Holy Crap! HubSpot Has Now Raised A Total Of $33 Million

About This Blog

This site is for  entrepreneurs.  A full RSS feed to the articles is available.  Please subscribe so we know you're out there.  If you need more convincing, learn more about the site.



And, you can find me on Google+

Connect on Twitter

Get Articles By Email

Your email:


Blog Navigator

Navigate By : 
[Article Index]

Questions about startups?

If you have questions about startups, you can find me and a bunch of other startup fanatics on the free Q&A website:


Subscribe to Updates


30,000+ subscribers can't all be wrong.  Subscribe to the OnStartups.com RSS feed.

Follow me on LinkedIn


Current Articles | RSS Feed RSS Feed

Holy Crap! HubSpot Has Now Raised A Total Of $33 Million


It has been a little over a year since I announced the news that my marketing software startup closed it’s Series B round of funding.  The article, “Insanity? Why A Bootstrap Entrepreneur Raised $17 Million in Venture Funding”, was a candid glimpse into the rationale for raising what seemed like a huge amount of money to me at the time (it seemed huge, because it was — at least to me).

Today, we’ve released news that HubSpot has just closed on another $16 million funding round (our Series C) bringing our total capital raised to a whopping $33 million. 

As I write this, I’m a bit worried that this article is going to come off as arrogant and/or self-indulgent.  I promise that’s not my intent.  I’m just going to let you “inside my brain” in the hopes that some of you will find the excursion interesting, amusing or useful.  Although not all of you are out raising money (thank goodness!), I thought you might want an insider’s view on why an otherwise rational and pragmatic entrepreneur would make this kind of leap.  I promise, the decision to raise this kind of money wasn’t as crazy as you might think.

The Story Of How I Ended Up Raising $33 Million In Funding

1. Did we need the cash?  No, we didn’t need the cash.  We had over $6 million in the bank.  But, if I’ve learned one thing about VC fund-raising it’s that not needing to raise money helps a lot. 

2. Why raise money at all?  As the company has evolved, we’ve learned a lot about the mechanics of our business.  We have gotten pretty good not just at predicting our growth path — but actually solving for it.  There’s no better way to illustrate this than with the graph below:

HubSpot Growth Chart

This graph shows the number of customers (people that pay us money) over time.  Note that our revenue curve is  even better than this (because the average revenue per customer has steadily gone up over the same period).  In short, things have been going pretty well.  As we’ve gotten more visibility into the business, we’ve gotten good metrics around the drivers in the business.  The two most important are:  COCA (cost of customer acquisition) and LTV (lifetime value).  We’ve worked hard to ensure that COCA < LTV.  And, this margin is getting better over time.  Given that we’ve got a decent handle on things, it made sense to further invest in the business so that we can continue to scale it.  Once we found a model that works, we figured it would be a good idea to iterate, execute and scale it.  As I’ve noted here in the past, we’re swinging for the fences with HubSpot and have not backed off of that position one iota. 

3. Should we raise now or wait?  OK, fine that we decided to raise money, but why now?  Given the state of the economy over the past year, some thought we were raising too early.  The business has been growing exceptionally well.  The question was:  “Why not wait until the economy improves, the business is even further along, and raise at better terms?”  That was a good question.  Our primary argument was that we didn’t want to wait too long, because the longer we waited, the less leverage we would have (see #1 above).  It was not a particularly easy decision.  We’ve been fortunate to have great investors in the company (General Catalyst and Matrix Partners) who have been exceptionally supportive.  We were reasonably confident that had we waited until next year, we would likely have had no issue raising funds.  But, even during our best times, we’re cautiously optimistic at HubSpot.  A few factors we were pondering:  1) Would the economy really improve?  If so how, when, how much, and for how long?  2) Even if the economy improved, what would the VC industry look like next year?  (We had already witnessed a fair amount of shake-out and expected more).  3) Even if things did get better, how much better would the deal be then vs. now?  How much should we discount back for risk?  4) How would a “wait until later” approach impact our decision-making in the business right now?  Would we take appropriate levels of risk or as time passed, would we start to act with increasingly more conservatism? 

After all was said and done, we decided that there was a price (or more accurately a “set of terms”) at which we’d be willing to do a deal now, instead of waiting until later.  We were able to beat that “minimum bar” (by a relatively large margin), so it made sense to do something now.  Of course, in these situations, it’s never “knowable” as to whether we made the right decision or not.  But, we’re relatively comfortable that we at least made a pretty thoughtful decision. 

