Does HubSpot Walk The Talk On Its Culture Code?

By Dharmesh Shah on April 11, 2013

A couple of weeks ago, HubSpot shared our culture code deck (http://CultureCode.com) — a document that describes what we believe and how we work. 

The presentation, despite being 150+ slides long and on a topic that doesn't involve celebrities, cat photos or currently trending topics has been remarkably well received. It has had over 340,000 views.  It's one of the most viewed presentations on slideshare in the past year. I've received many, many emails and tweets with positive comments about the culture code deck (thanks!)

Deck is included below, for your convenience, in case you haven't seen it yet.

 

 
describe the imageNow that the deck is out there and has garnered so much interest, I thought it might be valuable to dig into some of the core tenets of the HubSpot Culture Code and try to do an honest assessment of how well we live up to the tenets. Or, stated differently, how well do we "walk the talk"?  In the deck itself, when a particular tenet was more aspirational than descriptive, we tried to call it out.  (I think this candor is one of the reasons people like the deck). But the call-out doesn't always capture the degree to which we live up to the ideal, so we're double-clicking here.

So, here are the core tenets with a self-score on how well HubSpot lives up to the tenet. Of course, even this take is biased (I'm a founder, and all founders are naturally biased about their startups) and it's a qualitative judgment call. On my list of things to do is to see if we can make this more measurable. But, that's a topic for another day. 

1. We are as maniacal about our metrics as our mission.

Score: 9.5/10

Lets break this one down a bit.  First of all, we are very passionate about our mission to transform marketing and move the world towards more inbound and creating marketing people love.  It's a noble vision, it's a big one — and we invest in it and mostly live up to it.

Mission score: 9/10:  I dock us a point because we do have some outbound marketing in our mix of marketing spend.  We're not pure inbound marketing. We spend some money on PPC, some telemarketing and some paid online channels.  Not a lot — but enough to deduct a point.

Metrics score: 9.5/10:  We really are maniacal about our metrics.  We pore over data.  We slice and dice things like customer cancellation data, SaaS economics metrics, employee happiness surveys, marketing channel data.  I've talked to many, many startups and fast-growing companies.  Of those, HubSpot is one of the most data-driven and metrics-obsessed companies I know.

2. We obsess over customers, not competitors and “Solve For The Customer”

Score: 8/10

The statement itself is mostly true (we spend 99% of our time worrying about customers and very little time worrying about competitors), but the underlying mantra of “Solve For The Customer” is not yet as true as we'd like it to be. 

We get points for the way we have handled pricing and packaging over our 6+ year history.  We have raised prices almost every year, and each time, we go out of our way to grandparent our existing customers and reward them for putting their belief in HubSpot.  So, on this front, I think we do really well.

We deduct points because the overall experience of HubSpot is not as smooth as it could be.  It's not customer-friendly enough.  We sometimes make decisions that are for our self-interest or convenience rather than customer happiness.  We're working on this.

We're getting better at having people call B.S. on decisions or directions that are not in the customers' interest.  People will speak up with questions like “What's in it for the customer?” or “How is this solving for the customer?” or “Seriously?”.  On the one hand, it feels good that people can be open and candid when they don't think we're living up to the SFTC (Solve For The Customer) credo.  On the other hand, in an ideal world, these non-customer-happiness focused things wouldn't have to be called out, because we'd always be acting in the customers' interest.  It would be natural and second-nature.  But, we're a metrics-obsessed, goals-oriented, for-profit company — so it may take some work and practice to have SFTC be natural, 100% of the time.  In the meantime, we'll continue to try and catch ourselves before we make decisions that don't make sense for the customer long-term.

3. We are radically and uncomfortably transparent.

Score: 9.5/10

We are super-duper, hyper transparent — and our transparency level has moved up over the years, not down.  We share all sorts of crazy things with every employee.  For example, one of the posts on our wiki goes into detail on every funding round we've done.  Details include the What the valuation was, what the common strike price was, how much money was raised, how much dilution there was, etc.  

