework like that with the process that we have driven.
- [12:34]
Unknown
Can I ask you online, is the have a growth mindset? I always think you want something where someone can take the alternate side. So, for example, for me, I believe working unreasonably hard yields better outcomes.
- [12:44]
Yamini Rangan
There you go.
- [12:45]
Unknown
Work life balance is a complete myth. Yes, but many people disagree with me, and that's fine. But you take the for against. No one wants someone who doesn't have a growth mindset, do they?
- [12:55]
Yamini Rangan
That is not true. I'll push you on that.
- [12:58]
Unknown
Go on.
- [12:59]
Yamini Rangan
I mean, people love the comfort of what they have done every single day. Look at AI which is coming. And one of the things that we're talking to the whole company about is can we become AI first ourselves? Can we learn how to do prompts? Can we start using AI every single day? Well, the answer is not everybody wants to do that because they're comfortable. Some of us are comfortable doing whatever we've been doing for the last decade. And so I think growth mindset, the alternate is comfort in how you do what you do and maybe even comfort in the expert level that you have based on what you have done for a long period of time. Asking questions, being curious, learning, adapting. That is not a given in any company or that's not even a given in the mindset. And I think in the larger you become, you do have people who like the comfort of, you know, I've done this before, and I've done it a certain way. I know how to do it, and I'm very comfortable doing it the way that I have done it before.
- [14:05]
Unknown
I totally agree with you, and I think that's absolutely fair. I think I probably just don't like those people. But you're right. And that is, you know, I'm sure a large portion of large company workforces. Can I ask, what were you comfortable in how you did that? You've had to change with leadership change and becoming CEO. It's a big transition. What did you have to get comfortable that you weren't comfortable doing before?
- [14:30]
Yamini Rangan
Look, one of the biggest changes, when you go from any in a position into a CEO, the number of stakeholders that you have is massive. You now have the board, you have investors, you have founders in. You have a broader employee population across a lot of teams. And so it's like the number of key stakeholders that judge you, that Focus on what you're doing and look at you is just broad, right? So that's number one. What I got comfortable with is that no matter how hard I try, I'm not going to perfectly hit the approval of all of those stakeholders. At some point I'm going to do something which is super beneficial to customers. At some point I'm going to do something that employees are happy about. Some point I'm going to do something that board members are satisfied with and maybe investors are not. So you're never going to hit that perfect equilibrium where you're satisfying and maybe even overachieving the expectations of all of your stakeholders. So then how do you make decisions on a given day? How do you pivot? You said it comes from resource allocation. I actually think about it as resource alignment. What I mean by that is, have you heard this term that culture eats strategy for breakfast? I said this to our team. Alignment eats strategy for lunch. And what I mean by that is the biggest job, job number one is setting up strategy. But I think what is even more important and critical in terms of a CEO is aligning all of the resources to accomplish that strategy. And as teams grow and as they get distributed, as they get much bigger, vectors are totally not aligned.
- [16:17]
Unknown
Can you help me? Where were they misaligned? Where you aligned them? And what was the outcome?
- [16:21]
Yamini Rangan
Think about this, Harry. You have a sales organization that's optimizing for this quarter. You might have a customer success organization that's optimizing for the segment of customers staying and not churning. And those two are not always the same. And then you might have a product organization that's trying to launch a product. And how do you align every one of these functions that are trying to do what they think is right, they are trying to optimize for subsystems. How do you get them to align on the system? And the way to think about this is most of the work that gets done in a larger organization is cross functional in nature. They're not functional in nature. Most organizations grow up with a functional mindset. What am I doing in my team? What am I doing in my function? How do I optimize? And so really the alignment is, can we be clearer on what moves the needle for the company? Now, I gave you an example of our strategy earlier, which is we want our product to be easy, fast and unified. Now, that's not just the product's job. It is the job of marketing to communicate that value proposition to our customers. It's the value of sales to be able to demo to that and help our customers understand that it is the job of customer success to make sure that we are delivering based on that. Right. Those are very, very cross functional priorities. Now if I go to our team and we say the number one priority for HubSpot today is to make our product easy, fast and unified, that aligns the entire set of sub functions to optimize for that outcome that we want to drive based on that strategy. In most organizations, it's not just about resource allocation, is it? When you allocate the resources, is there duplicate work? Is there clarity in what the resources are going to accomplish? In what period of time do we know what the goals are? And if something does not work well, is there clarity in who takes accountability to get the right outcomes? And that's the job. And once you set that up, you begin to see that flywheel work.
