
HubSpot files for $100M IPO - moritzplassnig
http://betaboston.com/news/2014/08/25/hubspot-files-paperwork-for-its-initial-public-offering-of-stock/
======
bceagle
S1 filing here:

[http://www.sec.gov/Archives/edgar/data/1404655/0001193125143...](http://www.sec.gov/Archives/edgar/data/1404655/000119312514320044/d697256ds1.htm)

Hubspot has always been a high burn rate business and it looks like it may be
catching up to them. According to TechCrunch
([http://techcrunch.com/2014/08/25/with-money-tight-hubspot-
lo...](http://techcrunch.com/2014/08/25/with-money-tight-hubspot-looks-to-tap-
public-markets/)):

HubSpot’s slim cash load and expanding losses — the firm had a deficit
attributable to common shareholders of $16.37 million in the first six months
of 2013 — are contravened by its rising revenues: HubSpot had revenue of
$51.27 million during the first two quarter period of the year, compared to
$35.08 million in the preceding-year calendar period. HubSpot’s days of hyper-
growth appear to be mostly behind it.

The theory is that they can control their burn rate and become profitably, but
I am not so sure. As great as their software is, selling marketing software is
a tough business and there is a lot of competition. Their S1 filing seems to
indicate that they plan on keeping the burn rate high after the IPO in order
to compete.

~~~
nobody_nowhere
The challenge hubspot and some related business face is heavy reliance on
service. In their case, it seems like most of the business is "coaches" to
help SMBs with their content/inbound marketing. The amount of
software/technology behind it is questionable.

Seems like the investment strategy is to go long within the first 60-90 days
and then dump it once the public markets get hip.

~~~
patrickk
> In their case, it seems like most of the business is "coaches" to help SMBs
> with their content/inbound marketing. The amount of software/technology
> behind it is questionable.

This is absolutely spot on. Lots of webinars, on-boarding, weekly training,
more training than software oriented.

Source: someone who was trained up on Hubspot software in a startup.

------
danielpal
This is a good company. Just look at the numbers. Revenue is growing really
well. Their biggest expense is head-count and this year they will almost break
even (they are on route to 105M). This will also be the year were expenses
growth will be the smallest(23%). 2013 they simply grew very fast - which was
quite expensive (59% increase).

This year they are growing revenue really well, while their expenses are
moderately increasing(less than half of last year). There is a very clear path
to profitability in less than 24 months.

Revenues:

2011 —> 2012 -—> 2013 -—> 2014

    
    
    	 80% -—> 50% —-> 35%
    

Costs:

2011 —> 2012 —> 2013 ——> 2014

    
    
             35% —> 59%  ——> 23%

------
idlewords
I loved this bit from the TechCrunch article:

"The stock market has shown something akin to reticence in recent quarters
when it comes to companies looking to go public that have large, sustaining
losses."

[http://techcrunch.com/2014/08/25/with-money-tight-hubspot-
lo...](http://techcrunch.com/2014/08/25/with-money-tight-hubspot-looks-to-tap-
public-markets/)

------
xfalcox
The only thing I know about they are the projects[1] on github on frontend
stuff.

Their odometer[2] saved me on my last project, bussiness people love it.

1 - [http://github.hubspot.com/](http://github.hubspot.com/) 2 -
[https://github.com/HubSpot/odometer](https://github.com/HubSpot/odometer)

~~~
grinnick
Interesting library of gadgets. Thanks for linking them.

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imjk
Wow, with a quarterly loss of $17MM, and having raised only $100MM, they
really NEED this IPO to sustain operations at their current level.

~~~
danielpal
No they don't. They have a $35M credit line that should get them 12 months.
Further, most of their expenses are around Sales and Marketing, and further
the increase in their expenses is mostly more head-count (not ad's etc.)

Reducing the sales headcount to last years head-count and they would be
profitable by end of year.

~~~
jpmattia
Funny. I would have guessed that a profitable company would garner a higher
valuation, especially since they don't need money, yet the company is pushing
for IPO now.

I wonder why they elected to sell themselves short?

------
rokhayakebe
These are honest questions:

1) Why should the public fund a company that could not get to profitability
before its IPO?

2) Why, in public markets, a business with $1B in revenue and $10M in net loss
has a higher valuation than a business with $30M in revenue and $10M in net
income?

