SaaS Interviews with CEOs, Startups, Founders
Prediction: Freshbworks IPO Coming Next Month? Founders Thinking in 2018
09 Jun 2021
Chapter 1: What is the main topic discussed in this episode?
So we announced that we crossed $100 million of ARR and our valuation for the last funding round was around $1.5 billion. You are listening to Conversations with Nathan Latke. Now, if you're hearing this, it means you're not currently on our subscriber feed. To subscribe, go to getlatke.com. When you subscribe, you won't hear ads like this one. You'll get the full interviews.
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My guest today is Girish Mathurabhutam. He is the founder and CEO of a company called Freshworks, one of the world's fastest growing SaaS product companies, winning the Economic Times Startup of the Year in 2016 and the Business Standard Startup of the Year in 2017.
Freshworks now has a suite of products for businesses worldwide, including Freshdesk, Freshservice, FreshSales, Freshcaller, Freshteam, Freshchat, and Freshmarketer. Girish, are you ready to take us to the top? Yes. All right. Very good.
So I, you know, I think a lot of people listening maybe have heard or definitely have heard of one of these products and they go, Oh my gosh, one guy and one team is behind all of these things. So tell us the founding story. When did you launch the company and which of these product lines is your focus right now? Yeah. So, um, we started the company in October, 2010.
And, uh, at that time we started with only one product, uh, fresh desk, uh, fresh desk. Our whole idea was, and the story is, uh, um, Coming from a life incident, I was moving back from the US to India and I was shipping my stuff back And long story short, when my stuff arrived, my TV was broken. You know, the fancy 40-inch LCD TV was broken.
And I tried contacting customer care since I had purchased insurance. But five and a half months, numerous phone calls and emails later, they still wouldn't pay my insurance money. So at that point, I didn't care about the money. I wanted revenge and justice. So actually... The best revenge is justice, right? Yeah.
So I actually shared my experience online on an online forum where I found the shipping company and I posted pictures of my TV and posted my story and the community started engaging. The next day, the president of the company came and apologized and the next day money was in my bank. So I sensed that there was a paradigm shift happening in the world of customer support.
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Chapter 2: What is the story behind the founding of Freshworks?
Give us some more kind of the customer metrics here. So how many customers do you have now across all the platforms? So we have more than 150,000 businesses across all of our products using our software today. That's great. Okay.
And if you're at about a hundred million run rate today, I mean, I can divide, you know, a hundred million by the 150 and what people are paying you about 56 bucks a month on average. Does that sound about right? No, actually this includes our free customers also. So we don't break free and paid. Okay. Oh, got it. So when you say 150,000 users, that includes the free users?
150,000 businesses are using it. It's not users, it's companies using our software. But since we have premium versions for some of our products, that includes some of the businesses which are using the free version. Okay. So how many are just paid customers? No, I think we don't disclose that breakup yet. Okay, okay, got it. And why is that?
Is that just a strategic thing or you're still working on the conversion rate? Basically, we just want to hold it till we are ready to disclose it to the public. Basically, our PR team and our CFOs advised us that keep the numbers for some more time. Yeah, probably fair. Let's shift to something else.
If we don't want to talk about customer account, you know, churn is very critical at this price point, especially in the SMB space. 60% of your revenue comes from SMB. How have you managed churn and what is your churn today? So I think our churn is kind of in line with best-in-class SaaS companies that have SMB business in terms of the SMB business.
So it varies by product probably around, I would say, 2% a month. That's logo churn per month? Yes. But our dollar-based churn is actually negative because of the extraction revenue. So we have a very healthy... expansion, which means our revenue churn is negative. I'm very picky with sponsors I have on the show.
Usually I use the show and you guys, the audience as leverage to ask for a great deal. And I simply won't take on the sponsor unless number one, I love the product. And number two, they're giving us a special unique deal for our audience. Well, Zendesk reached out recently and you know, me personally, I've watched other tools in Zendesk, the customer support space, increase price.
They try and upsell you 20 different products. It's expensive because they want to move to the enterprise to make their investors happy. Well, Zendesk is publicly traded and that means they have a lot of cash to throw around, which means they can afford to give startups a great discount. In fact, all these enterprise tools, I convinced them to say, you know what?
We'll give it to your audience, Nathan, for free for six months. So here's the caveat. If you're pre-series B, or you have fewer than 50 employees, you're eligible today. Go to nathanlaca.com forward slash Zendesk to get their best customer support tools totally free for six months. Again, that's today, nathanlaca.com forward slash Zendesk.