- [18:26]
Unknown
When you think about alignment, I think about kind of facing a challenge bluntly and you're aligning against it. And it makes me think of Jay Simons who I spoke to last night.
- [18:34]
Yamini Rangan
Oh, nice.
- [18:34]
Unknown
He said I had to ask you about wartime versus peacetime CEO ship and here are your thoughts. How do you reflect on wartime versus peacetime CEO ship?
- [18:44]
Yamini Rangan
Yeah. Are there different modes that a CEO needs to operate in? Maybe the modes optimize for different things. When you, or maybe in a wartime or a hard time, you are optimizing for speed of execution. And when you are maybe in peacetime, you are optimizing for getting a consensus around what you're trying to do. And those modes are completely different. And you do have to operate. And the question is, should you be good at one or the other? The answer is you got to be good at both and many other modes of operating. You know, there are years where you get into the year and you're like, this is go, go, go. You are optimizing for speed, which means we are going to be very clear in terms of what we want to accomplish this year. We got to get like people just follow there. That's the North Star for this year. We're just going to go. And it's optimizing for speed of execution. And that's completely different. When you need to enroll everybody in your strategy, you're doing roundtables, you're getting everybody to align on what the priorities are. And the mode of execution is really different. You got to do both. And sometimes you got to change the mode in a year or maybe even a given quarter.
- [19:59]
Unknown
You say about the importance of speed, then can you take me to a Time where you move very fast and maybe you should have moved slower. And what did you learn? There's a moment with people where they know something in their head and it's like, do I say that story?
- [20:14]
Yamini Rangan
You know, I laugh, Harry, because so I've been getting like performance reviews forever and ever.
- [20:20]
Unknown
Oh my God.
- [20:21]
Yamini Rangan
Oh my God. Yes, exactly. And the consistent theme across now 25 plus years of my performance reviews is go slow because I have, you know, my natural mode is really going super fast. Very early on I was in sales. You know, I just gotten promoted to in a sales manager role. That was the first time I got that feedback. Go slow because your team is not behind you. You need to explain things to them. You need to ask questions rather than give answers. I have a sticky that is probably a decade old and I can't take that sticky off my computer because it says slow down and ask questions. I smiled and laughed because, you know, this is a lesson in the making. My mode of operation is always for speed and speed of execution. And I found that when you spend the time providing the context to your team, when you ask more questions so that they can get to answers, when you enroll them in what you want to accomplish as a whole organization, then you go far and sometimes you optimize for speed and you turn around and you're the only one there. And so what I've learned is that there is a ton of context building when you are making a pivot or when you're changing a direction of something, you have to provide the context. You have to provide the why behind the what you're asking to do. And that is a process of slowing down in order to go far.
- [22:02]
Unknown
I'm intrigued when you think about making those big decisions and providing context for them. One thing that again everyone actually said we should talk about was the transition in that's not fair to say transition, but the moving up also of customer ICP embracing a larger enterprise client.
- [22:20]
Yamini Rangan
Yeah.
- [22:21]
Unknown
Why did you decide to add mid market and enterprise to the pretty purely SMB HubSpot.
- [22:28]
Yamini Rangan
You know, that's a great question. I'll tell you then When I joined HubSpot, this is January 2020, I looked at how we were running the company, how we were running marketing, sales and service and we were running HubSpot on HubSpot and guess what? At that time we were a 4,500 person company so well out of our target segment zone and our ICP, it was working beautifully and we were customer number zero for HubSpot. So product was absolutely Ready. Then the question is, can you get the partner ecosystem, can you get the whole company behind moving upmarket? And just so we know we're talking about 2 to 2000, we're not talking about 20,000 person company, we're not talking about 200,000 person company. We're still talking the segment that we were originally focused in, which is two to two thousand. But the opportunity to go to a thousand person company and help them grow across marketing, sales and service was huge. Our product was already there. And so the next step was to state that as part of the strategy and to get the whole company behind serving an upmarket customer in that space. And it's worked out.
- [23:41]
Unknown
Is it not an entirely different business in the way that you've suddenly got to scale an sdr, a bdr, an AE team, a customer success team? These are really complex GTM motions functions. Is it not an entirely different company that you've got to build?
