Freshworks eyes funding round at $3bn valuation

BENGALURU:

Freshworks

, one of India’s largest software-as-a-service (

SaaS

) companies, is in talks with existing investors like Sequoia Capital India and Tiger Global Management — besides new investors, including mutual funds — to lead a fresh funding round at a valuation of $2.5-3 billion, said two sources. The new round could be a precursor to establishing a valuation before its public offering in the US in the coming years, which the Chennai- and California-based company has been preparing for.

“The discussions are still early, so the amount and valuation are yet to be finalised,” said one of the sources. The size of the ongoing round could not be ascertained. Freshworks has raised $250 million till now and also counts Accel India and

Capital G

, the investment unit of Google-owner Alphabet, as its backers.

“We have no funding news to announce. Freshworks policy does not permit us to comment on financial statements,” said a company spokesperson when contacted by TOI.

CEO Girish Mathrubootham, a University of Madras MBA who earlier worked at bootstrapped software products firm Zoho, co-founded the company in 2010 along with his former colleague Shan Krishnasamy. More recently, the 44-year-old CEO shifted to the US as Freshworks goes after bigger clients and the company prepares for an IPO by 2021.

Its flagship customer support product is called Freshdesk. Over the years, it has also expanded into IT services management and customer relationship management. Additionally, it came up with a fully integrated cloud bundle called Freshworks 360, which brings together sales, marketing and support applications to provide users with a complete customer engagement experience.

Earlier this year, the company said it has 35,000 paying customers and its billings in the April-June quarter have increased by 69%. In June last year, Freshworks had said that it had reached $100 million in annual recurring revenues (ARR). Analysts tracking the space peg the current ARR at $150-200 million.

The talk of a new funding round comes at a time when software companies in the US — like video-conferencing player Zoom, cybersecurity company

CrowdStrike

and analytics company Datadog — have had successful public offerings there because of a clearer path to profits as compared to heavy loss-making consumer-focused companies like WeWork and Uber.

Several software startups that started out in India — like cloud data protection player Druva and enterprise contract management player Icertis — have reached the unicorn valuation of $1 billion this year. Investors like Steadview Capital and Tiger Global have also been actively investing in the space.

Success of Freshworks will be a benchmark for India’s nascent but fast-growing software space, as it is laying the path for other entrepreneurs, said those tracking the industry. The company had reached $1.5 billion when it raised capital last year, making it the most valued software startup in India. Zoho is larger than Freshworks in terms of revenues.

“India began as a services-heavy country in tech. But over the last 20 years, we have pivoted deeply into product-first, cloud-focused companies which have global aspirations. Freshworks is one of the first companies in minds of Indian entrepreneurs to crack the global market and go after world market leaders like Salesforce and Zendesk,” said Hemant Mohapatra, partner at venture capital firm Lightspeed, which has backed software companies like Innovaccer and Darwinbox.