Freshworks CEO Girish Mathrubootham at the Nasdaq
Alphabet's CapitalG investment arm is generating hefty returns from a big bet on cloud software developer Freshworks.
After Freshworks shares jumped 32% in their Nasdaq debut on Wednesday, CapitalG's stake is worth $987 million. The group, which makes later-stage investments off Alphabet's balance sheet, put in a total of about $87 million over multiple rounds, starting at a valuation of $150 million.
"It's hard not to feel great," said Gene Frantz, the CapitalG partner who led the Freshworks investment, in an interview on Wednesday.
Also on Wednesday, Google's early-stage investment Group, GV, scored a win from Toast's IPO. The restaurant-tech company is valued at $31 billion, though GV's stake was not big enough to make it onto the prospectus. GV invested at a valuation of under $100 million.
Frantz recalled the time he first approached Freshworks CEO Girish Mathrubootham, who started 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 was working for us but the other way around," Frantz said. "I didn't want him to leave the room and tried to convince him we'd be a good partner going forward."
Frantz said the firm helped FreshWorks in a number of areas where Google's history and expertise could be beneficial. For example, the company has provided some engineering support with machine learning and artificial intelligence and has helped Freshworks when it comes to workplace issues such as remote work and returning to the office.
CapitalG has tried to help Freshworks design products in a way that doesn't require hours of training for the user, which is a common problem with competing enterprise software services.
They tried to "focus maniacally on creating a good user experience and figure the rest will fall into place," Frantz said.
Frantz said the firm also helped Freshworks rebrand from its previous name, FreshDesk, in 2017.
Freshworks joins a crop of cloud software companies to hit the public markets of late at a valuation north of $10 billion. Numerous others are in the pipeline. Frantz, though, said Freshworks would be valuable public market company regardless of the environment.
Frantz said CapitalG will continue to play in areas where it's had success like enterprise, cybersecurity and fin-tech, focusing on companies that can weather any economic condition.
"Activity around startups continues to be robust," he said. As for the high valuations, "certainly the times show the conditions will continue for some time," he added.
The Covid-19 pandemic has created challenges, Frantz said, but technology is meeting the moment.
"The economy is a better world than before Covid-19 — not to take away from the suffering — but from the business perspective," he said.