20VC: Three Core Lessons Scaling Freshworks to a $5.2BN Market Cap | Biggest Product and Pricing Lessons from Scaling to $597M in ARR | How India Can Compete Globally in Tech and AI with Girish Mathrubootham, Co-Founder @ Freshworks

24:50Then I step out of the way and let them play the game also. A lot of us in India, like we have not been there done that. So a new higher experienced talent, we assume that, okay, we are going to learn from this candidate so we let them play, right? But what happens is one of the most important lessons I learned which every CEO should do is while you can be hands off the initial period of letting the leader transition and settle in, you have to be closely involved in all the big decisions, you have to be watchful of how they're treating their people. So one of my OKRs now or my performance objectives is when I hire a new management team member, getting them to success is actually my OKR.

25:29So I need to make sure that... What are the biggest lessons and what it takes for them to be successful in that period? OK, you need to be on top of the more and you can't just leave them, but what is that actually break down into? Is granular and specific as possible? I'm really interested. I'll give you a couple of stories there. One of my friends, Chandar, who is the CM of Kupa, wrote a LinkedIn post recently. He said, when when you're changing jobs, philosophies are portable, playbooks are not. You can bring your philosophies and values, but you cannot take, bring your playbook and use it as a template to run in the new company.

26:01And the way I used to tell that one of my first meetings with every new leader that I hired, this is an original management lesson from me. I said, I always ask the leader, you need to learn to ask which cow which ditch. There is an ancient Indian fable which says, hey in a village when a cow falls into a ditch, you first need to take the cow out of the ditch and then you fill the ditch with sand and then you go and educate the villagers on how to prevent cows from falling into ditches and the sequence in which you do these things is important. And that is the original story and my adaptation of that is as a new leader, When you come with all your experience in a fast growing startup, you have to understand that there are already hundreds of cows that are falling into ditches.

26:47So if you want to be successful at fresh works, you have to ask the question, which cow, which ditch, which means where can you help? What are the top two or three most important priorities or problems that you can help solve? Go and help those cows from the ditches and then we will listen to you, give us a lecture on how to prevent cows from falling into ditches. What was the biggest cow in the ditch to follow your analogy that you didn't identify for a while? 2015 we were really really growing fast and we were hiring a lot of sales folks and the sales wheel was spinning faster than the engineering wheel.

27:23We didn't hire enough engineers. We added like thousand customers or something like that. Feature requests were coming flying in and our engineering team was actually involved in a Ruby on Rails upgrade. So we couldn't even ship enough and so I realized that okay, how do you balance hiring across the org and so we did not have a process to do headcount planning in advance looking at okay, where are the revenue numbers going to be next year and how much now we have a full blown headcount planning process but but that was a big mistake that I did where I didn't hire product developers enough. How do you think about the balance on the product suite?

28:02I was really interested, but I didn't want to interrupt your flow when you were doing my different products. When you said your second product now crosses 300 million in an error, you have a resource allocation question as the leader, which is, I can put more money into growth, plow this forward, or I can do a third product and a fourth product. How do you balance between investing more in that killer product second that works versus expanding further with net new products? Yeah, in the early years the first decade as a VC funded company see one of the things you have to understand in that inbound model The secret source for fresh works was the business model disruption of being able to Profitably serve the long tail of the global SMB from Chennai when I was enabled to articulate it as early as 2012 When fresh disk the first product had not even hit a million dollars.

28:49I was already working on the second product called fresh marketer I had booked 40 domains starting with fresh in 2010 and 2011. So my dream was to build a multi -product company and use the inbound PLG motion across so many products. You also have to understand that when we took our first round of VC money and then we spoke to some of our investors, they actually gave me advice, which is good advice at that time, 2012. Gereesh, your first product is not even a million dollars in revenue. If you build a second product now, you would be confusing the market. people think you're pivoting from customer service to marketing and and if you're going to raise your next round of VC funding that investor will be confused on why you're doing this.

29:29So I actually killed the fresh marketer product that we built in 2012 because it was good advice. But then I actually convinced our board to let me build fresh service which is today the three hundred million product because fresh service in a sense was help desk for employees. Fresh desk was help desk for customers. So and there was a company that Microsoft acquired called Pareture, which had done something like that. You had Pareture for IT and Pareture for CS customer service. So in that sense, we are taking something that is already working, they're ticketing knowledge based self -service model.

29:59And what is working well for external customer service? We were trying to do the same thing for internal employee service. So I convinced our board to let me build the second product within that narrative of being a help desk for employees. And that product hit one and a half million in the first year and six and a half million in the second year. and the board understood the power of the model, then my early VC investor, Shaker from Excel said, what are all the products that you can build? Have you ever had a product know work? Yes, two examples I can give you. One is a product called FreshConnet.

