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...):
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.
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.
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.
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.
2011 —> 2012 -—> 2013 -—> 2014
80% -—> 50% —-> 35%
2011 —> 2012 —> 2013 ——> 2014
35% —> 59% ——> 23%
"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."
Their odometer saved me on my last project, bussiness people love it.
1 - http://github.hubspot.com/
2 - https://github.com/HubSpot/odometer
Reducing the sales headcount to last years head-count and they would be profitable by end of year.
I wonder why they elected to sell themselves short?
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?
2) Because if you can get 10% profit on your $1B in revenue, that's $100M, on $30M it's $3M.
Investment is always about looking towards the future, and predicting how well the company will do.
But remember, the market can stay irrational far longer than you can stay solvent.
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.
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 .
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.
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.)