- [23:56]
Yamini Rangan
No, I don't think it is that different. Especially if you think about how we went about doing it is we were already serving companies with 200 employees and then we started serving companies with 500 employees and then we started serving companies with thousands. So I think like there is a myth that, you know, there's a completely different motion and you got to like go and hire all these enterprise class, you know, reps to come and sell. And in fact if you do that, that will break the system and that will break the culture. But if you think about more incremental approach of getting the product to be perfect fit for the next higher segment, so going from 200 to 500 and then looking at the kind of sales and support organization that you need and up leveling them incrementally the next year to make sure that they can serve a 500 person company and then taking it up to 1000 and taking it up to 2000, that is a much better way of scaling up market. And we've been able to bring along our reps by upskilling them. We've been able to bring along our partner ecosystem by upskilling them. We've been able to continuously drive innovation in the product as we go up market.
- [25:10]
Unknown
Well, where does it feel most different when you go from 200 to 400 and then 400 to 800 and then 815, where's that like oof. This is different to the last phase.
- [25:20]
Yamini Rangan
When the complexity of the buying process on behalf of the customer goes from I'm making decisions, I got the budget to I have a committee of people that now need to make the decisions. That includes it, that includes procurement, that includes security, that includes maybe the board. Then it probably gets a little bit more different. And that's where we had to upskill our sales team. How do you sell to a committee versus an individual owner or a sole proprietor or a VP of marketing? How do you make sure that you're driving a process that makes sense, that works for customers upmarket? Right. So I think there is a organic way of upskilling that you can do to make sure that your team is enrolled in the process, the skills are getting better, and then you begin to set that flywheel in motion.
- [26:18]
Unknown
When we think about the movement up to a higher employee base, you do more and more nudge into Salesforce's territory. You've always, not you. But HubSpot's always been quite like, yeah, no, we're not really competitors. No, no, no. And they're always like, no, no, they're not competitors. You kind of are. Right.
- [26:40]
Yamini Rangan
Look, it's a very large market. B2B apps are not winner take all markets. It's different than consumer apps. Consumer apps, you see one use case, there's an app that comes in and then it's like 90% of the market is just like one provider. That's not been the case almost any of B2B apps. Whether you look at like HR or finance or recruiting or you look at CRM, they all have multiple players. I think the way we look at it is for the 2 to 2000 segment, we have a great product and we have a great go to market fit. We're really good at that. Then Salesforce has got this amazing enterprise segment that they're really good at. Yes. Is there an overlap in the upper end of our upmarket 2000 person company? Sure. We see them and they probably are like, yeah, we have a whole space enterprise and okay, there's some overlap there. So yeah. Are we competitive in one portion of the segment? Yes. But we also focus on really delivering for that entire SMB, which is the 2 to 2000 space we've been talking about.
- [27:51]
Unknown
What do you think they do better than you? That you're like, you know, we can learn from that. We respect that and we can learn from that.
- [27:57]
Yamini Rangan
I always respect and learn from competitors. The best competitors make you better. Salesforce does a really good job of marketing and telling the story and creating the narrative. And we look at that and it's like, you know, we're very impressed and we learn from it.
- [28:16]
Unknown
What do you think they should learn.
- [28:17]
Yamini Rangan
From you making the products easy. And that's not what customer platforms and B2B applications have been. And so part of what we have been doing is to train the market, train our customers. That easy is a really important attribute.
- [28:32]
Unknown
Saying the easy to use product. Pat Grady told me that I had to ask this one, which was when you have an incremental dollar, how do you think about where to invest it? Whether that's investing in product to make it easier, the product like growth motion, more kind of fluid, or actually in a more sales LED motion, which obviously increases the higher ACV and touches the larger customer base. How do you think about where to spend that incremental dollar?
- [28:57]
Yamini Rangan
If we really had to make a choice, it would be product first. The more you can invest in the product for it to be intuitive, unified, the easier it is to get the sales and marketing engine going.
- [29:12]
Unknown
I do want to talk about SMBs in particular with regards to AI, because you said something fascinating before. You said AI is history's greatest equalizer for SMBs. Yeah, I was like my word. That is the title of a podcast. What do you mean by a AI is history's greatest equalizer for SMBs?
