Category: Product

SMB SaaS at Scale: Founder Learnings from HubSpot

SMB SaaS is hard. Getting the positioning right, increasing ACVs, controlling churn – it all becomes harder when your customer is a small business that is resource constrained & perpetually dealing with its own execution challenges.

Despite this, given SMBs are the most frequent early adopters of new products, the reality is that most startups tend to start mid-market. Though, in my experience, a majority get stuck in unfavorable economics of this customer segment & are unable to achieve breakout PMF.

So, what is the secret sauce founders can learn to effectively scale SMB SaaS? Hubspot is a great case study. I recently came across this SaaStr podcast with the HubSpot CEO Yamini Rangan, where she shared some of the company’s SMB strategy & learnings. Here are the key highlights:

  1. Go after a large TAM: given the fragmented nature of SMB verticals, it’s really important to have a large TAM. HubSpot made the smart decision to transition from marketing automation to CRMs, basically going after Salesforces’s lunch.

Mid-market verticals tend to have open opportunities for startups as SMB customers are usually sandwiched between either buying a host of solutions & stitching them together or buying an expensive, enterprise-grade solution. In this context, I had recently posted a Twitter thread about how Zoho followed a similar multi-use case bundling strategy to position itself as an “operating system for SMBs”. This strategy works well as SMBs have a tendency to simplify their tech stack & procurement processes by buying multiple solutions from the same vendor.

2. Customers gravitate towards competitively-priced, mission-critical products: in times of economic uncertainty like today, SMBs tend to become really sensitive about budgets. Customers start asking tough questions internally around (1) where are they spending?, (2) do they have a clear path to getting enough value from the spend? and (3) can they do more with less?

Acting per this analysis, SMB customers are then likely to consolidate their tech stack to a handful of mission-critical platforms that are competitively priced & deliver the most value. This is the bar startup products need to cross while selling in this tough macro environment.

3. PLG-based distribution is king: to achieve break-out growth in SMB SaaS products, startups need to have the widest possible distribution. The front door needs to be big enough so that most people can come in.

For the first 8-9 years, HubSpot was mainly driven by a sales motion comprising Direct Sales & Partner Sales. Around 2016-17, in order to exponentially grow distribution, the founders made a counter-intuitive bet to go from sales motion to product motion. Today, HubSpot has a massive user base of ~1Mn WAUs to monetize off of.

4. A strong “free” product is key to PLG: One of HubSpot’s truly differentiated product strategies has been to offer a strong, full-featured free product. Rather than making a “free” product free just for the sake of it, they have focused on making it really valuable.

Some important benefits of having a strong “free” plan:

  • Drives high top-of-funnel growth & user engagement, improving the probability of monetization once the value is proven out.
  • Puts product org. under pressure to deliver enough features at the top, in order to maintain the competitiveness of paid versions.
  • Forces the product team to maintain a “consumerized” ease of use, which benefits all customers, free or paid.

Irrespective of whether your GTM is sales-led or PLG-led, a founder should never give up on the “free” plan as it’s key to keeping your product competitive.

5. North Star Metric should be Net Revenue Retention: NRR is the best health indicator of an SMB SaaS business given it represents whether or not: (1) you are retaining the customer, (2) you are continuing to drive enough value so they buy more from you and (3) you are protecting yourself from churn.

6. Don’t underestimate the value of a Partner ecosystem: once you reach a certain scale, PLG & Direct sales aren’t enough. A thriving partner ecosystem can be a strong GTM moat. Interestingly, a majority of HubSpot solution partners *only* sell & deploy HubSpot as a CRM, thus creating valuable network effects for the company.

7. In geo-expansion, less is better: PLG-driven companies will always have customers in many countries eg. Hubspot has 130+. But in order to deeply localize for elements like language, currency, customer support etc., it’s important to focus only on a few markets. As an example, HubSpot has chosen 7-8 markets to deeply localize their offerings in, based on factors like TAM, existing installed base, net ARR growth being seen & the company’s ability to serve the market locally.

While SMB SaaS can be a tricky business model, it compounds beautifully once the founders figure out its key levers, as HubSpot has shown.

PS: if you enjoyed this post, you might also find this post on Top 10 enterprise SaaS learnings from a unicorn founder helpful.

