First off, congrats to Dharmesh and the entire Hubspot team making it to this point. It’s not every day you redefine a whole software category and grow to $100M in revenue.

I quickly read Hubspot’s S-1 filing for their IPO. I really know very little about evaluating publicly traded SaaS companies but I thought there were a couple interesting metrics take-aways from the filing….

  • If ARPU is increasing around 15% why is “Subscription dollar retention rate” at 90%? To be honest, I suspected it would have been closer to 100% (as Marketo, for example, currently has SDRR of 105%).
  • If I’m reading the notes on this properly, the SDDR value is the annualized rate from each month in the period. 0.9% monthly revenue churn annualizes at 90% and 1.2% monthly revenue growth annualizes to 15% so I’m guessing their customer churn is basically 2%.
  • Average subscription revenue per customer includes professional services revenue but professional services cost of revenue is equal-to or greater than revenue. If you remove that revenue, I wonder how that would effect SDRR? I’m assuming most of that revenue is up-front training required by new customers. Does this inflate the value of new customers?
  • If you cut out professional services revenue you get an ARPU of $8,000 with a CAC just under $12K in the trailing three months. 18 months of revenue to recoup CAC seems pretty good to me (not sure comparable numbers for publicly traded SaaS).
  • 2012 to 2013 ARPU increased 17.8% but CAC increased 40.6%. For latest three months, 16% ARPU growth on 2% CAC growth.
  • If we take 2% monthly churn, we get an average lifetime of 4.16 years. ARPU is $8,823 and gross margins are 67%, with a discount rate of 8% we get an LTV of 21,161. LTV divided by CAC is 1.8X. That said, this value would swing wildly depending on whether CAC has levelled out and if ARPU keeps increases at present rates. (I picked 8% discount rate based on this article about evaluating SaaS business from a16z).

A couple other interesting items…

  • Only 20% of revenue from outside US. I don’t know jack about scaling an international sales team but this seems like a huge opportunity (and they’ve had a Dublin sales office for years already).
  • CTO Dharmesh Shah holds 8.8% of the company. CEO Brian Halligan has 4.9%.

In terms of other publicly traded companies, these numbers seem pretty good to me for a $100M revenue SaaS business. The other thing going for it is that I’ve really only heard good things from people who use Hubspot. In comparison, I’ve never heard a customer say anything positive about Salesforce.

Last night I had the chance to catch up on some old episode’s of Charlie Rose including a discussion from the end of March concerning the Supreme Court and Same-sex marriage. The discussion is incredibly informative about the legal arguments of the two cases (specifically concerning the validity of federalism and equal protection arguments).

Although the episode is worth watching, this closing comment by Andrew Sullivan blew me away and just had to share it:

“The freedom to marry is based in the Declaration of Independence. I don’t think any heterosexual, for example, has ever believed they had the right to the pursuit of happiness if that did not include the right to marry the person they love. So in the end, it’s the deepest question of all: Are we gay people, as Americans, allowed to pursue happiness? And if that right to happiness does not involve marrying the person we love, then what does it really mean?”

“Talent is God-given; be humble. Fame is man-given; be thankful. Conceit is self-given; be careful.”
“I never gave anybody hell. I just told the truth and they think it’s hell.”


My friend Ali told me to watch the above interview with Ben Horowitz and, specifically, this section about courage. This 3 minute section (Youtube link with timestamp) has some absolute gems that I think every entrepreneur can learn from.

Here’s the abbreviated text. Emphasis is mine…

In our pitch meetings, we spend the first 30 minutes not going through the pitch but talking about the founder and their background and understanding why they made decisions. And a lot of courage is […] “what do you believe that nobody else does”? Do you have the courage to even say that?

[…]

[As an example], an entrepreneur came into us once, his name was Christian Gheorghe, and we said “tell us about your background”. He says “I used to be the CTO of a company called OutlookSoft which sold to SAP…” and I was like “no no no, where did you grow up?”. He says "Well, I grew up in Romania in the 80s and then in 1989, in order to escape the communist regime, I swam across the Danube" and I said "We’re going to invest in your company!".

[…]

Aristotle said that courage is the first virtue. And the reason he said that, and it’s really important in leadership, is that people can have virtues in certain situations. But that’s not the question, the question is: if it’s going to cost you your company, do you have your integrity? If it’s going to cost you your job, are you honest? If it’s going to completely embarrass you in front of everybody, do you have it then?

And the only way you have it then is if you have courage. Courage ends up being the foundation of what you need as an entrepreneur.

[…]

I always say you need two things as an entrepreneur: great intelligence and great courage. And I always found as an entrepreneur that my courage was tested far more than my intelligence.

By its peak in the 1990s, the 6.5 acre Kowloon Walled City was home to at least 33,000 people (with estimates of up to 50,000). That’s a population density of at least 3.2 million per square mile. For New York City to get that dense, every man, woman, and child living in Texas would have to move to Manhattan.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.”