We share just about everything.  And, the things we don't share (like individual salaries), we're deliberate and clear about.  Deducted half a point simply because nobody's perfect and we can always be better.

4. We give ourselves the autonomy to be awesome. 

Score: 8/10

We're good, but not great in terms of giving ourselves autonomy.  HubSpotters have a fair amount of freedom.  You can run with an idea.  Most things don't require permission.  You can talk to anybody in the company, including the founders about whatever you want.  We don't have formal policies and procedures for most things (our default policy on most things is “use good judgment”).

So, why the lower score?  A few things:  First, although we philosophically believe in the “work whenever, wherever” idea, this is not universally enjoyed to the same degree by every HubSpotter.  We trust our team leaders to do what is right for their groups and use good judgment.  We're also a bit conflicted because the data overwhelmingly shows that working together in the same office leads to more creativity and productivity.  So, we understand the importance of co-location, but don't want to force it and take away freedom.  For now, we've straddled the issue.  Bit of a cop-out.

Our unlimited vacation policy has been a good thing (it's been in place for over 3 years).  But, there were a couple of issues.  First, some of us didn't really feel like they could take vacations without negatively impacting their work.  Second, we had growing suspicion that on average people might be taking less vacation than they should.  We didn't know if this was true, since we don't track vacation days — but we wanted to make certain that “unlimited vacation” didn't turn out to be “no vacation” for anyone at HubSpot.  So, we made a tweak: Everyone has to take at least two weeks of vacation a year, or face ridicule by their peers.  We've also tweaked some things to make it more likely that people do the right thing and take regular vacations. 

5. We are unreasonably picky about our peers.

Score: 8.5/10

This is true. We are really, really picky about our peers.  We're fortunate to have a lot of interest in the company, and for every open position we get many (often hundreds) of candidates.  So, we can afford to be picky.  It's actually harder to get a job at HubSpot than it is to get into MIT. Our acceptance rate is lower.

The reason for deducting a couple of points is related to the attributes we look for (Humble, Effective, Adaptable, Remarkable and Transparent). For the most part, HubSpotters manifest these attributes — we try to make sure of this during the recruitment and interviewing process.  But, we don't always get it right.  So, we get a negative point for that. 

Also subtracting a half point because not only do we make hiring mistakes sometimes (despite our best efforts), we're not as good as we should be at calling people out when they do un-HubSpotty things.  For example, we have being “Humble” as a core attribute (it's actually been an attribute from the beginning).  But, not everyone acts in humble ways, and we often fail to call it out. Part of having a great culture is defending it.

6, We invest in individual mastery and market value.

Score: 8/10

Though we've always believed in investing in our people and wanting to “build not just a company we're proud of, but people we're proud of”, this hasn't been explicit in our culture code until recently. So, we have some work to do here.

First, we're going to take a hard look at where our “discretionary culture spend” (aka “employee happiness expenses”) — which, incidentally is over a million dollars a year.  We want to shift our budget to things that help increase mastery and market value. Things like education and leadership training.  Yes, we enjoy parties and celebrations too (and those are important), but all things being equal, we want to invest these dollars (in our people), not spend them

But until then, we still get an 8 on this front.  We can do much more.

7. We defy conventional “wisdom” as it's often unwise.

Score: 8.5/10

This culture attribute goes towards how much we question the status quo and do things differently.  We're actually pretty good at this.  Good, but not great. We get points for things like not having offices and executive perks.  Our radical transparency and openness defies conventional wisdom.  We're one of the few private companies that publicly shares its key financial data (like revenues) every year.

8. We speak the truth and face the facts.

Score: 9/10

We have a very strong culture of facing the facts and reality.  Nobody is allowed to walk around with rose-color glasses on. We don't brush problems under the rug. We don't hide from issues. If anything, we can be faulted for being too critical sometimes.  We also do a great job of speaking the truth and being candid about the problems we see in the organization.  This happens in meetings, in hallways, over email and on the wiki.  When problems show up (as they do regularly), we are usually quick to react.

