Daniel Zarick, CEO of Arrows, on going all-in on the HubSpot ecosystem

When we analyze the opportunity for Arrows and where we fit in to all of that, we think, ‘Oh, wow, that's a really strong opportunity.’ There are a lot of people incentivized to sell Service Hub—the product business unit itself, the salespeople who are actually getting commissioned on trying to sell a larger ACV contract, the CSMs who are comped on retention and SQLs creating opportunities for expansion, and ultimately the solutions partners who are trying to sell more services to their clients. 

Now, it's important to frame it as how Arrows solves problems for actual customers. Arrows has to actually be valuable for HubSpot customers or else it just doesn't matter. But we often frame it through a lens ‘how does that also impact the things that you're metriced on as an employee?’ 

The last thing I'll say is if you look at the Salesforce ecosystem, their Service Cloud product is actually their highest revenue product, even more than the marketing and sales products. Unlike HubSpot, they started in sales, then added marketing and service later. Hubspot started with marketing, then added sales and service later. But Salesforce has seen phenomenal growth in the service category.

If you think about the size of customer service teams, they're pretty large. There's a big opportunity there to sell a lot of seats. HubSpot hasn't really unlocked that, but the strength that they have that’s different is this connected platform where everything is all in one place. 

We see Arrows as filling a very meaningful gap between ‘What happens when the deal closes and before a company starts servicing them.’ And well, that's actually a valuable process that customers should run inside HubSpot somewhere, so installing Arrows eventually creates a Service Hub opportunity for HubSpot.

It sounds like onboarding was kind of like this black hole in the HubSpot customer journey. You close the deal and then you might not hear from that person again for a month or two or whatever—there's this fog of war in the middle of that customer journey. Was that something that Hubspot themselves talked about with you? Had they identified that as an issue internally?

Not really, we never talked to them about it. It's something where a lot of customers—a larger number of customers than I think HubSpot even realizes today—manage and run post-sales processes inside HubSpot. Now, they've started to build more in this direction, and I think we'll see more from them around the idea of running post-sales things in HubSpot, which is great.

But I don't think they fully realized—definitely when we started working in the HubSpot ecosystem—how common an issue this was, how common a challenge this was for their customers, and how often people were doing hacky workarounds, like trying to connect project management tools to HubSpot or using spreadsheets. 

If you think about the alternatives for Arrows, it’s often spreadsheets, project management tools, and a few competitors. But really competitors aren’t the primary thing people are using as an alternative. The problem with most of those options is they don’t connect to the CRM, or at best they have a lightweight CRM integration. 

You can maybe automate creating an onboarding project plan with another tool when a deal goes to “closed won”, probably using Zapier or something like that. But you won’t be syncing any meaningful data back into HubSpot, you're not driving the workflow out of HubSpot, and it totally isn't serving the core platform or the other teams who are working out of there. Then ultimately, you're not able to run reporting on what's happening in onboarding from the CRM, which is where every exec looks for reports. 

Actually, I worked at Twilio 12 years ago, and when you think about how a business like that works—I might sign a new contract with you, but I really don't receive any revenue until you go-live and are actually sending text messages and phone calls through the platform. There are a lot of usage-driven tools out there which make money only when a customer is actively using it. It’s true with Stripe, Twilio, and a lot of the POS systems or other tools like that. 

So onboarding at a lot of companies is actually a revenue-driving function, not just COGS. And actually, a failed onboarding is effectively a failed sale because you never made any money from them. If you have a critical process like that running outside of the CRM, that's actually a huge missing component of driving revenue. That's something that the industry broadly is waking up to, and as an extension of the industry broadly waking up to it, HubSpot and the platforms are starting to pay attention to it.

One question that we look at a lot with app ecosystems is where the partner’s features start to mesh and meld with the ecosystem that they're building in. I'm curious how you think about what features live in Arrows versus using what's in HubSpot?

It's one of the most critical questions we ask ourselves. When we first built Arrows, even before we launched in the HubSpot marketplace, we built an integration with HubSpot. But we were like most of the integrations on these platforms—we were “data extractive”. 

A CRM has a bunch of contacts, company, and deal information. It has emails and communications info. So at first, apps plug in to this valuable data source which is just sitting there and sync it all to their own system. And then most apps still make you run your processes, reporting, automations and more entirely out of their system. We were on the same path initially.

