SaaS Interviews with CEOs, Startups, Founders
1409 $1.5B Freshworks To IPO: Growing 40% YoY, Passes $100M in ARR, $250M Raised, 150,000 Companies Using
03 Jun 2019
Chapter 1: What is the background of Freshworks and its founder?
I've had the fortune of meeting a lot of you guys at B2B SaaS conferences all around the world. And one of my favorites is coming up in New York City, June 4th to 5th. That is SaaStock East Coast. Now, it's my favorite, and I can say that because I'm getting asked to speak at almost every major SaaS conference because my data set is so large. Nobody has anything like it.
And the reason SaaS Stock is my favorite is because it's the most curated. It's a large group of extremely intelligent individuals.
In fact, many CEOs I've had on the show will be at SaaS Stock East Coast on June 4th through 5th in New York, including many you guys have heard of, like Rajit Thomas, CEO and founder of Sprinklr, Daniel, CEO of Greenhouse, and Stacey Bishop, partner at Scale Venture Partners. So I hope to see you guys there. If you decide to come,
I will get coffee with you, and I can get you guys a great discount, I think, as well. You can check it out at this link, NathanLatka.com forward slash SaaS Stock East, SaaS, S-A-A-S-T-O-C-K East, and then use code LATKA-20 to get a 20% discount. That's L-A-T-K-A-20, L-A-T-K-A-20. And then shoot me a text if you decide to come so we can get coffee, 703-431-2709. I hope to see you guys there.
Freshworks, the parent company, started in 2010. Now over six products really focused on customer engagement across every platform. It all started with a broken TV. He couldn't get a freaking insurance or refund on. He said, you know what? I'm going to build this thing myself, make the system better. They've just passed $100 million in ARR going 30% to 40%.
year over year, about $250 million raised, looking at potentially an IPO coming up here shortly, serving over 150,000 business logos on their platform. Economics are super healthy with the 16-month payback period on these accounts that come on and start paying them, call it 1,200 bucks in first-year ACV.
Churn is below 2% logo churn per month and net negative revenue churn because of their in-product expansion being at super healthy levels. Team of 1,500 based in San Bruno, California, India, and other remote locations. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn.
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company. It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers.
With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Girish Mathurbutam.
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Chapter 2: How did Girish Mathrubootham come up with the idea for Freshworks?
I don't count average.
Tell, tell, so tell me how you, one of the things I'm interested in is how you're doing core analysis across your customer bases, right? You have six different product lines and I'm sure you have different cohorts in each of those different product lines. Walk me through how you, what kind of, kind of analysis you guys are doing on a quarterly or monthly basis with your executive team.
So, so I think, uh, the context here is, uh, see fresh desk and fresh service are, uh, not really complementary products. One is focused on an entirely different buyer. So the external customer support and internal customer support. So there is not a lot of overlap between those two.
Before I answer your question, so Fresh Sales was the first product we got out which really could be sold into our existing customer base. And then The other four products we launched last year.
So what we do is, again, as part of our board meetings and investor analysis, we do all this fancy, I had to learn all of this stuff like the layer cake analysis and the net expansion into new products and so on. And I think what we see as a very big opportunity for us is the fact that
I think less than only 5% of our customers actually use more than one product, which is the fact that all the products are new. And so we didn't want to put a cross-sell team. I wanted to do product-based auto discovery. So like two months ago, I think we launched Freshworks Unified Experience with... with an Omnibar and a single sign-on called FreshID.
So I am a product person, so I believe that for our SMB customers, I want to do product-led discovery, automatic discovery of products. Like how when you sign up for Gmail, you don't sign up for Google Docs or Calendar, you just use them, right? So that's the kind of product integration we have done. And now we are starting to see that...
cohort of customers using more than one product move up rapidly and we are also in the process of seeing if we can do a cross-sell program across our customers no touch though all in product till now everything is in product yep very good so give me an average like across all these products i mean you're is this mainly for the smb like what's the average price point would you say across these things
No, so we have more than one-third of our customers and our revenues, sorry, comes from larger customers. So we have 65% of our revenue from SMB customers and 34% from what we call mid-market or large enterprise customers.
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Chapter 3: What are the different product lines offered by Freshworks?
What kind of pricing axes do you use inside your products to drive expansion revenue?
So today it is broadly only two axes. One is when the customer grows in terms of number of seats. So that is definitely one. And we see a lot in our mid-market and large enterprise business. We see a lot of expand, land and expand. So companies that start with, say, 40, 50 seats actually expand to 200, 500, etc. So that's been one axis.
The other axis is we also have a customer success program where we have a three-tiered customer success program. We speak to customers, understand their business challenges. We actually upgrade them to higher plans if what they need is something that we have built in the higher planner, but they're not aware of it and they're not using it.
So today, our account-based expansion is much larger than our plan-based expansion.
I see. Okay, so I heard you say two things. You have two pricing axes in terms of expansion revenue. One is number of seats, which is fairly typical. The second is you have a team of essentially built-in consultants or account managers or customer support people who will recommend additional feature upsells to customers who are not using you to your full extent. Is that right?
Yes, that is correct.
Very good. Interesting. So almost like a consultative sale.
No, it is called customer success. So basically, their job is not primarily sales. Their job is more to adoption and be proactive in their relationship with their customers in terms of doing quarterly business reviews and helping customers accomplish what they want with our product. During that process, if they uh, find that the customers need to accomplish something.
And that particular feature is available in a higher plan, but the customer is on a lower plan. Then they suggest that and get the customer.
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Chapter 4: How has Freshworks achieved significant growth and customer acquisition?
So mostly new customers.
OK, that's that's great. Very good. All right. Let's let's wrap up here with the famous five. Number one, what's your favorite business book? Execution. Number two, is there a CEO you're following or studying right now? So Jeff Bezos. Number three, what is your, besides any of your own, what is your favorite online tool for building your business?
No. So, so it used to be one note and, but right now I'm just thinking, probably I would just say, My Mac.
His Mac. You struggle because your products, I said you can't name one of your own, but your products do so many things. It's like you don't want to name someone that might do something similar. I have to ask you actually about that too.
I mean, you go into, you know. It's the entire Google suite. We are heavy users of that, the Google Docs and handouts and stuff.
Yeah. Why do you, how do you get a... Oh, uh, right now my favorite tool is zoom. Zoom. Okay. Very good. Eric will appreciate that. He was on a couple episodes ago as well. Um, tell me real quick. So like you just, you recently launched fresh chat.
I mean, when you look at the space in a kind of isolated way, I mean, intercom drift, people are raising hundreds of millions of dollars, you know, billions of dollars in valuation. When you look at that space, why do you go, you know what, even though there's, there's some people here that are well-funded and they're only focused on kind of messaging and chat, we're going to go after that space.
How do you make that decision?
So see, we are not looking at competition and deciding. So we are looking at the entire market size and our core base. See, our focus is on customer engagement. So when I say customer engagement, like if you look at fresh service or fresh team, we look at employees also as internal customers for the IT team or for the HR team, the employees, the customer.
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