After years in the making, former HubSpot CRO, Mark Roberge unveils his new paradigm for product-market fit and the ebook to get you there

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In this episode, Elias Rubel is joined by Mark Roberge of Hubspot who shares his experience at HubSpot, steps he used to achieve product-market fit, lead indicators of retention, and lessons from managing and onboarding people.

Episode OutlineEpisode Outline

[02:39] Mark’s experience in the HubSpot team

[07:16] Steps he used to achieve product-market fit

[11:13] Lead indicator of retention

[12:04] Steps in identifying leader and getting the economics right

[14:34] The process of getting prospects through the funnel

[16:35] Lessons from managing and onboarding people

[19:22] The importance of getting data through customer cohorts

Mark’s Inspirations:

John McMahon

David Skok

Brian Halligan


Connect with Mark

LinkedIn

Twitter

Elias Rubel (00:02):

Hey there, all you cool cats and kittens and welcome back to another episode of best in SAS where each week we take you behind the scenes from conversations with some of Silicon Valley's best and brightest operators and investors. Crack a beer, get comfortable and join us on our quest to find the patterns and playbooks that accelerate the sprint to 10 million of that good stuff, that repeatable stuff, that stuff we call a R R.

Elias Rubel (00:31):

Today, super excited to welcomeMark Roberge to the show advisor to HubSpot. You took them from zero customers if I'm right to over 10,000 as their SVP of sales and ultimately CRO. Mmm. You have a bestselling book, the sales acceleration formula. I also know we're going to get to talk today about, Mmm. An ebook you're putting together,uon topics near and dear to my heart and this podcast. Uand you're a senior lecturer at HBS. So Mark, welcome to the show. Thanks a lot guys. Thanks for having me. Yeah, so,uI mean, man, there's so much we could cover here together, but I'd love to just jump straight into it. Uyou know, your experience at HubSpot and now as an investor,uhas led you to,uamong many, many things work on this new project you have. What's the title of this ebook you're putting out?

Mark Roberge (01:25):

Ah, yeah, so really working, this is something that I've been working on for years. My Saster speech last year we laid the groundwork for it as well. Which was like the step by step guide to revenue growth, more title. It like these days it's reestablishing the science of reestablishing growth when, where, and how is really what, you know, I think it's a good way to apply the theories in the book to today's times. Is it basically like you wrote this book and it was based on all of your experience in the time that's passed, you've kind of observed shifts in the market or shifts in tech. Like what, what led you to want to kind of come back to the topic and update it? Yeah, it's a good car. I mean I've constantly been codified and stuff, especially in my work. It, HBS has kind of like my job to build cases to help with the curriculum.

Mark Roberge (02:16):

They're basically build it on the sales side. So that's been part of the other part is just like, you know, since HubSpot, I've worked with at least a hundred startups probably dozens of them very intimately, you know what I mean? Like for a year plus like one day a week. So, so like the sales acceleration formula was basically okay. A story of how I did the HubSpot team, you know what I mean? Like I just kept getting a bunch of questions about like, how do you hire reps, how do you build the comp plan and how do you do this data driven approach? It's predictable. And I was just like, you know, right. Got gotta write a book on this because I just keep getting the same questions from entrepreneurs. This will be helpful. So that was more of like how I did it at HubSpot.

Mark Roberge (02:58):

Mmm. But not as like focus on the right order in which you do it. Like when, and also like not really told in a way that is highly applicable to lots of different contexts, lots of different companies. So that's where, you know, this one was you know, I just feel like we don't have, we don't have a lot of signs around how we scale. We don't have a lot of signs around when we scale. We say this like product market fit. Everyone defines it differently and very subjectively. Mmm. When, when we raised a series a, we hired 10 reps the next month, I've never seen that work. And everyone does it. Like every time I see that happen, like you have two reps left a year later. So just th that's really what this, this work is addressing is trying to, trying to showcase what I've seen as best in class and how you think about scale.

Elias Rubel (03:51):

It's almost like the the build it and they will come mentality. But for many builders, sales team were like, Oh, we just need some talented, hungry AEs and we'll be, we'll be good to go. Yeah, exactly. And, and also like I think, you know, we're just prematurely and over obsessed with top line revenue growth, the whole triple, triple, double, double, you know that's always talked about in San Francisco. It's like with no regard for like less less regard than is necessary, especially in the early phases around customer value creation, which, which tends to be the pattern around what, what allows someone to skyrocket a unicorn. So the framework really resides in that, in that mindset. Well I'm excited to hear what, what you're proposing should replace that because every time I hear that it just makes me want to cry. I crave in and out burgers for like the double devil. You pick a non you know a name that is safe and far away from burgers.

