HubSpot, the Cambridge, Mass.-based purveyor of content marketing tools, filed for a $100M IPO this week. This is one of the most significant IPOs in the marketing technology world since Marketo went public in 2013, so we'd better pay attention.
What's the Big Deal?
We live in a world's fair of marketing technology. There are now about 1,000 marketing automation vendors. Many of these companies are venture capital financed, but few will make it. My guess is that 90 percent of the 1,000 other marketing technology companies will go out of business.
HubSpot is one of the more successful venture-backed marketing tech (MarTech) companies. It has had immense revenue growth, it's got an active and growing user base, and its own marketing techniques generate a lot of buzz.
It's important to point out that although HubSpot is growing rapidly — revenues increased from $28.6 million in 2011 to $77.6 million in 2013 — it's still not profitable. The company had $17.7 million in net losses for the six months ending June 30. But there is no doubt that it has emerged as a market leader, with more than 11,000 paying customers and 1,900 marketing agency partners.
HubSpot's S-1 statement, which companies vying to go public must file with the US Securities and Exchange Commission (SEC), was a good read on the history of the company. It also yielded many insights into the company's success.
Here are the five secrets of success I gleaned after reading the S-1.
- Hubspot Leads the Content Marketing Movement — There is probably no hotter trend in marketing then "content marketing," in which you align potential customers with interesting content and force them to download a form so that you can capture their email addresses and then pummel them with a barrage of sales calls. Cool. HubSpot became a leader in this movement. It is a great marketer of content marketing. It's leaders have been militant evangelists about content marketing. They have been great content marketers about content marketing. From the S-1:
Our founders, Brian Halligan and Dharmesh Shah, wrote the best-selling marketing book Inbound Marketing: Get Found Using Google, Social Media and Blogs. We also have one of the largest social media followings in our industry, and our INBOUND conference is one of the largest inbound industry conference events."
- HubSpot Picked its Market Well — HubSpot uniquely positioned itself in a good market that many ignored, HubSpot decided not to do battle with software and MarTech Goliaths and go after large enterprise accounts. Instead it focused on growing small and medium size businesses (SMBs) and mid-market firms. This was a play out of the Salesforce.com playbook. This strategy paid off big time. From the S-1:
We focus on selling our platform to mid-market businesses, which we define as businesses that have between 10 and 2,000 employees. As of June 30, 2014, we had 11,624 customers, and in the second quarter of 2014, our average subscription revenue per customer (on an annualized basis) was $8,823. According to AMI Partners, in 2013, there were 1.6 million of these mid-market businesses with a website presence in the United States and Canada and 1.3 million in Europe. According to a January 2014 study by Mintigo of 186,500 US-based B2B companies of varying sizes, only 3% of those companies had implemented any of the most common marketing automation applications."
HubSpot understood something may larger software vendors did not: There was a huge untapped market for SMBs that wanted powerful, reasonable, and easy-to-implement content marketing software. And they wanted marketing automation that didn't require an army of IT experts to spend months integrating with other platforms. That leads me to the next secret of success …
- HubSpot Integrated Disparate Tools — HubSpot figured out something very early in the game: There wasn't one really easy-to-use tool to set up a fairly basic content marketing system. Back to the IT headaches: Many companies were forced into integrating complex, disparate applications to set up a content marketing machine. Content Management Systems (CMSs) were good at managing content, but not necessarily great at managing marketing databases. HubSpot's innovation was to combine content management and inbound marketing, and set up a system designed for this. From the S-1:
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