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Chapter 3: How did Girish Mathrubootham identify the need for Freshdesk?
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 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 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. Got it. So seat-based upselling and feature-based upselling, two main things. Very good.
Talk to me about, you know, we talked about upselling, but let's go back to the top of the funnel here for a second. So customer acquisition, what has proved most effective for you in terms of, you know, customer acquisition? So we really have a long tail of online acquisition as the primary. So freemium is definitely something that drives a lot of top of the funnel.
And we do all kinds of online acquisitions. So we have very little outbound calling, but the majority of our leads are inbound and primarily through SEO, SEM, So I think different products have different rates. We have 50, 50, 60, 40 kind of rates between paid and free or organic lead gen. And give me a general sense monthly. What are you spending on direct paid Google ads, Facebook ads?
If you had to guess. I don't. Probably in the millions of dollars. In the millions of dollars. So between, we'll say between a million and 10 million, you think?
that maybe yes yeah okay and not not more than not more you're not spending more than 10 of your revenue on on on direct paid spend is what i'm trying to get at a percentage talking about uh millions of dollars per month right per month yeah okay good so maybe who knows very good and then talk to me about team today so where are you guys at how many team members
So we are like 1,500 employees and growing. So I think we're adding more. So right now it's 1,500 across all of our offices. Where are the offices mainly?
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Chapter 4: What product lines does Freshworks offer and in what order were they launched?
Where's the headquarters? So we are headquartered in San Bruno, California. And the largest team is in Chennai, India, the product development team in Chennai. We also have offices in London, Berlin, and Sydney. So London and Berlin are around 35, 40 people each. I think London is 30 and Berlin is probably 40. And Sydney, Australia is the smaller team, like 16. Very good.
And before we wrap up here, Juresh, with the famous five, I meant to ask you this, CAC. So when you look at your fully weighted CAC, I know you're doing a mix of many different things, but generally speaking, what is your fully weighted CAC today? So I think we... Again, it's different for different product. What we look at is CAC by itself would be meaningless.
Basically, I'm interpreting your question as what's more interesting for SaaS companies. You'd have to understand both payback periods and LTV to CAC ratios. So I think... Each one of our products operates at, say, 15 to 16 month payback on a gross margin basis. That's what we try to be at and really LTV to CAC. And sorry, an LTV to CAC of what?
Uh, so it depends on each product, but we, we know the benchmark is, uh, three. So we are, uh, around that. Okay. Very good. So good. So quick, you know, so someone comes on and is paying you 1200 bucks per year. You're saying you're totally willing to spend, you know, 14, 1500 bucks to acquire that logo or that company in the first place. Very good. Um, and talk to me about growth.
So you just told us you passed a hundred million dollar run rate today. Where were you at a year ago in August or September of 2017? So, so I think, uh, As a private company yet, we are not ready to disclose some of those. I would love to check with my team. But we are growing at, let me say, very, very healthy rates, like north of, let's say, 40%.
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Chapter 5: How does Freshworks analyze customer data across different product lines?
North of 30% or 40%? So I'm just using it as a ballpark, north of 40%. North of 40. Well, that's, I mean, if you're at a hundred million run rate today, you know, growing 30, 40% year over year is healthy for obviously that scale. So congrats on that growth. And is most that coming from new customer acquisition or from expansion? So mostly new customers. Okay. 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. 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... Right now, my favorite tool is Zoom. Zoom. Okay, very good. Eric will appreciate that. He was on a couple episodes ago as well. 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 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.
So our core is about how can we make customer engagement across all where the customer lifecycle is. How can we win that? So in that sense, definitely today's customer wants to be omnichannel. So they want to speak on chat or social or email or phone. So that explains why we had to do like caller or chat or whatever. So today's customer, we want to manage all conversations.
Today's businesses want to know everything about their customer. So what we are doing is executing on our vision of how do we see the future of customer engagement? That's what we're looking at. So whether it's AAML or omnichannel engagement or full lifecycle of customer,
management got it all right number four here how many hours of sleep are you getting every night i try to get at least seven hours okay that's healthy and what's your situation joresh married single kids well i'm married with two boys two little are they little or are they out of the out of the house no they're 14 and 12. ah okay and how old are you i'm 43 43 last question what do you wish your 20 year old self knew okay i i should have probably started sooner
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