Freshworks’ IPO boosts an Indian SaaS boom
“i feel like an Indian athlete who won the Olympic gold medal,” Girish Mathrubootham, the co-founder of Freshworks, said as he rang the iconic bell at Nasdaq on 22 September. he called it a certification of India’s product expertise.
for Mathrubootham, it was “day zero all over again” and a new beginning in his entrepreneurial journey from his early days in Trichy, Tamil Nadu. the company became the first Indian software-as-a-service (SaaS) firm to be listed on the US stock exchange. this has opened the floodgates for many Indian SaaS companies to go public.
on its Nasdaq debut, Freshworks was valued at $13 billion. with this, over 500 of its employees turned millionaires. it’s a monumental moment for a company which has stood its ground against legacy companies such as SAP, whose market value is $200 billion.
ever since the Covid-19 outbreak, SaaS companies have been in demand. the pandemic made work-from-anywhere the new-normal. this meant that companies and their employees/clients needed to access data remotely. the companies that were earlier only thinking of moving to the cloud were forced to make the switch. This had to be done on a secure platform.
here, SaaS companies like Freshworks gained. it reported revenue of $250 million in 2020. for the first half of 2021, it clocked revenue of $169 million. in February 2021, the company said that it surpassed $300 million in annual revenue run rate (ARR), growing the business by 40% year-on-year.
for the company, a steady growth in revenue meant that their dreams got bigger. getting listed would fund its business ambitions and hence, by April 2021, the IPO plan started firming up.
it took a cue from other success stories in this space, such as Palantir, Snowflake, and Zoom.
the success of Freshworks has also encouraged local SaaS companies in India. firms like Chargebee, Zenoti, Innovaccer, Druva, and Postman operating here have become unicorns.
the business model works well because clients pay for services from the first day. larger the companies, the better is the cash flow.
a McKinsey-SaasBOOMi report said that India is looking at a $1 trillion opportunity for SaaS. it will also create nearly half a million new jobs by 2030.
today, 10 of the 51 unicorns in India are from the SaaS space. Indian SaaS startups have raised $4.3 billion in funding in 282 deals since the start of 2020, according to Venture Intelligence data. this year, Chargebee, MindTickle and BrowserStack became unicorns.
according to a benchmarking analysis by Bain & Company, select leading Indian SaaS companies such as Freshworks, Browserstack, Gupshup, HighRadius, Chargebee, and Innovaccer, are even outperforming their US peers.
since Mathrubootham idolises the mega movie star Rajinikanth, his IPO was codenamed ‘Project SuperStar’ after Thalaiva.
this listing could also give a fillip for fund-raising by Indian SaaS startups. a blog by Priya Rajan of Silicon Valley Bank said that because of the surge in demand, Indian SaaS companies are also raising more capital earlier in their life cycles and garnering higher valuations than other sectors, both in vertical SaaS, such as Zenoti, and horizontal SaaS like Freshworks.
horizontal Saas firms cater to a wide audience irrespective of the industry, while vertical SaaS companies offer services to a specific industry, say insurance or healthcare.
prior to Freshworks’ IPO, where its valuation zoomed, another SaaS startup Postman became the most valued in this space, with $225 million funding at a $5.6 billion valuation.
in India, RateGain, which provides SaaS solutions for the travel and hospitality industry, has filed for a ₹1,200 crore IPO. this will be the first such SaaS firm in India to get listed domestically. merchant bankers have said many more are underway.
“apna time aa gaya” or “our time has come” was Mathrubootham’s reaction to the IPO.
Freshworks (then called Freshdesk) was set up in 2010 by Girish Mathrubootham and Shan Krishnasamy.
in a blog, Mathrubootham had said that the idea to build a product like Freshdesk came when customer support was challenging and existing solutions were expensive.
in the years following its inception, Tiger Global, Google Capital and Sequoia Capital India came in as investors. by 2019, the company moved to San Mateo in California to be closer to its customers in North America. then came the pandemic and the plan to list on the US stock exchanges.
while the listing has happened, and Indian SaaS companies are booming, a slew of challenges remain. hiring skilled workers is one major concern. according to the SaaSBOOMi report, 77% of SaaS leaders in India say their biggest challenge is ramping up critical talent.
mentorship programmes and academic exchange initiatives with SaaS firms could help staff these companies. this is what will fuel all the future of Freshworks style firms of India.