30:30This was the early days of Slack, when we saw Slack really growing rapidly. So I could see that enterprise collaboration was actually gaining momentum. And this was even before Microsoft Teams had launched. The theory in my mind was if I look at how our customers or our employees were using Slack So they would get a customer service ticket and then they would go on Slack and ask somebody for help and then that person will say Okay, send me the link to the ticket then they'd copy paste the ticket link and then the person would go there They need to have a login and then they would read the customer contacts and then they come back on Slack and offer help So we found that okay, Slack is actually winning because enterprise software is broken in collaboration So what we wanted to do was bring context and collaboration together.

31:14Like while you are working on a customer service issue, how can you collaborate on that ticket then and there? Like how you do in WordDoc, right? Google Doc. But what had happened by the time we were late, like we took more than two years to launch. And by the time both Slack and Teams have actually started winning so many users, when we took it to our customers, the CIOs actually told us, we are already dealing with Slack and Teams. We have to sanitize on one. please don't give us a third. So I think we were late and we lost the game but do you know right away when a product isn't working or do you think it takes time to know?

31:48I think you will know at the end of the day customer adoption will tell you pretty quickly whether it's working or not right so and we knew that so what we did was we conceded collaboration so today our same fresh connect code that we built is integrating with Slack and Teams So we considered collaboration to teams and slide. Can I ask you, when you think about your leadership now, we've spoken about so many different aspects from the pricing, from the geo -expansion, to the building, hiring teams, how has your leadership style changed, Girish? How have you changed as a leader? One of the things I've always believed in is my job as a leader is to create an environment of performance hire the right people and get out of the way.

32:28Personally, I'm more like a jack of all trades, right? Like I don't write code. My style has always been believe in the power of a team build the right team higher great people with a learning mindset and with the right passion to excel in whatever they're doing create an environment of Performance get out of the way. How do you create an environment performance? You find people who are passionate about what they do that starts with our hiring process and the context in India you have to understand is everybody finishes is computer science engineering and then figures out what they want to do in life.

33:00So, I have folks working in sales, in pre sales, in marketing for all computer science engineers. So, that's a very different content, which means our hiring actually identifies what are they really good at because if you are truly playing to your passion, you don't have to work for a day in your life. Somebody said that. So, what becomes play? So, that is core to getting the right people on the job. And that's the first thing for environmental performance. Second thing is all about culture. How do you treat people? We build genuine relationships. Our manager training program is called Lead with Heart.

33:36So I've never done empty pep talks, sugar -coated feedback. Like if I am happy with somebody, I'll tell them I'm happy. If I'm unhappy with somebody, I just do it in private. But I actually tell them what didn't work out. I am still friends with all the people I've fired and let go also. because it is never personal, it's all about having that open conversation, telling people why something is not working out and why we have to part ways. So creating that environment of performance means you need to act when you have made bad hires. I've also said in one of our early versions of a culture called that, don't be a jerk, even if you're brilliant, don't be a brilliant jerk.

34:13And we've seen that it's about team winning, not about an individual superstar win. as there ever been a moment where it feels like the culture is broken. In pockets as the company grows larger, specifically around Covid, it was incredibly hard to build culture on Zoom. Like I have felt that we had taken a few steps back, like the next two, three years has been incredibly hard, that nobody coming into office, people jumping from Zoom meeting to Zoom meeting. Why, I still don't know how to build culture when nobody's coming into the office. Can I ask a bit of a weird one, but in the journey that you have as an entrepreneur, You change financial profiles as well.

34:49I always ask this because I think it's such an interesting one How do you reflect on your own relationship to money? So money doesn't really change a person. It only amplifies who you really are and I know so the other thing I believe is the purpose of money is to serve society so beyond a certain need I have no interest to kind of keep accumulating more and so I I believe it's it's more about giving and giving back So for me to truly succeed in life, you need to unleash your purpose. We have this incredible opportunity to make an impact on so many lives, lives of our employees who have been with us for so many years.

35:24Now when they share their stories of them buying a home with cash or being able to spend for their siblings' weddings and things like that. Or we have a software academy where we take students who can't afford college, teach them software skills and then place them in companies. FC Metras is an example where we are helping young sports people built into athletes. I did just want to ask, when you were talking about young people on purpose, what do you advise the thousands of young people stay who don't know what their purpose is? See, I think this is where the Maslow's need hierarchy has to play in.

