Why Girish Mathrubootham’s FreshWorks made Indian business history
This week, Indian software vendor FreshWorks raised $1.1 billion in an initial public offering through a listing on the Nasdaq stock exchange in New York. “Today is a dream come true for me,” tweeted Girish Mathrubootham, co-founder and chief executive, “from humble beginnings in #Trichy to ringing the bell at @Nasdaq for the FreshWorks IPO.”
Freshworks, now based in San Mateo, California, leases software to businesses of all sizes to help them manage customer relations across the web, phone, email and social media platforms. Clients include Byju’s, an online Indian education company, Honda and American Express. Unlike competing software, where a customer may need to understand eight different tools before using it, “The No. 1 reason we are able to win…(is because) any customer in the world can get our product in 20 seconds…and don’t even have to talk to anyone” in technical help, Mathrubootham, 46-years-old, told the San Francisco Business Times.
The software also increases productivity and lowers costs, in part by being easy to use. This enables FreshWorks to compete against established rivals like Salesforce, which has a market value of $271 billion; other competitors include Zendesk, market value $15 billion, Oracle, $245 billion, and Microsoft, $2.3 trillion.
FreshWorks has more than 50,000 customers in over 120 countries. In 2020, it had revenues of $250 million, up 45% from 2019. It had a net loss of $57 million in 2020. Yet, investors are eager to buy the stock. It rose 32% on its first day of trading, valuing the company at $18 billion, more than 45 times estimated 2021 revenues. Investors are attracted by its rapid revenue growth in a large market, potentially about $120 billion.
Making Indian business history: 500 millionaire employees
The code name for FreshWorks public offering was Project SuperStar, named after Rajinikanth, the most successful movie star from Tamil Nadu. Mathrubootham, who grew up in the southern Indian state, notes in a letter in the company’s offering document. “I want to express my love and gratitude to (Rajinikanth) for being my maanaseega guru...a mentor; a role model that lives in your mind, from whom you learn a lot by watching from afar.”
Mathrubootham has made Indian business history in several ways: generous financial rewards to employees; building a major, global software products company; starting in Chennai, not Bangalore; and founding a major technology company with an engineering degree and work experience from little known institutions.
Mathrubootham has awarded stock worth $4.5 billion to about three quarters of his 4,300 employees. This minted about 500 millionaires in India. “They all earned it…This is going to have a life-changing impact for many employees.,” Mathrubootham told reporters following the Nasdaq listing.
FreshWorks stock awards to employees is unique among Indian-owned companies since owners, founders and investors rarely, if ever, give any ownership stake to employees. So it is not surprising that Mathrubootham’s action has gotten massive, enthusiastic support from professionals as well as wide media attention in India.
Back in 2015, he told The Economic Times.that he wanted all his employees to be able to buy a BMW car. “I think today we are delivering on that promise,” he said. He enjoys fancy cars and earlier, while living in Chennai, bought more than fifteen of them, including a Mercedes Maybach S 500 and a Volvo, along with a BMW. “He lives life king size, without any sense of guilt or embarrassment,” as Pankaj Mishra describes Mathrubootham, in a 2017 profile for Factordaily.
Making Indian business history: a global software product company
Mathrubootham has also made Indian business history by setting up India’s first major global software products company. “Freshworks is the company that wasn’t supposed to win,” writes Mathrubootham. “Whether we could…build a global SaaS (software) company from India, the doubts were always there. And people were not shy about telling me!”
Since the 1980s, India has been known, not as a center of technological innovation, but for back office information technology (IT) services and outsourcing, provided by Infosys, Tata Consulting Services, Wipro and other Indian companies. In 1999, Infosys was the first Indian company to list on the Nasdaq stock exchange in New York. In fiscal 2021, the company’s revenues were $13.6 billion and it has a $100 billion market value. It employs more than 260,000 people worldwide.
Now, FreshWorks’ Nasdaq listing and valuation bring global attention to India as a potential source of major software and other technology companies. “With an immense pool of engineering and product talent and an aspirational eye to entrepreneurship, India is a region that can also be the founding ground for world-class technology product companies,” Shekhar Kirani and Sameer Gandhi, partners at Accel, write in a blog post. Based in Palo Alto, California, Accel is an early-stage venture firm managing about $9 billion.
Infosys, which is based in Bangalore, was founded in 1981 by seven engineers, some of whom are now billionaires. For instance, N.R. Narayana Murthy, co-founder and the company’s first CEO, has an estimated $4.5 billion net worth, according to Forbes. In contrast, FreshWorks co-founder Mathrubootham, as he told reporters, has acted on his belief, “that wealth has to be shared with the people who created it, and not just for the founders to get richer…This is truly something that India needs to do more often.“
Unlike FreshWorks, which offered stock rewards to employees since its inception, Infosys did so in 1994, thirteen years after its founding - though, at that time, it was an unique employee benefit at an Indian owned company. Infosys’ current plan could award its employees, a few levels above entry level, with $1.2 billion in stock, if the company meets certain financial targets. This is roughly only a quarter of the $4.5 billion in stock Mathrubootham has given his employees.
Making Indian business history: Chennai, not Bangalore
In 2010, Rathna Girish Mathrubootham co-founded FreshWorks with Shan Krishnasamy, the company’s Chief Technology Officer, in a 700 square foot warehouse in Chennai, the capital of Tamil Nadu state. Over the years, Mathrubootham - known as G among employees - was told, “You can’t find talent in Chennai; you can’t win unless you move to Bangalore.”