- [29:29]
Yamini Rangan
50% of companies that get started fail within the first five years. Starting is hard, but scaling a company is absolutely brutal. And if you think about why is scaling so hard, especially for small medium businesses, they operate under constraints and particularly three constraints. They are headcount constraint, they cannot add the next headcount. They are capital constrained, they don't have big budgets, they are expertise constrained, they don't have an army of consultants and resources to kind of like bank upon. So they operate under constraints but yet have grand ambitions. And when I said that AI is an equalizer for SMBs, it removes each one of those constraints. So think about headcount. If you're using AI for support, you may not need to hire the next support person for a bit longer. Right? So I think it does unblock the headcount constraint. Think about it. For marketing, if you have like a huge budget, then you can personalize every single message that you send out. But if you don't have a huge budget, you're not going to be able to do that. But now AI can help you look at your ICPs. Look at segments, not as broad segments, but as individual customers that you want to be able to prospect and get much better conversion rate. So no need for huge budgets. If you're leveraging AI to send personal messages and then think about sales, the expertise that you need to sell and you said this earlier, you need a pre sales consultant, you want a demo, you want a solution consultant, you want all these experts to be able to scale selling well, you can get demos done through AI. AI can actually help in a lot of those areas. And so when generative AI came on the scene, we got like super excited. Not because it was a shiny, cool technology that we all wanted to hype about, but because it unblocks SMBs in the core areas that we focus on, marketing, sales and service. And that is exciting. Taking a pretty sophisticated technology, making it.
- [31:38]
Unknown
Super simple that you mentioned sales tools that can do all these things. If you actually speak to most of the customers, they've churned and said they're not very good. This is for point solutions which are purely tailored to a specific part. Demoing, interviewing candidates, whatever that is. What is hype and what is reality?
- [31:56]
Yamini Rangan
Lot of hype, isn't it? I mean, look, I think this is why the North Star for us has always been customer value. We talked a little earlier about companies lapping an AI SKU and pricing it and then you begin to see there's churn. And one of the things that we are focused on is let's build great product and let's make sure that there is repeat usage, repeat value with customers. And when we see it, then we can scale it and then we can price it and then we can do all kinds of things with it. And so to your point, it's early, but we are seeing clear signals in terms of agents.
- [32:32]
Unknown
What signals do you think we're seeing that are most exciting?
- [32:34]
Yamini Rangan
Look, I think support is a very clear signal. We have agents, a customer agent that we have, we have 1500 customers and, and within weeks we saw 42 to 45% of tickets being deflected by AI. And that's handful of weeks, right? Internally We've been using AI to resolve tickets 35% in year one and now we'll be on to 50%. So very, very clear signal. In terms of leveraging AI in order to scale support, I would say the same thing in terms of marketing. We've used marketing to drive conversion by having more personalized emails. That has driven conversion rates and that has helped us scale marketing. And so it's early, but at this point in the technology we're looking for.
- [33:21]
Unknown
Signals in terms of the slapping on AI. What's the difference between slapping on AI and the way it should be done for a lot of scale ups? Say your notions, your canvas, you're in that realm, AI. And I think They've done it well, by the way. But AI is added to an existing product base. What's slapping on and what's doing it the right way?
- [33:42]
Yamini Rangan
Think about this from an end user perspective. When a product is kind of like neat and novel, they're going to use it for one day and then they're probably going to check it out again once every two weeks or maybe they're not going to, and then they churn out. It's really the difference between neat and necessary. And necessary means you're using it every single day. You cannot get your job done without it. And so the best way to think about leveraging AI and building it into your product is can that feature go from neat to necessary and can it become like essential as part of the workflow of your end user that they cannot live without it? Don't you think, like, this is the time where you got to dream big and you have to iterate small and you got to start with a couple of use cases and continue to build patterns in terms of customer usage.
- [34:37]
Unknown
Do you worry about margin degradation with the integration of AI into your tools? And what I mean by that is obviously you sit on top of models and you have to pass through a lot of the revenue to them. It's expensive to use them. Yeah, that is more expensive than just running traditional HubSpot.
- [34:50]
Yamini Rangan
No, first of all, model costs and cost of inferences come down pretty significantly. You know, you look at it in 2023 to where we are now, it's come down significantly. I think cost curve is going to continue to, you know, decline. I wish we had a margin problem. That means the usage is going to be really high. I think we're still in the early parts of getting the features out, getting people to use it on a daily basis. So I don't think that there is margin degradation. I continue to believe that the cost of inference is going to continue to come down, that we won't see that there'll be a lot more value that we can generate for our customers.
- [35:31]
Unknown
Who actually is most advantageously placed? Is it startups with no legacy code, much more nimble? Is it scale ups, I don't know, 500, 2000 people, or is it like your HubSpot's of the world, your incumbents.
