Freshworks Inc – Sep 14, 2023

Digital transformation has changed the dynamic for customer service and employee management across countless industries, reshaping them from mere support desks and admin functions into a crucial brand touchpoint and means for retaining top talent. This evolution has necessitated businesses, regardless of size or sector, to invest in robust tools that not only resolve issues, but also create loyal relationships.

Global SaaS provider, Freshworks, is meeting these challenges head-on with a product suite that spans a range of functions including customer relation management, IT service management, sales force, and marketing automation solutions, along with a messaging and chat platform. With products that are user-friendly, straightforward, adaptable, and cost-effective, the comprehensive offerings are helping over 63,000 businesses across more than 170 countries connect with their consumers and employees seamlessly, ultimately improving daily operations and communications.

Freshworks prioritizes built-in intelligence and automation to boost efficiency, enabling users to quickly adapt to the rising demands of modern customers and employees, while ensuring the platform delivers a robust return on investment for clients.

Having already achieved a significant global presence, the company continues to consolidate its market position with a strategy focused on product innovation, penetrating emerging markets, and nurturing a robust partner ecosystem. New features that leverage cutting-edge technologies like AI and machine learning are being introduced. At the same time, their global expansion efforts are underscored by localized solutions ensuring cultural and operational relevance. Lastly, their expanding network of partners continues to amplify their reach, enabling businesses worldwide to harness the benefits of the powerful platform.

After being inspired by resentment from Zendesk customers at rising prices for the popular customer support platform, former Zoho Corp colleagues Girish Mathrubootham and Shan Krishnasamy founded Freshdesk in 2010. The company began its journey focusing on cloud-based customer service software solutions.

In its early growth phase, Freshdesk not only developed its own proprietary solutions, it soon added value to its suite of services with acquisitions of 1CLICK.io, Konotor, and Frilp, leading to the launch of Freshsales, a customer relationship management platform.

In a significant rebrand in 2017, the company was officially renamed Freshworks Inc, reflecting a broader vision of products and services beyond just a helpdesk solution. By 2018, Freshworks was reporting an annual recurring revenue of over $100 million. The same year, it also launched Freshworks 360, a comprehensive product suite that combined the power of sales, support, and marketing software together, further solidifying its market position.

In addition to going public in 2019, continuing growth saw Freshworks debut at number 40 on the Forbes Cloud 100 list. It has also maintained impressive year-over-year revenue expansion which now exceeds more than half a billion dollars annually.

Girish Mathrubootham is the CEO and founder of Freshworks. In just over a decade, Girish has taken Freshworks from an idea to a leading software company empowering businesses to delight their customers and employees. Under his leadership, Freshworks has expanded its operations to 13 global locations to serve customers throughout the world. He is also a prominent venture capital investor and adviser to over 60 companies, and a founding member of SaaSBOOMi, Asia’s largest community of founders and product builders.

Freshworks delivers a suite of software solutions for business users across customer experience (CX) and IT service management, along with sales and marketing automation solutions. The suite of products and its appeal encompasses a vast array of sectors and company sizes, from small start-ups to global giants.

Furthermore, the company has pioneered a distinctive approach to delivering business solutions. With a commitment to product-led growth, it has crafted its suite of products that not only attract a diverse range of customers, but also create avenues for sustained expansion. This approach relies heavily on ensuring the user experience is at the forefront, leading to greater user adoption and loyalty.

For customer-facing teams, the CX family of products including Freshchat and Freshdesk simplify and streamline customer support with a centralized dashboard where businesses can manage customer tickets, prioritize issues, and ensure swift and effective resolutions. Its ability to integrate with other channels, like social media and email, makes it an encompassing solution for companies looking to boost their customer service response rates and overall satisfaction scores. In the real world, an online retailer might use Freshdesk to handle customer queries about order statuses, product information, and return requests. Integrated with an inventory system, customer agents can quickly provide updates and solutions. For example, a travel firm may deploy Freshdesk to manage trip cancellations, itinerary changes, or travel advisory updates, providing timely assistance to travelers.

For employee-facing teams, and targeting the specific needs of IT teams, Freshservice provides both the intelligence and automation businesses need to give employees a “consumer” like experience that many now expect. The product ensures that internal technical issues, from hardware malfunctions to software glitches, are tackled promptly. In practice, large universities can track and resolve tech issues for students and staff, from Wi-Fi outages to software installation requests, while a hospital could manage its vast inventory of medical devices, ensuring timely maintenance and addressing malfunctions.

