Indian Tech Startup Freshworks Jumps 32% After $1 Billion IPO

Freshworks Inc. rose 32 per cent after raising $1 billion in an initial public offering priced above a marketed range.

Shares of the software company closed at $47.55 Wednesday in New York trading, giving it a market value of $13 billion. Accounting for employee stock options and restricted stock units, Freshworks would have a fully diluted value of more than $14 billion.

The potential competitor to far larger Salesforce.com Inc. was valued at $3.5 billion in a 2019 funding round. Freshworks sold 28.5 million shares Tuesday for $36 each after marketing them for $32 to $34, a target that the company had elevated from $28 to $32.

Freshworks boosted revenue about 40 per cent last year after the coronavirus pandemic prompted businesses to go digital, and sales continue to grow in the first half of 2021 while its net loss shrank.

Now with 52,500 customers, the company saw its revenue grow in the first six months of this year to $169 million, up from $110 million in the first half of 2020. Its net loss shrank to $9.8 million from $57 million from a year ago, according to its filings.
 

Accel Stake

Freshworks was founded in India and moved to Silicon Valley to be closer to customers. Now based in San Mateo, California, the company retains a substantial workforce in the southern Indian city of Chennai. In its filings with the U.S. Securities and Exchange Commission, founder Girish Mathrubootham likened Freshworks software to the iPhone, saying businesses shouldn't have to rely on multiple tools to engage with customers.

Affiliates of Accel India and others of Tiger Global Management each control more than a quarter of the company's Class B shares. 

Mathrubootham said that when he started the company, he wanted to reach $1 million in revenue. He said that was until Shekhar Kirani of Accel put the idea of a U.S. IPO in his head. 

“He said you can sell Freshworks and make a lot of money, or you can be the first Indian company in SaaS to go public in the U.S. and it would really be a historic milestone,” Mathrubootham said. “And from that point on that was when the dream towards today actually started.”
 

‘Respect' for Salesforce

He added that he considers Marc Benioff of Salesforce.com an “amazing leader.”

“We have great respect for Salesforce and what they've built,” he said. “We would love to continue to build Freshworks to greater heights.”

Accel partner Sameer Gandhi, a Freshworks board member, said the company didn't need U.S. sales professionals to get the startup off the ground. 

“The product has to be the salesperson,” he said, adding that the company continues to grow because its software is intuitive and easy to use. He added that he expects the company to make more acquisitions. 

The IPO was led by Morgan Stanley, JPMorgan Chase & Co. and Bank of America Corp. Freshworks shares are trading on the Nasdaq Global Select Market under the symbol FRSH.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)