Welcome to The Partnered Podcast Episode 063 with Pete Caputa, CEO at Databox (previously VP of Sales at Hubspot). Enjoy!
Join host Adam Michalski as he interviews Pete Caputa, CEO at Databox (previously VP of Sales at Hubspot).
Pete and Adam discuss the early days of building out HubSpot's Partner Program and all the learnings that came with it. We then get into Databox and how Pete thinks about partnerships as CEO of the growing business analytics company.
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Welcome to The Partnered Podcast, the podcast where we interview enterprise partnership leaders from the world's best SaaS companies. The goal is to give you an inside view on how leading organizations drive the most partner sourced and influenced revenue out of channel sales, partnerships, and alliances.
The Partnered Podcast is brought to you by Partnership Leaders, the community where the best in partnerships, channel, and ecosystems come together to share knowledge, network, and grow their programs. Apply to join the conversation at PartnershipLeaders.com.
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Adam Michalski: Welcome back to The Partnered Podcast, super pumped to have Pete Caputa on today, CEO at Databox. And Pete, just to kick things off, can you tell us a little bit about your professional background, your time at HubSpot, and the road to Databox?
Pete Caputo: [00:01:13] Sure. Yeah. Yeah. So having an engineer by trade or by training, I should say.
Did that for a while, did mechanical engineering for a while. Then the internet got real big. I don't know if you're around for the.com boom, but I cut caught in the.com boom, started a software company right towards the end of it actually. Did that for a few years, kind of made a living, but never really built a big company.
It was a SAS product to software as a service product before they used the word SAS the term SAS. And then ended up hiring a sales trainer to learn sales. And his son ended up being the fifth hire and the first VP of sales at HubSpot. So I ended up getting introduced to them. Well, before I joined about a year before I joined right after that.
Kind of an idea out of the MIT, they all met getting their MBA at MIT. So they were kind of an idea of building this own one software. I gave them some feedback cause I had a lot of relevant experience selling to SMB small businesses at the time and that's who their target market was. And then about a year later they raised their series a, I got a call from Marco bear's shoes that VP of sales at HubSpot.
And he said, Hey, would you consider joining us? And I said, absolutely not. You know, doing my own thing, blah, blah, blah. And then he raised a pretty good salesman. And I went in and I listened to the pitch from Brian Halligan and Dharmesh. There was like all three of them in a room trying to convince me to join the sales team.
And so I ended up shutting down our startup, joining HubSpot as employee 15. In sales. And along the way I realized that marketing agencies would be great resellers, which I think is why we're on this call today. So I started the HubSpot partner program in like 2009, 2010. And then grew that to.
50% of HubSpot's revenue. And so for those that don't know HubSpot, HubSpot's now a billion dollar revenue company, so that generated a billion dollars in annual revenue. And they're public and growing 40% year over year, roughly as a public company. So worked out fairly well for me. Oh, so I got big, obviously I'm a startup guy.
And so it was going to start something on my own and ended up meeting with Databox his investor mean investor. And he said, you gotta meet the founder of the company, looking for somebody to come in and run the, help them on the company. And so I said, I'm not really looking to join something. I want to start something, but then I took the meeting we left.
I ended up clicking really well with the founder. And so I joined a CEO four years ago and we've been building the business since we've been cashflow positive for the last few years. Working with marketing agencies as partners is a, has been a key growth driver for us to be able to grow about 40% year over year over the last two years and be cashflow positive.
So that's my professional career story. Very
Adam Michalski: [00:03:48] cool. Very cool. And we'll dive into a lot of the HubSpot stuff soon enough, but for, for those who aren't familiar, can you share a little bit about what Databox is and what exactly it is that you guys are the problems that you guys
Pete Caputo: [00:03:58] are solving? Yeah, I think the best way to think of us as we automate performance monitoring, reporting and management for any really any kind of business we have.
Customers that use us, but heavily focused in, on helping marketing department, sales departments, customer facing departments really manage their team and the performance of their teams. Pray practically we hook in with all the tools that a company might use, say everything from like Google analytics and Google ads and Facebook ads to social media sites, to marketing automation, like a HubSpot or active campaigns, SEO tools to the CRM to a customer support tool, a ticketing tool, a chat tool, et cetera.