Catering to sales and marketing teams, Freshsales provides CRM software that simplifies lead tracking, streamlines communications, and ensures that businesses can maximize their sales potential. With features like email tracking and advanced analytics, sales teams are equipped to approach leads with more strategic insights. While Freshmarketer delivers a holistic marketing automation solution that enables businesses to craft, manage, and assess campaigns with ease, ensuring that marketing efforts translate into tangible results. Freshsales allows real estate agents to track potential clients, schedule property viewings, and follow-up communications to ensure no lead is overlooked. While with Freshmarketer, a fashion brand can promote a new line, by segmenting their customer base and sending targeted email campaigns, measuring engagement and conversion rates.

Central to Freshworks’ strategy is the simplicity of its products combined with robust functionalities. By offering trial versions of its software, the company allows potential customers to experience firsthand the efficiency of its tools. With pricing that is transparent, affordable, and easy to understand, reducing the length of sales cycles and increasing the efficiency of marketing and sales, it is disrupting the traditional top-down sales motion, letting users, not executives, designate Freshworks as their software of choice.

The company also benefits from a flexible go-to-market approach that allows it to respond to how businesses want to buy its products. For instance, smaller businesses benefit from a low-cost, low-touch model, ensuring efficiency. Meanwhile, larger enterprises, especially specific departments or divisions within them, receive targeted attention, catering to their unique needs. This tiered approach maximizes reach without compromising the quality of service. This approach is proving successful as larger customers continue to fuel growth in the business.

Providing a compelling tailwind, companies today, both big and small, must adapt to the digital era. Larger firms need to become quicker in their decision-making and processes, while smaller firms must provide top-notch service to compete. As robust data is now central to key business decisions, Freshworks has created the Freddy AI Copilot for developers which enables a fast and intuitive app development experience to incorporate machine learning features across all of its products.

The company is steadily scaling towards a multi-billion dollar valuation by further strengthening its position in its three large total addressable markets.

In the IT and employee service space, Freshworks sees significant opportunities to innovate within IT and adjacent spaces, particularly targeting managed service providers, security operations, governance, risk and compliance, as well as government applications. In customer service, it is building upon a history of innovation to provide an all-in-one customer service suite, specific industry, quality, workforce, and agent performance management and training solutions, along with field service management applications. While in the sales and marketing sectors, Freshworks is seeking to create a unified CRM to accelerate growth with its generative Al enhancements, highly personalized experiences, and conversational commerce capabilities.

Also of particular note, India is central to Freshworks’ operations, employing 85% of its global staff, allowing for faster innovation with a cost advantage that enables it to operate more efficiently and compete globally.

Over the last three years, Freshworks has delivered an impressive run of strong double-digit year-over-year growth between 30% and 50% annually. After closing out another record year in 2022, achieving just short of half a billion dollars in revenue, the company has continued this robust trajectory in 2023, again increasing 20% for the first half, hitting $236.1 million for the six months. This was primarily driven by increases in additional agents enabled by customers under their account, sales of products to existing customers, as well as the addition of new customers. In the second quarter, in particular, new generative AI enhancements launched across Freshworks’ product lines outperformed estimates across all of the company’s key financial metrics.

Fortunately, the increase in cost of revenue was far more tempered at only 8%, or $3.7 million for the last six months primarily due to third-party hosting costs and software license fees. Increases in operating expenses were similarly restrained at just 7%, with moderate rises in personnel-related costs due to annual compensation adjustments and changes in stock-based compensation expense, partially offset by a decrease in advertising, marketing, and branding expenses. Consequently, net losses are gradually improving each quarter, now reaching just $35.7 million in the latest period.

Looking ahead, management is forecasting to end FY23 with total revenue of $587 million to $591 million, representing year-over-year growth of 19%, matching consensus expectations. Analysts are also forecasting for full-year earnings per share to improve significantly from a $0.07 loss per share in 2022, turning around to a $0.20 profit in 2023, starting a trend that is expected to return 40% year-over-year improvements in subsequent years.

Freshworks operates in a highly competitive environment. Many companies including giants like Salesforce, Zendesk, Oracle, and ServiceNow, as well as newer entrants like Atlassian offer products and services similar to what Freshworks provides. However, most of these competitors focus on specific areas like customer service, IT management, or sales and marketing.

In addition to providing a more comprehensive suite of solutions that now allows for smart automation and the use of artificial intelligence, Freshworks not only prioritizes the needs of their users, making their products easy to use, but it also ensures that customers quickly see the benefits of using their products. The platform provides a smooth experience and can be tailored for any business, big or small, while offering good value for money with quality at an affordable price.

Freshworks has adeptly navigated the digital transformation era, evolving from a customer service software company to a comprehensive solution provider empowering businesses around the world. Bolstered by user-friendly, adaptable products and strategic innovations, the company’s robust growth trajectory and its unique approach to meeting both customer and employee needs position it as a formidable player amidst heavyweight industry competitors.