HubSpot, an eight-year-old marketing software company in Boston, has filed for an initial public offering that looks to raise as much as $100 million.
HubSpot was founded by Dharmesh Shah and Brian Halligan to address the shortcomings of marketing companies that were working with startup companies. The goal of the company is to centralize different tools for marketing automation and search engine optimization into a single platform to increase the effectiveness of inbound marketing.
Inbound marketing is a kind of marketing campaign that companies create to attract the attention of customers using different channels such as of Facebook posts and Twitter updates. In comparison, outbound marketing forces the company's message onto the customer, such as when a company releases a TV advertisement.
In its filings for the IPO, HubSpot said that it has 11,500 customers, with 2013 revenue of $77.6 million, representing 50 percent growth compared to 2012. The growth rate has been maintained by the company so far this year, with the company posting revenues of $51.3 million in the first half that is a 46 percent increase compared to the first half of 2013.
However, unlike most subscription companies upon their choice to file an IPO, the company is not making any profit. HubSpot lost $34.4 million in 2013 and has lost $17.7 million for the first half of this year.
The losses stem from the fact that subscriptions to software usually take several years to offset the initial losses.
According to HubSpot, the usual customer of the company is a medium-sized business that employs between 10 to 2,000, with the business paying $8,823 on average per customer, per year.
The IPO will be another major win for technology companies in Boston, as e-commerce company Wayfair similarly filed for an IPO just a few days ago. However, the biggest winners for the HubSpot IPO will be the company's two largest investors, who are venture capitalists Larry Bohn and David Skok. Bohn owns 27.1 percent of HubSpot and first invested back in 2007, while Skok owns 17.1 percent and first invested back in 2008.
HubSpot is intending to use the money to be raised by the IPO for research and development, acquisitions, and general corporate purposes.
Back In February, the Wall Street Journal speculated that the market valuation of HubSpot could reach as high as $1.3 billion, which is lower than the value of $1.7 billion held by marketing automation company Marketo back then. Marketo, which was already public at that time, reported better growth than HubSpot with revenues of $95.9 million on growth of 64 percent last year. However, Marketo's losses reached $47.4 million, and the company continues to report losses even after one year of its IPO.
The stock of Marketo has since decreased by about 33 percent, and so HubSpot may have an initial value less than what was reported back in February.
HubSpot's founders will not reach billionaire status with the IPO for sure, however, as Halligan only owns 5 percent of the company and Shah only about 9 percent.