HubSpot Aims for 2013 IPO

According to a study published by inbound marketer HubSpot, The State of Inbound Marketing Report, organizations that use inbound marketing channels as the preferred mode of marketing find costs per lead to be 62% lower those that prefer outbound marketing tools. Inbound marketing is also benefiting from increased adoption. The report shows that in 2011, the share of inbound marketing channels for lead generation increased to 17%, from 9% in 2009. Social media sources such as Facebook, Twitter, and even blogs are helping to push up inbound marketing efforts. Businesses were willing to spend nearly 29% of their lead generation budgets on social media platforms in 2011, compared with a 24% allocation in 2009. Today, more than 65% of businesses have blogs on their websites, compared with 48% in 2009. The impact of blogs can be seen in the fact that 57% of  businesses using blogs acquired customers through these blogs.

HubSpot’s Financials
Cambridge, Massachusetts–based HubSpot provides an all-in-one inbound marketing software platform for small and medium businesses. The company was founded by Brian Halligan and Dharmesh Shah in June 2006. I spoke with Mark Roberge, VP of sales for HubSpot, a few years ago. He summarized the premise of the founding of HubSpot as to cater to the dramatically changed ways that buyers engaged with products and services or look for prices for products and services due to the Internet. The founders saw that consumers were no longer relying on salespeople reaching out to them through direct marketing tools and instead were searching for products on their own through the Internet and social media tools. HubSpot’s goals were to transform the way people viewed marketing and to provide small business owners, marketers, and others with the tools and knowledge they need to align their sales and marketing strategies with this shift in buyer behavior.

Initially, HubSpot was funded and supported by and catered to the needs of the MIT community. It has come a long way and today servers to close to 6,000 enterprises spread across 43 countries, and the company claims to have more than a 50% share of the inbound marketing segment. During the past year, the total number of leads generated by their customers using HubSpot grew 202% over the previous year to more than 12.4 million.

Clients use HubSpot’s tools to help increase site viewership and conversion ratios on their web sites. HubSpot’s offerings include a software platform that assists with website management, blogging, search engine optimization, lead management, marketing analytics, email marketing, landing pages, and social media monitoring.

Besides its software platform, HubSpot is also known for its tool WebsiteGrader.com, which has amassed more than three million users. Website Grader is a free service that offers an automated evaluation of a website in comparison with others by tracking metrics such as Google Page Rank, Traffic Rank, the number of inbound links, del.icio.us bookmarks, and the number of Google indexed pages. Website Grader also suggests to the user things that could be changed to attract more visitors. Along similar lines, it also has products like the Twitter Grader and Facebook Grader, which help users assess their performance of their social pages on these media networks.

HubSpot earns revenues by charging a flat fee to its customers based on the contacts targeted a month. The fee ranges from $2,400 annually for fewer than 100 contacts targeted during that period to as high as $60,000 a year for two million contacts annually.

HubSpot has seen impressive growth in its financial performance. Revenues for 2011 grew 81% over the year to $29 million. More details about its earnings have not been publicly disclosed.

To date, it has received $65.5 million in venture funding from investors, including Dharmesh Shah, General Catalyst Partners, Brian Shin, Mike Volpe, Matrix Partners, Scale Venture Partners, Sequoia Capital, Google Ventures, and Salesforce.com.

HubSpot’s Acquisitions
Last year, HubSpot made two acquisitions to help expand its market presence. In June 2011, it added another marketing software company, Performable, to its portfolio. Performable was known for its marketing software platform that helped businesses with marketing, sales and customer service efforts. Performable’s customers could get insight into their marketing programs across multiple online and mobile media including e-mail, the web, and the social media. Its tools enabled clients to initiate marketing campaigns based on real-time customer behavior. HubSpot leveraged the acquisition to improve conversion ratios for its clients.

In August 2011, it acquired social business management platform Oneforty. Oneforty was a startup founded in 2009 as an app store for Twitter. Oneforty helped businesses to manage their social media efforts. Initially, it offered an e-commerce marketplace that enabled third-party developers to sell apps on the Twitter platform. More recently, Oneforty’s B2B platform helped businesses understand the intricacies of managing social media advertising.

HubSpot is now getting ready for an IPO. It recently hired a new CFO, JD Sherman, from Akamai to help it prepare. A year ago, analysts pegged its valuation at more than $260 million. Analysts expect to see the IPO by next year. If we estimate 2012 revenues to be in the $50 million range, followed by 2013 at about $80 million, the IPO could come in at about $750 million-$800 million.