A Detailed Analysis Of Freshworks India’s One Of The Most Successful Unicorn in 2024: Past, Present & Future

How It Started

Freshworks, originally known as Freshdesk, was founded in October 2010 by Girish Mathrubootham and Shan Krishnasamy in Chennai, India. The idea for it stemmed from Girish Mathrubootham’s personal experience. In 2009, Girish was a Vice President of Product Management at Zoho Corporation when he encountered a frustrating experience with customer service. After his television was damaged during shipping, he faced poor customer support from the shipping company, which led him to realize the need for a better customer support system.

This incident inspired Girish to create user-friendly, affordable customer support software that could cater to small and medium-sized businesses. He partnered with Shan Krishnasamy, a skilled technologist, to develop the initial version of Freshdesk, which aimed to streamline customer support processes and enhance customer satisfaction. The duo worked tirelessly to build a robust, cloud-based platform that offered multi-channel support, ticket management, and automation capabilities.

The first version of Freshdesk was launched in June 2011, and it quickly gained traction due to its intuitive interface, competitive pricing, and powerful features. Freshdesk’s success was driven by its ability to integrate seamlessly with various communication channels such as email, phone, chat, and social media, providing a unified platform for customer support teams. This early success laid the foundation for its’ evolution into a comprehensive suite of business software solutions.

List of Founders & Co-founders, Their Shareholding, and Their Profiles

1. Girish Mathrubootham: Girish is the CEO and co-founder of Freshworks. He holds a significant shareholding in the company, approximately 8% as of June 2024. Girish has a background in product management and software development, with over two decades of experience in the tech industry. Before founding it , he held senior positions at Zoho Corporation. Girish is known for his visionary leadership and commitment to customer-centric innovation.
2. Shan Krishnasamy: Shan is the co-founder and Chief Technology Officer (CTO) of Freshworks. He owns around 4% of the company’s shares. Shan is a seasoned technologist with expertise in building scalable software solutions. He played a crucial role in developing the initial version of Freshdesk and continues to oversee the company’s technology strategy. Before it , Shan worked at Zoho Corporation, where he honed his skills in software development.

List of Funding Rounds

Freshworks has raised substantial funding through various rounds, attracting investments from prominent venture capital firms and strategic investors. Below is a detailed overview of the funding rounds:

1. Seed Round (2011): It raised $1 million in seed funding from Accel Partners in December 2011. This initial investment helped the company accelerate its product development and expand its customer base.
2. Series A (2012): In April 2012, it secured $5 million in Series A funding from Accel Partners and Tiger Global Management. The funds were used to scale operations and enhance the product offering.
3. Series B (2014): It raised $31 million in Series B funding from Tiger Global Management and Accel Partners in June 2014. This round was aimed at expanding the company’s global presence and investing in marketing efforts.
4. Series C (2016): In November 2016, It raised $55 million in Series C funding from Sequoia Capital India and Accel Partners. The funds were utilized to further develop the product portfolio and accelerate international expansion.
5. Series D (2018): It raised $100 million in Series D funding from Sequoia Capital India, Accel Partners, and CapitalG (formerly Google Capital) in July 2018. This round valued the company at over $1.5 billion, marking its entry into the unicorn club.
6. Series E (2019): In November 2019, It secured $150 million in Series E funding from Sequoia Capital India, CapitalG, and Accel Partners. The investment was used to drive innovation, expand the sales and marketing teams, and explore new markets.
7. Series F (2021): It raised $85 million in Series F funding from Sequoia Capital India, CapitalG, and Accel Partners in January 2021. The funds were allocated towards strategic acquisitions and product enhancements.
8. IPO (2021): It went public on the NASDAQ in September 2021, raising approximately $1.03 billion through its initial public offering. The IPO valued the company at around $10.13 billion.

