HubSpot wants to be Salesforce.com for small business

August 8, 2011: 10:34 AM ET

And venture capital thinks it will be. Sixty-five million dollars have poured into the Cambridge, Massachusetts-based startup.

By Avery Stone

FORTUNE -- Blogging. Social media. Old-fashioned cold calling. Getting consumers' divided attention can be difficult – especially for mom-and-pop shops with tiny marketing budgets. Cambridge, Massachusetts-based HubSpot wants to change that.

The startup aims to gives small firms an affordable way to reach new customers the way much larger businesses do. The company's service, which starts at about $3,000 a year, automates a medley of basic digital marketing must-haves, including search engine optimization, online analytics and social media like Facebook, Twitter and Digg. On a tear, HubSpot has snagged 5,000 subscribers and managed to acquire a close competitor. Venture capital has flowed in too, $65 million in all, including a recent $32 million round led by Sequoia Capital.

Founded in 2006, HubSpot is the brainchild of two MIT classmates, Brian Halligan and Dharmesh Shah. Halligan affectionately refers to the pair as the "mere mortal and the geek." The idea came when Halligan, then a venture-capitalist, realized that traditional marketing was being tuned out. "And, at the same time," he says, "the way people shop and learn is changing because they're spending more and more time on social networking sites." Halligan believed he could merge these two realizations.

Enter HubSpot.

Halligan and Shah entered a precursor in MIT's $50,000 business plan competition and were semi-finalists. When they had both graduated, they "plunged in and just stared doing it," says Halligan. Jumping into HubSpot is easy for users too. Web visitors can request a live demo with an expert to show them how the software works. They can then sign up for a 30-day free trial. If this goes well, they can subscribe to one of three software packages with varying features and price points.

The model quickly took off. Schwartz Communications, a Boston-based PR agency that turned to HubSpot raves about the service. Senior Vice President Ross Levanto says the tool has quickly become crucial, and "a great way to innovate new ideas for our clients." By using HubSpot, Schwartz gets a Twitter and Facebook page, help getting to the top of Google search results, and detailed reports about visitors to his website. And it has proven successful. In the last calendar year, Schwartz's revenues from digital services have tripled.

Forrester analyst Suresh Vittal agrees that HubSpot is onto something with its unique premise. "They've created and defined this idea of inbound marketing. The fact they're integrating all of these elements sets them apart," he explains. Inbound marketing, a term coined by Halligan, refers to a way of being found online by more qualified visitors through tools like blogging, social media, and analytics instead of more traditional ways of advertising such as email spamming.

Success isn't guaranteed. As it expands, HubSpot faces the threat of a larger and more established company offering similar services at discounted prices, potentially pushing it out of the market. But for now, HubSpot is in growth mode. In July, the company launched the HubSpot App Marketplace -- similar to Apple's (AAPL) App Store save all apps are marketing-related. Currently, the Marketplace houses about 30 apps, both free and paid, that only HubSpot clients can access. (Eventually, it'll be open to everyone.) And, if Halligan has his way, that's only the beginning.

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