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Hubspot CEO Brian Halligan on M&A Strategy, Lessons from PTC and Groove, and Boston as the “Next Madison Avenue”

March 18, 2011
Xconomy
by Gregory Huang

They are the “Mad Men” of the future—the guys (and gals here in the 21st century) at marketing-tech companies like HubSpot, Constant Contact, DataXu, BzzAgent, Demandware, and Performable.

I’m not a big fan of the show, so I won’t take the analogy much further. But perhaps Brian Halligan, the co-founder and CEO of Cambridge, MA-based HubSpot, could be called the Don Draper of Boston. (Or maybe the title is reserved for his co-founder, Dharmesh Shah.)

“We missed the PC, and the Internet,” Halligan says of the local tech scene. But, he adds, “I think there’s a marketing revolution. I want Boston to be the next Madison Avenue.”

That’s an interesting spin on the burgeoning Boston-New York startup rivalry (and collaboration, if you listen to the kumbaya crowd). I sat down to pick Halligan’s brain last week, as his company is coming off a big venture round—a $32 million Series D led by Silicon Valley investors Sequoia Capital, Google Ventures, and Salesforce.com. Halligan had some unique perspectives to share on where his company is headed—look for an acquisition soon—as well as where he’s been as a tech executive, and how that has shaped HubSpot’s strategy.

HubSpot, which is up to around 200 employees as of this month, makes Web marketing software that helps small and medium-sized businesses turn their websites into search engine- and social media-optimized selling machines. Although you probably haven’t heard of most of its customers, there are a lot of them—enough for HubSpot to generate revenue at a run rate of $25 million a year.

That’s not big enough for the five-year-old firm to go public yet, but it does raise the question of why HubSpot decided to raise the new VC round. Besides the usual platitudes of what the new investors bring to the table (and their track records), it’s clear HubSpot wants to “go big” and dominate the marketing world, which seems ripe for the taking.

One interesting point that Halligan revealed is that this strategy will probably include an acquisition. HubSpot will “try to do some M&A,” he says. “We’ve been looking around, and we’d like to buy a company.” (I’m not deep enough in marketing tech, but perhaps a complementary firm like BzzAgent or Demandware could be a candidate, or, in the Valley, a startup like Marketo—pure speculation on my part.)

What also grabbed me was Halligan’s lessons learned from his previous experience at Boston-area firms Parametric Technology Corporation (PTC) and Groove Networks. At PTC in the 1990s, he worked in Tokyo and Hong Kong, building up the design company’s Asian business. There he learned to think independently. “It was pre-Internet,” Halligan says. “You’re completely isolated, you have to make your own decisions, you can’t rely on anyone else. Your boss was many time zones away. You’re really on your own.” He also took from PTC its sales-driven culture. The company was “very good at hiring young, aggressive people and teaching them how to sell,” he says.

Later, at Groove, Halligan learned from Ray Ozzie how to “skate way ahead of where the puck was” and build a business based on where the Web and its users were moving. At HubSpot, he says, “We’re trying to do the same thing in marketing” as Groove did for collaborative software tools. “We also saw the power of small business,” he adds. “We saw you could reach small businesses in a very effective way.”

I asked about challenges and missteps at HubSpot over the years. “It’s gone smoothly,” he says, with “little hiccups here and there, but no potholes. Those are probably still ahead of us.” Halligan did say that in the first two years, the startup “put too many venture dollars into sales and marketing, and not enough into product. Sales were great; the product wasn’t great.” He admits that might be because of his sales-focused PTC background. But since then, he says, “We caught up.”

Lastly, Halligan thinks HubSpot exemplifies an important shift toward more mature, founder-led companies. Instead of VCs investing in a young kid and then getting a veteran to run the company (“adult daycare”), he says, more founders are sticking around to lead their firms through their growth stages. Halligan, for one, doesn’t want to leave his baby anytime soon.

“I hope they take me out of here in a stretcher in 20 years,” he says.

Hubspot CEO Brian Halligan on M&A Strategy, Lessons from PTC and Groove, and Boston as the “Next Madison Avenue”

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