Notes from the HubSpot S-1 IPO Filing

HubSpot just filed their S-1 to go public and I’m excited to dive into it. HubSpot has been in the B2B online marketing space slightly longer than Pardot and has awesome co-founders in Brian Halligan and Dharmesh Shah. Dharmesh is truly the king of content marketing with his excellent slide shows, best-selling book Inbound Marketing, and huge OnStartups.com community.

HubSpot started out as a blogging platform before adding search engine optimization functionality and finally becoming a marketing automation platform. As HubSpot became more focused on marketing automation, Pardot and HubSpot started to see each other more often in the market and had a few partnership discussions before we ultimately decided we were heading down a path of direct competition.

Here are notes from HubSpot’s S-1 IPO filing:

• 11,624 customers and 1,900 marketing agency partners (pg. 1)
• Focused on the mid-market (pg. 1 — this is a change from a few years ago when they were small business focused)
• Revenue (pg. 2)
  2011 – $28.6 million
  2012 – $51.6 million
  2013 – $77.6 million
  2014 1H – $51.3 million
• Losses (pg. 2)
  2011 – $24.4 million
  2012 – $18.8 million
  2013 – $34.3 million
  2014 1H – $17.7 million
• Mid-market defined as companies between 10 and 2,000 employees (pg. 2 — this is a very broad definition of the mid-market)
• Average revenue per customer is $8,823 per year (pg. 2)
• 20% of customers outside the U.S. (pg. 4)
• Professional services revenue (pg. 6)
  2011 – $2.8 million
  2012 – $5.7 million
  2013 – $6.8 million
  2014 1H – $4 million
• One major risk factor is the inability of customers to create content to make blogging, social media, and inbound marketing in general worthwhile (pg. 10 — regularly writing good content is a serious effort)
• 719 full-time employees as of June 30, 2014, up from 304 as of December 31, 2011 (pg. 12)
• Accumulated deficit of $123 million (pg. 39)
• More than 90,000 individuals with a free or paid Signals account used the Signals product during June 2014 (pg. 47)
• 88.6% annualized subscription dollar retention rate (pg. 47)
• $11,334 cost of customer acquisition (pg. 48 — it’s awesome that they are so transparent with their renewal rates and cost of customer acquisition)
• $7.3 million in cash on hand and negative $22 million in working capital (pg. 60)
• Great letter from the founders that describes the background of the business and the big vision (pg. 71)
• Seven core principles of the HubSpot Culture Code (pg. 88)
  We are maniacal about our mission and our metrics.
  We empower every employee, at every level, to “Solve for the Customer”.
  We are radically transparent.
  We give ourselves the autonomy to be awesome.
  We are unreasonably picky about our peers.
  We invest in individual mastery and market value.
  We constantly question the status quo.
• Venture capitalists own 66.3% (pg. 110)
• Founders own 13.7% (pg. 110)
• Co-founder/CEO owns 4.9% (pg. 110)
• Note: The S-1 made no mention of competitors like Pardot and Marketo, which is unusual for this type of document.

Overall, I expect this IPO to be very successful due to the excellent team, large market opportunity, current growth rate, and awareness of the company within the online marketing industry. Look for HubSpot to have a market capitalization in excess of $1 billion shortly.

What else? What are some other thoughts on the HubSpot S-1 IPO filing?