Software startup Freshworks files for IPO with losses shrinking

[SAN FRANCISCO] Freshworks filed for an initial public offering (IPO), contending its customer-relations management software is providing a step toward unified cloud services.

The company in its filing Friday listed the size of the offering as US$100 million, a placeholder that will change when terms of the share sale are set. The potential competitor to far larger Salesforce.com was valued at US$3.5 billion in a 2019 funding round.

The Silicon Valley startup boosted revenue about 40 per cent last year as the coronavirus pandemic prompted businesses to bolster their digital capabilities, Girish Mathrubootham, its founder and chief executive officer, said in an interview in February. Customers in health care, education and government contributed to the increase.

The CEO said then that, in addition to an IPO, the company's options also potentially included a merger with a special purpose acquisition company or a direct listing, as well as raising more capital from private investors.

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.

During the coronavirus pandemic, Freshworks hired a chief financial officer, made acquisitions to strengthen its artificial intelligence tools and won new customers.

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

Affiliates of Accel India and others of Tiger Global Management each control more than a quarter of the company's Class B shares. In a letter to investors in Friday's filing with the US Securities and Exchange Commission, Mathrubootham likened Freshworks software to the iPhone, saying businesses shouldn't have to rely on multiple tools to engage with customers.

"Before 2007, we were all using multiple devices - I personally had a Nokia cellphone, a Garmin GPS, a Sandisk MP3 Player and a Canon point-and-shoot camera," he said.

"As consumers, we were quick to ditch our gadgets for a single product with a superior unified, intuitive, and delightful experience."

The IPO is being led by Morgan Stanley, JPMorgan Chase & Co and Bank of America. Freshworks is seeking to list its shares on the Nasdaq Global Select Market under the symbol FRSH.

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