35:59It is quite common for young folks to not worry about things like purpose because, and I'm sure all of us are familiar with the Maslow's need hierarchy. First comes the physiological needs, then the safety needs, then social needs and esteem needs. I think people have to go through the journey and when you don't have enough for yourself you're not going to be able to think about purpose. But I think it's okay. Like when I reflect back on my younger days, I did not actually have a lot of purpose. It was more about hey I need to first make money, I need to provide for my family, I need to do all these things and then once you, it dawns on you.

36:34Like once you become successful, once you make money and And then you realize, okay, what do you want to do? That is time and it's okay. I do have to ask, India and Europe are often characterized in the same way, which is every generation we say, ah, now's the time for European tech, or now's the time for Indian tech, and we're still kind of waiting. There's amazing companies like FreshWorks or Spotify in Europe, but there's not that many. Why is now different, or is now not different? This is the time. I would now say now is the time for Indian tech product companies and this is going to be the decade of India as a Product nation.

37:10What I am seeing we are living the reason why I even started a fund called Together Fund and we I'm a co -founder of an Organization called SAS Boomi. We just had our annual event two weeks ago in Chennai. So in 2016 when we first came together as a bunch of There was a grand total of 40 SaaS companies building global products in India. We didn't find any ecosystem, so we decided to create an ecosystem. Last year, there were over 3500 companies in India and 1000 people, 1000 founders attended SaaS Boomi. This year, there are over I think 6000 companies in SaaS and AI in India and 1600 of those founders were attending our event.

37:52and so we are just seeing this tsunami of startups happening and I will also tell you in the last two weeks alone at our fund together fund we have received 150 applications from startups in two weeks. We have never seen this kind of deal flow before. This is really really happening. The other challenge to people put to the ecosystem and they put it to Europe too is the lack of liquidity markets. That's changing now that was the that's the old perception. So when you look at what has happened in the recent years the flip Walmart acquisition of Flipkart showed that a very large M &A can happen in India.

38:26The Freshworks IPO on NASDAQ showed that you can take an Indian startup and actually list in the US. The local listings are actually even more attractive when you look into Zomato and Paytm and so many other startups actually listing in India. So there are also been PEE exits like PEE back exits. So all different kinds of liquidity has actually been demonstrated it now and yes that was the complaint against India that hey there is no liquidity but it is starting to change. What's the biggest misconception about the Indian tax ecosystem? What do you hear the like, oh fuck sake I wish that would change.

38:58People think that we will build for India first and then go global as opposed to many of the Indian SaaS product companies are actually starting global on day one and that I have found many times when I am talking to LPs and investors they don't get it because the US company would sell in US and Australian company would sell in Australia first and then branch out. So they're all coming with that preconceived notion where we had to educate them saying, hey, these are global product companies that are getting customers internationally from day one and there is a playbook for them. In terms of those incredible companies that and founders that are building in these markets, you then choose to be an investor as well.

39:35We see that together fund logo behind you. Talk to me about that decision, Gersh, because you could just be an angel investor. Why I like institutionalize it with a fund. And in your decision making framework, why did you decide that was the right decision? Yeah, so I think I was angel investing before starting the fund. I've made around 60 or 70 startup investments, but most of my investments are small. Like $25 ,000 could be the average check size, right? So when we created SaaS Boomi, we started opening up our playbooks and sharing this with startups because the dream was about India as a product nation.

40:10See, when you look at it from outside, it'll look like, hey, Gresh is doing fresh works, he's doing sass boomy, he's doing together fund, and also he's doing FC Madras. Why are you doing all these different things, right? Like, in my mind, it's a unified connecting theme. How can I be a catalyst in creating world champions from India or world leaders from India? For the first three, it is India as a product nation. So when we did all the work in sass boomy, we still realize that our startups had to go for funding from traditional investors while they are very savvy financial investors, there was very little operational expertise that any investor in India actually brought to the startups, which means you could end up with a good investor or a bad investor sometimes looking at excel sheets and not really understanding how to help the startup.

40:55This is why when Manu and I, both of us co -fronted as Bumi talked about this, he proposed this idea. At that time, there was not a single VC fund was focused on B2B global SaaS products from India. Today everybody wants to invest there, right? But when we started the fund, even today we are the only operator -led fund in India and we are the only fund that's focused on SaaS and AI investments only. Generally, all the VC funds were sector -agnostic, like they would invest in consumer internet, they would invest in marketplaces, they would invest in FinTech, they would invest in SaaS. Like we believe that we can build an operator network and truly help these startups really scale and that's how we can be a catalyst in that journey of creating the next few global product companies from India.