4.  Did you really need to raise that much?  Not really.  Our model and plan called for significantly less than this.  But, the other important thing I’ve learned about venture fund-raising is that you should always raise more than you think you need to get to the next milestone.  We had a model and plan in place that would make this the last venture round we’d need.  But, given the terms on the table, it made sense to leave ourselves some wiggle room and buffer.  This increased the probability that we’d be able to get to where we wanted — even if things didn’t quite go precisely as planned (which they rarely do).  And, it’s painful to go through the fund-raising process, so if you can condense things into fewer rounds, it saves a lot of pain and agony.  We had the opportunity to raise more than we needed, with pretty “entrepreneur friendly” terms — so we took it.

5.  What are you going to do with all that money?  Well, we’ve always been pretty capital efficient.  One quick calculation I’ve been doing in my head since the early days of starting the company is this:  Figure out your run-rate annual recurring revenue.  Multiply this by some conservative industry multiple (somewhere around 3X).  Then, make sure that the total money you’ve “consumed” is less than this number.  When it is, you’re basically operating on an “accretive” basis (i.e. the actual enterprise value built — even if sold to a conservative financial buyer — is greater than the amount of money used to build that value).  In our case, we’ve been accretive from the early, early days.  And, despite our torrid growth, we’re still accretive now (revenues and associated “enterprise value” is growing faster than our rate of capital consumption).  So, back to what we’re planning to do with the money:  #1 product.  #2 product.  #3 customer acquisition.  We have a backlog of ideas that’s both uplifting and depressing at the same time.  There are so many great ideas for how we can deliver more value to our customers.  We plan to pick the best of these and execute on them maniacally. 

We are out to build the next-generation marketing platform.  

6.  So what’s next?  We’re also on to what we think is a massive opportunity that helps organizations capitalize on the major tectonic shift in the marketing industry.  It’s a really, really big deal.  But, with radical change comes the need for radical education.  And that kind of education takes committment — and capital.  We’ve got a burning passion to help people figure out how to better reach their potential customers by pulling them in.  This is what caused me to devote most of the Summer to write Inbound Marketing (a book that captures a lot of what I’ve learned about marketing by helping startups and small companies figure out how to “get found”).  But, enough about me.  Let’s talk abut you.  You’re likely in the startup game because you perceive something fundamentally wrong with the world that you know you can make better.  I know how you feel.  My advice is to dig in, understand the problem as well as you can — and go fix it

OK, so reading back through the article, it came off as more self-indulgent than I had planned.  But, it’s 2:00 a.m. here in Boston and I’m not sure investing more time is going to make the article much better.  Such is life sometimes.  I trust you’ll forgive me for this lapse.  It’s a big day for me and my team at HubSpot.  We’ve now got even higher expectations for ourselves than we had before.  Like you, we’ll be working hard to live up to those expectations.  I’ll close (once again) with my definition of success:

Success = Making those that believed in you look brilliant.

What do you think?  Did I do the right thing in raising all this funding or am I just rationalizing my behavior decision?  What would you have done?

Oh, and if you're a blogger/journalist/media type and are curious about details or want to write a story, feel free to email me at dshah {@} onstartups.com.  Would be happy to chat.

Posted by Dharmesh Shah on Mon, Oct 19, 2009


Congratulations. If you can close a round now then it makes perfect sense to do so. You are providing a GREAT service to paying and non-paying customers. I was always told if you are offered water in a desert, take a drink, even if you are not thirsty.

posted on Monday, October 19, 2009 at 9:34 AM by Mark Littlewood

Congrats! That's a lot of play money -- it will be fun to see how the product evolves. 
It is true that "inbound" is the future; people who don't get it will still have to live it...

posted on Monday, October 19, 2009 at 9:46 AM by Jason Cohen

Hi Dharmesh,  
This post was not at all arrogant or self-indulgent. I would rather say you are the only person who writes freely about his plans and successes. It is very enlightening to people like myself who are trying to set up their first start-up and having all these questions. 
Thanks for this post. 
I hope you will keep writing your (your company's) thought process.

posted on Monday, October 19, 2009 at 9:56 AM by Mihir

33-mil, thats' not chump change. 
Maybe you can invest $500,000 in my Frontier "Face" business development model which is a hybrid Independent sales rep organization/marketing company which offers cold calling direct sales in an "offline format" for small and start-up companies who cannot afford a real outside sales force and who don't want to get lost on an Independent Sales Reps organizations line card with similar products. 
Anyone interested in my new business model can contact me at: 
And I also have invented a product-treatment for psoriasis, a chronic skin disorder that requires funding and I cannot gain the attention of anyone in the Dermatology industry because my product works as well as the $12K to 25K a year products, but at a cost to the sufferer of under $1,500 per year, A PPP is available and I am seeking $500,000 investment for Frontier DermaSciences,LLC, viewed at:  
So its great to hear you raised 33million, how much income has your firm generated and are you profitable yst? 
Joe S.

