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Freshdesk CEO: We Raised $31 Million From Tiger And Google Capital Because Valuations Are About To Drop

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When Zendesk went public in May, one company watching closely was a competitor, Freshdesk. Founded out of Chennai, India, Freshdesk's the upstart in the customer support space, the smallest of the three "desks" all out to sell you software that helps manage your customer service. The other thing that CEO Girish Mathrubootham was watching was the public market for enterprise companies.

Zendesk's stock is up big, almost 40% since its IPO, but many enterprise companies have since their stock prices take a hit this spring, leading companies like Box and MobileIron, which finally went public today, to blink in their IPO timing.

At Freshdesk, which has to contend with the now $1 billion public competitor in Zendesk and a $30 billion company in Salesforce.com , which has a competing Desk.com unit (customer support companies seem to love the desk metaphor), that meant taking on more cash to grow at comparable pace. But what's most interesting about the deal is that Mathrubootham says Freshdesk raised faster than it'd planned--the company had expected to raise again in December--because of the shifts in the market.

"The public market's turning, and if we waited, we may have increased revenue without getting our desired valuation," the CEO says. Freshdesk raised this new round while still retaining most of its money from its last September raise still in the bank, buoyed by a generous multiple and the fact that investors weren't asking for an aggressive ownership stake.  "When you get the healthy multiple, you take the money," Mathrubootham says.

Freshdesk's now likely valued at about $150-200 million, compared to a bit above $50 million in its last round. While the company didn't disclose revenue, Mathrubootham said he got a multiple that he doesn't expect the market to offer startups later this year. Fund-raising for enterprise companies is in flux right now, as companies like Okta have struggled to find public-facing investors and went back to existing investors for more funds.

That's also partly what Freshdesk just did, announcing it's raised $31 million from in a Series D round led by existing investor Tiger Global, alongside return investor Accel Partners and new investor Google Capital. But while Tiger's re-upping a commitment it first made leading the $7 million Series B round in 2012 and then injecting another $5 million with Accel last year in the Series C, Tiger's actually the kind of later-stage growth specialist that many startups right now are finding a little tougher to snag.

"We were Tiger's first software-as-a-service investment ever, and it's because Tiger happened to be in India at the time that we got inbound interest from investors in January of 2012," says Mathrubootham. "I met personally with [partner] Lee Fixel and they made an exception for us."

Google Capital was prepared to lead the round, Mathrubootham insists, after reaching out following the company's Series C raise in September. The common thread of Google Capital investments, Mathrubootham says, is that they all fit the Google apps ecosystem and work with small businesses.

"We are excited to get Google on board. Google being Google, they have access and a different view of thinking in terms of being able to offer security-minded engineers, scale-minded engineers, and Google's product focus and marketing."

Much like its competition, Freshdesk looks to help those small businesses with subscription software that helps those business customers be more active in their custom support through social media and a broader range of online communications. Those include chat, forums, and conferencing, while still providing the traditional phone and email response. What Freshdesk does uniquely, its CEO argues, is to layer on 'gamification,' game-like mechanics to encourage sales reps. The software has trophies and points that reps can earn through successful interactions with customers, such as one for the person with the fastest resolution times per ticket. Rewarding the strong performers in such a system produces more energized and higher-rated service reps, Mathrubootham claims. Freshdesk now works with 23,000 clients in a freemium model.

Despite its growth, Freshdesk's CEO says that healthy companies looking to raise this fall may see trimmer valuations as enterprise companies settle into stable but lower prices on the market.

"The market turned in March and we saw public valuations drop significantly for enterprise SaaS. That hasn't reflected on the private market yet, so we took the money now."

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