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Billion Dollar Unicorns: Freshdesk is a Prospect

Posted on Wednesday, May 20th 2015

A Gartner report published last year on the global customer relationship management (CRM) software market projects the industry to grow 15% annually through the period 2013 to 2017. The growth in the industry is estimated to be driven by increasing adoption of cloud based offerings which are expected to grow 22.6% annually over the same period. Freshdesk is a fast growing player in the industry, and was incubated in the 1M/1M program since early 2011. In 2013, Freshdesk joined the 1M/1M Million Dollar club and now, it is aiming for the Billion Dollar Unicorn status.

Freshdesk’s Offerings

Freshdesk was founded in 2010 by CEO Girish Mathrubootham and CTO Shan Krishnasamy in Chennai, India. Prior to founding Freshdesk, Girish worked as VP of Product Management at Zoho Corporation. As part of his job, Girish had worked with the ITIL helpdesk, customer support helpdesk, and facilities helpdesk as well as experienced the fast action within cloud computing at Zoho. While at Zoho, Girish read about how customer support firm Zendesk’s users were unhappy when they decided to raise prices by 60-300%.  Soon, Girish realized that there was a big market opportunity to create an affordable alternative for a high quality customer support services firm. Within a short while, Girish had reached out to his friend and colleague Shan with his ideas. The two quit their jobs in 2010 and set up Freshdesk to cater to the customer support market through a SaaS offering.

Freshdesk has been focused on small and medium businesses. They connected with their potential customers to understand what their customers really wanted and soon realized that while customers would have liked the upcoming social features, such as communicating through a Facebook wall, their basic requirement was an engine that could help solve customer issues first. Additionally, they realized that customers were really looking for a platform that integrated helpdesk, contact management software, customer feedback forums, customer satisfaction surveys, and the ability to handle support for SLAs.

Today, Freshdesk provides customer support software that integrates a back-end helpdesk system used in ticketing and knowledge management with an online social customer portal on the front end to provide a communication channel across multiple media. The company has helped establish India’s presence within the global Cloud CRM space. Freshdesk also makes customer support service more fun through features such as reward points and trophies to representatives for their problem solving skills.

Freshdesk’s Financials

Freshdesk charges their customers a monthly fee for services provided. Their basic service is available for free and lets up to three agents from a business access the email and phone support channel alongwith their knowledge base. Premium options come with features such as social support channels, community forums, gaming options, live chat channel, multi-product support capability, enterprise reports, portal and agent role customization, IP whitelisting, and custom e-mail servers. Prices start from $16 per month and go as high as $70 per month for the all-inclusive option.

Their product has received strong feedback from the market. They have over 40,000 customers and that list includes big names like Sony Pictures and 3M, not only SMBs. Within two years of its launch, Freshdesk joined the 1M/1M Million Dollar Club when they reported more than $1 million in revenues. Revenues were estimated to have grown to a $10 million annual run rate by the end of 2013. Recent revenues are not public, but Freshdesk has been growing by over 100% annually.

Freshdesk has been venture funded so far with $95.1 million in funding from investors including Google Capital, Accel Partners, and Tiger Global Management. Their last round of funding was held last month when they raised $50 million from their existing investors at an undisclosed valuation. Analysts, however, estimate that the round value them at “mid-to-high hundreds of millions”. In June last year, they had raised $31 million at a valuation of $250 million. Freshdesk is planning an IPO by the year 2017, which should give the company a couple of years to reach the billion dollar valuation.

Freshdesk may still be a fair way from joining the Billion Dollar Unicorn club, but they stand a fair chance of getting there.

I have recently written an important piece called The Funny Money Unicorn Business, cautioning entrepreneurs about the perils of chasing Unicorn status without adequate emphasis on revenue, quality of revenue, cost of customer acquisition, profitability, and other fundamentals. Needless to say, we’re big supporters of Freshdesk, having known them since their humble beginning days. The company, however, needs to keep its eye on the fundamentals fair and square. If that means the billion dollar valuation takes longer to reach, so be it.

Just to put things in perspective, their significantly larger rival Zendesk, with quarterly revenues of $42 million, is currently trading at $1.9 billion. Freshdesk’s private market valuation looks artificially bloated in contrast. It is not sustainable in the public market.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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. Workday's Ramp to Multi-Billion Valuation
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 1)
. ServiceNow's Expanding Market Opportunity
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 2)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 3)
. Gaurav Dhillon, Founder of Informatica and SnapLogic (Part 4)
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