Freshworks' Journey to India’s First SaaS IPO: A Deep-Dive

Freshworks (formerly Freshdesk) has long been the leading light in India’s SaaS industry. It was India’s first SaaS unicorn, not only achieving massive success but also ushering in a second wave of new SaaS firms, while on their path to becoming India’s SaaS superpower.

Since last year, the Indian software-as-a-service (SaaS) sector has been developing at a breakneck pace, but Freshworks’ NASDAQ public offering has pushed things to the next level.

The company, which creates customer engagement software for businesses, was valued at $12.2 billion after its stock opened 21% higher than its initial offering price of $36 per share.

How It All Started?

Freshworks, which was founded in 2010 by current Chief Executive Officer Girish Mathrubootham (@mrgirish) and current Chief Technology Officer Shan Krishnamasy (@shankrishna), delivers business software to 50,000 clients in over 140 countries. Freshworks provides 11+ products as well as an AI-powered software-as-a-service platform to improve customer experiences, increase staff efficiency, and enable a developer and partner ecosystem.

Freshworks began with a single product, Freshdesk, aimed at the customer support software industry. “We wanted to make a platform that combined assistance with businesses’ social networks,” says Ramesh Ravishankar, Freshworks’ Senior Director of Marketing. “For instance, Freshdesk allows clients to connect Facebook pages and Twitter accounts into their helpdesk and manages them from there.” It also enables them to communicate with consumers via WhatsApp to address issues more swiftly.”

More traditional customer care capabilities like live chat and the conversion of support communications into trackable tickets that a helpdesk can handle are complemented by these functionalities. Freshservice, a cloud-based IT service-desk software that assists with tickets submitted through email, a self-service portal, phone, chat, or in-person, was introduced in 2014. Freshworks became the umbrella name for current and new goods two years later after the creators introduced Freshsales.

Freshworks’ product suite is positioned as offering marketing, support, and sales for the whole customer experience, from acquisition through relationship termination. It provides cloud-based software to organizations with up to 5,000 workers and also utilizes software-as-a-service products to manage its operations.

Freshworks conducts up to 4,000 marketing and advertising initiatives each year, accounting for around 70% of the company’s income. This is also reflected in its recurring revenue growth:

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Freshworks Strategy For Success

Freshdesk was the company’s first customer service software. Freshservice (2014), Freshsales (2016), Freshteam (2017), and now a comprehensive suite of enterprise solutions that capture the whole customer life cycle have all been released.

Let’s take a look at the success journey of Freshworks.

(A) Creating A Blueprint For The Red Ocean Market

All of these services — customer service, marketing automation, IT support, and so on — have significant markets on their own. Girish focused on how to identify red ocean markets and develop a strategy that performs effectively in them. In blue ocean markets, the firm would need a specialized sales staff to educate clients on why they need the product, but in red ocean markets, there is already a defined market that does not require discovery but does require significant effort and money to stand out.

There were approximately 600 help desk products on the market when Freshdesk launched, creating a deep red ocean industry. Freshdesk was also able to triumph thanks to an easy-to-use product, as well as solid execution and a pleasing appearance. This helped its traffic grow and they have pretty much sustained it:

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(B) Execution That Outperforms The Competition

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Freshworks went from $1 million in ARR to $100 million in ARR in only five years, a pace of growth that equals that of the greatest SaaS businesses throughout the world, as seen in the graph above. To get to this point, it needed some unusual methods as well. To fight against established companies like Zendesk and Salesforce, Freshworks generated online content and used guerrilla marketing methods.

Freshworks was mentioned among well-known firms like Zendesk as part of the RipoffOrNot campaign. The Zendesk CEO labeled Freshdesk a rip-off on Twitter (because of the word ‘desk’ in both titles). Instead of retaliating on Twitter, Freshdesk launched the RipoffOrNot campaign, which proudly displayed Zendesk’s CEO’s accusation and encouraged users to make up their minds. Freshdesk received PR alongside Zendesk as a result of this, thus putting it on the same level as the industry leader, a clever method of profiting on a competitor’s insult.

Freshworks gatecrashed Dreamforce, Salesforce’s largest customer event, in 2018 by taking to the sky with a #Failsforce blimp that circled Salesforce Tower throughout the week-long event. The goal was to persuade consumers not to pay for bloated software such as Salesforce.

Girish describes how Freshworks focuses on online client acquisition and how this has aided the company’s worldwide expansion using local talent. Freshworks hasn’t been bashful about promoting itself as the leading help desk provider. The first result for Zendesk versus Freshdesk is “Freshdesk Vs The Others — See Who’s The #1 Helpdesk Tool.”

(C) Creating Solutions For Disadvantaged SMBs In The Long Run

Freshworks was able to acquire market share by catering to the long tail of small businesses, not just in India but throughout the world. Though the helpdesk industry was fiercely competitive, the SMB market was a blue ocean, with existing solutions that were either too difficult or too expensive for small businesses to use.

Instead of elephant hunting (big enterprises), which the global players were concentrating on, Girish refers to it as deer/rabbit hunting. SMBs account for half of the company’s revenue, with the remainder coming from mid-market and corporate customers. It is well reflected in how well it collaborates with other apps to create an ecosystem:

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Freshworks’ easy-to-navigate website, straightforward pricing, intuitive design, and ease of configuration, all of which are important for any product to find acceptance by SMBs, also helped it acquire traction.

To summarize, Freshworks has risen to the top for three reasons:

Taking advantage of the situation: Freshworks picked a booming market and was able to outperform the competition in terms of product, execution, and design.

Taking advantage of their assets: Freshworks established its unique approach to target the long tail of SMBs, rather than following the worldwide SaaS model of sales-driven development.

Getting a chance to play in the major leagues: Early on in its journey, by distinguishing itself and generating noise through creative PR methods, it was able to place itself among market leaders such as Zendesk and Salesforce.

Wrap Up

Freshworks wanted to expand internationally, which entailed learning about market dynamics, category landscapes, and geographic peculiarities before entering a new country or area and executing its playbook flawlessly in each region it entered.

In 2019, Freshworks became the first Indian SaaS business to reach a billion-dollar value.

In 2021, Freshworks prepared for an initial public offering (IPO) with pre-IPO funding round, meant to establish the company’s worth and establish a benchmark for how much Freshworks could be valued at the IPO.

And finally, on September 22, 2021, the shares began trading on the NASDAQ Global Select Market under the symbol “FRSH”. The initial IPO price was set at $36 dollars per share, easily achieving Unicorn status and claiming the title as the first Indian SaaS company to not only reach a billion-dollar valuation, but also, IPO.