Disrupted

by Dan Lyons

  “I can’t believe this place,” Trotsky tells me one day, when we’re having our biweekly one-on-one meeting, which is supposed to be a sort of status update but usually involves just hanging out on beanbag chairs and shooting the shit.

  Unlike just about everyone else here, Trotsky has actually worked at companies other than HubSpot. He’s having a hard time adjusting.

  “Do you realize that the girl who runs the email campaigns can just refuse to do something that I tell her to do?” he says. “She’s twenty-two years old, and just graduated from college. I’m a vice president. But I can’t give her an order. All I can do is ask. And she can say no. And she does! She tells me she’s too busy!”

  Welcome to my nightmare, I tell him. “I thought maybe all companies are like this,” I say.

  “Yeah, well, they’re not,” he says.

  Trotsky is not overly impressed with HubSpot. He thinks the culture is ridiculous, and the people are precious. Cranium doesn’t communicate at all and has been completely ignoring Trotsky, giving him no guidance or direction. Wingman is a dimwit and an insecure hack. Spinner is a lousy PR flack and has no sense of humor. The women on the blog team are obstinate and have an overly inflated sense of their abilities. For annual performance reviews, HubSpot asks employees to rate themselves across several categories, on a scale of one to five. I give myself a set of threes. Trotsky tells me that one of the blog women—he won’t tell me which one—has given herself fives across the board. He can’t believe it. “These people really think they’re the shit,” he says.

  I’m relieved to hear him vent like this. For months I’ve been walking around HubSpot thinking that the place is nuts, and then questioning my sanity because everyone else seemed to have no problem. Now here is Trotsky, and he sees things the way I do—or at least that’s the impression I get from our conversations.

  In the first quarter of 2014, people start disappearing. For all of 2013 HubSpot was on a massive hiring spree, especially in sales and marketing, but now the company is reversing course. I suspect this has something to do with the fact that the company recently hired a new chief financial officer who has experience running publicly traded companies. Max, my old-guy buddy, says he’s hearing rumors about an IPO. Maybe the new CFO wants to reduce costs and spruce up the financials so that HubSpot can go public.

  For whatever reason, people are getting booted out. It’s like living in Argentina during the 1970s. Every week someone else is no longer sitting at their desk, and we get an email from Cranium telling us that so-and-so has graduated, and hey ho, let’s all wish them well. One guy, who worked with Trotsky at his last company, and whom Trotsky recruited, lasts only for a few weeks and then gets the axe when someone decides they don’t need him after all.

  So many people are being let go that at one of our weekly marketing department meetings someone submits an anonymous question to Cranium: “Over the last two months, we have lost at least one male employee every week. Are the remaining males safe?”

  Cranium tries to make a joke of it. He assures us that HubSpot is not cutting costs, that companies make adjustments all the time. He says he is actively hiring, and the company is growing, and everything is awesome.

  In our next one-on-one beanbag chair bull session, I tell Trotsky that it seems to me that the company is trying to cut costs. I realize that I’m probably being paid more than most of the young people in our department, and if makes sense to cut me loose, I will understand. “All I ask,” I say, “is that you give me a little bit of warning. I’m asking this not as an employee, but as a friend. Just give me a little time, and I’ll go find another job. I’ll get out of your hair.” Trotsky assures me there is no pressure on him to cut his budget, but if things change, he will let me know.

  For a few months in the first half of 2014, things actually get better. I’m now working up on the fourth floor, in a newly renovated space, a world away from the ring of hell that is the telemarketing room. I’m writing e-books aimed at venture capitalists and chief marketing officers, which isn’t as fun as being a columnist at Newsweek, but it’s better than explaining HTML to Marketing Mary. I’m also helping write an update to Inbound Marketing, the book that Halligan and Dharmesh published in 2009.

  On the side, I’ve started picking up some freelance work, writing articles for Newsweek Japan on topics like robotics and artificial intelligence. Sure, there are still days when I go home and tell Sasha about some astonishingly stupid thing that some bozo has done, but most of the time I can just tune things out.