Mark Roberge (04:50):

Believe me, we want to see that. But it's not like it doesn't summarize the story in the plan. So basically the whole premise is based on this premature obsession with revenue growth, sort of too subjective, like non rigorous definition of product market fit. All right, so let's just start with product market fit for a second, which is the first phase. Like when, when should we scale? We need product money and it's like Google product market fit. There's a good Wikipedia page. Some of the great thought leaders have definitions there, but it ranges from like a great product and a big market, which is like what does that mean? And like there's some more rigorous stuff like survey your customers and a 40% say they can't live without your product. You have it. I mean, I'm just a little concerned about surveys are riddled with false positives.

Mark Roberge (05:38):

You know, it's like they'll tell you what you want to hear, right? Mmm. Nobody wants to break entrepreneur's heart. Of course. I can't live without it. You know, surveys in general, just like huge false positive risks. So it's a little scary to base a huge decision. Like when to scale that. Oh man, you know, then you got a lot of people put it in sales. I think that's totally wrong. I'm coming from a sales person. Like really product market fit is a people buy product that has nothing to do with whether your product works or delivers the value. It's that spicy message market. You know what I mean? Like your vision is great, but so, so for me, like the best definition, if I had to choose one metric, it would be like retention, right? So I think either retention or if you're not as subscription business like repurchase or buy more from you.

Mark Roberge (06:34):

Right. So when that happens, then I think that's the best measure of product market fit. The whole problem is that's such a lagging indicator, right? Yeah. I mean we can't, we gotta go in days, weeks and like we can't wait a year to like acquire a customer and see if they renewal and retain it. And so question for you on that just to dive in real fast. Like is there a way then we could game the retention lag and purposefully set up shorter contract terms where they have to, I prefer, I prefer the terms out of the gate. Yeah. I don't, I don't feel like we're ready to lock people in out of the gate. Like we want that. Yeah, that's, that's good down the road from a cashflow standpoint and like the stress on your CSM team. But like I, I like that. I mean that's one way to do it, but I think it's not the best way is to seek out a leading indicator of customer attention.

Mark Roberge (07:32):

I think this is one of the most important tactical decisions that an entrepreneur needs to make. Once they have a theory on what they're, you know, what they're going after. And I don't see a lot of them do it. I mean it's starting to gain momentum in the Valley. I think they call it the aha moment zap. But I have a very particular pattern that I like to, but I, you know, I invest through it. I have my companies I advise set up to define the leading indicator, the customer's tension as the percentage of the percentage of customers that achieve.

Mark Roberge (08:12):

Let's just unpack that for a sec. If we take it slow, like socks has some documentation, 85% of our customers sent in 2010 messages in 30 days. Beautiful. Beautiful. Like of course, if that happens, yeah, I'm really comfortable with product market fit. 80% of the customers we sign up more than two messages in 30 days. It's so much better than like people buy our product or like, you know what I mean? That that's, that's product market fit and it probably correlates with attention in a year from now we can actually make sure that it does for Dropbox. I think it was, I'd love to hear your example. It sounded like it was more like 85% of yeah. A share one file, one folder through one device within one day. I'm probably like close to them. Well I think it's, yeah, it changes pretty frequently with stage, right?

Elias Rubel (09:09):

Like as you cross each and talking with drew and that kind of stuff. Like back in the old days when they were at that age stage, what would you guess it would have been? Oh man. I mean, we came in super late stage, so I, I truthfully don't have good visibility into what it was, but I, yeah, I mean, I think what you said, something along the lines of what you said where it's like, yeah, you know, someone, someone finds Dropbox with the intention of immediate utility and if they don't drop something meaningful in there and then probably come back and retrieve something within a certain time window, at least in the early days, right before it was considered something that you'd use in, you know, for work. Mmm, exactly. Which is now where like all of our focus now, not all of it, but a good chunk of it is on, you know, how, how does it become really sticky in the workplace as this new collaboration?

Mark Roberge (10:01):

I mean, some of the new products or changes, you know, that's what I define it on that new product line. But that's an example. And they're T for T days, he's going to be much shorter than say, slacks drop. I mean, HubSpot's, I know it was, we, we we discovered ours when we are North of 10 million because we didn't know the value of it. But ours was 80% of our customers using five or more features in our 25 features suite within 60 days. And that was groundbreaking for us. So, so anyway, I would just encourage people to like take a more Dina driven, rigorous approach to product market fit in line with his thinking, figure out what your leading indicator of retention is and then set up your customer cohorts. So you can see like, okay, great. Like last month in April, if we look back to March and required, okay, 20 customers and you know, two months later, like 56% and hit this early indicator.

