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HubSpot files for $100M IPO (betaboston.com)
56 points by moritzplassnig 838 days ago | hide | past | web | 30 comments | favorite



S1 filing here:

http://www.sec.gov/Archives/edgar/data/1404655/0001193125143...

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.


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.


> 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.


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%


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...


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/ 2 - https://github.com/HubSpot/odometer


Interesting library of gadgets. Thanks for linking them.


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


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.


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?


Reducing sales headcount is expected to reduce revenue.


They should be OK thanks to their credit line: http://betaboston.com/news/2014/08/26/hubspot-ipo-cash-short...


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?


1) Because members of the public think that the company will succeed in becoming profitable.

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.


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


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


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.


Stock prices reflect investor expectations of what will happen, not just the current state of the business.


"Something is only worth what others are willing to pay for it."


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.


>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...


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.


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.


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.


I don't know where did you get that rule? There are a lot of public software companies without $100M ARR. For example Boulder darling Rally Software has been slowly growing from $30M to $75M in yearly revenues over 4 years https://www.google.com/finance?q=NYSE%3ARALY&fstype=ii&ei=Xn...


In SaaS it's about $60m ARR with 40%+ CAGR, actually.


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


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.)


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!


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




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