Almost on Cloud 9, Freshworks ready to earn much deserved unicorn tag

Girish Mathrubootham was still with Zoho Corporation busy conceptualising and building complex products for the Software-as-a-Service (SaaS) company when he came across a news article published in Hacker News. 

The article was on how Zendesk, a US-based customer services software company, raised its prices rather steeply, much to the dismay of its users. But it was not the article but the readers’ comments that grabbed the attention of the techie who was already toying with the idea to start something on his own. 

Having expertise in building an on-premise helpdesk system since 2004, Mathrubootham immediately backordered a domain name which was then set for renewal. He also roped in a great co-founder in Shan Krishnamurthy, a colleague of several years at Zoho, who immediately agreed to join with him in the journey that started in October of 2010. The result was a product that was at least 50-60 per cent cheaper than anything else available in the market at the time. 

Just close to eight years later, Freshdesk, which has now been rechristened as Freshworks, is close to earning its much deserved Unicorn tag, the second company from Chennai after bootstrapped Software-as-a-Service (SaaS) giant Zoho Corporation. 

The cloud-based enterprise software company, which is backed by global venture capital firms such as Tiger Global, Sequoia, Google Capital and Acccel Partners, is racing towards the billion dollar valuation tag as it exhibits strong growth, crossing the milestone of $100 million in the annual recurring revenue recently.

Freshworks first customer was from Australia, who paid for the service after a few hours of toying around with it, despite having a 30-day free trial. The cloud-based customer relationship software maker today boasts of a user-base of over 150,000, including large MNCs like Honda, Bridgestone, Toshiba, Hugo Boss, University of Pennsylvania, and a large number of small and medium enterprises. In India, the company also has a rich list of customers including Saavn, Decathlon, Grofers, Lenskart, Oyo Rooms, Byju's and Goibibo to mention a few.

“Our initial scaling was fast. We hit 100 customers in 100 days and 200 customers in 200 days,” says Mathrubootham, who is currently the CEO of the company.

Freshworks almost had a free run in the initial few years when it was clocking a growth of almost 200 per cent year-on-year, though at a lower base. As the base started expanding, the growth also began to taper off, forcing the company to chalk out a multi-product strategy of focusing on customer engagement. This again revived growth to around 70 per cent last year, and the company expects this momentum to continue this year as well.

Starting out with a single product for customer support, Freshdesk has now branched into sales, marketing, chat and contact centre software such as Freshsales, Freshservice, Freshmarketer and Freshcaller, among others.

“Each one of these products addresses a multi-billion dollar market opportunity. So, the potential for growth is huge,” says Mathrubootham.

While Freshdesk and Freshservice do drive bulk of the company’s revenues today, some of newer products like Freshsales and Freshchat are getting a lot of traction. The other thing that has helped Freshworks diversify its business is acquisition, and the company has made nine acquisitions since 2015.

1click, the first company that Freshworks acquired, is powering the co-browsing feature in Freshdesk while Konotor, another acquired company, is behind the new Freshchat product. The Zarget acquisition, which Freshworks did in 2017, helped it launch Freshmarketer software, while the other acquisitions have helped it in its artificial intelligence, machine learning and bots technology.

“Our company’s growth has been driven by the fact that we’re delivering cloud-first, easy-to-use software to customers who are tired of using clunky, overpriced products. The status quo of business software has severely underserved small and medium enterprises, which puts their data in silos. This fails to provide the real value,” adds Mathrubootham.

Unlike its neighbour Zoho, which was built by founder Shridhar Vembu completely on his own steam, Freshworks has tapped the venture capital route to grow much faster. The company has so far raised a total of $149 million in multiple rounds. In 2016, when it raised its last round of $55 million led by Sequoia, the company was valued at $700 million. While Freshworks has not gone for any new funding since then and Mathrubootham refuses to comment on company’s future fundraising plans, industry experts believe that the firm is on its way to hit the billion dollar club in a year or even before that. 

One of the reasons why valuation of the company will only keep growing, say experts, is the massive growth opportunity that SaaS market offers globally. According to Gartner, SaaS revenues are expected to grow from $58.6 billion in 2017 to $99.7 billion in 2020.

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