41:38Is it harder than you thought? I find a lot of operators you move to Vanshara like God, it's more hard work than I thought it would be. Is it different what you thought it would be? See I think it is hard work but I will say I'm tired not stressed because it's like playing a game. Like I see I'm always anyway working with startups even when I made say like 60 to 70 startup investments. I have spent time with startups. So I enjoy doing that. I learn a lot interacting with these younger founders. In terms of time everybody has only 24 hours a day and I get my time to play tennis and do the other stuff that I like which is watching movies and so everything else is work.

42:13So it just keeps going. What's the most non -obvious thing you look for in the Founders You Bag? So for example for me I look for early signs of exceptionalism in something. It could be an exceptional footballer when they were nine. it could be they made money selling cookies when they were eight and made a $5 ,000 whatever it is. What's non -obvious? Three or four things I don't know if it's not obvious or obvious. First thing is what gives them the right to win in that market? Because sometimes I meet founders who say, hey I evaluated 160 ideas and I picked this one based on these 70 parameters that I looked at.

42:48Super smart founders but I don't get excited by those founders. So for me you have to have spent a lot of time in the problem domain to be able to solve that problem. So what gives you the right to win in that market? That's number one. Number two, craftsmanship. Everything that they do, whether it's a deck that they send or a product mock that they have, can I see them to be world class? Because you cannot win in a global market without being a truly world class product. And then their ability to hire a great team. Well, this may seem obvious. Many times you see people hiring just younger folks, fresh out of college, they don't have the ability to sell their vision when they don't have anything, right?

43:28But building a product is not about you, I building a company is all about people. The great founders who go the distance are the ones who are able to build a great team. That's my opinion. That's the most important part of the challenge. If you hire a great team, the work will get done. But if you have great ideas, but you don't have a great team, then no matter what you do, you're solving it. final one. What's the biggest investing mistake you've made? I've made many. I've also made many. I think when I was angel investing, I have a very optimistic person, right? And I love founders. And so it's hard to say no.

44:03So a lot of times I have given them checks just to help them even when I'm not 100 % convinced that they would work. So then I realized that I'm not really helping them. So then I got my angel investing bar also to be a little bit higher. Is that a mistake? That was a deliberate choice to help someone. It's very kind of you. But I didn't think that. Yeah, I thought you asked for investing mistakes. Yeah, but I didn't think that's a mistake. Yeah, no, no, no. They were all investing mistakes because the companies wound down. I lost my money. I counted as an investing mistake. I don't regret my decision.

44:33But from an investment standpoint, I think, I, by the way, my one investment returned all my entire angel portfolio. So, and I still have seven unicons there. Wait, where, which one? Charge B. charge B. What price did you invest at charge B? I think it was 2 .4 million pre -money valuation, a 20 -acre investment turned into a 3 .4 million return. Wow, did you sell? Yeah. Well done, Garrosh. You can play for FC Madras for two years now with that. Dude, I love this. Can I ask you a weird one? What's the secret to a happy marriage, Garrosh? So I think everybody has to go through that and be patient and be a good listener.

45:11I think that's the secret. Your wife is always right as well. That's your final final edition. Listen I want to do a quick five so I say short statement you give me your immediate thought does that sound okay? Okay, so what do you change your mind on most in the last 12 months? Yeah, I always thought poker was gambling. I'm starting to learn how to play poker and I realize that it is a much better strategy game Is not gambling. What's your biggest weakness as a leader? My biggest weakness is probably I don't hold people accountable. I like to inspire, I like to tell people what needs to be done, but I expect them to do it.

45:48I'm not the kind of person who will like hold the whip, like ask for status updates and make sure everything is tracked and I think that's not my style. Are you a head or a heart decision maker? Heart. Tell me, you can have dinner with anyone that are alive. Who do you have dinner with? Jeff Bezos. I always look up to the vision and the the audacity of how Amazon has grown and again from one product to multiple products starting from literally a garage like how we started. So I think a company that's product and engineering at its core, not sales or marketing. What's the biggest mistake you see founders make today?

46:25Under estimating the market, fighting with co -founders. Final one for you. Where's Gyrish and Tanya as you've got together fund, you've got freshwork, see you've got FC Madras. 2034, where's Girish then? Maybe while watching India play in the World Cup. Girish, I've loved having you on. I had so many good things. Thank you for being so open and for putting up with my questions. This has been a joy to do. Thank you. Thanks for having me. I enjoyed it too. I have to say, Girish was just such a great character to have on the show and I so enjoyed that discussion. If you want to see the full video of that episode, you can check it out on YouTube by searching for 2 -0 VC, that's 20 VC, but before we leave you today, as face it, your employees probably hate your procurement process.

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