Why HubSpot’s lack of cash won’t affect the IPO

Image via HubSpot
Image via HubSpot

Yesterday’s post by TechCrunch on HubSpot‘s planned initial public offering focuses on the company’s tight cash position, pointing out that the company had only about $7 million in cash as of the end of June—and losses that would seem to outstrip that surplus soon if the $100 million IPO doesn’t go as planned.

But there’s a problem: The post omits some key financial details about the Cambridge-based marketing software firm. True, “the company is not cash-wealthy in its current form,” as TechCrunch points out. But HubSpot has plenty of credit. During the first half of the year, the company increased its credit lines to a total of $35 million, according to the IPO plan filing.

What that means is, cash is not the only option for covering salaries and other costs. The filing shows that HubSpot in fact borrowed $5 million from its revolving credit line during the second quarter of the year.

According to my back-of-the-napkin math, the credit, plus revenue, plus available cash would appear to be enough for expenses.

That’s why the company can tell prospective IPO investors in the filing that “we believe our working capital and available borrowing amounts under our credit facilities are sufficient to support our operations for at least the next 12 months.”

Also worth noting: One reason that HubSpot isn’t flush with cash is that it hasn’t raised funding from investors in nearly two years (the last round was $35 million in November 2012). By contrast, Boston’s other high-profile tech IPO hopeful, Wayfair, had $88 million in cash as of the end of June, but it also had raised $157 million in funding earlier this year. If HubSpot’s IPO were to fall flat, private investors would probably be willing to step in once again.

HubSpot intends to list its shares on the New York Stock Exchange under the symbol “HUBS.”

Founded in 2006 by chief executive Brian Halligan and chief technology officer Dharmesh Shah, the company offers software to help marketers manage online campaigns, including tools for creating online content, search engine optimization, and website analytics.

HubSpot employs 719, and has raised about $100 million in funding. Top shareholders include General Catalyst Partners (27 percent of shares), Matrix Partners (17 percent), Sequoia Capital (10 percent), Scale Venture Partners (7 percent), and Charles River Ventures (5 percent). Other investors include Google Ventures and Salesforce. Shah owns 8.8 percent of HubSpot’s shares, while Halligan owns 4.9 percent.

Read more:

Kyle Alspach has worked in journalism in Massachusetts since 2005 and was one of the original staff writers at BetaBoston.
Follow Kyle on Twitter