The Story of HubSpot: Day 1 to IPO

Author: Mathew Abraham

HubSpot is an American developer and marketer of software products for inbound marketing, sales, and customer service. The Company offers integrated applications that helps in lead generation and social marketing. It was founded by MIT graduates, Brian Halligan and Dharmesh Shah in 2006. The company started out in Boston as one of the many marketing services product enterprises in the sector. Itts growth story from being valued at a few thousand dollars to now being worth almost 30 dillion dollars, is a classic rags to riches story. We’ve traced the journey of the company from its inception to the present day. We’ve also looked at the hurdles the Company faced along the way, and the factors that worked out in their favour. Interested to know more? Read on! 

Initial growth phase (2005-2010)

In 2004, Brian and Dharmesh, fellow graduate students at MIT, realised that consumers no longer wanted marketing to be loud or interruptive. But rather, looked for services that genuinely added value to their requirements, as opposed to interruptive bids for their attention. It was from this idea that HubSpot was born. It was focoused on the idea of “inbound”, the notion that people don’t want to be interrupted by marketers or harassed by salespeople — they want to be helped.

In 2005, they started with a blog to provide useful content and also showcase how HubSpot works. The idea behind starting with the blog before their product was to build a community of users, while displaying the functioning of HubSpot. In 2006, they created their product – HubSpot. They received a seed fund of 500,000 USD, which they used to build their product. 

The idea of the company is simple. HubSpot creates various software products for inbound marketing and sales purposes. These software tools are aimed at being B2B solutions and the tools allow their business customers to capture leads, drive sales and educate customers through content. The primary revenue stream for HubSpot is from charging customers for using the premium features of their software tools. These are divided into so-called hubs and tailored towards different parts of the sales cycle.

Slowly but surely, HubSpot began to see an increase in its consumer base. In 2007, the company reported 255,000 USD in revenue. The funding round they organized in 2007 was also hugely successful and the company managed to raise 5 Million USD in the Series A funding round with the investment from General Catalyst. 

Second Growth phase (2009-2014)

Between 2008, and 2009, the company raised close to 30 Million USD in Series B and Series C financing rounds. Matrix Partners and Scale Venue Partners were respectively, the lead investors for these funding rounds. By 2010, the company reached the million-USD revenue mark, and made 15.6 Million USD in revenues.

This ensured the massive success of their Series D funding round, where HubSpot raised 32 Million USD from the likes of Sequoia Capital, Google, and Salesforce.

In 2011, HubSpot made their first acquisitions, acquiring Oneforty, a social business management platform, and Performable, a marketing software company. Oneforty started out as an app marketplace for twitter, and allowed creators to sell their apps on the Twitter ecosystem, however, it would be later integrated into the HubSpot marketplace. Performable operated in the same marketing software sector as HubSpot, and the acquisition of Performable infused more talent into HubSpot while also reducing the presence of one competitor in the market. 

In 2012, with their Series E funding, they raised 35 Million USD and expanded their operations further. HubSpot acquired Chime, a notification center for browsers, and PrepWork, a personal research assistant that briefed users on their appointments in 2013. These acquisitions, not only expanded the footprint of the company, but also added new functionalities to their products, which helped them diversify their customer base from exclusively small businesses to upmarket businesses employing more than 1000 people. 

IPO and growth post-IPO (2014 onwards)

In 2014, HubSpot decided to go public to help with cash-flow needs and gain additional funding for expansion. They launched with an impressive IPO raising $125 million in fresh capital and leaving the company with a market valuation of $880 million. During the time of its IPO, HubSpot had more than 11,500 customers and had reported a revenue of $77.6 million on 50% year-to-year growth. That growth had held about steady with the company taking in $51.3 million, an increase of 46% year-to-year.

However, it hadn’t always been smooth sailing for HubSpot. In July 2015, HubSpot’s CMO, Mike Volpe, was dismissed for violating HubSpot’s code of business conduct. It was found that he tried to obtain a draft copy of the book Disrupted: My Misadventure in the Start Up Bubble, written by his former employee Daniel Lyons. According to an article in The Boston Globe, records obtained under the Freedom of Information Act indicated that HubSpot executives considered the book “a financial threat to HubSpot” and Volpe used “tactics such as email hacking and extortion” in the attempt to prevent the book from being published.

In April 2016, after his book was published, Lyons wrote in The New York Times that HubSpot had a “frat house” atmosphere. He also called the company a “digital sweatshop” in which workers had little job security. Later that month, HubSpot’s founders gave an official response to the book, in which they addressed several, but not all, of Lyons’ claims. Although this didn’t damage the company’s reputation in the long-run, since consecutive journals and magazines repeatedly rated it as one of the best places to work, it did affect the company’s stock prices in the short-term. 

In 2017, HubSpot decided to get in on the AI wave. It made a series of acquisitions of AI products that would help it develop automation solutions to marketing, and created its own AI chatbot eventually. In 2019, HubSpot acquired Acenna data, a product using Machine-Learning solutions to increase sales productivity for field sales. These innovations were incorporated into HubSpot’s own offerings, increasing the value-added by its products even further. 

In 2019, HubSpot diversified into the Ed Tech space, launching HubSpot Academy, which provided courses and training on inbound marketing and sales. Between 2020-21, in the period of the pandemic, as all businesses were forced to move online, HubSpot saw a tremendous increase in revenue and valuation. The stock price of HubSpot rose by 66% reaching a high of almost 860 USD in September 2021. 

In 2021, Brian Halligan, one of the founders, stepped down as CEO, and opting to remain as the Executive Chairman of the Company. Yamini Rangan, was named his successor, and became the first non-founding member of the company who became the CEO. 

Reviewing HubSpot in 2022

Today, the company is a giant, valued at close to 27 Billion USD. However, tracing its humble beginnings, this valuation might have just been a dream for the founders. One of the crucial factors that worked in HubSpot’s way was their focus on not being intrusive with their marketing, and making that their focal point. The idea of inbound marketing that they developed continues to guide the company. 

Despite their growth and expansion, the fundamental philosophy of HubSpot continued to remain the same – inbound marketing by understanding user needs and catering to them silently, without loud and interruptive sales or marketing tactics. Shah, the founder of HubSpot attributes HubSpot’s success with retaining customers to this fundamental philosophy. Further, given their focus on inbound marketing, they were able to carve a niche for themselves in the market since marketing/sales were largely seen to employ “don’t take no for an answer” tactics to get customers. 

Further, given this philosophy, they were able to understand consumer behaviour from the data they had, and could constantly tweak their products to stay relevant in the market, and cater exactly to the needs of their consumers. 

Final Thoughts

We often think that one must be ruthless to succeed in business. HubSpot’s success story is but one of the many real-life examples that this needn’t be the case. By sticking to their fundamental philosophy of putting the customer first, by truly understanding consumer needs, they have succeeded in creating an ecosystem that builds a community and helps businesses grow better everyday. The bottom line from the story of HubSpot is to identify and stick to your fundamental philosophy, and success will automatically follow.

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