Freshworks, a customer Engagement software company with roots in both California, USA and Tamil Nadu, India, is going public. The S-1 filing paints the picture of a company that scales quickly and improves profitability as it matures. However, to understand the company’s numbers, we need to peel out certain costs for a clear picture.
The Exchange spoke to Freshworks CEO Girish Mathrubootham a few weeks ago about the future of his company, a conversation that we timed quite well with hindsight. We’ll be drawing on notes from the call as we analyze Mathrubootham’s IPO filing.
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Freshworks’ IPO is going well. The company raised hundreds of millions of dollars while it was private, including a $ 150 million Series H in late 2019, which the company valued at around $ 3.5 billion, according to Crunchbase data. The list of investors includes Accel, Tiger, Sequoia and Capital G.
This morning let’s take a look at the company’s historical growth, track Freshworks’ changing profitability profile, and see if the quality of sales improves over time.
Brief notes on the product
Before we dive into the numbers, let’s discuss Freshworks historical product work.
The company started with a single piece of software called Freshdesk. Freshdesk was born after the company’s CEO struggled with poor customer service while trying to return a broken TV.
According to Mathrubootham, there have been more opportunities than ever for customers to reach businesses and that the business market is evolving in a way that gives customers more control over how brands are perceived. Hence, Freshdesk has brought together a wide variety of customer contact methods including social media, which was an emerging market category at the time.
Freshworks later found that some of its customers were using its customer service software to provide IT support to their own employees. From this observation, the company developed Freshservice, a version of its original product, but one that has been optimized for internal use. The company later built sales tools and, more recently, a unified database for customer data. The latter enables companies using Freshworks software to have a single record for each customer across all marketing and sales interactions, which should also be extended to support communications.
All that can be said is that Freshworks has a product it can sell to small businesses that may need a single piece of their larger product mix and a lot more software it can sell to those customers. And it has a suite of products that it can sell to larger companies as well.
How did the company hold its own in the market? Let’s find out.