So we hook into all these tools. The performance data out so that it can then be visualized all in one place. You can set goals against it, receive alerts, automate the reporting process so that you don't have to cut and paste data and, and and have all these different formats for your reports.
Adam Michalski: [00:04:54] I love it.
Pete Caputo: [00:04:55] for all your data, right? Yeah. There we go. By just saying it's a data box. One
Adam Michalski: [00:05:00] of the best names I've actually heard. Yeah. That's very good.
Pete Caputo: [00:05:04] No credit. I know there's a box for it, but it was early enough before, before domains were crazy.
Adam Michalski: [00:05:11] I love it. All right. Well, cool. So let's dive into a couple of questions that I had here for you.
I think obviously, like, I mean, having been around HubSpot at such an early stage employee, number 15 as you met. And watching, you know, that grow into the company that it is today. I would imagine there's a couple like tidbits of information that you took along the way, in terms of just learnings that you kind of experienced across that journey.
So it would be curious to know, you know, what are like those top couple learnings that you kind of took. Being at HubSpot so early and really seeing the rise of the partner program there.
Pete Caputo: [00:05:39] Well, at the time we didn't have it all figured out, but it was a lot of smart people on the team. And so there's a lot of things looking back that we didn't know before, right.
Or not, but turned out to be come best practices. I think I'll give you three. One of them is the focus on unit economics in a SAS business. And so like if you read, I think the first person to really write about this a lot, this David Skok and if you read his early. Instructional content on how to use unit economics to manage the performance of your SAS business.
You'll see, he cites HubSpot quite a bit in there, so there's a lot learn. So that's one, I'd say number two kind of comes out of the unit. Economics is to focus, not just on growth, which HubSpot clearly grew quickly, but also to control customer acquisition costs. And so I think that's a big one and that leads into all kinds of marketing and sales strategy decisions.
As well as product decisions as well. And I'd say the third one is just around having an operating system of how you run the business. Especially a fast growing company. You need to have a cadence of certain activities, a cadence of how, and when you make decisions, a cadence on reporting on progress.
Cadence on hiring and, and training and promoting and all of these things that you need to do to run a business when HubSpot doesn't talk about that much, cause it's not what they do, right? Their software. They talk a lot, mark, a lot about marketing and sales because their software does that. They don't have a piece of software that they use that helps to manage the business.
But I would say that HubSpot was an amazing place to learn how to run a business. Theoretically, so those would be the three. Got it.
Adam Michalski: [00:07:11] Got it. And I think one of the things that I really enjoyed when you and I first spoke was you know, obviously everyone who thinks about HubSpot today, it's a massive company, you know, a big behemoth of an organization that has a very like well-oiled machine.
But, you know, you know, early on there was obviously like an evolution of how important partnerships were at the time. So, can you talk a little bit about like that evolution and, you know, kind of how you saw the company evolve from obviously an early stage company all the way to really building out like a well-oiled partner program and just overall go to market machine?
Pete Caputo: [00:07:41] Yeah. So when we started doing what we called coined or called inbound market, No one else was really doing it. So it was surprisingly easy to actually rank in Google back then and generate traffic that way. And then figured that out pretty quickly. Mostly third Dharmesh is blogging years realized, and I actually have a blog since like 2001, so I understood some of the concepts as well.
But from there we figured out how to generate leads by, you know, creating eBooks and doing webinars and things like that. We figured out this lead generation thing, and we just happen to be attracting marketing agencies. So as we are marketing marketing software and yeah, I didn't know this at the time.
No one really knew this at the time. There weren't many companies that had done when we, we figured out what the partner program. We realized that a big portion of marketing for small businesses was done by a consultant or an agency not fully employed by the company. In my estimate at this point would be like 40% of marketing services for SMBs or, or marketing is for us.
And B's just done by a contractor or an agency. I still, we realized that there was this, like, if we really want to sell marketing software to everybody, when you. I realized we needed to figure out how to work with marketing agencies. And before I joined HubSpot, I was actually selling websites and doing SEO on the side, kind of, as I was you know, as part of the startup we had built, I knew what it was like to try to sell those services to small businesses.