  The best thing is that I no longer have to work with Marcia, Jan, and Ashley, the women on the blog team, or Wingman. The only person I deal with is Trotsky, and he and I are becoming pals. I like Trotsky so much that one weekend I invite him and his family to a cookout at my house. I cook steaks and our kids play together. At work, Trotsky sometimes swings by my desk just to talk.

  Apparently the women on the blog team have noticed that Trotsky and I are getting to be friends, and this bugs them. They don’t like Trotsky. Neither does Spinner, for that matter. Spinner complains to Cranium that Trotsky and I are getting too friendly. Cranium tells Trotsky that he needs to stop hanging out with me at work. That, anyway, is what Trotsky tells me.

  “The women on the blog team don’t like it,” he says.

  I can’t believe it. “What is this, middle school?” I say.

  “Well,” he says, “it’s not just that.”

  Spinner has told Cranium that some of our banter is making the women who sit near me uncomfortable. One woman who overheard one of our conversations felt it was inappropriate. Trotsky won’t say which woman complained, but he does tell me which conversation it was. We were talking about child care. Trotsky’s wife works full time. They’ve tried day care but are thinking about hiring a nanny. We’ve dealt with the same issue, and first hired a nanny and then resorted to getting au pairs to live with us and watch the kids. It turns out that having a nineteen-year-old German girl living in your house is maybe not the greatest idea. Nothing inappropriate ever happened, but it drove my wife nuts, I tell him. Trotsky says no way would his wife even entertain having an au pair live with them.

  This conversation has made someone uncomfortable. That person confided in Spinner, who reported us to Cranium.

  To me the whole thing seems stupid. But Trotsky takes it seriously. “You can get fired for almost anything and survive,” he says. “But the one thing you cannot survive is getting fired for sexual harassment. If that happens, you’ll never work again.”

  From then on I steer clear of Spinner and the women on the blog team. I say hello when I come to work and goodbye when I’m leaving, and that’s about it.

  Trotsky’s trouble with Spinner is just beginning, however. For whatever reason, she has decided that she hates him, and she’s waiting for another reason to pounce. One night, foolishly, he gives her an opportunity.

  It starts when Trotsky writes a Facebook post about the Ban Bossy campaign that Facebook COO Sheryl Sandberg is promoting. Sandberg wants everyone to stop using the word bossy to describe girls. Trotsky says that instead of using her bully pulpit to pursue something as trivial as the word bossy, Sandberg should dedicate herself to more important issues, like the plight of the African elephant, which is on the verge of extinction.

  Trotsky loves elephants. He’s always ranting about the awful poachers who kill them for their ivory. I have no idea how elephants became so dear to him, or how his mind makes the illogical leap from Sheryl Sandberg’s feminist crusade to the issue of elephant poaching. I also don’t care.

  Spinner, however, does. She goes ballistic. Instead of bringing the issue up at work and talking to Trotsky privately, she leaps into Trotsky’s Facebook post and starts adding comments bashing him for not taking women’s rights seriously enough. She says Trotsky needs to think about the message he is sending to the talented and intelligent women who work for him at HubSpot. What will they think when they read his post? They will
feel neglected. They will feel that he cares more about elephants than he does about them.

  This is insane. It’s also a strange move for a PR person to make. We’re all supposed to be “solving for enterprise value” and protecting the brand at all costs. Why attack your company’s newest vice president, a guy who is two levels above you in the org chart, and do it in public, on Facebook? What is she thinking?

  I’m starting to suspect that Spinner might be a little bit unhinged. I definitely think Trotsky is unhinged. He gets into fights on Facebook, and goes on and on, like a dog with a bone. But this is even better, because just like Trotsky, Spinner loves to fight and will never back down.

