January 2016, a month after he had joined Freshdesk, Rao (global COO) and Freshdesk founder Girish Mathrubootham took an unusual decision: To focus on the “unsexy” mid-market clients.
Typically, SaaS (software as a service) firms enter the small and medium-business category and move upwards; Rao wanted to stay put in that category so Freshdesk would become the default choice for those companies. “A segment focus works better from a product standpoint,” says Rao. “When it comes to large clients, the product has to be customised every single time and that puts pressure [on us] in terms of resources. We said that we’ll only make a change if it’s repeatable. If [just] one client wants it, we won’t do it,” he says.
The strategy paid off, tripling average revenue per user in Britain, one of Freshdesk’s key markets. Rao plans to take those learnings to other markets.
He’s also spent 2016 fortifying what is turning out to be one of the best success stories in the SaaS space out of India. Early in the year, he identified a number of gaps across business functions of Freshdesk, from human resources to finance to marketing strategies and sales.
“The idea was to strengthen the foundation. In some departments, we had to go from good to great, in others, the roots weren’t really that strong,” says Rao. Step one was to overhaul tracking systems across all the business functions. For example, a closer look at the different ad formats indicated that display ads—the bread and butter of digital marketing—didn’t really help convert, even though the company was blowing up a lot of cash on them. Rao insisted Freshdesk instal a new ad scoring system and moved away from ad formats that didn’t pay back.
As important, Freshdesk revised its Google AdWords strategy. “So far, we had been running the U.S. as one region using the same AdWords. We asked ourselves if we should be looking at different keywords for California, vs. New York and Chicago. Suddenly, our marketing dollar was performing better and we saw leads double, and better conversions,” he says.
His mission for 2017 is to fix the finance function, including hiring a CFO and bringing in ERP systems. Before that, Rao knew he had to tighten HR. Which is why he sat up nights working on a new appraisal system that was built around a meritocratic performance-led reward structure.
“We closed the year around 950 employees and what worked for 500 people may not work for 1,000 plus,” says Rao. He has also introduced an anonymous vox pop within the company, to facilitate better communication and ideas within the teams.
The result of all the housekeeping? Freshdesk doubled the number of customer signups per month in 2016. The company also raised a third round of funding of $55 million that pegged its valuation at $700 million, up from $500 million raised in 2015. But Rao’s work is far from done. He’s begun conversations about profitability internally. “I don’t want to weigh down growth in favour of profitability, but it’s time to build a clear path to it,” he says.
Rao believes that with the company on an accelerated growth path, and gross margins already higher than competition, it’s time that the teams start putting the groundwork for an IPO. He wants them to think through the cash burn. “Always ask: Can I make some changes, tone it down a bit?”
Building a bench is also high on his priority list for 2017. Rao believes that a certain degree of predictability is a true measure of a world class company and a strong bench is the first step towards that.
This plan might just end up easing Rao’s calendar as well. For the past one year, his weeks have started with an early flight on Mondays from Delhi, where his family is based, to Chennai the headquarters of Freshdesk. The father of three is still looking for time to get back to playing the guitar.
On a personal level, Rao tells me that Tejinder Gill, a regional sales head from his previous company, LinkedIn, took over as the India head for Truecaller late in 2016.
During Rao’s LinkedIn stint, Gill was one of the people he mentored, so this move is personal, he says. “We’d been working together since 2012 and to have played a part in getting Tejinder to where he wanted has been extremely satisfying.”