On Monday, Freshworks, the Chennai-based SaaS company, said it had acquired Zarget, a 16-month old SaaS startup. As part of the acquisition, all Zarget founders and about 40 employees have joined Freshworks. Chances are you might have heard of Freshworks, which is now valued at $700 million, but Zarget might not ring a bell. But it should because not only did it have an eventful short life, it also brings into focus an acquisition where entrepreneurs, angel investors, and mentors have sat on both sides of the table.

In April 2016, Zarget raised a seed round of $1.5 million. Given the spate of multi-million dollar funding rounds that every other startup seemed to be raising in India at that time, this news was predictably not viewed as anything special.

But Zarget was special. For two reasons.

One, this round was led by Matrix Partners and Accel Ventures—two of India’s prominent VC firms. It was unusual for one VC firm to lead a seed round in the first place and Zarget had two.

Two, at the time of this funding Zarget was a very young company. How young? Well, it was founded a mere two months prior to the funding. If that wasn’t enough, just six months later Zarget raised a Series A round of $6 million. The lead investor this time was Sequoia Capital, the bluest of the blue chip investment firms. Both Matrix and Accel participated in this round. This probably made Zarget the only early-stage startup in India that had raised money from these three marquee firms.

So what made Zarget a “VC magnet”?

Three factors.

First, the founders of Zarget—Arvind Parthiban, Naveen Venkat, and Santhosh Kumar—were Zoho veterans, each of them having spent nearly a decade in various roles at India’s leading SaaS company. Arvind Parthiban took on the role of CEO. Naveen Venkat was the CPO. And Santhosh Kumar the CTO.

Second, there was an increasingly bullish sentiment within investors in India that SaaS was the next big opportunity for Indian startups. SaaS was ostensibly a $50-billion market and India was projected to grow to a $10-billion revenue industry by 2025. The most attractive segment within this market was SMB SaaS—cloud services targeting small and medium enterprises, a domain that Zarget was specifically focusing on.

Third, investors were excited that the person mentoring Zarget was Girish Mathrubootham*, the CEO and Founder of Freshworks (known earlier as Freshdesk). Freshworks is India’s most heavily funded SaaS startup and is backed by the likes of Accel, Sequoia, Tiger Global and Google Capital. Like the Zarget Founders, Mathrubootham was himself part of the so-called “Zoho mafia” and not only was he a role model and guide to Zarget, he was an angel investor as well.


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