Dharmesh Shah launched HubSpot in 2006. Since then it’s grown to about 2,900 customers, 170 employees and $33 million in capital raised.

Dharmesh shares 7 lessons he learned during this time:

1. You are financing your customers: Most SaaS (software as a service) businesses are subscription-based. As a result, sales and marketing costs are front-loaded, but revenue comes in over time. This can create cash-flow issues. The higher your sales growth, the larger the gap in cash-flows. This is why SaaS companies often raise large amounts of capital;
2. Retaining customers is critical: In the SaaS world, everything is usually some sort of recurring revenue. This, in the long-term is a mostly good thing. But in the short-term it means you really need to keep those customers that you sell or things are going to get really painful, very quickly. Figure out your total acquisition cost and your monthly subscription revenue, and calculate how long you need a customer to stay to recover your acquisition cost;
3. It’s Software — But There Are Hard Costs: To deliver software as a service, you need to invest in infrastructure — including people to keep things running. Talk to other SaaS companies in your peer group (at your stage) that are willing to share data. Try and figure out what monthly hosting costs you can expect as you grow (and what percentage that is of revenue);
4. It Pays To Know Your Funnel: One of the central drivers in the business will be understanding the shape of your marketing/sales funnel. What channels are driving prospects into your funnel? What’s the conversion rate of a random web visitor to trial? Trial to purchase? Purchase to delighted customer? Make sure you have a way to generate the data for your funnel as early in your startup’s history as possible. At a minimum, you need numbers on web visitors, leads/trials generated and customer sign-ups, so you know the percentage conversion at each step;
5. You Need Knobs and Dials In The Business: One of the great things about the SaaS business is you have lots of aspects of the business you can tweak, such as pricing, packaging/features and trial duration. Don’t make too many changes too quickly (because often, there’s a lag-time before the impact of a change shows up). Try not to make several big changes at once — otherwise you won’t know which of the changes actually had the impact. If you do experiment with pricing, try hard to take care of your early customers with some sort of “grandparenting” clause;
6. Visibility and Brakes Let You Go Faster: One of the big benefits of SaaS businesses is that they often operate on a shorter cycle. You’re dealing in days/weeks/months not in quarters/years. What this means is that when bad things start to happen (as many experienced during the start of the economic downturn), you’ll notice it sooner. If something really big happened in your industry, do you have internal alarms that would go off in your business? How long would it take for you to find out?; and
7. User Interface and Experience Counts: The applications you are getting compared to are ones where someone likely spent some time thinking about UI/UX. Design matters so start recruiting great design and user experience talent now. They’re in-demand and hard to find, so it might take a while.

Full story at OnStartUps »

One of the things I love about business is the ingenuity of entrepreneurs. People come up with the most amazing ideas and I love reading about these types of business success stories. They inspire me, and I hope they inspire you too.

Here are a few of the 20 million-dollar businesses you’ve probably never heard of:

• BlackSocks: Sock subscriptions – $5 million in 2009.
• Mabel’s Labels: Personalized, permanent labels for kids’ stuff – $4 million in 2009.
• Sky Zone: Arenas covered with trampolines – $3 million-plus in 2009.
• Geese Police: Geese abatement using collies – estimated revenue of $2.5 million in 2010.
• Stave Puzzles: $125 to $5,000 hand-made wooden jigsaw puzzles – $2.5 million in 2009.
• DNA 11: DNA artwork – $1.4 million in 2009.

Come across any ingenuious business success stories you want to share? Tweet it to @MarketingMunch or email us at email at marketing munch dot com.

Full story at Forbes »

New York-based Solve Media, combined websites’ need for user authentication with advertisers’ need for consumer attention, and created a new form of online advertising.

Solve Media’s patent-pending technology turns CAPTCHA, those difficult combinations of distorted letters and numbers, into branded TYPE-INs™.

Users are easily frustrated by traditional CAPTCHA. Solve Media TYPE-INs™ are easy to read, easy to complete and reinforce messages that are easy to remember.

Implementing TYPE-INs on a website involves little more than cutting and pasting a few lines of code. They have plug-ins for many popular forums, blogs and CMS platforms, as well as developer tools for custom integrations.

Every time a consumer enters a brand message, they share the revenue with their publisher partners.

According to Solve Media, a study by the Wharton School, at the University of Pennsylvania, found that on average, on a relative basis, TYPE-INs increased brand recall 111% and message recall by a factor of 12 compared to the exact same creatives displayed as non-interactive static advertisments.

In conjunction with your TYPE-IN campaign, Solve Media’s proprietary brand research system measures lift in awareness, recall, recognition and purchase intent across control and exposed groups. Solve Media also supports all the industry standard pixel tracking and market research platforms.

Ingenious! Now why didn’t I think of this idea?

At school they teach us to write things down to help us to remember it. Solve Media’s TYPE-IN is one of the few forms of advertising that I can think of that gets you to write down advertising messages.

The only other one I can think of is those contests that ask you to complete a sentence in under 25 words. For example: Marketing Munch is a must-visit marketing blog because… ;-)

What do you think of Solve Media’s TYPE-IN concept?

Do you use CAPTCHA on your site? Would you use convert your CAPTCHAs to TYPE-INs to generate additional revenue for your site?

If you already use Solve Media’s TYPE-IN, how profitable has the program been for you?

Visit Solve Media for more information »

Businessweek.com set out this summer to find the most promising entrepreneurs aged 25 or under. For their sixth annual roundup, they narrowed the finalists from hundreds of suggestions contributed by readers on companies that range from tech startups to clothing retailers to medical device makers. Visit Businessweek and flip through the slide show for a fascinating look at each business.

It is always fascinating to discover what new startups young enterpreneurs have come up with, and these are no exception.

Full story at Bloomberg Businessweek »

Related story: The Winning Young Entrepreneurs 2010: In this year’s Best Entrepreneurs 25 and Under roundup, the top five vote-getting businesses were all either profitable or cash-flow positive.