- [35:45]
Yamini Rangan
Of the world, Companies with speed will win. It doesn't matter whether you're a startup or a scale up or a Grown up like HubSpot, anybody who operates with speed, who can innovate will win. And at this point HubSpot is operating like a startup, we have the speed, the agility, the focus, the urgency, like a startup. And that's what it is.
- [36:05]
Unknown
You always have done.
- [36:06]
Yamini Rangan
No, this is a pretty big shift in our culture. As soon as we really pivoted the organization towards building an AI first platform and building all the features for AI, we also said that we needed to become agile, we needed to move with urgency. And so it's a.
- [36:22]
Unknown
What specifically do you do to move with urgency and agility where it wasn't before? Is it like devolved decision making? Is it removing one on one? I don't know.
- [36:32]
Yamini Rangan
Whatever it is, I think it is speed and cross functional decision making that needs to get faster. We talked a lot about alignment. In a company like HubSpot, getting work done is getting cross functional work done, and getting cross functional work done is who's making the decision? Is there clear accountability for the decision? What happens if the project goes south or if it hits a pothole? How are we going to solve for it? And that is the speed that we're trying to get people to rethink. And I also think it's about the fluency of what AI can do for us internally as a company as well as for our customers. And so part of driving that urgency is, are you AI fluent? Are you getting better at writing prompts? Are you getting better at use cases within your function? And the more conviction you have in using AI every single day, the more conviction you'll have in educating customers and getting customers on AI.
- [37:38]
Unknown
I got told I had to ask this one. How do you personally use AI every day? You said about writing prompts there.
- [37:43]
Yamini Rangan
I do. Look, I think my workflow has changed quite a bit. I have Claude with few projects set up.
- [37:50]
Unknown
You have Claude?
- [37:51]
Yamini Rangan
Yeah, I have like, you know, projects within Claude set up. And there is one.
- [37:56]
Unknown
Why do you have Claude?
- [37:58]
Yamini Rangan
I mean, I have all of them, so I have Gemini Gems. I have.
- [38:01]
Harry Stabbings
I'm just intrigued.
- [38:01]
Unknown
Why Claude? So I'm gonna. I lose friends. Cause like Mike Krieger was just on the show and you know, Daryl, I put in a prompt for Yamony.
- [38:12]
Yamini Rangan
Okay, you did?
- [38:13]
Unknown
Yeah. I do for every single show. And I do it across Grok. I do it across perplexity, open air, deep breath, research and Claude. It comes out with amazing ones from Claude. And it says Yamini said this. And Yamini said this. Ask her this. And I say amazing. Where did Yamini say that? And it comes back, oh, we didn't know you actually needed real statements. She said. And I'm like, whoa, whoa, Whoa. I could have said to her, you said this and you're like, no, I didn't.
- [38:40]
Harry Stabbings
These are very, very bad.
- [38:42]
Yamini Rangan
You're talking about sourcing and citation, which is really important in certain use cases. I'll tell you, I use it to write my LinkedIn post. I use it to. Do you find it better than OpenAI in certain cases? Yes. And I will tell you that I have a project for earning script writing and I've literally fed it with the last 16 quarters of earning script. Now what do you do?
- [39:12]
Unknown
You feed it the PDF.
- [39:14]
Yamini Rangan
It's basically all of the docs of the last 16 earning script. I fed it into project and when I'm about to write the next one, I give it. Here's the parameter of the story that I want to say. Use the approach that I've taken in the past 16 and help me write and think through it. It will think through it and then I'll ask prompts of if I needed to make sure that I communicate this message, can you improve it? And so reasoning, thinking, sorting, analyzing, and then writing. Super useful. And it's actually really short in the time I write every one of the earning scripts. And I now use combination of Claude and a couple other models. I do the same thing, which is I'll try a couple of different outputs with the same prompts and see which one I like better. And that has helped me refine my thinking.
- [40:03]
Unknown
Can I ask, what is your process for writing an earnings script? Do you sit down and do it in one session? Do you do it over multiple? How. How does that look?
- [40:10]
Yamini Rangan
Earning script or any writing in general?
- [40:13]
Unknown
Earning script?
- [40:13]
Yamini Rangan
Yeah, it's one session.
- [40:15]
Unknown
Wow.
- [40:16]
Yamini Rangan
It is one session.
- [40:17]
Harry Stabbings
They're long, aren't they?