~~~
jliptzin
You can short the stock if you disagree with its valuation.

~~~
rokhayakebe
But shorting does not speak of the value as much as what others are willing to
pay.

~~~
tg3
Value is only what someone is willing to pay for an asset. Shorting the stock
allows you to profit off of your knowledge that the stock is overvalued
compared to what the market thinks.

But remember, the market can stay irrational far longer than you can stay
solvent.

------
BorisMelnik
Hubspot has a ton of assets to speak of that are taking off and not yet
monetized at all or to their full capacity. Inbound.org, for instance is the
HN for inbound marketing and has attracted a huge user base in their short
existence. Tons of plans to monetize that and of course, drive more customers
to their services.

They also have a great conference, coming up I beleive in Boston that is also
not too shabby. Their content brand is also very much on point, their blog is
a huge resource and ranks for basically any inbound/SEO type of query you
could think up.

I'm not trying to argue against their profitability or growth, but Hubspot is
a good company that has a lot of tricks up their sleeve. Dharmesh is also an
extremely savvy individual who has elected a very capable CEO.

I don't know if I'd buy shares of Hubspot or not, but I will keep my eye on
them.

~~~
halcyondaze
>Inbound.org, for instance is the HN for inbound marketing and has attracted a
huge user base in their short existence.

I agree, the userbase is high, but relative to their current revenues, even a
well monetized Inbound isn't going to make a dent in their rev.

Also, the quality of the site is fairly low in my opinion.

Currently on the trending is a 2013 AMA from Rand. Over a year ago, the
content is still on the homepage.

Dharmesh also recently posted a discussion about the ranking power of
subdomains vs. subfolders. The CTO and founder of a company losing tons of
money every quarter that doesn't have enough to last if they DON'T IPO is
talking about a somewhat trivial (in the grand scheme of things) ranking
factor [1].

[1] [http://inbound.org/question/view/it-s-2014-what-s-the-
latest...](http://inbound.org/question/view/it-s-2014-what-s-the-latest-
thinking-on-sub-domains-vs-sub-directories)

------
soundlab
As a bootstrapped startup I was a bit skeptical of their pricetag but once I
dedicated a full time person to train and exclusively work on it I've been
incredibly impressed. Huge ROI and a strong increase in inbound leads
requiring us to ramp up sales. Integrates well with Salesforce and they have a
very rigorous onboarding program that must be contributing to that high burn
rate. Glad to see a SaaS IPO in Boston stick around- they could well have been
acquired years ago.

------
programminggeek
It seems that simple, profitable business models are hard to come by these
days with tech startups, especially in the SAAS space.

~~~
patio11
The common counterargument to this is that investors want to buy growth, not
profits, and to maximize valuation you should give them what they want.

Profitable SaaS businesses are not rare. Profitable SaaS businesses which do
$50 to $100 million recurring within fiveish years of founding? Those are
pretty rare. (Most HNers could, if they thought through it carefully, name one
example.)

~~~
ovi256
I thought you were going to say "Most HNers could, if they thought through it
carefully, create one" and I judged it over-optimistic. How over-optimistic I
was!

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rdl
How is this happening? I thought the rule of thumb was $100mm/yr run rate and
profitable before IPO, now. This business violates all of that.

~~~
ripberge
You could also chalk this up to a global asset bubble. With all of these
federal banks trying to keep interest rates down, money needs to be gambled on
riskier investments in order to get any return. That's why it's now plausible
for a company like this go to public. Have a look at ECOM. Almost the exact
same story.

The sad thing is, a lot of pension money will probably be put into these
"technology" stocks which are a lot of smoke and mirrors.

I am very familiar with ecommerce and SEO and hearing analysts and investors
talk about these types companies is pretty astounding. The people investing
tons of money in them have very little understanding of what they actually do.

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ehurrell
Great to see. I was recently in their Dublin office, they seem to be doing
interesting work, and doing it well.