9. We believe in work+life, not work vs. life

Score: 8/10

This one is a bit squishy and hard to measure.  Generally, we do a really good job of work-life fit.  Mostly flexible hours, unlimited vacation, centrally located and relatively easily accessible office.  All of those things help.  Things that fall into this bucket that we're not great at is diversity — particularly gender balance and getting more women into leadership roles.  We're “leaning in” on this, and hope to get much, much better at this over the next few months.  Stay tuned.

10. We are a perpetual work in progress.

Score: 9.0/10

This one's a bit of a gimme (note to self: We need to replace this tenet with something that's more substantive and less platitudinal).

We don't sit on our laurels.  We celebrate victories big and small — but celebrations are short-lived.  Though we are pleased with our modest success so far, we recognize that there is still much work to be done.  We're constantly trying to improve how we run the busines and ourselves.

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Clear Eyes, Full Heart: Beating The Series A Crunch

By Dharmesh Shah on April 9, 2013

The following is a guest post by Alan Wells, co-founder & product designer at Glyder. [Disclosure: I'm an angel investor in the company. -Dharmesh]

It has been widely reported that at there will be least 1,000 orphan startups this year - companies that raised a seed round last year and will fail to raise follow on financing.  The popular opinion in the tech press is that most of these 1,000 orphan companies will die due to lack of capital. As a founder, it's hard not to let this influence your thinking - with all the talk of failing fast, acqui-hires, and overnight success stories, it's easy to believe that your only options are to find a soft landing or shut down and try again with something else. And compared to sticking it out, walking away is most certainly the easier path (although it might make you a punk).

But I believe that in those 1,000 orphan startups, there are great companies - companies that can still put a dent in the universe, companies that can break through if the founders stick to it. Ben Horowitz says that all great CEOs have one thing in common: they don't quit, and at Startup School last year, this theme played out over and over again. Almost every founder that spoke went through a trough of sorrow that lasted 18-24 months before things really started to click for their companies.hang in there

Maybe it’s coincidental that the trough of sorrow is usually just a bit longer than the runway you have after an average-sized seed round, but I’m beginning to believe that great companies are often the product of these trying circumstances. Unfortunately people don’t like to talk about what’s not going right with their companies, and there’s not much discussion going on around what founders are doing to successfully navigate these waters.

I’m the founder of a startup that recently decided to double down and do our best to beat the series A crunch, and in the interest of focusing on the road instead of the wall, I wanted to share some of the things I’m learning as we find a way forward.

Acknowledging Your Reality

Founders are optimistic people, so it's easy for us to believe that if we just add this one thing to our product, hit that one key metric, or sign that one partnership deal, investors will come banging on our door begging to give us money. However, if you know things aren't going well or you are already having trouble raising your next round, what your startup needs more than anything is a lucid founder that can realistically assess the situation and identify a path forward.

Doing an honest appraisal of the things that were and weren’t working in our business was an important moment for our decision to press forward. Inside the head of a founder, things can seem great one minute and terrible the next, so getting outside perspective can be valuable as a check to your instincts and emotions. Meeting with advisors and existing investors also helped us get some third party perspective about trends in the market and issues we’re facing.

Understanding Why You're Not Fundable

As a startup founder, you're working in a four dimensional problem space: team, product, market, and timing. Hopes and dreams are often enough to raise money at the seed stage, but in my experience, you need more than that for your next round: you need to convince investors that you're the right team building the right product for the right market at the right time.

If you've been fundraising for three months and haven't gotten a check yet, something is probably wrong in one or more of these areas. Understanding what's wrong is critical to figuring out your path forward, and investors that pass can be the best source for understanding what the missing pieces are.

Until recently, I don’t think I quite appreciated the complexity of getting all this right at the same time, especially when you throw in the added complexity of trying to match up with the various investment theses and historical biases of top tier firms. As Ben Horowitz said, “this is not checkers; this is mutherfuckin’ chess.” Getting useful information isn't always easy - most investors seem to be worried about offending founders and prefer high level statements like "not enough traction" over candid feedback about the holes they see in your business.

I want to thank a few folks that were candid and helpful to us in this way - Ashu Garg (Foundation Capital), Thomas Korte (AngelPad) and James Currier were among the the people that gave us really insightful, critical feedback.