I knew what it was like, tried it, deliver them, deliver results, measure it, prove it out, et cetera. And so as we got into the funnel and all these leads were coming in, they weren't marketing it's owns and marketing agencies and they weren't gonna. We'd have great conversations with them. Cause they knew enough about SEO and websites and blogging and stuff to be dangerous.
And we could have great shop talks. And then so our sales team would be like, this is awesome. This guy has got five clients. He's going to put them all on HubSpot. I'm going to sell five accounts and like four demos later that agency just goes to this. Right. And it never, never returned anymore a call again.
And that happened over and over and over again. So. At one point we just said, Hey, stop calling marketing agencies. We're not going to call them anymore. Meanwhile, what I have done is developed some tighter relationships with some really forward thinking agencies that were smart guys, that inspired gals that started them and was having some success with like four or five agencies where they would bring me a deal once a month, once a quarter, et cetera, to the point where I was over achieving my personal quota consistently.
And at that point is when I said, Hey, there's something here. And I think I can train hundreds. You know, maybe thousands of these agencies to sell HubSpot along with a set of services that HubSpot enables. And so I started pitching that to agencies, teaching some of them one-on-one jumping on their calls with them to help them sell their services.
Sarah, et cetera. And have had more success to the point where I was doing like two X, my quota consistently. And so I've put together an internal deck and pitched it internally. And, and basically, I didn't know all the details at the time, but they basically said, no, this looks like too much of a distraction.
And the marketing CMO at the time, Mike wasn't really on board. Mark was kind of falling Alligance lead, who was, who was focused a hundred percent on raising our series B and didn't want the distraction of all this. And the VP of services had no interest at all in in launching a partner program, because it would mean that he would lose control of implementation and the software, which you know, how he was measured.
So so I got to know, and then luckily I had a sponsor Dan tire at the time who was my sales manager at the time he had actually built the largest Lotus notes reseller back in the day. So he had some experience with resellers. And so he and I were like, we're dogs on a boat with it. And like six months later, we pitched it again.
And after like a three hour meeting where we just got went, like they drilled us with all of the eventual problems. This could cause as I was literally about to give up and walk out of the room, Brian Allegan said, fine, you can start the program. And you're reporting to Mike Volpi now who was the CMO at the time.
And I'm like, what? And he said, It's like, you have a problem with that. I'm like, no, I don't have a problem with, so that's how the program started. Yeah. The rest of the rest is fairly public information. We gradually grew it to the point where it was, you know, 20% of sales, 30% of sales to the point where the sales team was you know, bought 150% of the productivity of, of the direct team.
And you know, ultimately to 50% of
Adam Michalski: [00:11:52] revenue. So cool. Yeah. I love, I mean, hearing it's, it's funny. Cause I mean, a lot of, you know, our listeners face the, kind of the same, the same type of journey where they're pitching it internally and everyone's like skeptical or they're like, ah, I don't know, it's a lot of work or all these different things as partnerships at the end of the day, it might be a longer term game and everybody understands the direct motion.
So yeah. It's funny to hear that.
Pete Caputo: [00:12:10] Yeah. I look at it as like you're developing another product, right? You need to put similar. Kind of research and development into a partner program as you would in fi you know, building a product and finding product market fit. Right? So unless a company has built muscles around that R and D that product market fit process and, and willing to invest both in marketing and kind of infrastructure and product and different selling motions.
It's doomed to fail. Yeah,
Adam Michalski: [00:12:39] exactly. It's a lot more work than initially meets the eye that's
Pete Caputo: [00:12:42] for sure. Yes. So let's talk
Adam Michalski: [00:12:44] data box. So tell me a little bit about like, I mean, the partnership ecosystem that you're building a data box and like, it'd be curious to hear, I mean, like what learnings from your previous life you kind of brought along to the current role?
Pete Caputo: [00:12:55] It took a very different approach at Databox for a few reasons. One, I think that the freemium model is really. Change in software. And I think all software eventually will be all software companies will at least have a free product that's valuable and has an ongoing use case, which then leads to a sale.
And so I think that changes reselling quite a bit because then there's less of a traditional selling motion that you would need a retailer for even a direct sale team for in some cases. So that's one big change. Another thing is, I think back in the day with channel sales before the internet existed, there was very clear ownership lines, and I know it's something that you guys help with, but it was very clear ownership lines between indirect and direct you know, or uh, companies were smart and said, we're going to do one or the other with the internet.