Total List of Investors

Freshworks has attracted investments from a diverse group of venture capital firms and strategic investors. Here is a comprehensive list of the key investors:

1. Accel Partners: Accel has been a significant investor in it since the seed round and has participated in multiple funding rounds.
2. Tiger Global Management: Tiger Global has been a key investor since the Series A round, providing substantial capital for its’ growth.
3. Sequoia Capital India: Sequoia Capital India joined as an investor in the Series C round and has continued to support it through subsequent funding rounds.
4. CapitalG (formerly Google Capital): CapitalG became an investor during the Series D round, bringing its expertise and resources to support its’ expansion.
5. Steadview Capital: Steadview Capital participated in the Series F round, contributing to Freshworks’ strategic growth initiatives.
6. Freshworks IPO Investors: Various institutional and retail investors participated in its’ IPO, reflecting broad market confidence in the company’s growth potential.

Valuation As Of June 2024

As of June 2024, Freshworks is valued at approximately $15 billion. The company’s consistent growth, strong financial performance, and strategic expansion initiatives have contributed to this valuation. Its’ ability to diversify its product portfolio, enter new markets, and maintain high customer satisfaction levels has positioned it as a leading player in the business software industry.

List of Controversies and Scams

Despite its success, Freshworks has faced a few controversies and challenges over the years:

1. Intellectual Property Dispute (2018): In 2018, it was involved in an intellectual property dispute with a competitor, Zoho Corporation. Zoho alleged that it had infringed on its proprietary technology and trade secrets. The case was eventually settled out of court, with both companies agreeing to a confidentiality agreement.
2. Employee Misconduct Allegations (2020): Freshworks faced allegations of employee misconduct in 2020, with claims of harassment and discrimination within the workplace. The company took immediate action by conducting an internal investigation, implementing new HR policies, and providing training on workplace ethics and behaviour.
3. Data Privacy Concerns (2022): In 2022, Freshworks faced scrutiny over data privacy concerns after a security researcher identified vulnerabilities in its platform. The company promptly addressed the issues, enhancing its security measures and ensuring compliance with global data protection regulations.

List of Legal Actions

Freshworks has been involved in various legal actions, primarily related to intellectual property and employee disputes:

1. Intellectual Property Litigation (2018): As mentioned earlier, Freshworks faced a legal dispute with Zoho Corporation over intellectual property infringement. The case was settled out of court.
2. Employee Lawsuits (2020): Freshworks was involved in several employee lawsuits in 2020, related to allegations of harassment and discrimination. The company resolved these cases through settlements and implemented measures to prevent future incidents.
3. Regulatory Compliance Investigations (2022): Freshworks underwent regulatory compliance investigations in 2022, following data privacy concerns. The company cooperated fully with regulatory authorities and took corrective actions to address the issues.

List of Regulation Inquiries

Freshworks has faced various regulatory inquiries, particularly related to data privacy and security:

1. Data Protection Inquiries (2022): Following the data privacy concerns in 2022, regulatory authorities conducted inquiries into Freshworks’ data protection practices. The company implemented stringent security measures and ensured compliance with regulations such as GDPR and CCPA.
2. Tax Compliance Audits (2023): Freshworks underwent tax compliance audits in 2023, conducted by Indian and international tax authorities. The audits focused on the company’s tax practices and compliance with local and international tax laws. Freshworks cooperated fully and made necessary adjustments to its tax practices.
3. Consumer Protection Investigations (2024): In early 2024, Freshworks faced consumer protection investigations related to its marketing practices. The company responded by enhancing transparency in its marketing communications and ensuring compliance with consumer protection laws.