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Building…one at a time

I recently tweeted a really interesting insight I heard from Mike Maples, Jr of Floodgate at a recent Draper University closed-door event:

This is so true, and a common mistake that founders & product leaders make while building new products. Looking back on my own startup, while I rigorously tried to execute Paul Graham’s “Do things that don’t scale” philosophy, I still created unreasonable expectations in my own head around user growth for each MVP iteration. This was probably due to the baggage I was carrying from my previous experience of working at large companies like Alibaba, where numbers were talked about in Millions & sometimes, Billions.

When the absolute user numbers weren’t met, my morale as a founder would get hit with each iteration. In hindsight, hitting numbers shouldn’t have been the goal at all. The ideal 0-to-1 mindset is like that of a scientist, with curiosity being the core driving emotion, backed by an iterative product development approach. The target outcome of this approach should be to gather insights that help refine the hypothesis.

Similar to how scientists drive their research process one experiment at a time, I have realized that building any new product or service from grounds-up requires moving one “unit” at a time. It’s up to you to decide what that unit should be – acquisition, activation, frequency of use, revenue or even just getting qualitative feedback!

In a scientific process, more than just the number of experiments run, what’s important is taking the learning from each experiment & applying it to the next one so it becomes better than the first.

Similarly, a good approach to building anything new is to delight one person at a time. This automatically focuses the building process & anchors it on an actual customer, thus making it easier to ship something that solves a monetizable problem for someone in the real world. Trust me, this is a non-trivial hurdle that many startup teams are unable to cross.

The 0-to-1 stage can be highly fuzzy but breaking it down into one unit at a time helps give more clarity to the team around the exact short-term goals.

The most profitable way for a product to grow is via word-of-mouth. The above approach naturally optimizes for it. And once the testimonials & organic growth start kicking in, traction compounds with minimal incremental effort.

Of course, the key to executing this building approach well is patience. Again, think of a scientist. A larger research budget or more headcount can’t necessarily speed up a breakthrough. Similarly, building one unit at a time requires a small team committed to iterating over a long enough timeline for customer compounding to kick in. A lean & capital-efficient operating model is a requirement of this approach as a long runway significantly improves the odds of success.

Learning from my mistakes as a founder, as I have now started working towards regularly putting useful startup & investing content out there, I am consciously following the approach of publishing & learning one unit of content at a time – blog post, Twitter thread, LinkedIn post etc.

Same for my angel investing, wherein I am trying to help each founder, co-investor & startup employee I meet, one week at a time, with whatever resources I have – network, expertise, capital etc.

This approach is helping me to first put the core enablers of my venture investing craft in place that then, hopefully, self-compound. Therefore, I feel much better this time about hitting my long-term goals.

PS: on a similar note, I really like this post by a16z on how creators only need 100 true fans to build a business. Whether this number is 100 or 1,000 is less important. The real insight is that even a small number of dedicated fans are needle-moving.

Also, in case you are interested in other similar startup insights shared by Mike Maples at the DraperU event I referred to earlier, check out my Twitter thread on it.

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Workomo 2.0 - manage your network in one place

To everyone who has been following Workomo’s (and my) journey over the last 2 years, apologies for the hiatus — our entire team took a break from writing to channel our energies towards building Workomo 2.0.

Since the beginning, our vision behind Workomo has been to build an intelligent hub where a professional’s entire network lives, including valuable context around these people. So what is Workomo 2.0 and how did it come about, you might ask? Read on to find out…

1. Workomo 1.0 journey — tiny steps with mighty pivots

The driving force behind our vision, as I had articulated in my original blogpost in June 2019, was my own frustration with the limitations of LinkedIn esp. its lack of relevance, noisy feeds, extremely weak search, and no workflow capabilities.

First landing page

Starting from launching the first landing page and opening the waitlist in mid-2019, over the next 1 year, we actively iterated on what’s the most burning problem we should be solving first, and what’s the easiest solution we can build for it. After about 15 MVP iterations, we got the most traction from users for the simple use case of displaying a distilled professional profile of a person before you meet them and doing so with minimal typing or manual work from users.

While the use-case sounds simple, achieving this simplicity required creating a highly automated people-intelligence API even for the first cut. We created the v1 of this platform & built a Chrome extension that delivered this people-info directly in workflows like calendar, Meet & Zoom in a “zero-typing” experience. We launched Workomo 1.0 on Product Hunt in Aug’20, trended #1 for several hours, ended in the top 10 products of the day, and got featured in their newsletter.

