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The Power of Partnerships: Unlocking HubSpot's Martech Dominance

In an era of slowed growth for sales & marketing SaaS, HubSpot, with its 1.7Bn ARR and enviable 39% YoY growth, stands out like a beacon.

You're probably thinking, "What's their secret?" Well, let's dive in and find out.

1️⃣ HubSpot's Winning Bet: Partnerships

Partnerships are the engine driving HubSpot's growth, contributing a staggering 45% of its revenue in 2022 and referring 33% of their customers. Not only are these partners driving almost half of the revenue, but they're also bringing in customers who pay more than the average.

2️⃣ Scaling from an App to a Platform

HubSpot’s journey, from a single app in 2015 to a full-fledged platform today, has been nothing short of remarkable. This transformation, which saw HubSpot evolve into a multi-product platform featuring 1300 integrated apps, has significantly increased cross-sell revenue and doubled their customer upgrade rate.

2015 - single app

2017 - suite of products

Today - platform with 5 core products and a marketplace with 1300 apps.

More on this later.

The Building Blocks of HubSpot's Foundations

Over the past 16 years, HubSpot has created a very strong brand in martech, becoming recognized as a leader in marketing and sales. They championed innovative concepts like the content marketing flywheel and inbound marketing, with their INBOUND event drawing in a staggering 45K attendees in 2022.

Unlocking the SMB Market: The Underappreciated Strength

But one of HubSpot's strengths that may be underappreciated is their ability to unlock the SMB market, which is notoriously difficult to crack.

Solution Partners are the unsung heroes here who helped HubSpot reach SMBs efficiently at scale. These are service providers (like marketing agencies) who support SMBs with marketing strategy, then implement their go-to-market plan and help to set the tech stack. Many of these agencies relied on the income from providing marketing services using HubSpot, developing websites on HubSpot, etc.

Agencies became ardent evangelists of the HubSpot brand and offer the HubSpot CRM platform to their clients. They not only help HubSpot reach new SMBs cost efficiently, but they also provide these customers more diverse and higher-touch services with higher margins. Win-win.

HubSpot launched their partner program early in their journey (~2010), and then doubled down on it when they realized that they can 3X (triple) LTV with it in just a year.

Doubling down on channel partners, HubSpot 3X (tripled) LTV in the early days

In the early days, HubSpot discovered that selling through channel partners led to an LTV:CAC ratio of 📍 5.0 - substantially higher than the LTV:CAC ratio of 1.5 while selling directly.

By restructuring their sales team, they unlocked impressive growth. They started with 12 reps selling directly, 4 reps via Channel Partners After 12 months they had: 2 reps selling direct, 📍 25 reps through the channel

Brad Coffey, frm. Chief Strategy Officer at HubSpot:

“When we started this analysis, we had 12 reps selling directly into the VSB (very small business) market and 4 reps selling through Value Added Resellers (VARs). When we looked at the math we realized we had an LTV:CAC ratio of 1.5 selling direct, and an LTV:CAC ratio of 5 selling through the channel. The solution was obvious. Twelve months later we had flipped our approach – keeping just 2 reps selling direct and 25 reps selling through the channel. This dramatically improved our overall economics in the segment and allowed us to continue growing.”

HubSpot’s Platform Journey

After securing their leadership position in martech, HubSpot started expanding its product portfolio and evolved into a comprehensive platform. Not content with just being a single-app solution, they decided to leverage their existing foundation to offer more to their customers. Here is how they did this:

1️⃣ Expanding with new modules

HubSpot took advantage of their wealth of existing data and product foundations to build additional modules such as Sales and Customer Success. As a result, they went from being a single-function solution to a multi-product company.

2️⃣ Embracing third-party integrations

They designed a developer-friendly API to make it easy for customers to connect all their other software and pipe data into the platform. This strategy not only enhances the customer experience but also reinforces the stickiness of the HubSpot platform. After all, once customers have gone through the trouble of integrating their software with your system, it's hard for them to switch.

3️⃣ Nurturing an ecosystem of third-party app developers.

The final step of this transformation was to build an ecosystem of third-party app developers. These developers could build tools and products that exist on top of the HubSpot platform, further expanding its capabilities and attractiveness.

When they went public in 2014, HubSpot was primarily a one-app company, focusing on Marketing for companies with a size of 20-200 FTE.

But fast forward to today in 2023, HubSpot now boasts of five core products:

  • Marketing

  • Sales

  • Services

  • CMS

  • Operations

Interestingly, HubSpot also expanded the size of companies they serve, now covering almost the full range - from very small businesses of 2 to large enterprises of 2000 FTE.

This platform transformation resulted in significant cross-sell revenue and doubled the rate at which their customers upgrade seats, illustrated in the graph below:

Creating Powerful Network Effects

As the platform grows, so do the network effects for the company and their partners. Businesses looking to use software outside of HubSpot's CRM Platform can now leverage their ecosystem of third-party integrations.

HubSpot made it easy for users to find and install new or existing software solutions that complement HubSpot CRM Platform. Currently, over 1,300 integrations and applications are available for its users across a wide range of categories - from social media to email, sales, video, content tools, and more.

Tens of thousands of customers now integrate third-party apps with HubSpot CRM. Customers can also build custom apps and integrations on top of their platform, either independently or through third-party developers in HubSpot's ecosystem.

All of this has resulted in a powerful ecosystem flywheel, driving more businesses to adopt the HubSpot CRM Platform.

“As our engaged audience grows, more Solutions Partners collaborate with us, more third-party developers integrate their applications with our CRM Platform, and more professionals complete our certification programs, all of which help to drive more businesses to adopt our CRM Platform.”

The Future of HubSpot: The App Store of Business Software?

Scott Brinker, VP of HubSpot Platform ecosystem, envisioned HubSpot transforming into a business software ecosystem similar to the seamless integration experience provided by the Apple App Store.

We discussed 3 platform rules of HubSpot and its platform future in a conversation last year. Check it here.

"If you just go to the Apple Store or the Play Store, and you're like, "Oh, I think I'd like this app" and you pick it and it just comes on your phone, and it just works…. it's not going to cause problems with the other apps you have on that phone… I think that is the aspiration we would like to get to in business software."

HubSpot is continually growing and refining its partnerships and platform strategy. It's a fascinating journey that offers valuable insights for other partnership teams.

It's also an exciting future to look forward to, one where B2B SaaS apps could be as simple and seamless to integrate as downloading an app on your phone.

📊 Learn more from our Insights

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