SaaS unicorn Freshworks plans up to $912mn IPO; seeks $9bn valuation

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Software-as-a-service (SaaS) company, Freshworks Inc., which filed for its initial public offering (IPO) last month with the US Securities and Exchange Commission (SEC), plans to raise up to $912 million as a part of its listing.

In its latest filing with the SEC on Monday, Freshworks said the company looks to offer 28.5 million Class A common shares at an offer price range of $28 to $32 per share. With this, Freshworks is planning to raise between $798 million and $912 million, as a part of its public listing. Further, it has reserved an additional 2.8 million shares, in case of an oversubscription. If this overallotment option is fully exercised, Freshworks could raise as much as $1 billion in its IPO. The company has said it may use some of its proceeds for acquisitions or strategic investments in complementary businesses, products, services or technologies.

Freshworks' cumulative outstanding shares after the IPO would be over 278.3 million shares (or 281 million shares in case of an oversubscription). Thus, the company’s valuation is pegged at $8.9 bn to $9 bilion at the upper end of the price band, the regulatory filings show. 

This will make Freshworks the most valuable SaaS startup from India, post-listing, zooming past the likes of application program interface (API) development platform, Postman, which recently was valued at $5.6 billion and mobile application testing platform, BrowserStack valued at $4 billion this year. Freshworks was last valued at $3.5 billion in November 2019. 

“We have two classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 10 votes and is convertible at any time into one share of Class A common stock,” said Freshworks Inc., in its filing.  

“Outstanding shares of Class B common stock will represent approximately 98.9% of the voting power of our outstanding capital stock immediately following this offering, with our directors, executive officers, and principal stockholders representing approximately 78.3% of such voting power,” read Freshworks’ filings with SEC.  

The 11-year old software-as-a-service (SaaS) startup has appointed Morgan Stanley, J.P.Morgan, BofA Securities, Jeffries and Barclays as book managers to the IPO, among others.

Mint had earlier reported that Freshworks was looking to use the proceeds from the IPO for general corporate purposes, including catering to working capital needs, operating expenses and capital expenditures. The company was also looking to use a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services or technologies.

“Freshworks is a very special company. We were unconventional from the beginning - not for its own sake, but because we saw an opening in the market for a unique approach [...] We offered a ‘fresh’ approach relying on efficient, product-led, low-cost, and low-touch sales; and we targeted massive, underserved markets. And we had one simple mantra: happy employees create happy customers. In fact, we made that our mission," said Freshworks’ founder Girish Mathrubootham, in a letter, as a part of the IPO filings. 

Freshworks Inc. will be the first to lead the pack of Indian startups which are actively looking to list on the US exchanges in the coming months.  Names include payments service provider Pine Labs, e-commerce behemoth, Walmart-owned Flipkart as well as mobile advertising major, InMobi. Freshworks has raised more than $327 million in funding till date from the likes of Accel, CapitalG, Sequoia India, and Tiger Global Management. It has more than 52,500 customers across 120 countries.

The company reported a revenue jump of roughly 45% between calendar year 2019 and 2020. For 2020, the overall revenues for the firm stood at almost $250 million. The company reported an 84% increase in net losses between 2019 and 2020. For Freshworks, the losses for calendar year 2020 stood at $57.3 million. However, the company has made concerted efforts to reduce its losses in 2021. For six months ending 30 June, Freshworks’s net losses stood at $9.84 million in 2021, an 83% drop from the $57 million net loss it reported for the same period in 2020. 

Freshworks said that 52,500 businesses across 120 countries have used its software till June 30.