Putting the Freshworks IPO in Context (Part 2)

Freshworks’ Financials

Within two years of its launch, Freshdesk joined the 1Mby1M Million Dollar Club. Revenues were estimated to have grown to a $10 million annual run rate by the end of 2013. In December 2011, the company raised its first Series A funding for $1 million, $5 million in 2012, and $31 million in 2014. So far, the company has raised $484 million in over nine rounds and has acquired 13 capital-efficient startups, several of which were funded by Girish as an angel investor.

Freshdesk rebranded itself as Freshworks in 2017 after it expanded its portfolio to offer IT services management software Freshservice, CRM software Freshsales, call center software Freshcaller, applicant tracking software Freshteam for recruiters, customer messaging software Freshchat, and conversion optimization suite Freshmarketer.

Along the way, it has slowly but surely reached all its goals: $100 million ARR, unicorn status, and most importantly, profitability in FY 2017-2018.

As per the S-1 filing, Freshworks has a customer base of 52,500 organizations as of June 30, 2021, compared to approximately 48,500 as of December 31, 2020 and approximately 40,000 as of December 31, 2019.

Its revenue grew 45% to $249.7 million in 2020. Net loss increased to $57.3 million in 2020 from $31.1 million in 2019. It had an accumulated deficit of $3.1 billion and cash and cash equivalent balance of $104.8 million as of June 30, 2021. It achieved profitability in one quarter of 2020, but does not foresee profitability in the near future as it is a growing company.

Freshworks competes with Salesforce and Zendesk, and legacy vendors, such as Oracle and SAP in the CX market. Within ITSM, its competitors are ServiceNow, BMC, Ivanti/Cherwell, and Atlassian. Within CRM, it faces competition from full-featured vendors, such as Salesforce, HubSpot, and Microsoft Dynamics, and legacy vendors, such as Oracle, SAP, and Sage.

Freshworks’ journey to a multi-product strategy has expanded from CX, to employee and IT support, to messaging and cloud telephony, to a unified customer vision. It also has advanced AI and ML capabilities. Its marketplace provides access to over 1,100 applications developed and published by third parties that businesses can plug into their Freshworks solution to further extend the product. Businesses have built over 2,900 custom apps to address their specific use cases. Its partner ecosystem consists of channel partners, independent software vendors (ISV) partners, and its marketplace.

Freshworks expects its TAM to be about $120 billion. According to IDC, by 2025, the markets it addresses within CRM will represent a $76 billion opportunity and the SSM market will represent a $44 billion opportunity.

Photo Credit: Economic Times

This segment is part 2 in the series : Putting the Freshworks IPO in Context
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