Sequoia, Google Ventures, and Salesforce.com Send Money East, leading $32 Million Investment Round in HubSpotMarch 08, 2011
by Scott Kirsner
HubSpot, the Cambridge marketing software start-up, is announcing its fourth round of funding today: $32 million from Sequoia Capital, Google Ventures, and software-as-a-service pioneer Salesforce.com. The money from that trio of West Coast backers brings HubSpot’s total funding raised to about $65 million; the company’s Boston-area investors include Matrix Partners, General Catalyst, and Visible Measures CEO Brian Shin.
HubSpot coined the term “inbound marketing” (and its founders, Brian Halligan and Dharmesh Shah, published a book with that title.) Essentially, inbound marketing is the opposite of traditional “shotgun-style” broadcast marketing. Inbound marketing involves publishing informational content on Web sites, blogs, Twitter, and other social media platforms that helps prospective customers learn about your product or service. Then, HubSpot helps track the leads that come through those various channels, to see what’s most effective at turning prospects into paying customers. HubSpot sells a subscription to its Web-based software, starting at $3,000 a year for the smallest businesses.
It’s not commonplace for Sequoia Capital — which has funded Google, Oracle, Atari, and Apple, among others — to make an investment in Boston. Shah told me last night that he knew of only four other relatively recent tech investments the firm has made here: A123 Systems (public), Kayak (going public), ITA Software (perhaps getting acquired by Google), and Netezza (public, then acquired by IBM). (He missed one: Jeff Taylor’s social network for baby boomers, Eons, which laid off most of its employees last year and has lately been trying to sell off its component pieces.)
HubSpot’s current headcount is 192, and the company had expected to hire about 90 people this year — but that was before closing this latest funding round. Shah, the company’s chief technology officer, says that “we generally have an ‘open budget’ on product people (engineers, quality assurance, designers). As we come across great people, we always try to hire them.” (Shah joked that these days, his CTO title more accurately stands for “chief talent officer.”)
Raising this much money, said HubSpot board member Larry Bohn of General Catalyst, means that Shah and Halligan are “swinging for the fences,” trying to build a substantial company in Cambridge. (They’ve apparently had some acquisition talks, which haven’t gone very far.) “The two strategic investors that really matter for them are Google and Salesforce, and they got both of them to invest together for the first time ever in this round,” Bohn says.
Apparently, this latest funding round also helps the two founders cash out some of their stock in HubSpot — a transaction that many investors see as key to building a company for the long-term, since it reduces the appeal for the founders of selling to achieve a quick payday.
Shah tells me that the initial introduction to Sequoia happened through David Skok of Matrix, who introduced CEO Brian Halligan to Sequoia’s Jim Goetz. Shah explains: “Brian coordinated doing an informal meeting during a West Coast trip he made right before Christmas. The second sentence from Jim (after the introductory hello) was, ‘what’s it going to take for us to own a piece of HubSpot?’ They had been following the company for a while…”
At Google Ventures, Cambridge-based partner Rich Miner oversaw the HubSpot investment.