posted on Monday, October 19, 2009 at 9:59 AM by Joe Simiriglio Jr

Well done and never turn down money! It's akin to never turning down a meal in the military. 
You never know when your next meal will be...

posted on Monday, October 19, 2009 at 10:43 AM by DefunktOne

Congrats on this and the new book Dharmesh. 
Thanks for your candidness. Good to see the Boston scene is still alive and kicking.. Also interesting to note that raising funds from VCs in the Valley doesn't mean you have to move there. =) 

posted on Monday, October 19, 2009 at 11:08 AM by Fred

Great to see that You Have Successfully Raised $33 Million.

posted on Monday, October 19, 2009 at 11:21 AM by

I'm a MIT Sloan first year and Hubspot (former) customer (before returning to school) who loves the product and the customer service. Truly enjoyed watching the company take off over the last few years. 
I don't quite get it. If you have $6MM in the bank and are cashflow positive or close to it (big assumption of mine I guess), why not use the $6MM for Product and Customer Acquisition? 
Keep up the fantastic blogging! 

posted on Monday, October 19, 2009 at 11:41 AM by Slava Menn

Congrats Dharmesh! Timing on the round was smart, and not just because you didn't need it. While this is somewhat counter-intuitive, great companies are currently raising capital at relatively aggressive prices from an investor perspective. Many investors are eager to put money to work, but there is a scarcity of deals that pass the higher bar that is set in a down market. Given that Hubspot is one of those unique companies, I imagine you were able to raise capital at a fair price.

posted on Monday, October 19, 2009 at 12:35 PM by Joe Medved

you are very generous  
on twitter

posted on Monday, October 19, 2009 at 1:27 PM by judy

Congrats Dharmesh. You and your company deserve it, and thanks for sharing, this, and all your thoughts and experiences!! They're immensely valuable.

posted on Monday, October 19, 2009 at 5:08 PM by Jon

One thing that was confirmed in your Blog is how one must continue to refine their plans and financial statements to reflect their objectives and the reality of their progress.That's why we built the Funding Roadmap as a server based in the cloud reporting system so your plans can stay courant with your progress. 
Dream It! Plan It! Launch It!  

posted on Monday, October 19, 2009 at 10:21 PM by The mapteam

Many thanks for the great insight into what drove your just closed $16mil round. Not many explain such things, but yours was quite educational. Congrats on your closing and on your Inbound Marketing book published today.

posted on Tuesday, October 20, 2009 at 12:28 AM by Tony Johnston

Great Post man! I def like the way you think. I hope the best for you. 

posted on Tuesday, October 20, 2009 at 2:02 AM by RyanBuke

Great book Dharmesh! I've been reading everything from your company and definitely get it! I'm a lowly little Social Media instructor in the state of Washington to Real estate and mortgage professionals and battling it out here on the inbound marketing frontier. 
It's been an educational process to bring awareness to the radical changes happening in marketing and your company and site and everything you guys publish has been instrumental in my learning/teaching process. 
It's inspired me to coin the phrase "Unique CONTENT Proposition" to many of my students and clients. My recent clients are beta testing a suite of best practices I've developed, in helping them craft great content in their inbound marketing efforts. During that process recently, we discussed the tried and true concept of developing a USP (unique selling proposition). 
Well, taking a chapter from your playbook, I said that it isn't about selling with the publishing mindset we're developing, it's about creating content that differentiates you from the rest of the competition. And borne from that was UCP - "unique content proposition." If a company can find it's UCP, they will have remarkable content worthy of resharing, reposting, and further build relationships! 
I'm also working as the Social Media Networking Consultant in a small startup (I say small, since their VC proposal is only requesting 1.5 mill) and what they have for the mortgage industry is quite unique. We have customers now, are poised for rapid growth and the key, main marketing tactic is through our educational efforts. I've teamed up with various entities to offer education to Real estate agents, mortgage professionals, and most recently to the consumers. Thanks to Hubspot for being an example of how educational efforts breeds business opportunities. 
To that end, it's about using all the newest techniques to create attention for ourselves via inbound marketing. Is it a challenge for a small startup company? ABSOFRIGGINLUTELY! But reading your post offers inspiration and positive reinforcement. 
Thanks for the great book and info here as always; it helps us to know what's inside your mind and how Hubspot ticks. If you find that all that VC $$ is taking up too much room in your safe, feel free to toss a few bucks towards us in Seattle, Washington! LOL 