Mark Roberge (11:02):

And if we go back to like, say the December cohort when they were two months old, it was only 38%. So we're doing a lot of stuff right here, you know, so now, now I feel like we're achieving, we're getting closer to product market, right? Well and I love how that, that in a way unifies sales, marketing and product civic wait, because now you know, instead of marketing having their own golden motion and being like an Island to tee up good, just revenue opportunities in general. Now you have everyone kind of with the same, same motion in mind and supporting the same education, buyer, education, all that. So exactly, it allows, so that's the magic is not the number. The magic is the alignment because I'll take you through the next two phases here, but well first you have to recognize which Fraser and then you have to align your whole go to market it because even how you copy your rep, who your rep is, the customers you're going after, the pricing of your product.

Mark Roberge (12:01):

The best companies I see navigate through this adjusted based on that stage. Okay, so let's just break that down for a sec. Okay. Yeah. The product market fit stage, it's like the rep first off isn't like the same rep is when you're like, you know, a million in revenue. That's like you got a playbook. This is a commission. You know, this person has a commission plan, they want to make a lot of money. Like this rep is like half, half. Sure. And I mean they're like, they don't necessarily, they may not even be able to hit quota. Like I don't care. They're just like the innovator. They can, they can listen to the customer and to do great discovery like a PM would talk to engineers to communicate the trends way different. And and like the, the, the marketing team at this point, like first off, I think at this stage you could be heavily reliant on like board and management referrals.

Mark Roberge (12:53):

You know, like non-scalable demand gen, we just need like a couple dozen customers here to play ball. We don't need to build like a cold calling function. So, so that, you know, [inaudible] pricing, let's not talk about this right now. Pricing comp plan, price, price for commitment. You know what I mean? It's like, it's like, listen, you know, we're, we're pretty early. We have five customers here. Mmm. We're probably going to charge like 40,000 a year for this. But like we're just looking for 20 customers to give a 90% discount to for the first year. Unless your biggest risk is price, which it rarely is. Who cares? The only thing, just get them in the door. Don't make it free cause they need to be committed to sign this thing off. Okay. Just, you know, we really need to be talking about getting the right customer. So everyone's aligned. Marketing is bringing in the customer is not just that we'll buy, but they'll succeed with this indicator. Sales is selling people not just for money, but for this indicator product is studying why the percentage isn't higher and revolving the roadmap around it and the customer success reps are measured by this not longterm chart, right? So it's just this really nice alignment of the team.

Elias Rubel (14:00):

I love that. Okay, so now we go to the next phase. The thing about this is like during this stage of product market fit, like we got a fall. Paul Graham's advice, like know like do unscalable things, right? So just like David cancer drift when he was in this stage, he was like, he was literally flying to customers that we're paying them $50 a month to personally set them up on drinks. Like that's how you throw everything in the kitchen sink at this to get to that number. Cause so few companies can do it. But once you get there, now we have to do it. Scalably so this is what I call go to market. Yeah. The next stage after product. So we have to keep, keep in product market fit. We gained the confidence that when we acquire customers at a high degree, what we'll retain now we have to do that scale.

Mark Roberge (14:50):

Okay. And that's how we usually measure that as unit economics. Now the same and economics being my payback period, LTV to CAC magic number, like pick your poison or do all three. Right? But that's the same with you and economics. Same thing here. This is also a lagging indicator. Like we, we, you know, all the stuff we're doing right now, you know, we're not going to get visibility to the LTV to CAC until you know, quarters later. And so we have to extract that, that outcome too near term metrics and that's very easy to do. It's just algebra. I mean lifetime value is just how much your customer is paying your times, the gross margin divided by the churn and the CAC is how many customers are you signing up to your sales marketing spend divided by those customers. We can extract all that back into metrics that we're already measuring, which is total appointments set by our SPRs, you know, cost per sales qualified lead, the conversion of those SQLs to opportunities and customers.