- [40:18]
Yamini Rangan
Sunday afternoon, probably three hours to four hours. And it's much more about what is the clear narrative you want to provide. Now I have a thought partner and a reasoning partner and a creative partner for doing it. I used to do it all by myself. I'm like, well, get me through the Sunday afternoon. Now I'm actually enjoying it because I'm like, did I get this message across in this paragraph? Analyzes it? No, you could probably say it this other way. And so I think it really helps with being a partner in terms of some of this process. And it's, you know, I actually enjoy it. You know, as much as I say it's a lot of work, I really enjoy it because it is a time for me to reflect on the past quarter or reflect on the year and think through where did we make Progress. What has worked and how can we clearly articulate that story to a really wide audience?
- [41:16]
Unknown
This may be way too in the weeds.
- [41:18]
Yamini Rangan
Sure, go for it.
- [41:19]
Unknown
When we think about SEO today, I'm sure a lot of HubSpot's traffic is SEO.
- [41:24]
Yamini Rangan
Yes, it is.
- [41:26]
Harry Stabbings
Unbelievable.
- [41:26]
Unknown
Content engine SEO is slowly transitioning from Google and from search engines to ChatGPT and to other providers. How do you think about that? Is that a concern?
- [41:38]
Yamini Rangan
Well, it has been something that has been happening for a few years. Right. If you look at the SEO traffic, especially after AI overviews and what perplexity. And some of these sources actually provide. The big shift that has happened, Harry, is search engines used to provide blue links that you can click and then reach someone's website. Now they're providing answers, which means you no longer need to click. And I think that's a shift that's going to continue for a while.
- [42:05]
Unknown
And then you sponsored beneath that.
- [42:07]
Yamini Rangan
Exactly.
- [42:07]
Unknown
And then suddenly on page two. Page three.
- [42:09]
Yamini Rangan
Exactly. So I think there is a whole process that's going to happen. I don't think that this is surprising to us. We've been really looking at diversifying our content strategy for the last three to four years, even before AI came in. That's a process of expanding to podcasts. We actually brought a podcast network and we get millions of users listening to our podcast. We've actually bought a couple of email newsletters, old style email newsletters and those get daily coverage and provide us another way to expand kind of our distribution.
- [42:45]
Unknown
That's how you get the ROI of those media acquisitions. I know them and they're fantastic properties and well done for them. But how do you think about the ROI of them? Like conversion, attribution versus brand and marketing. It's difficult to do.
- [42:57]
Yamini Rangan
It's just distribution. It's like top of funnel. I don't think that there is one user who's just going to listen to podcast and immediately buy a product. But the awareness building. How do you think about brand overall? The level of awareness of your brand and the level of multiple touches it takes for someone to look at your brand and then continue the process of being even more curious about the brand and then getting converted into sales. That's a multi touch attribution model. I don't think we look at it on single property basis. It's the how is our overall awareness increasing across these multiple channels?
- [43:35]
Unknown
It's very difficult when you think about the shift away from SEO. That is one that I'm just spending more and more time thinking about the.
- [43:41]
Yamini Rangan
Way we think about it is where are our customers? It used to be the customers just visited our website, but today they are on YouTube, they're on Instagram, they're on other TikTok and they're on LinkedIn. And you need to be where your customers are, not just expect them to come to where you are, which is your digital presence, which is what SEO helped us do, which means it's a much more customer centric marketing strategy, which I love.
- [44:11]
Unknown
One of my favorite segments is the Quick Fire segment though. So I'm going to say a short statement and you're going to give me your immediate thoughts. Does that sound okay?
- [44:18]
Yamini Rangan
It sounds good. Let's go.
- [44:19]
Unknown
So what do you believe that most around you disbelieve?
- [44:22]
Yamini Rangan
Pricing strategy should not be to chase revenue, but it should be to attract revenue. Most people think that pricing is a way to maximize revenue and that's why you get all these questions of AI, how are you going to monetize it and what's the next big thing that you're going to do? We always look at how do we provide value for customers first? And we've consistently actually lowered pricing to increase the value that we provide and the compelling value that we provide attracts more customers. A lot of people think that pricing is to maximize every dollar and therefore get to revenue maximization. We actually think about it as market share maximization, which means you'll approach pricing very differently.
- [45:09]
Unknown
You can buy and hold one public stock for the next 10 years.
- [45:12]
Yamini Rangan
Not HubSpot, Microsoft. I think Satya Nadella is like one of my all time favorites. He's just done such a phenomenal job.
