Analysts Are Bullish on This CRM SaaS

Presented by GOTO Market Institute

Happy Tuesday. This week, we’re discussing rumors of a potential Google acquisition of Hubspot, why fintech funding is going bone dry, and proposals to establish guardrails around how AI should be used.

• Wall Street is all-in on HubSpot amidst rising revenue trajectory, SMB partnerships, and rumors of a possible Google acquisition.

• Fintech funding plunged to its lowest levels since 2017, with only $7.3B raised globally across a paltry 6 new unicorns in Q1.

• Tech platforms are experimenting with limited user input on AI models, but experts argue that users should gain formal voting power to democratize governance over appropriate AI guardrails.

Wall Street Is Obsessed with Growing Salesforce Rival, Hubspot

It looks like Wall Street is keeping a close eye on HubSpot. The $34B cloud-based CRM and marketing software darling has analysts hot and bothered amid talks that Google's parent company, Alphabet, discussed making an offer to acquire it.

Not that the Cambridge-based tech provider needs help with growth  — especially when you take into account the fact that HubSpot generated $2.17 billion in revenue in 2023, up 25% from 2022. However, a Google acquisition could significantly boost HubSpot's position alongside the reigning Cloud and CRM monarchs like Salesforce.

The thing is, Hubspot has already tapped into Saleforce's weakness and carved out a niche market positioning of its own: SMBs and affordable products. Last year, frustrated enterprise customers explored HubSpot's more integrated, less labor-intensive products after Salesforce substantially raised prices.

"With Salesforce, you need a Salesforce administrator," said Rishi Jaluria, managing director of software equity research at RBC Capital Markets. "Different products are not as well integrated as they are with HubSpot, where they're all organically built on the same platform." 

"We are seeing more situations where HubSpot is actually being competitive with Salesforce," he added.

While an official merger with Google hasn't materialized yet, Wall Street analysts remain bullish on HubSpot's ability to sustain innovation and strong performance. They believe HubSpot's more recent AI developments could supplement organic growth even more whether or not a Google deal culminates. Given the excitement surrounding this emerging leader, HubSpot is poised to continue making waves in the cloud software market this year.

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Fintech Funding Slows to Its Lowest Level since 2017

Fintech companies were feeling extra parched in Q1 as funding to the sector evaporated to its lowest level since 2017.

Globally, fintechs only raised $7.3B across 904 deals, a whopping 54% less than the steady influx of cash they landed in Q1 last year. That's almost as much as Ohio's 2022 drought losses in corn and soybean yields… 

Anyway, it wasn't a completely dry quarter, however. Equity financings rose 15% higher as some gutsy investors still bet on payments tech. That being said, the average deal size shrunk rapidly amidst dwindling tech budgets and economic uncertainty.

On the other hand, the few lucky startups that did win funding had to battle it out gladiator-style for investor attention. UK neobank Monzo scored the biggest check at $430M, while travel rewards app Bilt nabbed 3rd place with its $200M round. 

Fintechs aren’t the only ones taking a beating this year, though. Some sectors saw particularly barren funding landscapes. Insurtechs landed 36 deals totaling $641M — half as many deals as Q1 2023 valued at less than one-third the dollar amount.

When the dust from this past quarter settled, only 6 new fintech startups reached $1 billion valuations — a 75% decrease compared to Q1 2023's figures.

To overcome this funding shortage, fintech founders may need to tap into their reserves and start operating as lean as possible. Looking ahead, this funding environment may remain the same unless macroeconomic headwinds start to shift. The predictions aren't pretty — Gartner forecasts fintech funding to drop nearly 18% globally in 2024.

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How to Keep Humans in Charge of AI?

Google's AI leader is once again in detention after some eyebrow-raising class comments. After their recent blunderfest with Gemini AI, it’s abundantly clear why we can't count on corporations alone to police their generative AI models.

But lawmakers laying down commandments for how AI should be governed pose problems for free speech. Remember when the EU parliament proposed a ban on AI chatbots pretending to be human? (Talk about avoiding the real issue.)

So, who decides the guardrails for keeping AI in line? Some tech firms have started giving users the mic to weigh in, but most initiatives lack ongoing participation or accountability. I

Experts say it's time to let users take the driver's seat for real through so-called "AI democracy" that would directly engage users in policy decisions. Under this “democracy,” participants could be granted proportional voting shares linked to their platform contribution metrics. Then, to leverage issue expertise, users might delegate their votes to specialized delegate councils. 

The idea behind this approach, in theory, is that the more control users have over shaping AI’s behavioral norms, the more society may begin to trust AI technology.

Sure, people have their own inherent biases. But even messy democracy is better than CEOs and politicians claiming absolute authority over what AI can and cannot say. At least when users screw up, we only have ourselves to blame.

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Parting Thoughts

Well, that’s the tech news for this week. Hit reply and let us know — did you learn something from today’s newsletter?

Until next time!