Then we had a light bulb moment and realized we needed to change direction with the product. We really flipped it on its head and said, ‘Actually our product should be built with a CRM-first lens. Let’s slice off the part of Arrows which is uniquely powerful, the customer-facing onboarding plan, and we’ll only do that. Then we can actually treat the CRM as the source of truth that most people want it to be, and rely on all the features it has out-of-the-box like process tools, reporting, automations, and more.’

Today we build everything through the lens of ‘How does this affect our HubSpot integration?’ That means the data from Arrows, the by-product that comes out of sending your customer an onboarding plan, is all synced back in to HubSpot in real-time. 

We have over 40 data points that we sync as properties to the HubSpot object that you're attaching an Arrows onboarding plan to. Now, some people would think, ‘Well, that's our data, that's powerful, don't we want that in our system?’ We think instead, ‘We're still the ones who have to generate the data, so that's what's valuable.’ The Arrows customer-facing plan has a checklist made of tasks, with who they’re assigned to, and which ones are overdue as well as a lot more data. And ultimately it's managing the collaborative experience with your customer. That's a unique thing that HubSpot is not building and doing. 

What a user can do once they’ve synced all that data into HubSpot is drive their onboarding reports out of it. Imagine something like which sales reps have customers who fail onboarding or have slow onboardings most often. I can actually power that reporting out of HubSpot in a way that I could never have done if all that reporting was done in Arrows, because I'd have to get an amount of data into Arrows about the rest of the GTM functions which would be impossible. 

Similarly, with automating parts of the onboarding process, we could build a bunch of onboarding automation features in Arrows today which would be slow and expensive. But if we push all of our data into HubSpot, we can actually say ‘yes’ to far more feature requests than typical.

Back to that restaurant POS example—software companies selling to SMBs are a common customer of Arrows. A lot of those companies will ask, ‘Hey, I want to send SMS notifications when an Arrows task is overdue.’ We now get to say, ‘Yes, actually, you can totally do that. Go buy an SMS provider with HubSpot, or use their out-of-the-box one, and then use the Arrows data attached to the onboarding object to trigger all the SMS notifications you want.’

We don't have to actually build a lot of stuff that would normally be table stakes for a product like Arrows—reporting, automation, Kanban views, etc—because a lot of that stuff is commoditized and already in HubSpot the platform. That's really what we think about—what's a commodity vs. what’s valuable? 

Where would I, as a company, ideally or ergonomically run that onboarding process? I'm going to want to run my onboarding pipeline view out of HubSpot, because that’s where my team already lives. They don’t want another inbox. So we push all the data that’s needed to power on onboarding pipeline directly into HubSpot.

Now, what can I not run out of HubSpot? I can't see insights on how my onboarding plans are performing across all customers, and which changes I should make to them. For example, which tasks are most commonly overdue? Which phases should be restructured, reordered, or maybe even deleted?

How can I track my improvement of time-to-completion for onboardings over time—I can't do that easily out of HubSpot. That's the stuff where we believe that should be in Arrows. In other situations, it’s the day-to-day workflow stuff, like the daily dashboard for a customer success manager who's managing multiple Arrows plans. I can see the pipeline overview in HubSpot very easily, but they don't have a surface area for us to add functionality in HubSpot to know what things to take action on very easily. So we’ve built that into Arrows too. 

That's how we look at it—what can we launch very quickly out-of-the-box in HubSpot in a way that people expect it, and that actually enables a lot more functionality where we can say yes to a lot more? But what actually happens, as a byproduct of that, is we get to prototype things in HubSpot.

For example, if there’s a common workflow automation that people build in HubSpot using Arrows data, we’ll consider bringing it in as a first-party feature in Arrows, because we know how tedious it is to build that report or build that automation in HubSpot. We’ll realize one day, ‘Oh, that’s really popular and it would be really valuable if that was only a couple clicks in Arrows.’

You mentioned the vision to go to Salesforce and be CRM native. Thinking about how working with HubSpot has allowed you to prove certain aspects of Arrows, and how it helps to prototype things, see how they work, and see the results, does that give you more—not leverage—but more proof that you need and the convictions to go elsewhere and integrate with every CRM?

We think of it in two ways. There's the product integration and then there's go-to-market for each platform.