Mark Roberge (15:49):

We just have to make sure that we, we what we're tracking yields and LTV to CAC above three and now we can know daily and weekly. Yeah. If we're playing out our business model as we have designed it, right. So this is where like comp plan is huge. We got to get it right. Pricing model is huge. Getting one scalable demand gen channel is huge. It doesn't matter in product market fit, but this is where these things come into play. And now at this point I probably have a three or four person sales team and again, it's not the, the coin operated like crush quote around. It's like the process builder because one of the most important things I need at this point, there's a sales process. Right. And it makes sense. Obviously it ranges wildly, but are you mapping this back to any kind of ballpark MRR?

Mark Roberge (16:43):

Usually it's like a couple hundred thousand ARR in the product market fit and usually you're approaching like a million and the go to market fit. But you know, you know, the majority of startups don't follow this process. So it's like, I think it can happen a lot earlier. Mmm. Laser focused on doing the things that don't scale and getting those first Marquis customers are going to leverage the product and give you the feedback and you're discounting heavily than you may have falsely low. There are our number. Totally. Yes. Yeah. You just need it. Also, it's like, are you selling jets or pencils? Right. It's like it's getting better a lot. Right? So, so, but yeah, that's roughly what I see. And then, so now you've got product market fit and we can continue to measure it through these customer cohorts. So every month we see our, for our new cohorts, how are they progressing on our term, on our leading indicator we got go to market fit, which is our dashboards that we know that if these metrics are hit, it'll produce good.

Mark Roberge (17:47):

You in economics. Now we go into the final stage. Okay. So how fast do you scale? How fast? That's a great, that's a huge question. Sure. How fast should we scale? Like if you get this wrong, if you go too fast, you kill your business. If you go too slow and you leave the window open for competitors and yet very little science to answer this. So, so the, what I see just kills companies. I mean, pretty much every startup I see, like they raised, they have product market fit as perceived by some crazy number like sales. And then they raise a series a and they hired 10 reps in the next month.

Mark Roberge (18:27):

You could see that, right? How do you hire? How do you go from a higher, you have one, two sellers in your team. How do you hire 10 reps one month? Oh, but Mark, they're ready. They're so ready. So the dream to the investor, they bought the valuation. We have to do it. Dude, you are so screwed. I've seen, I've seen you tried 50 times. You have a one or two reps left a year later and you burned millions of dollars. It's crazy. Like how many interviews do you have to do to hire 10 reps in a month? Like how do you onboard those people without a process? Who's going to manage them? How do you feed them with demand? There's so much there. And that's the stuff when you figure out how to go to market. And so you've figured out half of it.

Mark Roberge (19:10):

And so a better approach to scale is a pace, not a lump sum hire at the beginning of the year. So that's really what we do is now we've got these two instrumented measures. So let's hire one rep a month in the next five months. And let's watch our lean and naked or retention economics. Yeah. We hired one rep a month for five months a month, and after four months was going to four months and after four months is going to eat a month, that's frigging scale. And if they break, we'll no way. Or a little note, two quarters ahead of the P and, L, which is what most companies use to evaluate whether they're doing well. You can hear me. So do you, so do you imagine this being like, Oh, the new formula, like with the two to the three, I mean this is what I did.

Mark Roberge (19:54):

Well yeah. I don't know what right piece. Thank you. You got author some of these things to the business, right? So yes, it's very common for a business selling a product that's tens of thousands of dollars in the mid market that it's like one for four months, two for the next four months for, for the next. I'd much rather do, if we could go there in our plans as opposed to hire 10 reps in January and see what happens. [inaudible] The failure rate of series B startups will go from 70% to 50. I mean, it's like Jesus. Yeah. Don't you think so?

Elias Rubel (20:23):

Yeah, no, totally. I mean, I think if I look at when we're brought in as like senior marketers come help almost, I like 75% of the time [inaudible] by a frantic board or a frantic VP of sales who's like, shit, we'd like, we just got all these reps hired and they're sitting like the, you know, there's no support for the demand.

Mark Roberge (20:46):

There's no pipeline outside of just cold know outbound. Yeah, for sure. Yeah. So anyway, like that, and then you just watch the dashboard. I call it the speedometer. No, it's just two pieces. It's the lead indicator retention lead indicator of economics that's spit on her. And so just, we put those plans together and yeah, I just think it's a lot healthier. And that's what's, that's what I've seen is when we did a HubSpot is what I do in a lot of the businesses, the first six investments, we made, five of them marked up in seven months. So when you're, I mean, as with your investor hat on, how do you, I'd imagine you, you have crazy deal flow just from your background and you're probably seeing a lot of companies that more traditional kind of investors who have, who are, who are okay with the way that we kind of arbitrarily placed product markets.