The Founding Team Gut Check

With some honest datapoints on the investor perspective of your business, you have the information you and your co-founders need to have a gut check conversation about the state of your business. You'll likely find your product, market, team or timing are in conflict with what investors see as likely to be a homerun, and you need to decide how to respond to that mismatch.

In our case the problem seems to be mainly around market - we're targeting very small businesses, a fragmented market where there is no historical precedent for big winners being built within the timeline that venture investors need for their 10x returns. We're well aware of the historical challenges in serving this market, but we believe that due to a number of new trends, big winners will emerge in this space in the next 3-5 years. Very few investors agree with us.

Our focus on very small business is one of the founding principles of our company, and we believe deeply in the potential that lies in serving this market. Our conviction in serving this market increased when we launched Glyder and started seeing the positive user response to the product. Because of this conviction, we decided that we would rather continue focusing on this market than switch to a different target market, even if that means we're not fundable in the short term.

Having an open and candid conversation with our team about the challenges to our company was a great chance to gauge everyone's commitment to the business. Building our business without more capital will be difficult, but when everyone voiced renewed desire to keep going forward, it helped me as the CEO get excited about figuring out how to do it.

Moving Forward & Changing Tactics

Paul Graham likes to tell founders that "the surest route to success is to be the cockroaches of the corporate world." The analogy works particularly well for orphan startups, because without additional capital, you must be resilient, resourceful and self-sufficient as quickly as possible. Here are some of the changes we’ve made as we continue building our business.

Incentivizing Existing Investors to Stay Involved and Excited 

Before we started trying to raise a new round, we gave our existing investors the opportunity to put more money into the company on fairly favorable terms. The cap on this new note was lower than the cap that we had previously raised money on - although our business was much further along, the funding environment had changed as well, and we wanted to make the decision to put additional capital in easy for our existing investors.

We also went back and amended the documents for all investors who had put money in on the higher cap and gave them the lower cap instead. This is unusual, not legally required, and meant that we were giving up additional dilution.

Why would we voluntarily increase dilution? Our investor group includes friends & family, angels, and the great team at 500 Startups. Our relationships with most of them started long before this company, and we hope they will extend far into the future. These relationships motivate us to keep building the business - they trusted us with their hard earned dollars, and although they all know the risks of betting on our startup, we want to show them results. When it comes to a decision like the one we made with the cap change, the cost in dilution was well worth the goodwill it generated among our investors. It also demonstrated our commitment to acting with integrity even when things aren't going according to plan.

Re-evaluating the Product Roadmap

As we heard the skepticism from potential investors while trying to raise more capital, product priorities were the first thing to change for us. We no longer have the luxury to focus on user growth over monetization, so our entire product roadmap shifted to focus on revenue. Our app, once offered for free (to maximize signups) is now a paid download. We don't have the luxury of supporting users that aren't willing to pay for what we make.

Lowering Burn Rate 

In addition to shifting product priorities to revenue, we also made dramatic reductions in burn rate so we could reach profitability faster. This meant letting several team members go - by far the hardest decision in this entire process - and asking remaining team members to take a pay cut (we softened the blow with this by giving additional equity). The changes in product and burn rate have put us on a path to reach cash flow positive before we run out of capital.

Preparing For Battle

In addition to the tactical changes in our business, the process we’ve gone through in the past three months has mentally and emotionally prepared our team for the road ahead. We know who we are and what we’re working toward, we’re aware of and very comfortable with the contrarian stance we’re taking, and we believe the long term opportunity is well worth the short term sacrifices we are making. As they say on Friday Night Lights, “clear eyes, full hearts, can't lose.”


I think Andrew Chen had it right when he said, "there’s always another move." If you’re the founder of a startup staring headfirst at the Series A Crunch and you can find the will to keep going, your job is to find that next move and make it happen. I hope to see more discussion on how companies are sticking with it and navigating the trough of sorrow. If you're in the midst of this process and need someone to bounce ideas off, drop me a note at @alanwells.
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