posted on Tuesday, October 20, 2009 at 8:12 AM by Ed Bisquera

Just have to put the counter opinion here, too much agreement. :)  
I think it was a VC who said "I was always told if you are offered water in a desert, take a drink, even if you are not thirsty." 
They also said "Wouldn't you like to own 3% of SOMETHING rather than 100% of nothing?"  
They are platitudes mostly. Created to make entrepreneurs feel good in giving up most of their sweat equity to money that doesn't always help. I don't agree with the always raise money when you can philosophy. Each case is different - very different.  
If you guys are profitable, or close to it, then raising may not be a great idea. The BEST way to raise money for a company is from customers - by selling your product. That's the real "old fashioned" way, and it works it most of the cases of successful companies.  
Perhaps you took some out for yourself - anytime you can put a little away for your hard work, you should. You work for less than market rates with the promise of equity upside for years, someone wants that upside, it's okay to put some in the bank for yourself selling it to them - some of your own. Which is also non-dilutive to the rest of the company.  
Yes, there are certain opportunities that require capital - for speed reasons, structure of business, etc. Google and Facebook come to mind - and raising was very smart for them, but also very non-dilutive from the start - they got great valuations. For Hubspot was this a wise choice? Perhaps - could have been very wise. I don't know for sure- don't know enough about the business. But I thought this post should at least have something addressing more of the reasons not to. :)  
Say hi to Brian Halligan for me please.

posted on Wednesday, October 21, 2009 at 12:20 PM by Cashman

You made all the right decisions for all the right reasons. Entrepreneurs waste way too much time worrying about valuation and timing and typically spend not enough on building the business. Further thoughts on this theme are at http://bit.ly/2NSvyE

posted on Friday, October 23, 2009 at 2:39 AM by rhhfla

I have to agree with Cashman on this. It might have been a smart move, but considering you have 6 million in the bank, and you have a product that's selling...it seems you got money because you could, not because you needed it. And I don't think that's a good reason if your plan is to build a BIG business. 
But either way, sounds like you're doing quite well...I hope it works out for you.

posted on Friday, October 23, 2009 at 10:16 PM by Mike

Frankly, your story is what my clients and students need to hear. Although we live in an economy we create our own economics. GOOD ON YOU. Keep us posted! 

posted on Wednesday, October 28, 2009 at 11:50 PM by Harmony

Are you a startup! Having dreams to make your mark, trying to get in 
touch with your most precious asset: The customer. 
ReviewPunch provides you a platform where you can rate and review your 
startups/products/services etc. This way reviewpunch.com will help you 
in hearing what you customers are saying and thinking about you. 
ReviewPunch.com is not just another rate and review website we have an 
edge above others as our group consist of many entreprenuers which may 
also help 
you by suggesting what can go wrong with your startup and can suggest 
you many innovative ways to improve.We also try to target your market 
segment and 
provide special leads for you.What more can you ask for , we can even 
help you suggest various marketing techniques and can even provide 
technical help. 
Just register with us and tell little bit about your startup ( My 
Account -> Add Product ) try to tell as much as possible about your 
company/idea and 
our experts will also provide their opinion and help you get in touch 
with your target audience. 
All in all ReviewPunch.com can help you make a mark. 
ReviewPunch is a platform where one can review from anything to 
everything let it be products,services etc. Here people can give 
reviews on almost 
all the things like Product review,services review,movie review,hotel 
review,mobile phone review,electronic equipment review,startup review 
Rate and review Products ,Services,Movies,Hotels,Restaurants,Mobile 
phones,Electronic equipment,Startups 
Rate and review Products ,Services,Movies,Hotels,Restaurants,Mobile 
phones,Electronic equipment,Startups 
ReviewPunch Team 

posted on Friday, October 30, 2009 at 12:14 AM by ReviewPunch

If anyone need website design, logo design, business card design or any other design, please check out the crowdsourcing community of the world's best graphic designers. 
The designers will simultaneously work on your design need and you choose the design of your choice. 
Check it out www.contestdesigns.com

posted on Tuesday, November 03, 2009 at 9:55 AM by grant tailor

For those of you still looking for your 33 million take a 30 day free trial at <www.fundingroadmap.com> 
Map out your companies immediate goals and long term objectives.Keep track of your companies significant milestones.Make informed decisions using our multiple choice format.Pitch anytime from anywhere and lead your business to funding success.

posted on Tuesday, November 03, 2009 at 10:18 AM by Ruth E Hedges

Have enjoyed reading your blogs even earlier. But since I saw you (or rather the video of it) speaking you in 'Business of Software' conf last year, have become a fan of yours.  
You are emerging as one of the most proficient blogger on Startups. Off late your blogs are no less insightful than PGs essays! Keep it up. 
And not to forget: I simply love your definition of success. Very well said.  

posted on Tuesday, November 10, 2009 at 5:13 AM by Khushnood

Comments have been closed for this article.