Online marketing software seller HubSpot, which helps mid-sized businesses attract customers with blog posts, e-mails, and social media campaigns, has raised about $114 million in its initial public stock offering.
The Cambridge, MA-based company said Wednesday night that it sold 5 million shares of its stock at $25 each. That price was higher than HubSpot’s previously estimated price range, indicating good demand for the stock.
After accounting for fees, HubSpot will clear an estimated $113.7 million—cash it will immediately use to bankroll its operations, which had become reliant on debt financing while it waited to complete the IPO. Underwriters have an option to buy another 750,000 shares if demand is high.
The company’s shares would begin trading publicly for the first time on Thursday morning.
HubSpot (NYSE: [[ticker:HUBS]]) was founded in 2005 by CEO Brian Halligan and technology chief Dharmesh Shah, who met while attending business school at MIT. They decided to start HubSpot after finding that many small companies had to patch together an unwieldy number of software programs to help them market their companies online.
The company faces several competitors, including standalone companies like Marketo (NASDAQ: [[ticker:MKTO]]) and individual product lines offered by larger software sellers, including Salesforce and Oracle.
Salesforce, in fact, was a venture investor in HubSpot before spending $2.5 billion to acquire a competitor, ExactTarget. Since then, HubSpot has developed new products aimed at salespeople, increasing its competition with Salesforce.
HubSpot’s public-market debut was the second major tech-industry IPO for the Boston area this year. The online home-goods retailer Wayfair went public on Oct. 1.
Like a lot of young companies, HubSpot has historically been a money-loser as it tries to gain a large market foothold. But more recent results show that the company is trying to stabilize its financial position as it heads to the public stock markets. In the first six months of the year, HubSpot reported that it collected about $51 million in revenue, an increase of about 46 percent from a year earlier. The company’s losses grew by less than 9 percent in that same period, to nearly $18 million.
Marketo, by comparison, has reported proportionally higher losses so far this calendar year, with a nearly $26 million net loss on $68 million in sales.
Most of HubSpot’s losses are tied to its heavy spending on sales and marketing for its own services, which give mostly mid-sized business-to-business companies the ability to improve their websites, e-mail pitches, blog postings, and other online marketing assets.
HubSpot’s average revenue per customer grew from $6,580 in 2012 to more than $7,700 in 2013, an increase of about 18 percent. But the company’s customer acquisition costs grew more quickly: HubSpot spent nearly $8,300 to land each customer in 2012, compared with more than $11,600 in 2013, a jump of more than 40 percent.
As a result of its spending on company growth, HubSpot definitely needs the cash injection that the IPO can provide. As of June 30, the company had just $7.3 million in cash on hand, which is less than it’s spent per month on operating costs this year. To keep its operations humming, HubSpot drew $13 million from its $35 million line of credit.
Before the IPO, most of HubSpot’s stock was owned by the venture capitalists who infused the company with more than $100 million in private investment since its founding.
General Catalyst Partners was the biggest shareholder before the IPO, with about 27 percent of the company. Matrix Partners held about 17 percent of the company, and Sequoia Partners had a roughly 10 percent stake.
Halligan owned about 5 percent of the company before its IPO, and co-founder Shah held about 9 percent.
HubSpot also shared some of its newfound wealth with people who typically don’t get the best price on IPOs—in SEC filings, the company said its bankers had agreed to set aside 5 percent of its IPO shares for HubSpot employees and some of the company’s marketing agency partners.
Those partners, typically marketing consultants who sell HubSpot’s software to their own clients, are critical to the company’s success: HubSpot says they’re responsible for about a third of its sales and more than 40 percent of its customer base.
