Indian Software-as-a-Service ( SaaS) unicorn, Freshworks Inc. has filed for an initial public offering (IPO) worth $100 million with the U.S. Securities and Exchange Commission (SEC).
The eleven-year old customer relationship management software platform has appointed Morgan Stanley, JP Morgan, BofA Securities, Jeffries and Barclays as book managers to the IPO, among others.
Freshworks joins the growing list of Indian unicorns which are making a beeline towards public markets. These include financial services major Paytm, insurtech player PolicyBazaar and beauty marketplace Nykaa among others in India. Merchant fintech Pine Labs is also looking to list on the US exchanges in 2022.
According to Freshworks, the net proceeds from the IPO will be used for general corporate purposes, including catering to working capital needs, operating expenses and capital expenditures.
The SaaS unicorn, which was last valued at $3.5 billion in November 2019, said that it will also be using a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services or technologies.
“Freshworks is the company that wasn’t supposed to win. Whether we could differentiate ourselves in crowded markets, or compete with larger players, or build a global SaaS company from India, the doubts were always there. And people were not shy about telling me! Over the years, I’ve heard it all, including: There are 600 help desks in the market. How do you expect to win? You can’t find talent in Chennai; you can’t win unless you move to Bangalore,” said Freshworks’ founder Girish Mathrubootham in a founder’s letter, as a part of the prospectus.
Freshworks has raised more than $327 million in funding till date from the likes of Accel, CapitalG, Sequoia India, and Tiger Global Management. It has more than 52,500 customers across 120 countries.
“Freshworks is a very special company. We were unconventional from the beginning - not for its own sake, but because we saw an opening in the market for a unique approach. We weren’t founded in Silicon Valley. We didn’t target large enterprises. We didn’t have access to a been-there-done-that talent pool. We offered a ‘fresh’ approach relying on efficient, product-led, low-cost, and low-touch sales; and we targeted massive, underserved markets. And we had one simple mantra: happy employees create happy customers. In fact, we made that our mission,” added Mathrubootham.
The company reported a revenue jump of roughly 45% between calendar year 2019 and 2020. For 2020, the overall revenues for the firm stood at $250 million. The company reported an 84% increase in net losses between 2019 and 2020. For Freshworks, the losses for calendar year 2020 stood at $57.3 million.
However, the company has made concerted efforts to reduce its losses in 2021. For six months ending June 30, Freshworks’s losses dropped by almost 83% to $9.84 million in 2021.
Mathrubootham, a known fan of Rajnikanth, also made a mention about his idol.
“The code name for our IPO was Project SuperStar, named after the most successful movie star from Tamil Nadu, Rajinikanth. I want to express my love and gratitude to him for being my ‘maanaseega’ guru. There is no comparable English word to express what this means. It is a mentor; a role model that lives in your mind, from whom you learn a lot by watching from afar [...] Thank you, Thalaivaa!,” said Mathrubootham, in the company filings with the SEC.
The company in its risk factors stated that it might not be able to achieve profitability or continue the rapid growth caused by the Covid-19 pandemic.
“We have a history of losses, and we may not be able to achieve profitability or, if achieved, sustain profitability [...] We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth,” said Freshworks in its company filings.