- [45:22]
Unknown
What do you learn from Satya?
- [45:23]
Yamini Rangan
How he has bet all in, first on cloud and now on AI. How he has used culture to pivot the company. How he has instilled this growth, mindset and curiosity within a company that seems super siloed. Before he started, I read the book Hit Refresh and I was obsessed with it. I'm like, this is amazing. This is just a whole lesson in terms of company building. And he's just done a phenomenal job. And he talks to customers, talks to partners, talks to investors, new companies. I'm like, that is incredible.
- [46:04]
Unknown
What board member do you not have that you'd most like to have?
- [46:08]
Yamini Rangan
The CEO of Anthropic. I think he is just phenomenal. Deep research, exceptionally well thought out process for safe AI. Just a researcher of incredible caliber.
- [46:22]
Unknown
I'm going to get in trouble. Definitely. Then for my review of Anthropic. Oh no, I Shouldn't have said that. Now, what have you changed your mind on in the last 12 months?
- [46:31]
Yamini Rangan
Okay, I have a personal story. So my son is applying to universities. I wanted him to be in California. That's where we live. I'm like, you gotta stay here. There are like plenty of great schools. He's just like, really focused on East Coast. And we went there, we looked at the colleges. He fell in love with east coast. And I changed my mind. I saw him there. He felt really at ease in a completely different part of the country and very supportive. He's going to university in the East Coast.
- [47:02]
Unknown
Does being a parent make you a better leader?
- [47:04]
Yamini Rangan
Definitely more patient leader. You know, I have two teens, and a lot of times what I go through with my teens is exactly what I'm going through at HubSpot. You know, we also happen to be in teenage.
- [47:16]
Unknown
There's a brilliant book, Speak so Children Will Listen and Listen so Children Will Speak. And it talks about kind of how to communicate to children and teams effectively. And it being very much largely the same.
- [47:27]
Yamini Rangan
I'll have to buy that.
- [47:29]
Unknown
I'm gonna go there. Why not? Unlimited vacation, mental health days, no meeting Fridays. Was this just like signs of woke times or is this like a part of culture?
- [47:42]
Yamini Rangan
Hey, we just actually made a change from unlimited vacation times to flexible time off. That is something that we have, like, moved the culture around. Now, a lot of what you talked about happened in 2020, 2021, and those were times that as a humanity, we were going through pandemic for the first time and people were losing their lives, livelihoods, and parents were trying to figure out how to work from home. And so I think it was a time where there was support that was necessary. We've now really refocused the company in terms of customer outcomes, mission orientation. We just made this change into flexible time off. Don't ask me how it goes.
- [48:24]
Unknown
I'm actually not. I'm going to leave it there. I really like you.
- [48:28]
Yamini Rangan
Thank you.
- [48:29]
Unknown
What concerns you most in the world today?
- [48:30]
Yamini Rangan
I read a stat recently that gender parity, at the rate that we are improving, it is going to take 134 more years. It's going to take 134 more years to get to gender parity. Just across broad health, longevity, the kinds of work that we do, the pay, all of that. That's a really long time.
- [48:52]
Unknown
Do you not think we're seeing a reversion in the work that was done over the last few years? It's one of those actually sad truths. But when you look at good times, you see things like gender parity being more of a focus. And bluntly, when times are hard, shit, inequality's worsening, conflicts happening, respectfully, it is not a priority and it is instantly deprioritized.
- [49:11]
Yamini Rangan
I know, I know. And that's scary. That's scary.
- [49:14]
Harry Stabbings
Very scary.
- [49:14]
Unknown
It's like climate. It's very similar. What's the biggest surprise or what thing do people not understand about being a public company CEO?
- [49:22]
Yamini Rangan
It's a rollercoaster ride. Every year there's some new challenge and you don't know what the challenge is going to be and it's a rollercoaster ride.
- [49:32]
Unknown
Do you find it hard to regulate yourself when it is very volatile?
- [49:37]
Yamini Rangan
I think you have to have good practices for yourself to ground. And for me, it's been meditation for a very long time. Meditation and yoga. So there are things that ground me and that is important to me and centers me. And so, yeah, there's a lot of volatility, there's a lot of uncertainty in the role. Every year feels very, very different than the previous one. But you got to ground yourself.
- [50:04]
Unknown
One thing I find hard is when companies reach a certain size, no matter how good everything is, there's always one thing that's bad in every company at a certain size. There's something that's wrong with HubSpot today. And so you can always choose to be down. Yes. Do you know what I mean?