  For two days they go back and forth, trading insults on Facebook. It’s like watching monkeys throw their shit at each other. It’s ugly, and stupid, and the best thing ever. Spinner lectures Trotsky about feminism, and Trotsky scolds Spinner about elephants. Soon other people—some from HubSpot, some just friends of Trotsky or Spinner—start chiming in, taking sides and egging them on.

  The argument degenerates to the level of seventh graders trading insults in the schoolyard. Neither one of them will give up. Every time you think it’s over, one of them lobs another grenade. Trotsky sends me email and tells me he’s done, he’s not going to take the bait anymore. But then I guess he sits at home, fuming, or maybe drinking, and finally he fires back. But she can’t let him have the last word, so then she fires back.

  Finally Cranium has to intervene—not on Facebook, but in real life, at the office. He calls the two of them into a meeting and tells them to knock this shit off, because they are making the company look bad.

  I love this. I think this is great. I wish they would fight every day. I have dreams where Trotsky and Spinner are dressed up in lucha libre costumes, stepping into an MMA octagon while the women on the blog team throw candy at them and jeer.

  Eighteen

  A House of Cards?

  One Thursday morning in the first week of April 2014 Trotsky pulls me aside in a hallway and shares a secret: HubSpot has filed its IPO paperwork. “It’s not public yet, and I’m not supposed to tell anyone,” he says, practically whispering. We’re about to go into a meeting. We’re waiting for the people in the conference room to finish up and get out. “But they’re hoping to start trading in June.”

  In the past few months I’ve started having doubts about whether HubSpot can pull off an IPO. I first started worrying after Halligan called that come-to-Jesus meeting in October and told us he was booting out the head of sales. “The machine is just not working that well” is his quote that has stuck in my mind.

  But here we are. The deal is on. HubSpot is going to sell its shares to the public, and we’re all going to cash out. It’s really going to happen.

  Only it doesn’t. The problem is that HubSpot files its paperwork right after another tech start-up, Box, announces its own plans to go public. Box is a high-profile company in Silicon Valley. It’s seen as a bellwether for other cloud computing companies, including HubSpot.

  Box has a charming, charismatic, twenty-something CEO, Aaron Levie, and everyone has been under the impression that the company is doing a booming business. But now it has published its financial results and the numbers are underwhelming. Sales are growing, but Box is spending way too much on sales and marketing, and losing huge amounts of money. To be sure, that’s the case for most of the other cloud software companies. But even by the relaxed standards of the second tech bubble, Box’s results are disappointing.

  Meanwhile, for some reason, shares in cloud computing and “software as a service” companies are starting to swoon. One index of thirty-seven publicly traded cloud-related companies loses $58 billion in market value over the course of two months. Salesforce.com, our rival and role model, drops 25 percent. Workday, another cloud company that’s comparable to HubSpot, drops 40 percent.

  On May 1, the Wall Street Journal reports that Box has decided to delay its IPO, since “investors’ love affair with cloud software is waning at the worst possible time.”

  That’s tough news for HubSpot. Trotsky tells me, again on the sly, that management has decided to shelve our stock offering and hope the market picks up again in the fall. The good news is that, unlike Box, HubSpot has kept its IPO plans secret. No one will ever know that we held off, and we can try again down the road.

  HubSpot has been able to do this thanks to a provision in the 2012 JOBS Act that lets “emerging growth” companies, with less than $1 billion in sales, keep their IPO paperwork private until the very last minute, when they are ready to start pitching their stock to investors. The provision was meant to boost the economy after the recession by making it easier for companies to go public, which in theory would create new jobs.

  An unintended but perhaps predictable consequence of this provision is that it allows companies to squeak into the public markets without being subjected to as much scrutiny. Some people fret that this is leading to bad outcomes, as described in a September 2014 Wall Street Journal article: “It is an increasingly common story: a company makes scaled-back disclosures about itself before going public and gives investors scant time to digest the information. The shares sizzle in their first weeks of trading but start to fizzle within a year.”