Channel conflict just became almost impossible to manage. And I realize you have a solution for it for bigger, especially for bigger deals. But very difficult to manage, I should say, especially 10 years ago or five years ago, even. And the third thing is I think marketing really has an unlimited reach at this point in scale.
And so if you put all three of those things together where you have a freemium model and you have marketing at scale and you have partners out there. I think it kind of requires a different motion. So the way we've structured, our program is less about the selling and more about kind of the marketing and the adoption of the product.
So just to give you some quick stats, you know, we get about 4,500 signups for our product every month and close a few hundred customers, 50% of those customers buy on there. Don't require any sales conversation. And so that enables our partners to have a similar model. If they choose is to add users to the system and let them adopt the product and purchase.
And then because it's so easy to set up, you know, it really doesn't require a lot of stuff. For the assistance for the partner. So it HubSpot like the sales team at HubSpot for the channel would be on calls all day with partners helping them close deals. It's really not necessary in data, but with data box, first of all, are, you know, once a partner learns how to set up our product for one client.
Fairly straightforward, just set it up for the second. We, when we have tools we built to make that really easy and kind of templatized. And then two, the prices is really for this market for this product, is it doesn't warrant a full sales cycle. So, you know, we're, we're selling dashboards offering the end of the day.
Ours is easier to use, easier to adopt a little more powerful than some of the competition, but at the end of the day, we're still kind of boxed in and and a hundred, $200 a month price point. And so. We don't have like a co-selling motion. And so the way we've priced it for partners is that you basically buy a license and then you pay based off of usage, not the number of clients you have, but the amount of data that they, it's a simple way to explain as the amount of data connections that you have across all your clients.
And so that's how we're going to market. We have absolutely no channel conflict. I've never had a partner reach out and say, Hey, you screwed me on this deal. I've never had a direct sales team member having an incentive to go and steal a client from a customer or from a partner. And so with zero channel conflict, you know, we're constantly figuring out how to we get agencies to add more client accounts.
Cause they can do it themselves. They can delete them and add them. And we've been able to grow that number consistently without any selling motion or even any marketing motion just through product improvements. So we're very much about like applying the product led growth and the freemium model to the.
I think there's a huge advantage and and customer acquisition costs to that model.
Adam Michalski: [00:16:36] Yeah. I mean, I tend to agree with you. I think that the freemium play is something that you're going to see. I mean, we've obviously seen more and more in SAS and I think that's only going to continue essentially the kind of the try before you buy motion.
Yeah. Like, let's dive a little bit more into, like, what are the ramifications of that? Like from the partnerships and you touched on some of them over there, but do you think I mean, that will obviously have effects on like, you know, resellers effects on, you know, different types of like co-selling motions and all that.
Yeah. I'd be curious to kind of, you know, peel that back a little bit, because again, I do think that a lot of our listeners too, might be in a position where they have a freemium offering and. That really does change the game on like how they should be building their partner ecosystem. Yeah.
Pete Caputo: [00:17:18] I think very few companies have this figured out because there is so much capital flooding software companies right now.
And if you figured out a good product here, you're going to have so many millions and you're just going to basically follow the same playbook that helps a follow it in 2010. In fact, my old boss, mark is making a killing, helping companies do that and investing in companies that are too. So I think I don't think most companies have wrapped their head around the combination of the two.
Actually I don't think most companies even wrap their head around, changing their selling motion with the freemium model. Most companies use freemium model just to get people in the door and then they just use the same old selling motion and they don't invest appropriately. I think in the product UI UX, the onboarding, they don't invest appropriately in, you know, using analytics to determine how to improve adoption of product features, et cetera.
And so I think that's the first thing is there's like buildings. Muscle out that team out so that you're constantly figuring out how do you reduce the friction and the product adoption. And we have two tracks. Like if you sign up for our product after you enter your email address, the first thing you'll be asked is what kind of account do you want?
Do you want an agency slash seller, a partner account? Or do you want a regular account for, you know, regular companies? And then we optimize it. Paths separately. So we actually have an onboarding process in app for the partner that's different than our regular customers. And then from there, it's much more about getting them to the point, not just where they're buying for themselves.