I think a lot about the type of customer onboarding tool we are as feeling similar to something like e-signature tools in the late aughts—we're moving into this point where a lot of companies are aware that this is a problem they have, but it's still new behavior for them. And actually, to inspire people to change or adopt this way of working with their customers, it's better to be louder in a smaller ecosystem. 

How do we get louder in a smaller ecosystem? We’ve built a very effective, very visible brand, and a lot of word of mouth in a smaller ecosystem. We get that to a larger degree by focusing solely on HubSpot for now. 

We can afford to be patient and focus on HubSpot because there's a timing component to the opportunity, since they're earlier in their platform play. Now, what we also get to do is go very, very deep on the integration. We are obsessive about what the product integration enables, and what the go-to-market looks like by extension. By obsessive, I mean we can just go and build more deeply and understand the platform more intimately than almost any other app partner in the ecosystem. 

What comes out of that, as a by-product, is HubSpot folks—both on the platform side but also the individual sales reps or CSMs—see our integration and see our go-to-market and say, ‘Wow, those guys are doing something cool. Those folks are really doing something unique.’ We’ve ended up building a notable brand in this smaller ecosystem that punches far above its weight as a seed stage company. We believe that all of those factors will help us eventually jump to other platforms. Knowing what a truly deep integration looks like, by having the resources or the ability to focus all of our resources on one platform, allows us to know, ‘Okay, this will look a little bit different in Salesforce, or Servicenow, or whatever, because they are a little bit different… but we know what great feels like here.’

It’s the same for the go-to-market motion. It will, by necessity, need to be different. But we know what we have to replicate, that feeling and awareness. We also expect we can leverage the solutions partners we have on HubSpot to jump later to Salesforce. Plus, once we have a bigger brand and some momentum, there are plenty more advantages and strengths we can carry over to other ecosystems. 

It's very non-consensus to focus on one platform for as long as we have, particularly as a venture-funded company. But because it's a newer product category, we think it actually makes a lot of sense. Then, there's this opportunity with the HubSpot platform itself, which is in a certain promising window of opportunity that we feel like we have to exploit.

Before we move on, you were talking about the depth of the integration. I'd love to hear more about what you see looking at other HubSpot integrations, too, what accounts for the depth, and what makes integration really good?

There are a few things that make an integration with a platform great. One way to start is to ask, ‘Okay, what does their API make possible?’ You start with the documentation itself and see what's possible, then start dreaming from there. But you can also start from the interface itself, and think about what a user of that platform would do day-to-day in their workflow. 

For Arrows, when you're moving a deal to “closed won” and you realize, ‘Great, now I need to start the onboarding product. I'm currently in the sales pipeline in HubSpot. What do I do next?’ In the past, you’d have to open the Arrows app. But we started over from scratch and thought, “What would happen if you opened the deal in HubSpot? How can I actually start the onboarding plan here? How else might I want to kick it off?” Well, no user wants to jump to some other tool to do all that. You want to do it from within the interface of HubSpot, where you’re already working. Or you want an automation to kick it off, and you’ll want that automation to be created and managed in HubSpot, where you already have your other CRM automations.

Now, imagine later I’m looking at the object that's tracking the onboard process in HubSpot, and I'm somebody managing the onboarding process. Or maybe I'm the sales rep who sold that deal, and I'm trying to track how it's going so I don't lose my deal.

What am I expecting to be able to see inside HubSpot? What reports would I want to look at? That's the stuff where we start from the HubSpot interface, and ask ourselves ‘What would I expect to be possible? What do I think would most ergonomically fit into my day-to-day workflow in this tool that I'm already using to do my job?’

Then, frankly, there's a later part where we start talking to employees at the platform and we ask, ‘What do you all pay attention to as a platform? What gets you excited about an integration? What parts of the product are you not seeing enough apps integrate with? What APIs are you not seeing people adopt that you wish they were?’

Ultimately we’re servicing our customer above all, but we also try to service the platform. It’s important for us to be a good partner. We want to show off what's possible as a partner and as an app. So there’s another piece that we consider, which is when a HubSpot employee looks at their internal dashboard showing the Arrows integration, we know exactly what they pay attention to. How they track if we have a healthy integration, we know the ways we're scored on that. That's stuff we've learned bit-by-bit over a long period.