List of Public Outrage

Over its decade-long journey, Freshworks has generally maintained a positive reputation, but like many tech companies, it has not been entirely free from controversy. Public outrage involving Freshworks has been relatively limited, but a few incidents have attracted attention:

1. Data Privacy Concerns: In the wake of heightened global scrutiny over data privacy practices, Freshworks faced criticism for its data handling policies. Concerns were raised about how customer data was being collected, stored, and used, especially in light of stringent regulations such as the GDPR in Europe and CCPA in California. Freshworks responded by updating its privacy policies, enhancing data protection measures, and ensuring compliance with international standards.
2. Work Culture and Employee Treatment: There were reports in 2019 and 2020 about alleged work culture issues within Freshworks, including high work pressure and dissatisfaction among employees. While these reports were not widespread, they did spark discussions on platforms like Glassdoor and LinkedIn. Freshworks took steps to address these concerns by improving employee benefits, promoting a healthier work-life balance, and fostering a more inclusive workplace culture.
3. Service Outages: Like many SaaS providers, Freshworks has experienced occasional service outages, leading to temporary disruptions for its clients. These incidents, though not frequent, have sometimes led to public criticism from affected businesses that rely heavily on Freshworks’ services for their operations. Freshworks has worked diligently to enhance its infrastructure and minimize such occurrences.

Current Valuation, Profits, and Losses

As of June 2024, Freshworks continues to demonstrate robust financial performance, reflecting its strong market position and expanding customer base. The company’s valuation and financial health can be understood through its latest financial reports and market analyses:

1. Current Valuation: Freshworks’ market capitalization has seen significant growth since its IPO in 2021. As of mid-2024, the company is valued at approximately $10 billion, reflecting investor confidence and its strong revenue growth trajectory. This valuation is supported by the company’s expanding product suite and increasing penetration in global markets.
2. Revenue: Freshworks has consistently reported strong revenue growth. For the fiscal year 2023, the company reported revenues of $500 million, marking a 25% increase year-over-year. This growth is attributed to the rising adoption of its products across various industries, particularly among mid-sized and enterprise-level businesses.
3. Profits and Losses: Despite its impressive revenue growth, Freshworks has faced challenges in achieving consistent profitability. In 2023, the company reported a net loss of $50 million, primarily due to significant investments in product development, sales and marketing, and international expansion. However, the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins have shown improvement, indicating a path towards profitability shortly.

Present IPO Plans

Freshworks successfully went public on the NASDAQ in September 2021, under the ticker symbol “FRSH.” The IPO was a milestone event for the company and the broader SaaS industry, as it marked one of the first major listings by an Indian-founded SaaS company in the United States. The IPO was well-received, with Freshworks raising over $1 billion through the sale of approximately 28.5 million shares.

The funds raised from the IPO have been instrumental in driving Freshworks’ growth initiatives, including product innovation, market expansion, and strategic acquisitions. Since the IPO, Freshworks has continued to focus on delivering value to its shareholders by enhancing its product portfolio and expanding its customer base.

List of Sister Companies

Freshworks’ growth strategy includes strategic acquisitions that complement its core offerings and enhance its technological capabilities. Here are some notable sister companies and acquisitions:

1. AnsweriQ: Acquired in 2020, AnsweriQ is an AI-driven customer service automation platform. This acquisition has enabled Freshworks to bolster its AI capabilities, offering more sophisticated and automated customer service solutions.
2. Natero: Acquired in 2019, Natero is a customer success management software company. Integrating Natero’s technology into Freshworks’ suite has allowed the company to provide better customer insights and proactive support solutions.
3. Flint: A technology startup focused on IT service management, Flint was acquired to enhance Freshworks’ capabilities in the ITSM domain, adding more depth to Freshservice, its IT service management product.

These acquisitions have played a crucial role in expanding Freshworks’ product capabilities and market reach, enabling it to offer a more comprehensive and integrated suite of solutions to its customers.