In fact, sometimes we skip over that. We wait until they have that client, and that's when we're basically showing them how to use the product with clients in the app. So I think that's the first thing that needs to change is really that approach to how you onboard your clients or your partners. I should say, through doing that.
PLG and product like growth. That's one thing I think the other thing is really figuring out how to get your partners engaged in using your product early in their sales process. Right? So if they're going to go and sell a bunch of services through a bunch of zoom calls and then implement your product, that's a backwards.
What you need them to do is use your product to prospect. Use your product in there. Selling or, you know, building the case for someone to buy it from them, use your product to assess their clients you know, problems or needs. And by doing that, now they're using your product. Your resellers are using your product to grow their own business, not just to sell services.
So those are some of the things that, you know, Done. And I'd say, you know, some of those things we're really good at some of those things we're still working on.
Adam Michalski: [00:19:49] You're saying it really is a fundamentally different motion. And I feel like, you know, not too many people are thinking about that, even though there is a strong market push in that, right?
Pete Caputo: [00:19:57] Yeah. I think there's like in 2009, 2010, when we started selling inbound lead generation or inbound marketing, like enterprisey sales. Said oh, that won't work for my market. My customers don't for stuff like that, I need to go see them or my team needs to go see them. We need to show up and do four demos.
Right. We need to take them out to dinner. Like they want to get to know us. Like all of these we had, there was 50 more excuses of why inbound marketing for their business. And it wasn't a small part of the market that was like even small businesses it's sold to. Consumers would say things like that.
Well, I need, if you get me in front of someone, I'm good, but I don't want to have to worry about getting in front of people. And I don't think this will work for them. The only way it works for me is if I get a referral, right? Like there's all kinds of these things. And now 10 years later, we know that inbound marketing, SEO, content marketing, they all work if you do it well.
So I think we're at a similar stage now. Freemium where most software companies itself more than a few hundred dollars a month products look at it and dismiss it as that's an SMB thing. That's for you. You should use freemium. If you're selling to a mass market SMB, you know, if your market is really niche, then maybe I agree.
But if your market is more than a few thousand customers, I believe a freemium model is the easiest way to, to capture their mind, share and get them engaged. But I don't think, I think I'm in the minority there we've been,
Adam Michalski: [00:21:20] you know early on multiple times they've been right. So that that's usually, that's the bar.
We'll give you the benefit of the doubt
Pete Caputo: [00:21:26] on this one. You're talking about all my wins. You don't know about my screw up.
Adam Michalski: [00:21:31] So, okay. So, I mean, let's talk about the future of partnerships here, because I think that ultimately that's, I mean, kind of what we're here to cover and we're seeing a lot of change happening in the partnership ecosystem more broadly.
So I'd be curious to share, I mean, you kind of talked a little bit about this in terms of how you're seeing more of this bottoms up freebie emotion, but what are the other big changes that you think are coming to the partnership ecosystem more broadly over the next, you know, five years or so?
Pete Caputo: [00:21:55] Today about a company that was planning to start or restart their partner program, as you probably know, every software company like tested do three or four jobs before they get a partner program off the ground.
So I think this companies at their third and fourth, and they basically said, I'm hearing this hearsay a little bit, but they basically said to this person, I know really well. We're just going to go after the HubSpot partners and, you know, we think we can get them, but like that strategy doesn't work. I can promise you, even if you're a product closely relates to HubSpot, I think it's pretty similar for every ecosystem.
The problem is now, and I think this is true in software in general, but the problem is that three sellers are bombarded. With from vendors or software companies to resell their product. Like they literally could like walk out their front door and, you know, find four companies that are saying, Hey, you should resell our product.
And so I think that's, that's the big challenge right now. You can't like 10 years ago you could pop. And this is how we did that was probably get pop up a few webinars and like do a little training and get some partners in the door and they, yeah, they really jive with the message and they'd have the problem you could solve for them.
And, and they'd get on board. Now I don't don't think that's not the strategy doing a few webinars and hoping it works out. I think you really need to have your infrastructure in place. So everything from your lead registration, your deal registration, you actually need to structure that by best practice.
You need to have your co-selling processes established both with your channel reps, as well as your direct reps. And I think the days of like keeping those separate or over yeah. You need to have your co-marketing in place, right? Like if you want to attract the best resellers to your platform, to resell your platform, you need to show them something to show them that you're willing to put your reputation on the line and promote them just as much as they're putting their reputation on the line to promote you.