- [50:20]
Yamini Rangan
Absolutely.
- [50:21]
Unknown
It's hard.
- [50:21]
Yamini Rangan
Absolutely.
- [50:22]
Unknown
And if you're a perfectionist, you focus on that thing that's wrong. I know 98% is good, but that sales motion is not working.
- [50:28]
Yamini Rangan
That is right.
- [50:29]
Unknown
I'm struggling with that. What question are you never asked that? You're like, I wish people would ask that.
- [50:34]
Yamini Rangan
You know, Harry, the number of times I get asked the question, are you going up market? And so there's like, that's a shit question, isn't it?
- [50:41]
Unknown
Who would ask that? Right, right.
- [50:45]
Yamini Rangan
The number of clients is.
- [50:47]
Unknown
Take it out.
- [50:48]
Yamini Rangan
The number of times I get asked that question. There's a bit of a myth that the only way to grow, the only way to serve millions of customers, the only way to become a very large company is by going up market. I wished someone would ask, why do you have deep conviction in mid market? We would say, look, there is an enterprise market that's very large. There's a market for SMBs. We want to define a category of, of mid market software. And five years from now, 10 years from now, when you have guests in your podcast, I want you to ask them, hey, are you like Salesforce, Are you like HubSpot serving mid market or are you like Intuit serving SMB? And that is a question that I'd love to dig into.
- [51:31]
Unknown
That's a terrible question about moving up market. I can't believe people ask that. You're right Yamini. I've so enjoyed doing this. I heard Ali said so many good things from everyone. This has been such a pleasure to make happen.
- [51:42]
Yamini Rangan
Thank you so much for having me here and it's such a fantastic experience to do it live with you here.
- [51:46]
Unknown
It is so much better. This has been amazing.
- [51:48]
Harry Stabbings
Thanks.
- [51:48]
Yamini Rangan
Thanks a lot. Take care.
- [51:51]
Harry Stabbings
That was such a special show to do in person. I want to thank Yamini for coming to the studio in London. If you want to watch that then you can find it on YouTube by searching for 20VC. That's 20VC on YouTube. But before we leave you today, turning your back of a napkin idea into a billion dollar startup requires countless hours of collaboration and teamwork. It can be really difficult build a team that's aligned on everything from values to workflow. But that's exactly what Coda was made to do. Coda is an all in one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. Now at 20 VC, we've used Coda to bring structure to our content planning and episode prep, and it's made a huge difference in Instead of bouncing between different tools, we can keep everything from guest research to scheduling and notes all in one place, which saves us so much time. With Coda you get the flexibility of docs, the structure of spreadsheets, and the power of applications all built for enterprise. And it's got the intelligence of AI, which makes it even more awesome. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to CODA io20VC today and get six free months of the team plan. For startups, that's Coda iO20VC to get started for free and get six free months of the team plan. Now that your team is aligned and collaborating, let's tackle those messy expense reports. You know, those receipts that seem to multiply like rabbits in your wallet. The endless email chains asking can you approve this? Don't even get me started on a month end panic when you realize you have to reconcile it. Pleo offers smart company cards, physical virtual and vendor specific so teams can buy what they need while finance stays in control. Automate your expense reports, process invoices seamlessly, and manage reimbursements effortlessly all in one platform. With integrations to tools like Xero, QuickBooks, and Netsuite, Pleo fits right into your workflow, saving time and giving you full visibility over every entity, payment and subscription. Join over 37,000 companies already using Pleo to streamline their finances. Try Pleo today. It's like magic, but with fewer rabbits. Find out more@pleoio20VC don't forget to secure trust with your customers. Trust isn't just earned, though, it's demanded. That's why over 9,000 companies, including Atlassian, Quora, and Factory, rely on Vanta to automate their security. Compliance to Savanta helps businesses achieve certifications like SoC2 and ISO 27001, turning months of tedious work into this beautifully fast and straightforward process. Their platform automates compliance across over 35 frameworks, it centralizes workflows, and it proactively manages risk, all while saving you time with automation and AI. So whether you're just starting or scaling your security program, Vanta connects you with auditors and experts to get audit ready quickly and build trust with your customers. Get $1,000 off your first year by visiting vanta.com 20vc that's V-A-N-T a.com 20vc as always, we so appreciate all your support and stay tuned for an incredible episode coming on Wednesday.