BackFreshdesk sees interest from global investors for buying stake
Freshdesk has got an offer from a US-based strategic investor for purchasing a stake at a valuation of more than $500 million
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Mumbai: Tiger Global-backed Freshdesk Inc. has been approached by several investors to buy a stake in the firm, said three people with direct knowledge of the development.
Freshdesk, the cloud-based customer support platform that is also backed by Google Capital and Accel Partners, has got an offer from a US-based strategic investor for purchasing a stake at a valuation of more than $500 million, said one of the three people without naming the investor as the talks are private.
“They could raise up to $100 million and beyond at a very high valuation," said the second person.
“Some of the large investors that have held talks with the company include the likes of Singapore government’s investment arm Temasek," said the third person, requesting anonymity. An email sent to Temasek on Saturday remained unanswered.
Girish Mathrubootham, founder and chief executive officer of Freshdesk, confirmed the development but declined to give details.
“A lot of US-based investors who have invested in technology in India have approached us, so have late-stage investors from Europe, though we are not in active fundraising mode right now," said Mathrubootham, adding that the company is open to bringing in a new investor if a good offer comes its way.
“As of now, there is no term sheet or any advanced discussions," he said.
In April 2015, Freshdesk raised $50 million from its existing investors Tiger Global, Google Capital and Accel Partners, taking the total money raised by the company to $94 million. Google Capital made its first investment in the company in June 2014. The last round in April last year valued the company at almost $500 million, according to Mathrubootham.
One of the reasons for Freshdesk attracting interest from several investors is the huge market opportunity that it is catering to. Overall SaaS (software-as-a-service) spending is expected to increase to $106 billion in 2016, estimates Forrester Research.
Companies based in India have the added advantage of low costs. “Indian SaaS companies are targeting clients in the Western geographies such as US and Europe, while having their operations in India, which gives them an advantage on the cost front vis-a-vis SaaS companies in the West. Hence, historically, they have also tended to command more premium valuations," said Sumir Verma, managing director at Mumbai-based advisory firm Merisis Advisors.
Freshdesk is also largely a business-to-business company and not one with a huge cash burn rate like e-commerce start-ups in India.
“The company has been doing well and has been seen as a great role model for building global SaaS companies outside the valley. Investors are intrigued by Freshdesk and inbound interest is high for potential investment. The company is well-financed and based on the current burn rate, they have money for more than four years," said Shekhar Kirani, partner at Accel Partners and also on the board of Freshdesk.
The interest in Freshdesk comes at a time when the environment for fundraising has been substantially subdued compared with last year’s exuberance. Venture capital deals in start-ups fell to $634 million in the first half of 2016 compared with $958 in the year earlier, according to private equity and venture capital database Venture Intelligence.
Freshdesk competes with US-based Salesforce.com Inc., which has a market capitalization of almost $54.9 billion and Zendesk Inc., valued at $2.6 billion.
Freshdesk, which started operations in 2010, has around 80,000 customers in 145 countries, said Mathrubootham. Half of the customers have been added just in the last 12-14 months, he said.
As a strategy, the company has focused on small- and medium-sized businesses (SMB) rather than chasing large enterprise customers like its competitors.
“One of the main differences in our approach and strategy is that we have focused on owning and winning the SMB, mid-market space. When you look at the US companies, they start going upmarket and large enterprises. Other companies weren’t really excited about SMB customers who would pay $100-200 a month, whereas our team was eager to win these customers," he said.
Though the bulk of its customers are from the SMB space, Freshdesk also has large customers such as Elon Musk’s SolarCity, car maker Honda and Cisco. The company, which started with customer support service as its key offering, today has four different products that help companies engage with their customers.
In 2014, it launched Freshservice, an IT service product for internal use by a company’s IT department. This year, the company has launched two new products—Hotline, an in-app engagement tool for mobile app-based businesses and Freshsales, a customer-relation management product for sales teams to manage leads, contacts, email campaigns and event analytics .
Going ahead, the company is focusing on technologies in the areas of artificial intelligence, analytics and machine learning.
According to Mathrubootham, Freshdesk’s revenue has been growing at a fast clip. “We have grown 2.4X in the last year (2015); the year before that we grew at 3X," he said.
The company has been on an acquisition spree recently, acquiring several SaaS start-ups for adding new products to their portfolio or to acquire tech talent. “We acquired five companies in the last year. These were smaller start-ups with anywhere between 4-20 employees," he said. The companies that Freshdesk has acquired include 1click, a video chat and co-browsing platform, Konotor, a mobile engagement tool platform, Airwoot, a social media management tool, Frilp, a social recommendation app and Framebrench, a visual collaboration platform.
“We will continue to look at good acquisition opportunities as and when they come our way," added Mathrubootham.
swaraj.d@livemint.com
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