Elias Rubel (21:44):

How do you approach those deals and even maybe just the conversations with those investors behind the scenes where you're looking at it and saying, Hey, like this is unnecessary risk because of this approach.

Mark Roberge (21:58):

Yeah. We usually just don't get involved if their mentality is not there. I mean, first off, like we, we look first and foremost at customer attention and leading indicators before we look at revenue, which is way different than I think most semesters. Yeah. I think most people, it's like for most investors have you tripled your revenue? They're probably, Mmm. And for us it's like if you're, if your logo retention is above 90% we're probably, yeah, we'll probably out. And I don't care if you're gone 50%, a hundred percent or 200% because it's such an amazing foundation to accelerate. So like, yeah, we first out obviously check that the CEO's mindset and we educate them before the investment to see if they're into it.

Mark Roberge (22:38):

And then we talked to the board too. And then like some of the later stage folks, I mean, I had a board meeting this week that felon, I mean it's, it's a bit of a battle sometimes. But I don't know. I mean they fortunately like you had success at HubSpot, so they tend to like give me some. Yeah. But you know, it's, it's sometimes a little battle, but it's like you're not always solving for the next quarter and it's not that hard of a conversation where you're like, listen, I know you want me to hire 10 reps next month, but like, let's just, let's just model out what it looks like to do one for four months to four months, four for four months. And let's look at it as a two year horizon. Like you end up in a relatively similar ARR two years later.

Mark Roberge (23:27):

And especially when you factor in that you're likely turnover rate, lump sum 10 reps is at least 50%. Yeah. And if, if this model is going to yield more like 20% turnover, then the ladder plan crushes it, you know, so. So usually you can like, you can, you can like appease that the finance jocks with like an Excel model that shows them it sort of back to the strategy.

Elias Rubel (23:53):

Totally. So I know we could, we could deep dive and nerd out on this for probably an entire afternoon, but for folks who want to kind of deep dive, cause you just, you're just debuting this now ish, right? Like where would they find me?

Mark Roberge (24:05):

I'm not like, I'm not like a big like main launch guy. Like I'm not like write a book in a room for a year and then launch it. I'm more like, I've been thinking about this for years and talking about it. I just wrote a 40 page book on it.

Mark Roberge (24:20):

I finally had time to, I guess, you know, the first version of it's up on stage to capital's blog. We're, we're actually redoing the site right now, but like if you just click on the first blog post, we put there as the call to action at the end is the call to action at the end of most of the blog posts, the science of scaling, so you can dig in there. And you know, I'll probably, I'll probably write an article, like a headline article on it like this weekend and start launching it like next week. Perfect. That's super exciting. I love the framework. It's so clear. You know, it's like it just not even, not even like a radical, it's a radical shift without it being, you know, requiring a radical change in behavior. Right. It's just really just like of everyone's close, you know what I mean?

Mark Roberge (25:06):

Everyone's kinda, they're just not fully aligned and not quite looking at metrics as rigorous as we can. So it's not yet, it's not like hair grease had a bigger journey to do with like lean startup. I mean people were doing like waterfall, like that was a big change. You know, this is just kind of like just frame it a little tighter. Yeah, totally.

Elias Rubel (25:27):

So as we wind this down, I always love to ask who, who in your professional career, obviously you've had an amazing career so far and it's only just continuing to get better. Who are the folks out there who have inspired you?

Mark Roberge (25:42):

You know, John McMahon was probably like my most important mentor at HubSpot. He's, he's really well known amongst the venture community, probably not as much in the entrepreneur community. He just needs to write a little bit more. But he took PTC from a hundred million to a billion in revenue, freaking crazy. So he was, I would get together with him once a month and four hours and he would just help me see as we were scaling. Yes, she is. I wasn't seeing of course like how again and David Skok Halligan CEO of HubSpot and David Scott matrix, they really helped me connect like the strength of my mechanical engineering roots and analytical background and the future of sales leadership. So I thank them for that. It really pushed me to like, you know, beyond what was typically done in sales to innovate a little bit.

Mark Roberge (26:26):

And then a guy at LinkedIn for long time, he was just always a guy that I could like, Mmm. Call up for some of the softer side. So good and culture. And you're like, he was like my therapist. You know, there's a long list there, you know, those are some of the big, the big players that, that helped me.

Elias Rubel (26:49):

Amazing. Well, Mark, thank you so much. This was a great conversation. I know our audience is gonna love it. So I'm looking forward to digging into the 44 pages and hopefully seeing ripple throughout the tech community.