India's Freshworks flourishes on NASDAQ debut

Claims that the company is the first Indian SaaS player - or even the country's first unicorn - to list in the US might be contested.

Freshworks was founded in 2010 by Indian entrepreneurs, but the company soon relocated its headquarters to the US, to be closer to the main customer base. Numerous others SaaS start-ups have followed a similar trajectory, including PubMatic, which listed on NASDAQ at the end of last year.

Freshworks sold 28.5 million class A shares at $36 apiece, above the indicative range of $28-32, according to a filing. The stock began trading on September 22, quickly rising as high as $48 for a market capitalization of approximately $13.5 billion. It closed at $47.55, a 32% premium to the IPO price. The company achieved a valuation of $3.5 billion on closing a $150 million round in November 2019.

Freshworks’ largest shareholder is Tiger Global Management with 26% in class B shares prior to the IPO, followed by Accel Partners on 25.5%, Sequoia Capital India on 12.1%, and Capital G on 8.2%.

Capital G, an investment arm of Google, led the $150 million round in 2019, with additional contributions coming from Accel and Sequoia. All three participated in a $100 million round a year earlier, AVCJ Research’s records show. The most recent investment in the company was an $85 million commitment from Steadview Capital in 2020 that was used to take out existing investors.

Accel’s involvement with Freshworks – originally known as Freshdesk Technologies – dates to 2011. Tiger Global first invested in the company the following year.

Freshworks is described by industry participants as the India SaaS success story that made everyone take notice, partly because Zoho, the oldest of the SaaS unicorns, has never received external funding. 

Its first product was Freshdesk, a generic customer experience offering. From there, Freshworks expanded into IT services management and a broader range of customer relationship management (CRM) tools, including salesforce and marketing automation. The goal is to improve productivity and reduce cost, while maintaining high customer retention and net promoter scores.

As of June, the company had approximately 52,500 business customers, across more than 120 countries, with a net dollar retention rate of 118%. Around 13,300 of these customers each contribute more than $5,000 in annual recurring revenue (ARR); they also account for 84% of Freshworks’ total ARR. There are 1,164 customers in the $50,000 ARR and above category.

Revenue came to $249.7 million in 2020, up from $172.4 million the previous year. Over the same period, the company’s operating loss widened from $29.7 million to $56.1 million. Net losses rose from $624.5 million to $1.62 billion, but this was almost entirely driven by the accretion of redeemable convertible preferred stock.

The IPO comes on the back of a surge in private equity investment in India’s SaaS space. In the past three months, Freshworks has been surpassed twice as the leading unicorn, first by BrowserStack, which achieved a valuation of $4 billion with a $200 million Series B in June, and then by Postman, which hit $5.6 billion on closing a $225 million Series D in August.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Technology
• IPO
• Support services
• India
• USA
• enterprise software
• Accel Partners
• Sequoia Capital
• Google
• Steadview Capital
• Tiger Global Management