Google Ventures, Sequoia, Salesforce Lead $32M Financing Round for HubSpot

[Updated 2:00 pm ET with additional perspective from the investors] Three Bay Area organizations are behind a big $32 million investment in Cambridge, MA-based marketing software company HubSpot. The Series D financing round, announced today, was led by Google Ventures, Sequoia Capital, and, with Hubspot’s existing investors General Catalyst, Matrix Partners, and Scale Venture Partners also participating.

The round nearly doubles HubSpot’s previous venture stake, which had totaled $33 million, and is twice as large as HubSpot’s last major venture round in October 2009. It seems to represent a consensus—among the company’s investors, at least—that with 4,000 customers and counting, HubSpot has a major lead over other marketing software startups such as Eloqua, Genius, Manticore, Marketo, Neolane, and Pardot.

HubSpot’s basic message to other companies is that going out and finding customers the old-fashioned way—using “interruption”-based methods such as telemarketing and unsolicited e-mails—is less effective than helping customers find you by creating compelling, search-engine-friendly Web content. The company’s subscription-based, online software helps small and medium-sized businesses manage blogs, improve their search result rankings, and create Web “landing pages” that persuade customers to take action, whether that means buying something or just signing up for a newsletter. HubSpot’s tools can also help with managing social media campaigns, measuring site traffic, capturing information about potential sales leads, and analyzing competitors’ performance.

Brian Halligan and Dharmesh Shah co-founded HubSpot in 2006. “The fundamental way that people shop, learn, and buy has changed radically,” Halligan asserted in a statement released today. “HubSpot helps transform the way businesses market from outbound marketing (cold calls, e-mail blasts, and direct mail) to inbound marketing (Google, blogs, social media, mobile, etc.).” In fact, inbound marketing—the title of a book Halligan and Shah co-authored in 2009—is a term coined and popularized by the company.

All three of the new backers indicated that they were moved to invest by HubSpot’s market-leading position in a business—marketing services for small and medium-sized companies—that’s being remade by Web and mobile communications. “We back companies that are transforming their industries,” said Sequoia general partner Jim Goetz in a statement. “HubSpot is the emerging category leader in the [software as a service] marketing sector. Their customer base exceeds that of all the other relevant marketing software companies combined.”

In a conversation with reporters after today’s announcement, Goetz acknowledged that it was unusual to see three Bay Area companies sending money back East to fund a software company. “It pains us to acknowledge that a company from Cambridge, a bunch of MIT engineers and Sloan grads, have managed to outmaneuver a couple of companies here in the Valley,” Goetz joked. “But as that became more and more clear over the last couple of years, we wanted to find a way to … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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