Girish Mathrubootham: Biggest Product and Pricing Lessons from Scaling to $597M in ARR | E1142

Intro (0s)

• The key to winning in a market is having deep domain knowledge, world-class craftsmanship, and the ability to hire a great team.

Founding Freshworks (1m26s)

• Girish Mathrubootham spent 10 years building products before founding Freshworks.
• The idea for Freshworks came from a personal experience where Girish had difficulty getting a shipping insurance claim processed.
• He realized that customers often feel powerless when dealing with large companies, and saw an opportunity to create a customer support help desk that would empower customers.
• Freshworks was launched in 2010 as Freshdesk, its first product.

Product Market Fit & Pricing Strategy (4m28s)

• Freshworks was launched in June 2011 after winning a $50,000 prize in a Lean Startup contest on App Sumo.
• The company gained immediate traction with hundreds of users signing up for the beta version before the product was even ready.
• Freshworks launched its beta version on May 15th, 2011, with 500 users trying the product.
• By August 2011, the company had acquired 70 customers and reached 100 customers in 100 days and 200 customers in 200 days.
• This initial success was achieved without any external funding.

Global Expansion & Indian Market (6m31s)

• Freshworks started with a low price point ($9, $19, $29 per agent per month) to attract small businesses and educational institutions, believing it was easier to increase prices later than to start high and go down.
• The company chose to be global from day one, despite advice to the contrary, and found success by first winning globally and then in India.
• Indian customers are accustomed to a services mindset and require social validation from external international markets before making purchases.
• Freshworks' success is attributed to servicing a large market with the right unit economics, achieved by optimizing customer acquisition costs (CAC) through product-led growth strategies.
• Product-led growth involved SEO, Google Ads, and keyword density to drive organic traffic to the website, which was designed to enable customers to quickly understand and purchase the product without the need for sales interactions.
• Pricing was transparent and open, with no contract negotiations or redlining, making it easy for customers to make a purchase decision.

Importance of SEO & Keyword Targeting (13m8s)

• SEO keyword targeting is still important, but the future lies in using AI models like ChatGPT to recommend products.
• Pricing strategy should consider the target market and entry wedge, with low pricing being effective for SMBs and startups to gain market share.
• Product differentiation in a crowded market can be achieved through superior execution, better design, and a competitive price.
• PLG (product-led growth) can be a powerful strategy for larger companies frustrated with traditional enterprise systems.
• Packaging differentiates between SMB and Enterprise customers, with SMB plans offering limited features and Enterprise plans including advanced features like sandbox and audit logs.
• The user experience should be simple and consumer-like, with advanced features hidden away.

Transitioning From SMB to Enterprise (18m41s)

• Freshworks has over 67,000 customers, with more than 2,000 paying over $50,000 annually.
• 87% of Freshworks' revenue comes from customers paying over $5,000 per year.
• The smallest customers can be the most difficult and least profitable.
• Freshworks focuses on finding high-value customers through sales processes and marketing fine-tuning.
• Freshworks is a multi-product company, with many $5,000 customers starting at $100 or $50.
• Some $50,000+ customers are SMB customers who have adopted multiple Freshworks products.
• Freshworks' strategy of keeping the long tail open, feeding it, and letting customers grow and use multiple products has been successful.

Lessons on Second Product Expansion (20m38s)

• To successfully expand to a second product, the first product should be successful and generating revenue.
• Product managers should focus on long-term revenue (2-3 years), while sales can focus on short-term revenue (this and next quarter).
• Freshworks expanded from SMB to mid-market (500-5,000 employees) because mid-market companies have significant budgets and similar needs.
• Balancing inbound and Enterprise go-to-market motions is challenging due to different needs and product management complexities.
• Product management for Enterprise customers requires a focus on intuitive, user-friendly interfaces, even though they may not be using the product themselves.
• Pricing strategies differ between inbound and Enterprise sales. Inbound sales require affordable and open pricing to avoid website visitor loss, while Enterprise sales prefer higher prices and unpublished pricing. Freshworks opted for open pricing on their website as a company policy.
• Hiring leaders who understand both inbound and Enterprise businesses is crucial to avoid potential business suffering.
• One of the challenges in scaling a business to $597M in ARR is finding experts in their respective fields and building a complementary team with strong leadership in every function.

Hiring Challenges & Lessons (25m31s)

• Did not do reference checks on candidates who came through investor referrals.
• Got carried away by resumes and hired cultural misfits.
• Assumed new hires would teach them and let them play without proper guidance.
• Learned that while you can be hands-off initially, you need to be closely involved in all big decisions and watchful of how they treat their people.
• Need to be on top of new hires and help them succeed by identifying their top priorities and helping them solve problems.
• Biggest mistake was not identifying the biggest cow in the ditch, which was allocating enough resources to the Enterprise and US sales teams.
• In 2015, the sales team was growing faster than the engineering team, leading to a backlog of feature requests and insufficient shipping capacity.
• Realized the need for a headcount planning process to balance hiring across the organization and ensure adequate resources for product development.

