Freshworks Inc. made a stellar debut on Nasdaq on Wednesday—becoming the first Indian-origin SaaS (software-as-a-service) company to list shares in the U.S.
The company, originally founded in Chennai in 2010 but later shifted to Silicon Valley to be closer to its customers, raised over USD 1.03 billion in its initial public offering (IPO) by selling 28.5 million shares at USD 36 apiece at a USD 10.13 billion valuation.
The San Mateo, California-headquartered firm’s shares opened at USD 43.50 apiece, up almost 21% against the IPO price of USD 36, taking its valuation over USD 12 billion. Freshworks saw its share price surge by up to 33% to about USD 48 on the back of high investor demand, while its market capitalization ballooned to USD 13 billion on the first day of trading.
“I feel like an Indian athlete who has won a gold medal at the Olympics,” said Girish Mathrubootham, co-founder and CEO at Freshworks, before ringing the opening bell on Nasdaq.
“Today is a dream come true for me—from humble beginnings in Trichy to ringing the bell on Nasdaq for the FreshWorks IPO. Thank you to our employees, customers, partners, and investors for believing in this dream,” he tweeted after the debut. “The journey to get here has taken 11 years, a lot of hard work, and loads of good fortune.”
Freshworks’ listing has made hundreds of its employees wealthy. According to Mathrubootham, 76% of the company’s 4,300 employees globally hold stock or equity options, of which 500 became millionaires—with 70 of them below the age of 30.
“This IPO has given me the opportunity to fulfill my responsibility to all those employees who have believed in Freshworks for over ten years. This is going to have a life-changing impact for many employees,” he told the media.
The journey to the top
Freshworks, which provides intelligent customer engagement software for businesses of all sizes, was founded by Girish Mathrubootham with Shan Krishnasamy in 2010 in a small house converted into an office in a suburb in Chennai, India, after he had a terrible customer support experience with a shipping company. Prior to that, Mathrubootham worked with SaaS giant Zoho as vice president of product management.
“The story of Freshworks started with a non-obvious entrepreneur in a non-obvious location solving a painful and obvious problem: poor customer support experience for consumers and inadequate tools for the agents serving them,” said Sameer Gandhi and Shekhar Kirani, partners at Accel, in a blog. Accel was the first investor to back Freshworks in 2011 and has participated in or led every subsequent round.
“From our very first meeting, we were compelled by Girish and Shan’s unique, differentiated, and unconventional approach to everything about the business,” they said. “The team had strong conviction and perspective on things like value pricing, social product features, high-velocity go-to-market, and most importantly, design.”
Inspired by Apple’s iPhone, which made its debut in 2007, Freshworks focused on “craftsmanship, finish, and ease of use” while building its product suite.
“Up to this point, this is not something we have ever seen coming from India,” Gandhi and Kirani added. “Today, Freshworks is a global business with more than 50,000 customers, (annual) revenues over USD 300 million, and serving a market opportunity of more than USD 120 billion.”
By 2015, the company had raised almost USD 100 million from Accel and Tiger Global, which had come on its cap table in 2012. Freshworks came into the limelight when it became a unicorn in 2018 after landing a USD 100 million check. Its valuation soared to USD 3.5 billion with a USD 150 million funding round in 2019. For Sequoia—which first invested in Freshworks in 2016—the company became the single largest investment from its India and SEA funds.
Freshworks filed IPO papers with the U.S. Securities and Exchange Commission in August, in which Mathrubootham equated the company’s software to the iPhone—just like iPhone eliminated the need for consumers to use different devices, Freshworks enables businesses to rely on one product to engage with customers, instead of deploying multiple tools.
Freshworks, which competes with American giant Salesforce, said in the filing that its revenues surged 53% to USD 169 million in the six months ended June 30, 2021, compared to USD 110 million in revenue in the corresponding period last year. Meanwhile, losses fell steeply by 83% to USD 8.9 million.
The company also noted that the affiliates of Accel and Tiger Global both hold over 25% of the company’s class B shares, while Sequoia Capital owns a little over 12% in the same class.
With the public listing in the US, Freshworks has joined a slew of India’s corporations, including Infosys, Wipro, Tata Motors, MakeMyTrip, Rediff, ICICI Bank, and HDFC Bank that trade on the American stock exchanges.
“It is day zero for Freshworks all over again. We are truly inspired by the massive opportunity in front of us. We have a massive USD 120 billion market opportunity, so if you look at that, we have just scratched the surface,” Mathrubootham told local media Economic Times in an interview.