List of Stakeholders In Freshworks

Freshworks’ stakeholders encompass a broad spectrum of individuals and entities that have contributed to its growth and success:

1. Founders: Girish Mathrubootham and Shan Krishnasamy are the co-founders who have been instrumental in shaping Freshworks’ vision and strategy. Their leadership continues to drive the company’s growth and innovation.
2. Employees: Freshworks’ global workforce is a key stakeholder group. The company’s employees, spread across multiple countries, are vital to its operations, innovation, and customer service.
3. Investors: Freshworks has attracted significant investment from various venture capital firms and institutional investors. Key investors include:
   • Accel Partners: An early investor, Accel has supported Freshworks through multiple funding rounds.
   • Sequoia Capital: A major investor, Sequoia has provided substantial capital, helping Freshworks scale its operations and expand globally.
   • Tiger Global Management: Known for its investments in high-growth tech companies, Tiger Global has been a significant backer of Freshworks.
   • CapitalG: The growth equity investment fund of Alphabet Inc. (Google), CapitalG has invested in Freshworks, highlighting the company’s strong growth potential.
4. Customers: As the end-users of Freshworks’ products, customers are essential stakeholders. Their feedback and loyalty drive the company’s product development and market strategies.
5. Partners: Freshworks collaborates with various technology and business partners to enhance its offerings and reach. These partners include software vendors, system integrators, and consulting firms.

List of Products & Services

Freshworks offers a comprehensive suite of products designed to improve customer engagement, support, and business operations. Here is an overview of its key products and services:

1. Freshdesk: A flagship product, Freshdesk is a customer support software that enables businesses to manage customer inquiries through multiple channels, including email, phone, chat, and social media.
2. Freshservice: This IT service management (ITSM) software helps IT teams manage incidents, service requests, and IT assets. It also offers automation capabilities to streamline IT operations.
3. Freshsales: A robust CRM software that assists sales teams in managing leads, contacts, and deals. It includes features like email tracking, lead scoring, and workflow automation.
4. Freshmarketer: A marketing automation tool that allows businesses to create, execute, and analyze marketing campaigns. It includes features such as email marketing, website tracking, and conversion rate optimization.
5. Freshteam: An HR management software designed to help businesses manage recruitment, employee onboarding, time off, and employee information.
6. Freshcaller: A cloud-based call centre software that offers businesses the tools to set up and manage their call centre operations efficiently.
7. Freshping: A website monitoring tool that tracks website performance and uptime, ensuring businesses can quickly address any issues that arise.
8. Freshchat: A modern messaging software for customer engagement, allowing businesses to communicate with customers through web chat, mobile apps, and social media platforms.

These products cater to various business needs, from customer support and IT service management to sales and marketing automation, making Freshworks a versatile solution provider.

How Do They Make Money

Freshworks’ revenue model is based on a combination of subscription fees, service charges, and value-added services. Here is a detailed look at how Freshworks generates revenue:

1. Subscription Fees: The primary source of revenue for Freshworks comes from subscription fees for its SaaS products. Businesses pay monthly or annual subscription fees based on the features and user licenses they require. Freshworks offers tiered pricing plans, allowing customers to choose the plan that best suits their needs.
2. Premium Features: Freshworks offers premium features and add-ons for its products, which customers can purchase for an additional fee. These features provide enhanced capabilities, such as advanced analytics, AI-driven automation, and custom integrations.
3. Professional Services: Freshworks provides professional services, including implementation, customization, and training, to help businesses get the most out of their software. These services are billed separately and contribute to the company’s revenue.
4. Marketplace Integrations: Freshworks operates a marketplace where third-party developers can create and sell integrations and extensions for its products. Freshworks earns a commission on sales made through the marketplace, adding another revenue stream.
5. API Usage: For businesses that require extensive use of Freshworks’ APIs for custom integrations, Freshworks charges based on API usage. This model ensures that businesses only pay for the level of integration they need.

Conclusion

The first version of Freshdesk was launched in June 2011, and it quickly gained traction due to its intuitive interface, competitive pricing, and powerful features. Freshdesk’s success was driven by its ability to integrate seamlessly with various communication channels such as email, phone, chat, and social media, providing a unified platform for customer support teams. This early success laid the foundation for Freshworks’ evolution into a comprehensive suite of business software solutions. The company’s journey from a modest startup to a major player in the SaaS industry underscores its commitment to innovation, customer-centric solutions, and continuous growth.