Freshworks Reports $300 Mn ARR, As Indian SaaS Gains Pace Amid Pandemic

Chennai-based customer engagement software unicorn Freshworks surpassed $300 Mn in annual recurring revenue (ARR), a key metric used by software-as-a-service (SaaS) or subscription businesses, in 2020 through Covid-induced unprecedented economic times.

The Silicon Valley-based company’s revenue grew by 40% last year as the pandemic forced companies to adopt digital transformation and strengthen their remote operations through enterprise tech tools. The customers in health care, education and government contributed to this increase, CEO and founder Girish Mathrubootham said in an interview.

“Like everyone, our 2020 plan went out the window when the pandemic hit, but our hard-working team persevered,” he said, adding, “Our team rose to the challenge and rallied around our customers to help them navigate unknown waters and empower their employees to respond to increasing customer demands.”

In 2020, the SaaS unicorn launched Freshworks CRM, which aggregates data on an embedded customer data platform for personalized customer engagement, improved lead conversion and sales growth.

Even though several businesses came to a halt due to the pandemic, Freshworks introduced new product offerings and strategic acquisitions to accelerate the involvement of artificial intelligence (AI) in its businesses. The company also expanded its executive team to fuel its next phase of growth.

Besides this, it also made two acquisitions last year — AnsweriQ in February and Flint in July.

Founded in 2013, Flint offers an enterprise-grade IT operations system and an intuitively designed dashboard. AnsweriQ, founded in 2017 by Pradeep Rathinam and Prashant Luthra, is an AI service in the customer support space.

FreshWorks Working Towards IPO

According to media reports published last year, the company is looking to list itself in the New York-headquartered stock exchange NASDAQ, therefore it needs to create awareness regarding its brand in the US. The acquisition of AnsweriQ is going to solve that problem with its wide user base. Reports also suggested that Mathrubootham had also moved to the US to prep up for the IPO and keep in touch with the Freshworks’ US headquarters.

Mathrubootham, in a recent interview with Bloomberg, highlighted that the company has no immediate plans to go public as of now, but the option down the road include an initial public offering (IPO), a deal with a special purpose acquisition company, a direct listing or raising more capital from private investors.

“We are readying the company for every possible scenario… All options are now on the table,” he added.

Covid Strengthens Indian SaaS Economy

According to a report by Bain & Company, the Indian SaaS companies have the potential to capture a 7-9% share of the global SaaS market by 2022. Companies like Zoho, Druva, Icertis and Freshworks have led this space in India, with SaaS firms poised to reach between $18 Bn to $20 Bn in revenue by 2022.

Going beyond these players, India witnessed the entry of two SaaS players in the unicorn club — Zenoti in December and Postman in June. Zenoti, which is the first vertical SaaS unicorn of India, offers cloud-based software for salons, spas, and medi-spas. Postman, founded in 2014, helps developers and companies supercharge their application programming interface (API) workflow.

The report adds that first-generation founders like Sridhar Vembu of Zoho and Mathrubootham of Freshworks have played a pivotal role in India’s SaaS journey by actively engaging to build a community of budding entrepreneurs.

Both Freshworks and Zoho Corp stand neck-and-neck in the global SaaS ecosystem.
Zoho claims to have over 45 Mn customers, over 7K employees and offices across seven countries including, US, Netherlands, Singapore, UAE, Japan, and China. It managed to make a profit of INR 516 Cr in FY2019, with a 37.1% spike in revenue to INR 3,308 Cr.

Meanwhile, Freshworks has more than 150K clients across the world, which include NHS, Honda, Rightmove, Hugo Boss, Citizens Advice, Toshiba, Cisco and others. It crossed the $100 Mn ARR mark in June 2018 and the $200 Mn mark in November 2019. Its Indian entity reported a net profit of INR 30 Cr on a standalone basis in FY2019, with a revenue of INR 404.7 Cr.