Heavyweights Line Up Behind HubSpot For New $32 Million in Series D Funding

HubSpot announced today it has secured $32 million is Series D funding, financed by Sequoia Capital, Google Ventures and Salesforce.com. This marks the first joint investment for the three companies. This is the fourth round of financing round for HubSpot.

HubSpot CEO Brian Halligan said the company will allocate a large portion of the funding toward research and development, as the company continues its commitment to innovating inbound marketing for the SMB market.

"The fundamental way that people shop, learn, and buy has changed radically in the last few years,” Halligan said. “HubSpot helps transform the way businesses market from outbound marketing (cold calls, email blasts, and direct mail) to inbound marketing (Google, blogs, social media, mobile, etc.).”

During a media briefing, Halligan noted that HubSpot, which is currently an application, will eventually be opened up to a platform to enable companies to connect into it and build applications on top of it. “The goal of the [funding] round is to improve the product and infrastructure so we can delight our customer and really use our customers to help spread the word about our product and try to win in this interesting new marketplace.”

According to the announcement, all of HubSpot’s existing venture capital investors — General Catalyst, Matrix Partners, and Scale Venture Partners — also participated in this financing round. Part of the $32 million will provide liquidity to some existing shareholders. Previous rounds included a $16 million Series C raised in October 2009, a $12 million Series B raised in May 2008, and a $5 million Series A raised in July 2007, for a total of $33 million raised prior to the Series D.

Hubspot grew from a $10 million run rate a year ago to a $25 million run rate today, according to company executives. The company now has more than 4,000 customers utilizing HubSpot’s marketing software.

Given the company’s tight focus on search optimization and inbound marketing, a goal of the new funding will enable HubSpot to integrate more effectively with Google. Halligan said the company will now be able to do single sign-on with Google into applications and integrate with Google AdWords.

HubSpot will also capitalize on the access to Salesforce.com’s database of 80,000 customers, and is building a native force.com connector to enable their system to be “much more social over time,” Halligan said. While further integration with Salesforce will be an obvious priority, HubSpot also recently announced plans to integrate with SugarCRM and NetSuite.

Sequoia Capital has a long history of partnering with founders to help them build long-term, multi-billion dollar companies, including Google, LinkedIn, AdMob, YouTube, Yahoo!, Apple, and Oracle. “We back companies that are transforming their industries,” said Jim Goetz, General Partner at Sequoia Capital. “HubSpot is the emerging category leader in the SaaS marketing sector. Their customer base exceeds that of all the other relevant marketing software companies combined, including Eloqua, Marketo, Genius, and Manticore.”

Building on the growing popularity of social media for business, HubSpot VP of Marketing Mike Volpe told DemandGen Report that the company is leveraging social channels to extend prospect outreach. “Social media today is sort of like where SEO was 3-4 years ago,” he said. “Everyone has realized its significance and now companies are trying to figure out how to best to implement internally.”

HubSpot has over 60,000 Twitter followers and 20,000 fans on Facebook, Volpe said, and therefore sees a great deal of web site traffic from those channels. “Social is how we spread content,” he said. “The key for BtoB to be successful in social is to integrate it into everything, not just tack it on the side.  Most BtoB companies fail with social without having good content, something relevant to talk to people about. Without better content and blogging, and without understanding what your customers want, you are driving away leads.”

“We agree with HubSpot’s belief that search engines, social media, and mobile devices have fundamentally changed how businesses should market themselves,” said Rich Miner, Google Ventures Partner, (formerly co-founder of Android. “We’re thrilled to support their efforts to help thousands of small and medium businesses reach potential customers.”

The recent funding begs the question of an IPO in HubSpot’s future, which, Halligan said, is still too early for the company’s $25 million run rate. “Our goal is to build a historically-significant west coast style company,” he said. “We want to build a company like an Amazon, Salesforce, or eBay that’s around for many decades. Hopefully an IPO is a step on the road to that.”

“[An IPO is] pretty premature right now, we’re mostly concerned about helping more and more companies and those type of things will happen down the road,” Volpe said. “It will be a while, and we don’t focus on it too much.”