For months, rumors persisted that Google, and perhaps others, were interested in purchasing HubSpot, a Boston-based CRM and marketing software company. HubSpot’s market capitalization exploded as the rumors persisted, eventually reaching over $30 billion. But this week, Bloomberg may have finally put an end to this madness by announcing that the parties separated without agreement. Several Boston-area investors were happy to see the company remain independent.
As we wrote in Aprilthe deal didn’t seem to make sense. For starters, this market cap would mean that Google would pay the same amount for HubSpot as Salesforce paid for Slacka deal that was worth nearly $28 billion. If they had paid a multiple over the maximum market cap, it would have been even more. Given that the company’s largest deal ever was $12.5 billion, the HubSpot purchase was going to be significantly outside of Google’s M&A comfort zone.
Additionally, Google Cloud, which would benefit from such a sale, is firmly focused on businesses, and HubSpot is focused on SMBs. This is one of the main reasons why the rumors never came to fruition for Brent Leary, founder and principal analyst of CRM Essentials. “A conversation I had late last year with HubSpot co-founder and CTO Dharmesh Shah kept repeating in my head. He said the company remains focused on the SMB sector and has no plans to move upmarket to compete in the enterprise,” Leary told TechCrunch. When combined with price, he never saw that as a likely association, he said.
Maybe it was all part of a banker’s fever dream, fueling the rumor mill to keep the idea alive and perhaps drive up the stock price. It is perhaps not surprising that the stock fell 12% after Bloomberg published his story.
But HubSpot has been at the center of Boston’s startup scene since its founding in 2006. It’s an example of a startup that spun out of MIT before growing, growing, going public and building a solid business. In its latest earnings report, the company reported revenue of $617.4 million, up 23% from the previous year. Even with the recent drop in stock value, the market cap was still $25 billion on Thursday.
“HubSpot has been a great anchor in the Boston ecosystem, creating many startups and generating a lot of activity in the local tech scene, so I’m happy to see them remain independent and continue on this path,” said said Rob May. , a four-time founder and angel investor based in Boston, whose latest startup is BrandGuard.ai, a tool for building generative AI guardrails.
Greg Dracon, a partner at .406 Ventures, said it was ultimately a good thing for Boston. “While unfortunate for shareholders hoping to capitalize on a potential pop, Google already has a strong presence in the region, so maintaining an independent market cap ($25-$30 billion) company has many benefits for the ecosystem from Boston,” Dracon told TechCrunch.
Lily Lyman, general partner at Underscore VC, said she wasn’t surprised the negotiations broke down, but that a successful sale could have negatively impacted Boston’s ecosystem, at least in the short term. “In the shorter term (one to three years), I think the acquisition would have been a net negative for the ecosystem, as it would have led to a period where innovation and cultivation of great talent would have stalled as the company faced regulations. ” Lyman said.
But she points out that eventually, it is likely that some of these employees would have started their own businesses. “If that had been the case, in the long run it could have been beneficial to the startup ecosystem here in Boston because we could have potentially seen an exodus of great talent who would leave and create a new generation of great startups. ”
Regardless, assuming the rumors about Google’s interest are true, it appears the drama is over and HubSpot remains a standalone company. “The good news is that Hubspot is a healthy company that continues to grow and innovate. As long as it can continue to attract great talent into this next chapter, it can continue to be a powerful force in the Boston ecosystem,” Lyman said.