HubSpot takes the covers off its financial performance by filing its S-1. Like many recent SaaS IPOs, the documents show strong growth but steep losses. The company points to the nearly untapped market for its software ? and our surveys indicate that this is indeed the case, but HubSpot and its competitors will have to continue to spend heavily to build that opportunity.
HubSpot generated $93.8m in revenue for the most recent 12-month period ? an impressive 46% increase compared with a year earlier, but growth is declining from the 50% the company posted in 2013 and the 81% in 2012. During that same period, it had a $35.7m net loss, a figure that only grew 34% year over year. While losses as a percentage of revenue continue to tick down, HubSpot is many years away from putting up annual profits (not that we expect a lack of profits to impact the offering).
A recent survey by ChangeWave Research, a service of 451 Research, revealed that only 24% of companies had either deployed or planned to immediately deploy any form of digital marketing technology. Among companies with 10-1,000 employees (HubSpot’s sweet spot), nearly two-thirds said they had no near-term plans to begin using digital marketing technology, highlighting that while there is certainly a sizable chunk of the market that has yet to be tapped, the job of persuading the majority of potential customers that such investments are worthwhile is an ongoing challenge.
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