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For months, rumors persisted that Google, and perhaps others, were interested in buying HubSpot, a Boston-based CRM and marketing software company. HubSpot’s market cap ballooned as the rumors persisted, eventually reaching over $30 billion. But this week, Bloomberg might have finally put an end to the madness when it reported that the parties had parted ways without an agreement. Several Boston-area investors were happy to see the company remain independent.
As we wrote in April, the deal didn’t seem to make sense. For starters, that market cap would mean that Google would be paying in the same ballpark for HubSpot that Salesforce paid for Slack, a deal that was worth almost $28 billion. If they paid a multiple over the peak market cap, it would have been even more. Considering that the biggest deal the company ever made was $12.5 billion, buying HubSpot was going to be considerably outside Google’s M&A comfort zone.
What’s more, Google Cloud, which would benefit from such a sale, is firmly focused on the enterprise, and HubSpot is focused on SMBs. That’s a big reason that the rumors never added up for Brent Leary, founder and principal analyst at CRM Essentials. “A conversation I had at the end of last year with HubSpot co-founder and CTO Dharmesh Shah kept replaying in my head. He said the company remained laser focused on the SMB space with no plans of moving up market to compete in the enterprise,” Leary told TechCrunch. When combined with the price tag, he never saw it as a likely pairing, he said.
Perhaps it was all part of a banker’s fever dream, feeding the rumor mill to keep the idea alive and maybe drive up the stock price. Perhaps it’s not surprising that the stock dropped 12% after Bloomberg published its story.
But HubSpot has been at the center of the Boston startup scene since its founding in 2006. It is an example of a startup that came out of MIT before growing, scaling, going public and building a solid business. In its last earnings report, the company reported revenue of $617.4 million, up 23% over the prior year. Even with the recent drop in stock market value, it still had a market cap of $25 billion on Thursday.
“HubSpot has been a great anchor in the Boston ecosystem, spinning out a lot of startups and driving a lot of activity in the local tech scene, so I’m glad to see them stay independent and continue down that path,” 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’s ultimately a good thing for Boston. “While unfortunate for shareholders hoping to capitalize on a potential pop, Google already has a large presence in the region, so retaining an independent [$25 billion to $30 billion] market cap company has many advantages for the Boston ecosystem,” Dracon told TechCrunch.
Lily Lyman, general partner at Underscore VC, said she isn’t surprised the talks broke down, but a successful sale could have had a negative impact on the Boston ecosystem, at least for the short term. “In the nearer term (next 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 cultivating great talent would have stalled as the company dealt with regulatory concerns, potential infrastructure migration over to Google Cloud infra from AWS and Gemini from OpenAI and other distractions related to the deal,” Lyman said.
But she points out that eventually, it’s likely that some of those employees would have started companies of their own. “Had it gone through, in the longer term it could have been good for the startup ecosystem here in Boston, as we might have eventually seen an exodus of great talent that would leave and start a next generation of great startups.”
Regardless, assuming the rumors of Google’s interest were true, it appears the drama is over and HubSpot remains a stand-alone 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 in this next chapter, it can continue to be a powerful force in the Boston ecosystem,” Lyman said.
