12 Pieces of Business Advice From HubSpot Co-Founder Dharmesh Shah

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Jennifer Wang
Jennifer Wang

Published:

This is an AMA that originally appeared on Trends.

Dharmesh Shah
In 2004, two MIT grad students began discussing ways to help companies adapt to the shifting ways that people shop and buy. As consumers tuned out intrusive advertising techniques and increasingly leveraged the internet to discover products and services, it was time for businesses to refocus their approach.

Dharmesh Shah and Brian Halligan resolved to use new technologies to help small businesses level up their marketing, concentrating on customer engagement instead of outbound advertising. They launched their brainchild, HubSpot, two years later, then took it public in 2014.

Today, the company has expanded across 11 global offices and reels in $1B+ in annual revenue. Shah, a three-time entrepreneur and angel investor, remains the SaaS firm's chief technology officer.

Below, Shah shares his business wisdom, from how to pick the best ideas to how to navigate your venture through a downturn, in an exclusive session with Trends members. 

Q: What do you think are the most important first 5-10 hires?

Dharmesh Shah: At HubSpot, we focused on super-smart generalists that got things done. We didn’t care about experience all that much, because we weren’t sure what they would need to do. Everyone just rolled up their sleeves and did what needed to be done (and learn[ed] along the way).

Q: How do you come up with ideas for businesses and validate them?

DS: I have ideas all the time. The most dangerous ideas are not the bad ideas. Those you can discard easily. The dangerous ideas are the ones that are good -— but not great. Yes, it *could* work, and yes, I *could* do it — but that doesn’t mean I should.

It’s not about the failure rate -- I’m actually OK with that. It’s that good ideas eat up a lot of time/calories, leaving little time for the *great* ideas.

Q: We have so many business ideas — how do we objectively decide what to pursue?

DS: Here’s my simple framework for judging ideas:

1) Potential: If it worked, how big could it be?

2) Probability: What are the chances it’ll work?

3) Proximity: How close is this to things I care about, know about, or am passionate about?

The weights will be different based on your situation. For example, early in my career, “probability” was important. I hadn't had any successes yet, so the first one had a lot of value. Today, I solve mostly for #1 and #3. What has great potential that I’m passionate about? (Even if I fail, I’ll have no regrets, because I cared enough about it).

Q: Where should a new startup focus for customer acquisition — what’s new and emerging?

DS: I’m (predictably) going to say: Add value before you try to extract value. Do things that will help your prospective customers. That could be creating content. Could be a free tool. Could be free research. Could be pulling together the community.

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Q: The Fed has indicated that a recession may be coming. How do businesses that serve their clients through content creation pivot so that they can continue to grow, especially since marketing budgets are frequently the first ones cut? Also, is it possible to scale in a recession?

DS: I’m not an economist, but here’s what I have learned about downturns and how to navigate them:

1) Yes, there’s a chance that people reduce their discretionary spend on marketing, including content creation. There’s no easy answer to this: Demand for that service might just go down. If it were me, I’d talk to customers and see if there are other things you can help them with. Bonus points if you can be a partner for them in helping THEM navigate the downturn.

2) If you do feel a need to cut expenses (which is generally wise), don’t do it even[ly] across the company. First cut things that don’t bring direct value to the customer. So, if you’re a product company, DON’T cut R&D investment. Customers care about that. But customers don’t care about your fancy office space or employee perks.

3) Used correctly, a downturn can actually *strengthen* your business. It’ll be easier to hire. Less attrition. More focus. Use the opportunity to get closer to your customers. Never waste a good crisis.

Q: Me and a group of researchers in the cryptography field are looking to start a company and not sure where to start, who to target, do we take on projects? Do we reach out to existing companies and see if they’re looking for external resources?

DS: [Three] pieces of advice:

1) Create a consulting/advisory/services company. That’s the simplest way to get started.

2) Pick a name and set up a simple website that describes what you do best and who you do it for.

3) I’d start with your existing network of people that know you and see if anyone needs help.

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Q: When building and scaling, are you focused on the financial models or the impact and the product, or both at once? Does it pay off to focus on one thing first?

DS: I almost never think about the financial models. I just think about the customer problem and ways to figure out:

1) If problem is real

2) If many people have it

3) They’re willing to pay to help solve it

Q: What advice do you give co-founders who have grown to the point where it’s time to let the people they hired start making decisions and letting go of being involved in every task?

DS: A few pieces of advice to founders:

1) Remember, you're solving for building the best business you can.

2) Building a great business means attracting great people. This is never easy -— but is often even harder in a startup because you’re competing against bigger companies that can pay more, have catered lunches, etc.

3) In order to attract and retain great people, you will need to give them autonomy so they can try things — and yes, sometimes fail. That’s how they learn. And the best people are there to learn. If they’re not learning, they're not staying.

4) You doing everything and being involved in every decision just won’t scale. There are only so many hours in the day, or days in the week, and chances are, you’re already working too much.

5) There is a profound joy in seeing people you recruited and added to the team succeed and grow and help you build the company. Give yourself that joy.

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Q: I am currently self-funding and can only do so much. What will indicate the right time to “step on the gas” and therefore raise the funds to do so?

DS: What investors are looking for is:

1) Evidence of an actual market

2) Evidence that you can get/keep customers

There is no single metric whereby you hit X customers or Y revenue that defines when you can go out and raise angel funding.

Investors generally like to invest money when it’s clear you've found a clear path to building a big business, you’ve made some progress along that path, and money will help you move faster.

What they *don’t* want to fund is your exploration trying to find that path.

Note: Right now, the markets are chaotic, impacting most investors. So [it] will likely be harder than usual to raise funding. If you’re able to just hunker down and build more customer traction, that’s what I would do.

Customer revenue is the best form of funding.

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