Alphabet’s bet on Freshworks is up $ 900 million after IPO

Freshworks CEO Girish Mathrubootham at Nasdaq


Alphabet’s CapitalG investment arm is generating significant returns thanks to a big bet on cloud-based software developer Freshworks.

After Freshworks shares jumped 32% on their Nasdaq debut on Wednesday, CapitalG’s stake is worth $ 987 million. The group, which makes subsequent investments on Alphabet’s balance sheet, has invested a total of around $ 87 million over multiple rounds, from a valuation of $ 150 million.

Freshworks, whose software competes with Salesforce and Zendesk, marks CapitalG’s sixth IPO this year, following the debuts of UiPath, Duolingo, Robinhood and Oscar.

“It’s hard not to feel good,” said Gene Frantz, the CapitalG partner who led Freshworks’ investment, in an interview Wednesday.

Also on Wednesday, Google’s startup investment group GV scored a victory in Toast’s IPO. The catering tech company is valued at $ 31 billion, although GV’s stake is not large enough to be listed on the prospectus. GV has invested at a valuation of less than $ 100 million.

Frantz recalled when he first approached Freshworks CEO Girish Mathrubootham, who launched the company in India in 2010.

“We reached out to the CEO and invited him to our campus and introduced him to CapitalG to show not that he worked for us, but the other way around,” Frantz said. “I didn’t want him to leave the room and tried to convince him that we would be a good partner for the future.”

Frantz said the company has helped FreshWorks in a number of areas where Google’s history and expertise could benefit. For example, the company has provided technical assistance with machine learning and artificial intelligence, and has helped Freshworks with workplace issues such as working remotely and returning to the office.

CapitalG has tried to help design products in a way that doesn’t require hours of user training, which is a common problem with competing enterprise software services.

We’re trying to “focus maniacally on creating a great user experience and think the rest will fall into place,” Frantz said.

Frantz said the company also helped Freshworks rename its old name, FreshDesk, in 2017.

Freshworks is joining a series of cloud software companies to hit public markets lately at a valuation north of $ 10 billion. Many more are in preparation. Frantz, however, said Freshworks would be a valuable public market business regardless of the environment.

Frantz said CapitalG will continue to play in areas where it has been successful such as business, cybersecurity and financial technology, focusing on companies that can withstand any economic conditions.

“Activity around startups continues to be robust,” he said. As for high valuations, “certainly the times show that conditions will last for some time,” he added.

The Covid-19 pandemic has created challenges, Frantz said, but the technology is meeting the moment.

“The economy is a better world than before Covid-19 – not for eliminating suffering – but from a business perspective,” he said.

LOOK: Freshworks goes public in $ 10 billion IPO

Margie D. Carlisle