Billion-dollar jackpot for VCs & other takeaways from Freshworks’s IPO filing

Freshworks helped build the playbook for software product companies selling to small and medium-size enterprises. It’s now the first SaaS Unicorn from India to go for an IPO, one expected to deliver historic returns for Accel and Tiger Global

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By 

Madhav Chanchani

August 30, 2021

12 Min Read

When news of Freshworks filing for an initial public offering broke on Saturday morning, a few advantages of listing in the US rather than in India were immediately apparent.

Freshworks had confidentially filed for its IPO with the US Securities and Exchange Commission in May itself, staying away from instant public and competitor scrutiny of its numbers. It was able to do this under a facility for “emerging growth companies” with revenues under $1 billion.

Another advantage is that Freshworks can wait until a few weeks before listing to decide how much capital it wants to raise, declaring only a placeholder amount upfront. For now, that amount is $100 million, but is likely to change following roadshows to understand investor appetite.

“Freshworks aims to be listed by the end of September,” said one source briefed on the company’s plans. 

That’s one month of public scrutiny of its numbers versus three months for Zomato and CarTrade, which listed in India. Speaking of which, Zomato and CarTrade increased the sizes of their public offerings by 20% and 50% respectively, exercising the maximum limits permitted by the  Securities and Exchange Board of India. If they’d wanted larger IPOs, they would have had to file afresh.

That apart, Freshworks has the advantage of dual-class shares. It is offering investors in the IPO class A shares, with one vote per share. Its existing investors—including cofounder and CEO Girish Mathrubootham, who owns a 7.08% stake—hold class B shares, which entitles them to 10 votes per share. 

The CapTable looks at how the software-as-a-service major, which plans to list on Nasdaq, is set to deliver potentially the biggest series A investment returns in India’s venture capital history, how its numbers compare with those of Zendesk and Atlassian, and how it has helped build a new playbook for Indian SaaS.

Another Home Run for Accel and Tiger Global

Freshworks’s capitalization table is dominated by four investors—Accel, Tiger Global Management, Sequoia Capital and CapitalG (earlier Google Capital). These four have led multiple rounds of funding through the company’s 10-year history.

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