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 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?

4 thoughts on “Notes from the HubSpot S-1 IPO Filing

  1. I am amazed that a company with these metrics and low revenue can attract investors, especially for an IPO. So many more attractive investments in the marketplace. I think the market is overheated right now and deals like this will bottom out once the dotcom 2.0 sass rise and fall bottoms out. How much are they raising through the offering anyway and what net cash position does this offer them and what will they do with the cash, fund further losses?

  2. Great summary. Thank you for doing this. The CAC (customer acquisition cost) is unsustainable and might indicate that there has been a build up in sales and marketing expense in the last 6 months. David Skok addresses a similar scenario in his famous SaaS metrics post at However, it is understandable why a company filing an S-1 cannot make an adjustment to their CAC calculation to better reflect their actual acquisition cost.

  3. Great summary – one note to your comments. In the old worlds of publishing and direct mail one of the “rules of thumb” in running these types of businesses: “you lose money on the first order (acquisition) – break even on the second order (conversion as in customer conversion NOT lead conversion) – and make money on the “3rd order” or in publishing or subscription models the “3rd term”. This is clearly what HubSpot is experiencing. They lose money on acquisition, break-even on conversion (and I’m being generous here since they have piled up a large stack of losses and they appear to be using an “unloaded” cost analysis on their acquisition/conversation metrics); and finally make money on the 3rd term (assuming long-term cost controls and 88% revenue retention.

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