And then four, you really need to have your, your reward system built, you know, just like most companies would not establish a direct sales team without having goals and compensation aligned to those et cetera. Having a partner program set up where you don't have rewards and recognition. And I think it's actually recognition is more important, but having rewards and recognition set up so that when your partners do a good job of selling and retaining that you're recognized.
And I think most companies do like one of those things and get started with the program and call it a program. They put it up on their website. And they leave three of those off the table and they're like, oh, we'll figure that out. Once we get more traction, because all four of those things require some serious thought, some serious research and, you know, investments in technology and, and processes.
Adam Michalski: [00:24:28] Very interesting. Yeah. Yeah. And I think, I mean, we're starting to see more of this. Get more like the process get more formalized. So my hope is that, you
Pete Caputo: [00:24:35] know, Yes,
Adam Michalski: [00:24:38] but that's a a hundred percent. I think that, you know, when, especially when folks think about their initial partner program, there's still a lot of education that needs to happen in terms of like, what does that actually mean, mean for my organization?
What infrastructure do I need? How do I set all that up? Right. You know, how do I think through the co-selling MCO, marketing's transactional, not transactional. Like each one of those different pieces is something that takes like a decent amount of thought and like, For better or for worse, every organization is going to be different in the way in which they go to market.
And each one of those problems are a little bit more nuanced than like, you know, any type of like normal sales motion or marketing motion where it's just more of like a standard science.
Pete Caputo: [00:25:14] Yeah. It's still the wild west. And because everybody's got a different flavor of a partner program and yeah.
Different incentives, you know, there's the affiliates, right. Lead registration, I, or co-selling and deal, deal registration. Like there's all these, the different flavors. It's hard to do a one size fits all for sure. Exactly. But I
Adam Michalski: [00:25:30] think we're seeing more and more standardization. So hopefully, you know, over the coming years, like I think as more standardization enters the market and more folks get to understand like best practices and all that, then like it will help elevate partnerships.
As a role, you know, but also just help, like kind of illuminate how important partnerships can be to each and every like SAS organization out there. So,
Pete Caputo: [00:25:50] okay. Like a true partner guide. I think our new people have been saying that for decades now, someday we'll have a seat at the table. I listen to a few of your podcasts and there might be a handful of organizations that.
Have a seat at the executive table, but as it gets extremely varied, partners are usually delegated to sales or delegated to marketing. It's like, oh, that's marketing shadow, that sales job. And it's a small it's, it's an afterthought.
Adam Michalski: [00:26:13] Yeah. I mean, I'll quote JB Bain here and somebody smarter much smarter than I am, but you know, hopefully this is the decade of partnerships because outside it is, I'll have to bet on him on this one, but cool, man, I guess the last question that I had for you was just around.
If anybody wants to partner with Databox like.
Pete Caputo: [00:26:32] Yeah, I think you probably guessed just go to the website and sign up, click, click partner, count on the second screen. Everything from there. And we approved partnerships through a slightly manual process, but usually pretty quickly. And then the interface is different and you know, our sales team and support team are, are there to help, help partners get set up.
We're very helpful. We'll set up dashboards for people to their specifications. Jump on zoom calls and walk people through stuff. So it's a very not salesy process, just very focused on helping get up, set up in the free product or the free trial of our paid products and then making a decision from there.
Adam Michalski: [00:27:04] Awesome. Yeah. And for our listeners, we'll go ahead and we'll link out to to the partner program in our show notes, but Pete, thank you so much for taking the time. A lot of great stuff in there. I think you're right about the freemium stuff, I guess like time will tell. And we'll also be able to see.
Pete Caputo: [00:27:18] It's been a few years. I'll tell you if we hit our exponential growth curve and then I think people pay more attention, but
Adam Michalski: [00:27:24] yeah, we'll have to do a LinkedIn shirts too. On, on how many chief partnership officers there are out there, their chief Alliance
Pete Caputo: [00:27:30] officers that probably be in the market for one and about six months.
Adam Michalski: [00:27:36] All right. Well, thank you so much. I really
Pete Caputo: [00:27:37] appreciate that. That was a good conversation. Bye bye.
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