In the same way that Apple, when they have a keynote at WWDC and launch new APIs, by the Fall those APIs will be publicly available and they will promote apps which have adopted those new APIs. Adoption is their goal and promotion is the incentive. HubSpot, and any other platform, is going to have a similar sort of goal: ‘We launched this new API, and we want people to show off what's possible with it.’ Do that over a long enough period of time and you learn how to get attention.

Actually, building on that point, a lot of our content that we share publicly is showing off what’s possible in HubSpot. It’s focused on actionable advice and how-to content for doing powerful stuff in HubSpot. So it's not just the integration itself, it's also the marketing around the integration to help the entire ecosystem—solutions partners, HubSpot employees, and eventually our platform partners—actually pay attention to us enough to think, ‘Wow, they're doing something very unique.’

You talked a little bit about Solutions Partners, but can you break down all the ways that discovery happens in the HubSpot ecosystem, and maybe what's most important?

It's incredibly interesting, because a lot of founders or investors reach out to me asking, ‘How are you getting customers in HubSpot? You all seem to be doing well. You have a lot of installs. How's that happening?’ We currently have about 850 installs in the HubSpot ecosystem. If you look around, a ton of apps are in the low-to-mid dozens of total installs.

Well, I’ll explain the key drivers of growth we see. First, people assume the App Marketplace is a meaningful driver of installs. For other platforms like Shopify or the iPhone it definitely is. But on HubSpot, it's not very impactful. They haven't really unlocked that yet.

That being said, you do want to have a very strong App Marketplace page. It’s your storefront that people will look at—internally, HubSpot employees look at it, and solutions partners look. So it's just as useful for internal marketing as it is for external marketing. That said, it’s not going to be a driver of discoverability for you. We probably get 5-10% of our sales pipeline each month from the marketplace. It's not nothing, we wouldn't want it to go away, but it's not like, ‘Oh, we're investing there and that's the core driver of our business.’ 

After the App Marketplace, there's the HubSpot employees who are customer-facing. Anybody who has accounts they're managing, so salespeople, customer success people, solutions engineers, inbound consultants, etc. They have a bunch of different titles, but people who work with customers directly.

Next, there's all of the solutions partners. Those are the 7,000+ agencies that resell HubSpot, sell services for HubSpot, and generally are a huge driver of growth in the ecosystem. 

The fourth bucket that’s starting to grow more recently is the other app partners. Arrows is building momentum on the platform, and there are some other great app partners that are building momentum too. So we're all starting to circle each other in a way that suggests you’ll see a lot more partner-driven GTM efforts soon. HubSpot is also pushing a lot of app partner and solution partner collaboration right now.

The last thing I'll say is that content is king for HubSpot. There's a very active, excited, awesome community in the HubSpot ecosystem—and a lot of it's on LinkedIn, a little bit on YouTube and other places—but we found our content to be probably the biggest driver. Content touches every sales deal we have. 

Now, how do those people discover the content? That's where we go back to those solutions partners and those customer-facing HubSpot employees. They're the distribution channel for our content and the distribution channel for awareness of Arrows. Back to what I shared before about how we are mindful of each party’s goals—our content is so strong because it’s effectively a sales enablement resource for all those people. We distribute the content through all those employees and those solutions partners. Eventually those people know our brand, then they know the app, and we build goodwill.

At some point they hear, ‘I'm trying to run onboarding in HubSpot’, or ‘I'm trying to run customer success in HubSpot.’ Almost always they reply, Oh, have you checked out Arrows?’ Or ‘Have you read the Arrows playbook on how to do that?’ We've found that the content stuff is really valuable, but it's really how we built trust with those other constituents, by enabling them and being helpful to them first.

That's interesting and counter-intuitive about the marketplaces. We're often used to looking at Shopify, ServiceTitan—those kinds of marketplaces where their app store is a big driver of installs.

Right, but think about the scale of those customer bases too. Shopify has millions of stores, which changes the amount of installs you can get. But they've also, as a platform, really aggressively pushed people into the marketplace. They've also developed a type of app ecosystem on Shopify where there's a free motion or a very cheap install, the same way WordPress does. Cheap and free installs mean there are a number of apps that have an incredibly large install base.

Whereas in HubSpot, if you think about CRMs—I'm not sure about ServiceTitan and ServiceNow, I think they have large app marketplaces too—but at least with Salesforce and HubSpot, a lot of the apps that have integrations, they actually gate those integrations behind higher pricing tiers. Often, like an enterprise tier even. Arrows and a few other apps are very different, as in we have features of our integration that are gated behind higher pricing tiers, but for the core integration you can sign up for Arrows on our homepage with the HubSpot app. Uou install the HubSpot app to try it, and that's a very different motion than most.