  Venture capitalists and start-up founders love anything that makes it easier to flog their shares to the public. They can sell during the sizzle and run away before the fizzle. Mom and pop maybe should be paying more attention, and if I were still a journalist, I would certainly be warning them to beware of wobbly, money-losing companies floating shares to the public. But I am not a journalist. I am now on the same team as the VCs and founders, and hoping, like them, for a chance to foist off my shares. We can use all the help we can get.

  I’m curious about what we will discover when HubSpot finally does make its financial information public. At the meeting in October Halligan talked to us about revenue, churn, and customer acquisition cost, but he said nothing about our profit, or lack of profit. I assume we’re losing money, but I have no idea how much. When you work at a privately held company you really only know what management tells you. Officially, the word from Cranium is that everything is awesome.

  But I’m getting the sense that HubSpot’s financial results might not be very good. Two months before this, in March 2014, I had breakfast with Gordon, a venture capitalist who knew some of HubSpot’s investors. Gordon was not a fan of HubSpot. He told me he had met with Halligan and Shah when they first put the company together and were trying to raise money. “I went back and told my partners, ‘I wouldn’t put a penny into that place. They’re selling snake oil.’ Since then I’ve had to eat my words, because they’ve done pretty well.”

  Gordon had an engineering background. Before he became a venture capitalist he had built and sold a tech company. He asked me if I believed that HubSpot’s software did what the company claimed. “Do you really think some small-business owner, like a plumber, is going to come home at the end of the day and then write a blog? Do you think that happens?”

  “I don’t know.” I shrugged.

  “Even if people use the software, do you think it actually works?”

  I had wondered the same thing. One of the consultants told me it was a mixed bag. Some customers buy the software but don’t use it, because they’re too busy to write a blog. They’re like people who sign up for a gym membership then never go to the gym. Among those who do use the software, results vary. There are some places where the stuff just doesn’t work very well, the consultant told me. “And then there are about 10 percent of customers where it’s absolutely magic,” he said. “It’s like you’ve given them a dowsing rod, they’ve found a well, the town is saved. It’s magic.”

  Gordon says Halligan and Shah are good at telling stories and generating hype, but he doesn’t think much of HubSpot’s engineering team, and he is particularly dismissive of Shah. “He’s not really an engineer anymore,” Gordon says. “He’s a blogger. He wr
ites a blog. He makes PowerPoint decks.”

  Gordon was equally contemptuous of Cranium: “Everyone tells me he’s some kind of marketing genius, but I don’t see it. I’ve asked him several times to explain the product to me. He couldn’t do it. I still don’t understand what the product does. I’ve met a bunch of people at HubSpot and nobody there impresses me. None of them seems that smart.”

  After breakfast, we stood outside. It was a chilly Cambridge morning, with a cold wind blowing off the Charles River. Gordon told me I should stick around through the IPO, then find something better to do. “The place is a house of cards,” he told me. “I’m just hoping they can get to an IPO so the guys who invested can cash out before the whole thing collapses.”

  Those were pretty strong words, especially to use around a former business journalist. I don’t think Gordon meant that HubSpot was a flimflam operation. Obviously HubSpot had a real business, and was selling a real product, to real customers, and generating real revenue. I think what Gordon meant was that he didn’t think the business was sustainable, that sooner or later a strong wind would come along and blow the place down.

  Later, in August, when HubSpot publishes its financial results, I will think back to this breakfast and Gordon’s comment about the “house of cards.” Because it turns out the numbers are not so great. In seven years the company has accumulated losses of more than $100 million. It has burned through its cash and is borrowing money against a line of credit.

  If the market bounces back, HubSpot will be able to go public and its investors will get a return. But if stocks remain depressed, or if, God forbid, the bubble pops and the market crashes and HubSpot can’t sell shares to the public, then its fate will be uncertain. In the worst possible scenario, its investors could lose a lot of money.

  That’s what is at stake. That, I believe, is why Halligan has seemed so freaked out, why he pushed out his head of sales, and why the new CFO has been cutting costs.