Balancing Product Suite (30m18s)

• Freshworks' business model disruption allowed them to profitably serve the long tail of the global SMB from Chennai.
• Girish had a vision to build a multi-product company and use the inbound PLG motion across multiple products.
• Investors advised against building a second product when Freshdesk, the first product, had not yet reached $1 million in revenue, as it could confuse the market and potential investors.
• Girish killed the Fresh Marketer product built in 2012 based on this advice.
• He later convinced the board to let him build Freshservice, a help desk for employees, which became a successful product with $1.5 million in revenue in the first year and $6.5 million in the second year.
• Freshworks' pricing strategy is based on the value delivered to customers rather than cost-plus pricing.
• They offer a free plan to attract customers and then upsell them to paid plans as their needs grow.
• Freshworks uses a freemium model with limited features in the free plan and additional features and functionality in the paid plans.
• They also offer different pricing tiers to cater to different customer segments and needs.
• Freshworks believes in transparent pricing and avoids hidden fees or complex pricing structures.

Product Not Working (33m4s)

• Fresh connect product launch was delayed for over two years.
• By the time of launch, Slack and Teams had already gained significant market share.
• Customers were not interested in adopting another collaboration tool.
• Customer adoption is a key indicator of a product's success or failure.

Leadership Style (35m7s)

• Believes in creating an environment of performance and hiring the right people.
• Personal leadership style is hands-off, allowing teams to perform.
• Focuses on building a strong team with a learning mindset and passion for their work.

Creating an Environment of Performance (35m54s)

• Hire people who are passionate about their work.
• Build a positive and supportive culture that treats people well.
• Provide honest and direct feedback, both positive and negative.
• Act quickly to address bad hires.
• Emphasize team success over individual achievement.

Challenges in Building & Maintaining Culture (37m45s)

• Struggles to maintain company culture during the pandemic due to remote work.
• Difficulty in building culture when employees are not physically present in the office.

Relationship to Money (38m26s)

• Money amplifies a person's true character.
• Purpose of money is to serve society beyond personal needs.
• Believes in giving and giving back to make a positive impact.
• Fulfillment in life comes from unleashing one's purpose.
• Freshworks provides opportunities for employees to grow and make a difference.
• Software Academy helps underprivileged students gain software skills and secure jobs.
• FC Madras supports young athletes in their sports careers.

Indian Tech Ecosystem (40m36s)

• India is poised to become a global product nation.
• Growth of Indian tech product companies and startups.
• Together Fund and SAS Bhui events foster the startup ecosystem in India.
• Over 3,500 companies and 1,000 founders attended SAS Bhui in 2022.
• Over 6,000 startups in SaaS and AI in India, with 1,600 founders attending SAS Bhui.
• Recent surge in startup applications at Together Fund, indicating a strong deal flow.

Liquidity Markets in India (42m27s)

• India's tech ecosystem offers increased liquidity options, including M&A, IPOs, and PE exits.
• Many Indian product companies adopt a "Global on day one" approach, targeting international customers from the start.
• Girish Mathrubootham, founder of Freshworks, invests in B2B Global SaaS products from India through Together Fund, providing operational expertise beyond financial investment.
• Exceptional founders display early signs of exceptionalism, such as achievements in different areas at a young age, and should have a deep understanding of the problem domain and a clear competitive advantage.
• Craftsmanship is crucial, as world-class products and marketing materials are essential for success in a global market.
• The ability to hire a great team is paramount, as building a company is about people, and only great founders can build great teams.

Biggest Investing Mistake (49m8s)

• Girish Mathrubootham made many investing mistakes as an angel investor.
• He gave checks to founders even when he wasn't 100% convinced about their ideas because he's optimistic and loves founders.
• He realized that this wasn't helpful to the founders and raised his angel investing bar.
• One of his investments, Charge B, returned his entire angel portfolio, and he still has seven unicorns in his portfolio.

Quick-Fire Round (50m55s)

• What have you changed your mind on most in the last 12 months?
  • Used to think poker was gambling, now realizes it's a strategy game.
• What's your biggest weakness as a leader?
  • Doesn't hold people accountable, prefers to inspire and expects them to do their work.
• Who would you have dinner with if you could have dinner with anyone, dead or alive?
  • Jeff Bezos, to learn about Amazon's growth and product-engineering focus.
• What's the biggest mistake you see founders make today?
  • Underestimating the market and fighting with co-founders.
• Where do you see yourself in 10 years?
  • Watching India play in the World Cup.