HubSpot hasn't yet pushed their customers to the marketplace in the ways other platforms do. The homepage of the marketplace has pretty good traffic, as I understand it, but the individual app pages don’t. People mostly get there through search, either Google or the search bar in the App Marketplace. HubSpot has 200,000 customers but there's also a bunch of free accounts and people who have demo accounts. The scale of people who can install apps is fewer than something like Shopify.

One thing you mentioned a few times is looking forward, you feel like there's a lot of room to exploit. I'm curious what you look forward to the most there and with regard to this?

On Wednesday, HubSpot announced their earnings and they crossed 200,000 customers. They added 11,000 customers in Q4 of 2023. That's the highest amount they've ever added. They were adding like 9,000 before. If you look forward, it’s easy to believe they're going to add another 100,000 customers in two or three years again. In that period of time, they're going to go from around two billion in revenue to over three billion. Follow that thread further across the rest of the decade, as they're starting to go up market, they're selling to true enterprises, and they're starting to get a lot of rip-and-replaces from Salesforce. 

They're going to start seeing a lot more six- and seven-, maybe even eight-figure deals on their platform. True enterprises, great logos, instead of the traditional SMB that they've been serving. But even then, there are a hell of a lot of small companies out there. 

All that is what makes Arrows, being well-placed now, and being one of the early partners and early apps that has broken in, that has built awareness with the HubSpot employees, that has momentum in the HubSpot marketplace… that's the stuff where, as that momentum carries through the rest of the org, those strengths will accrue to the early partners who are demonstrating value and getting their brand built out in the ecosystem. 

That's what's most exciting to us—HubSpot is flying and doing really well, and we don't see many reasons why that's going to slow down for the next five or more years. They're operating very effectively and their leadership is operating very effectively.

The secondary part of that is they've been calling themselves a platform publicly. They say that they're a platform. And they know this—I've told them very directly—but they’re not a platform yet. They say it, but they don't actually show up in the way a real platform does. However, there are a lot of very smart, very talented people internally working to guide that transition. Part of what they're doing is saying that they're a platform so the entire organization gets on board and naturally moves that way. 

Historically, HubSpot has stated this idea that they're ‘Crafted, not cobbled.’ It’s counter positioning to Salesforce. They've not grown through acquisitions which are cobbled together through integration. They’ve mostly built things in-house and where they've bought things, it'll be like Piesync or now Clearbit that are more infrastructural providers that they can build on top of. 

What I imagine they’ll have to start doing—as they make this platform transition, and as they continue to grow the size of revenue they're adding—is they'll start to evolve that positioning to be a little bit more mature. Something like, ‘Well, we can't actually grow into the mid-market and enterprise and solve everything by building in-house, but we actually want to have a more lean team. We want to have a more effective team. To do this, we need to scale through app partners.’ That's how they go from $2 billion to $10 billion in revenue.

The company is getting there piece by piece. We believe that we're one of the partners helping encourage internal buy-in on that vision by showing them what's possible. We set very ambitious goals when we talk to them, and we try to paint a picture of what we think is possible. That helps a lot of the org buy-in on that vision. As that core business starts to scale, we think the platform itself, including the marketplace and all those things that are somewhat weak right now, will start to get better and actually drive meaningful business. That's why the last two years that we've spent focused solely on the HubSpot ecosystem have been fairly counterintuitive, yet we've grown to a very strong revenue only on HubSpot. 

But that leaves us with what the Arrows team believes is still the most exciting question: how does the fantastic position we've put ourselves in today, where we’re leaders in the HubSpot app ecosystem, actually affect growth for Arrows over the next 5 or 10 years? For our money, it’s going to be a lot more exciting than many people realize.

This transcript is for information purposes only and does not constitute advice of any type or trade recommendation and should not form the basis of any investment decision. Sacra accepts no liability for the transcript or for any errors, omissions or inaccuracies in respect of it. The views of the experts expressed in the transcript are those of the experts and they are not endorsed by, nor do they represent the opinion of Sacra. Sacra reserves all copyright, intellectual property rights in the transcript. Any modification, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, or selling any transcript is strictly prohibited.