HubSpot, Inc. (HUBS) is a high-growth multi-purpose SaaS company dedicated to business transformation. Targeting companies with 2 to 2,000 employees, HubSpot has more than 60,000 customers in 100+ countries that use their platform, which includes a marketing hub, sales hub, service hub, and free CRM.

While HubSpot has historically been a very successful investment story, I have some concerns going forward. First of all, the company completed a major product development initiative in the last year. But the result has been a deceleration of revenue growth. Second, despite multiple products and hundreds of third-party apps, HubSpot has a total subscription dollar retention rate of less than 101%. In my research of SaaS companies, I have discovered many companies with greater than 120% total subscription dollar retention rate. I consider 101% to be substandard. Either HubSpot doesn’t have sticky products or there isn’t much cross-selling going on, or a combination of both.

My third issue is that, by management’s own admission, they haven’t been staffing up as fast as they wanted to, but they are taking corrective action. It has been my observation from analyzing other SaaS firms that it takes up to a year for a ramp-up in sales and marketing to have an effect. Therefore, I believe that understaffing has likely impacted sales and will continue to impact sales for the next few quarters.

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