Friday, May 16, 2008

HubSpot grows, grabs a $12M round two

By Christopher Calnan

Internet marketing startup HubSpot Inc. has completed a $12 million Series B round of funding that company officials said they plan to use to boost sales and development of their application to convert website visitors into sales leads.

Cambridge-based HubSpot, which has grown to nearly 400 customers since it was founded in 2006, increased the total funding it has received to $17 million, said CEO Brian Halligan. “We’re vesting for future growth,” he said.

Investors include Matrix Partners, which operates an office in Waltham, and Cambridge-based General Catalyst Partners.

HubSpot develops a suite of online sales and marketing tools delivered via the Internet for small and midsize businesses. Last month, the company released a professional version of its product to enable customers to integrate it with Salesforce.com and generate closed-loop reporting.

HubSpot initially targeted very small businesses, but shifted its focus six months ago to small and midsize businesses when it became apparent that its original targets don’t have the personnel to analyze the metrics generated by HubSpot’s tools, General Catalyst managing director Larry Bohn said.

The shift has resulted in more customers for HubSpot. “The segment of the market they thought they were serving probably wasn’t the best segment for them,” Bohn said.

Halligan said the company has been operating with a $250,000-per-month burn rate and he expects HubSpot to be cash-flow positive in 2010, possibly avoiding the need for a Series C round.

HubSpot’s low cost of customer acquisition should quicken its march to profitability, said investor David Skok, a general partner for Matrix Partners.

The company was self-funded in 2006 by Halligan and Dharmesh Shah. Halligan is the former VP of sales for Beverly’s Groove Networks Inc., which was acquired for an undisclosed amount by Microsoft Corp. in 2005.