April 8, 2024

Now I know my ABCs

Hi there, 

Rumors flew last week that Alphabet may be considering a bid for HubSpot. 

It’d be a deal worth north of $33 billion (HubSpot’s current market cap).

It would be a pretty unusual deal for Google.

It would also be Google’s biggest acquisition ever.

Here is how it’d stack up in Google’s top 10 M&A deals.

1. HubSpot (rumor) - $33B+
2. Motorola Mobility (2012) - $12.5B
3. Mandiant (2022) - $5.4B
4. Nest (2014) - $3.2B
5. DoubleClick (2007) - $3.1B
6. Looker (2019) - $2.6B
7. Fitbit (2021) - $2.1B
8. YouTube (2006) - $1.7B
9. Waze (2013) - $1.15B
10. HTC - Pixel Smartphone Division (2018) - $1.1B

Google has been much tamer vs. its big tech peer Microsoft on the blockbuster acquisition front, as the viz below highlights. 

The company’s biggest acquisition ever was Motorola for $12.5B, which it sold off for a quarter of its acquisition price 2 years later.

The current antitrust environment in the USA and Europe, which is very anti-big tech, makes the prospect of a successful deal questionable. Google is also facing 2 ongoing lawsuits from the DOJ. 

The result is that big tech M&A has petered out — a trend we explore here. Activity has slowed to a crawl, and outside of Microsoft’s mega-acquisition of Activision, which closed in Q4'23, big tech is doing fewer deals. And when they do them, they’re of smaller companies.

Putting regulatory hurdles aside, a tie up would give Google a way to help advertisers take leads they generate via Google ad products and convert them via HubSpot’s sales & marketing software.

It’d take advertisers further down the funnel within the Google ecosystem and help protect Google’s ad revenue.

The 2 companies have a long-standing relationship, with Google Ventures investing in HubSpot way back in 2011 and 2012 and integrations between HubSpot’s CRM and Google Ads.

HubSpot has built its business with a peculiar customer focus — SMBs. 

Unlike many SaaS companies, HubSpot has resisted what co-founder Dharmesh Shah calls “reverse gravity,” i.e. the tendency of SaaS companies to move up-market into the enterprise.

As part of our software buyer interviews, we’ve spoken to numerous HubSpot customers. The company has an average customer satisfaction (CSAT) score of 8.8 across transcripts in our transcript database and is often lauded in these conversations for its:

• Integrations
• Usability
• Pricing

Some snippets from these transcripts are below.

An acquisition would also give Alphabet access to a huge TAM, setting it up against Salesforce and other CRM giants.

HubSpot also made an acquisition recently, which would make it a competitor to ZoomInfo.

Guess the company

The answer to our last edition of guess the company was Visa. 

Based on the below clues, reply here with your guess for this week's edition.

This private company:

• Has a $100B+ valuation (a “hectocorn”)
• Is under pressure from the US government 
• Made 57 investments at its peak activity in 2021

I love you. 

Anand 

@asanwal 

P.S. Submit your questions on the state of venture and our analyst will answer them live on April 16. Register here.

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