One billion dollars in annual revenue.
That is the North Star for software as a service (SaaS) entrepreneurs. It marks their entry into the big league and is a sign of having an insurmountable moat. Globally, only about 25 SaaS companies—such as Dropbox, Hubspot, and Zendesk—have risen to this level.
Zoho is the lone Indian company in this elite club. It took the bootstrapped firm 25 years to achieve the feat in 2021. However, its younger venture capital (VC)-funded rival, Freshworks, led by former Zoho executive Girish Mathrubootham*, sought to scale to this level in just about 13 years.
The company, founded in 2010, took nearly five years to go from US$1 million to US$100 million US$100 million The Ken The Freshworks journey from zero to $100 million Read more in annual recurring revenue (ARR) in 2018. SaaS was ruling the world at that time, and it took up the challenge of growing its ARR 10X to US$1 billion by 2023-24. When Mathrubootham laid out the plan in a leadership activity in 2018, “G [as employees call him] said the company will celebrate this milestone in Udaipur [City] Palace”, said a former executive who was present there.
“We had the playbook for it. We had the pipeline. We knew how to sell, and we had the overall growth mindset to achieve this,” added the executive.
It’s 2023, but the San Mateo, California-headquartered company is only halfway through achieving that goal.
In the year ended December 2022, it posted a revenue of about US$500 million. While this is not an insignificant number by any measure, it’s still not US$1 billion. Every revenue milestone used to be a party at Freshworks. But the celebrations around this time were muted. “There was cake, though,” said a current Freshworks executive.
Over 60,000 companies—mostly small and medium businesses—across the world use Freshworks’ suite of over a dozen products to manage information technology (IT) issues of employees, sales, and customer complaints, among other things. Besides, the company is increasingly moving up the ladder to target mid-market companies with 250-5,000 employees.
Even though it has a US$1 billion target to chase, one that may take it until 2025 to reach, according to current and former employees. It has more immediate challenges at hand.
Freshworks, which grew at a blistering pace of 40-50% every year until its listing listing The Ken Fresh off the SaaS boat: tracing Girish Mathrubootham’s journey Read more on the US’s Nasdaq exchange in September 2021, expects to grow by only up to 18% in 2023.
Companies have been cutting down on spending to deal with the aftereffects of the Covid-19 pandemic, the Russia-Ukraine war, and a global recession.