He got the idea for FreshWorks after reading a customer post criticising software vendor Zendesk for raising prices and hence seeking an alternative software provider. “Our simple idea was to create a ‘fresh’ helpdesk in response to a poor customer service experience I had,” Mathrubootham writes in his letter. “Our dreams came in increments, each building on the next and expanding our vision over time. In 2011, our big dream was to get to $1 million of revenue.” Its first customer was from Australia and its early customers, from four continents, were small users who found the software through an online search for solutions to their problems.
In 2011, the company got its first funding, $1 million from Accel, the California venture firm. The founders “had strong conviction and perspective on things like value pricing, social product features, high-velocity go-to-market, and most importantly, design. Freshworks at the core is about building products that reset the bar in terms of craftsmanship, finish and ease of use. And up to this point, this is not something we had ever seen coming from India,” Shekhar Kirani and Sameer Gandhi, partners at Accel, write in a blog post.
Following FreshWorks’ stock listing, Accel’s initial investment has likely risen more than 200-fold; its total ownership stake is now worth $3.1 billion. Other venture investors include Tiger Global Management and Sequoia Capital. These three U.S. venture funds together own stock worth over $9 billion, and have effective control of the company. Another early investor is G Capital, Google parent Alphabet’s growth fund, which owns shares worth nearly $1 billion.
Mathrubootham owns $800 million of stock in FreshWorks. In 2020, as CEO, he was paid $11 million, including in stock options. He is a venture investor and adviser to over 60 companies.
Making Indian business history: no IIT degrees
Many of the founders of major technology companies in India - Infosys, Flipkart, Ola and others - earned their engineering degrees from the world renowned Indian Institutes of Technology and advanced their technical and business skills while working for IBM, Google, Microsoft and other major global technology companies.
This is not the case with the founders of FreshWorks. Mathrubootham holds a B.E. in Electrical Engineering and Electronics from Shanmugha Arts, Science, Technology and Research Academy, a little known college in Thanjavur, Tamil Nadu, India. His co-founder Shan Krishnasamy earned a BE from Thanthai Periyar Government Institute of Technology, another lesser known college in Vellore, one of six engineering institutes set up by the government of Tamil Nadu. Mathrubootham holds an M.B.A. from the University of Madras.
Earlier in 2000, Mathrubootham worked in Texas as an engineer for eForce, a small consulting and training company. About a year later, returning to Chennai, he founded MindSphere, an education venture which failed. Eager to find a job in order to get married, he interviewed for several jobs, including at the Indian operations of Oracle and GE, but was rejected. Then, through a cousin’s friend who was working for Zoho Corporation, he got a job at the Chennai-based software development and cloud computing company. He stayed at Zoho from 2001 to 2010, serving in technical, product and sales positions. There he met Shan Krishnasamy, who was a technical architect.
In 2010, Mathrubootham and Krishnasamy left Zoho to co-found FreshWorks. While he earned a good salary and had a company car, Mathrubootham was unhappy that he had no ownership stake and hence got none of the upside of the business he was helping build, he told FactoryDaily.
In its hiring, Freshworks does not “look at credentials, experience or certificates, but instead look for what we call inherent talent,” Mathrubootham told the San Francisco Business Times. “For instance…if we are hiring salespeople, we look for people who can naturally hold a conversation on any subject with anybody.” Now, following the public offering and its attractive stock awards to employees, Freshworks will be able to hire the best talent in India as well as around the world.
iPhone equivalent for business software
Mathrubootham grew up in Tiruchirappalli, a town in Tamil Nadu renowned for its temple. His parents divorced when he was seven and he stayed with his father, a bank employee. His father re-married but Mathrubootham did not get along with his step-mother. “I couldn't accept someone else as my mother” he told FactorDaily. “In a normal family, you can be assured of a meal when you go home at night. For me, that wasn’t there at all.” He ran away from home twice. He has put up a prominent link to the FactorDaily story on his LinkedIn page.
In 2019, Mathrubootham moved Freshworks head office from Chennai to San Mateo, California. His wife Shoba does the dish washing, cleaning and other domestic chores in California, not hiring a large team of helpers like she had in India. They have two teenage sons.
The head office was moved to San Mateo to raise FreshWorks’ visibility among major existing and potential clients in the U.S. and attract more business. The move was also in preparation for a stock listing in the U.S. Publicity over the successful listing this week and the lofty valuation has sharply boosted the company’s global visibility.
Discussing FreshWorks’ future goals, in his letter in the public offering document, Mathrubootham notes, “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.” Then, Apple introduced the i-phone and consumers could buy one device to perform all these functions.
Today, “companies are struggling with multiple (software) tools for sales, marketing, customer support across multiple channels, bots, and much more. They often have disparate silos and disjointed information for a single customer - information sitting in multiple databases, none of which communicate natively with each other. This is true even if the tools come from the same vendor…What if we can create an iPhone moment in business software,” writes Mathrubootham.
Rajesh Rajasekhar, a friend since their college days, told FactorDaily that Mathrubootham “takes high risks, bets everything, goes for big even when we were playing” a poker game. “I’ve been with him during his low and high moments; the way he learns the right lesson from each is amazing.”