Product Hunt launch

2. Learnings from active users 

Between Oct-Dec’20, the Workomo Chrome extension got tons of user love. People used it for everything from Lunchclub meetings to interviewing over video. We also started receiving active feedback on what users want Workomo to be, in order for them to use it more deeply & eventually pay for it. The most important of these being:

#1 A more holistic network management experience that has utility even outside of ‘meeting a new person’, and where users can do many contact-management actions (eg. add a contact, search etc.)

#2 Ability to bring your own insights into Workomo (a.k.a note-taking)

#3 Significantly better profile-matching accuracy

#4 Even deeper integrations into a user’s workflows, to make the UX more intuitive

#5 Multi-calendar, multi-address book & multi-platform support

Sounds familiar? Our users had themselves defined the product manifestation of Workomo’s original vision — creating a smart & simple professional relationships management hub.

3. Alpha launch of Workomo 2.0

Perhaps for the first time, we knew exactly what we needed to build to effectively solve a burning pain point for our users. And this time, our goal wasn’t just to get users; we wanted paying customers. It was time to turn on monetization.

During Jan-Mar’21, we built our entire web app from the ground up to include all the above capabilities. In parallel, we created a significantly upgraded v2 of our people-intelligence API with improved identity-mapping accuracy, shorter data-display times for real-time workflows, and higher profile processing capacity. Powered by a herculean effort from Team Workomo, we soft-launched Workomo 2.0 alpha in Apr’21 to existing users.

Workomo 2.0 is your “one-stop-shop” smart Rolodex that deeply integrates into calendars & address books, aggregating contacts as well as important info about them in one place. 

What’s even cooler? Your Workomo Rolodex actually interacts with your life, showing you profiles of people you are about to meet, enabling you to take people or meeting notes when and where you prefer, sending you smart pre and post-meeting reminders, and making everything about your network contextually searchable. Basically, everything you wished LinkedIn could do for you! 

Workomo is now an end-to-end product suite :

  • Supports multi-calendar and multi-address book integrations (both Gsuite and Office 365)
  • Can be accessed by a progressive web app on both desktop and mobile browsers as well as a Chrome extension
  • Displays people-info across calendars, browser Meet & Zoom PLUS…
  • A super-cool, on-demand “assistant” experience coming soon on your favorite messaging app

Here’s a 60 sec. product intro of Workomo.

Workomo web app

4. Paying customers across multiple countries

Even before starting the company, I had always imagined the following 3 elements as being integral to my vision:

#1 Effective aggregation — auto-capture any important person I interact with on any platform

#2 Minimize manual work— drastically reduce the inertia of managing my network

#3 “Fabric” user experience— be present everywhere in my life but show up only when I need you the most

As a founder, it gives me immense satisfaction to see that Workomo 2.0, as it stands today, is perhaps the closest manifestation of my original vision and the way I had imagined the product to be.

Given the depth of the product now, we gradually turned on monetization over the last quarter with our “Premium” ($8.99 per month) and “Pro” ($14.99 per month) plans. Super-stoked to share that we now have paying customers across multiple countries including the US, UK, and India. Overall, Workomo has touched users in more than 20 countries since our first launch.

5. What’s next?

We are about to soft-launch a game-changing integration into a top mobile messaging platform— a one-of-its-kind experience wherein a customer can interact with its Workomo Rolodex entirely in an on-demand “assistant” experience to add contacts, fetch contact profiles (what we call ‘cue cards’), add people/ meeting notes & get smart reminders.

Stay tuned for more updates on it!

We keep marching on…

Workomo 2.0 is a result of the courage, conviction & hard work of Team Workomo — Swaraj, Nidhi, Pankaj, Harsh, Sujith, Rhythm, and Stas. Super-proud of this team for overcoming all kinds of challenges thrown at it, from the pandemic and delivering in a fully-remote & distributed team, to solving extremely hard data problems & cracking an intuitive design language.

This journey from 0 ➡1.0 ➡2.0 has been intense, gut-wrenching yet full of learning & transformational at a personal level for each of us.

We would love to have you try out Workomo 2.0 (sign-up here) and get your feedback. Till next time ✌🏽

PS: check out a 60 sec. intro of the product.

Note: This post first appeared on the Workomo blog here.