Freshworks bets big on AI with management rejig

Girish: The first message was that I am not going anywhere. Many did not understand the difference between Executive Chairman and non-Executive Chairman. If I wanted to go away from Freshworks, I would have become non-Executive Chairman and this option was available. I am executive chairman, gets paid and will get stock options. The transition is for me to focus on working on products, which is where I can add most value for Freshworks.

Girish. It was the most important question in the employees’ mind. Everybody was getting emotional that G is going to go and do his next venture. I told people that there is no farewell party for me. You will not miss me and I will spend more time in Chennai and with the product teams.

Girish: I started as a software trainer, became a product manager and then a product CEO. Everytime, I changed my game, I was learning new stuff. When I started Freshworks, building products was not hard because I had already built several products at the previous company. However, being a CEO was new. As a start-up CEO, I had done reasonably well; hiring a team; got VC funding and scaling the company to over $100 million in revenue. The next game was can I be a public company CEO? The last two-and-half years was a phenomenal journey. Now the question is should I continue spending time there or where I enjoy spending time. The answer was clear that I wanted to build products. That’s why I had a conversation with the board saying when the timing is right, I would like to move into building products and find a successor.

Girish: There is no perfect time to do this. We are at a time when artificial intelligence is transforming every industry. In enterprise software, we are going to see a lot of transformation. We have led the change in customer service automation right from the day we introduced Freddy in 2018. Today, customer service automation is one of the first use cases for AI, which is like a monster wave. Companies that ride the waves will emerge stronger.

Girish: I am continuing as Executive Chairman and continue to be with the employees. I am going to be with Dennis as his advisor and his co-pilot. I will take it as a compliment that I have been a good manager and people have that emotional connection with me. However, there is no reason for an employee to quit Freshworks because G is not there. It is not about who is the CEO, but about the environment, the culture, colleagues and how much are they learning; valued and respected and how their managers are keeping their employees inspired.

Dennis: Based on our calls with analysts and investors post earnings where the questions are mainly around generative AI, we believe that the reason for the stock to fall was about how GenAI will affect customer support and software business. Every small business is being impacted by interest rates and we took our guidance down marginally, just by around $5 million after adjustments. So, I don’t think we were surprised but only disappointed. We will demonstrate that we will be the beneficiaries of AI.

Dennis: We have two ways of monetising AI today. In case of co-pilot, we charge $29 per seat for access to the AI features. Customers see 30 per cent productivity when they deploy that. We have just started monetising it in the middle of Q1 and we have seen good adoption. In the case of Freddy Self Serve, we automate responses to common customer questions for companies to handle customer tickets. There, we charge on a per session basis. We are a little bit early in the monetisation journey but we have made sure customers are able to see the return on their investment.

Dennis: Absolutely, no doubt. Look at our momentum and our growth. We generated $38 million in cash just the last quarter and have forecasted to generate over $100 million in cash in the year. This means that we are not beholden to short-term swings and focus on the long-term and can invest in opportunities that can take years to play out. We have good economics, serve huge markets and an incredibly talented team.

Girish: His resume and track record is super impressive with what he had done with Dropbox. When he joined Dropbox, they were $200 million in revenue and he scaled it to $1.4 billion in four-and-half years. He spent lots of time at Google and Motorola. We were running two-in-a-box for the last 18 months, with the entire management team reporting to both of us. He was focussed on go-to-market while I was on product development. It was like a practice run before the official transformation. For outsiders, it may see a sudden development but for insiders, this was a plan put in place and we were working on it.

Girish: We cannot be thinking like that. When Satya Nadella is leading Microsoft, do Americans feel like, hey Indian is leading an American company? With Sundar Pichai leading Google, global employees don’t think that an Indian is leading the company. We are living in a global company where if you are building a global company, you have to compete with world class products and world class competition and you need to hire world class talent, wherever they are. As a captain, you need to assemble the best possible team. If Denis is on our team and both of us are playing, then it is stronger as a company. That is the narrative and I told the employees. It is just the way that we look at things. Sometimes, we get too emotional. However, today, we are in a global world and need to think about hiring the best talent.

Girish: He knows how to run GTM; scale business; how to hire a world class team. However, what he has never done is being a CEO managing a company with 4,000 employees in India. That is going to be the biggest challenge and how will you build followership in India? How will you connect with the leadership folks here? How to scale to 40,000 or one lakh employees like Google? There is a huge opportunity to focus on India as the strength and make sure that we can continue to deliver.

Girish: I will spend time on long term product strategy, AI and product vision while as CEO, he will run the company.

Dennis: What Girish has done is very special. Everything that you see here did not exist 14 years ago. He was in a secure job and was one of the highest paid employees at Zoho; was clearly doing well; left all of that. Coming from Silicon Valley, that was inspirational. Someone had that courage to leave a secure job based on a vision; bring a number of friends with him and many of them are here in senior roles. For me, this is irreplaceable. For employees, they were really pleased to here that Girish is not going anywhere and he has more time to focus on what he cares about deeply and he knows. I don’t have 25 years of building customer support software that Girish does. We get the benefit of getting all his time on where AI is going rather than all the issues, including people, legal and investors, that CEO had to deal with.

Girish: Our AI roadmap includes three pillars of Freddy Self Service, Freddy Co-pilot, and Freddy Insights. Fully autonomous systems are coming in enterprise software workflows. Level one customer service, customer feedback, outbound sales prospecting are a few examples. Wherever knowledge is definitive, processes are well documented, and today humans are being employed to do it, AI can be deployed to do the job. In the business world, AI is also going to make us all much more productive and get things done by just typing in a conversational prompt. The third aspect is around insights. Leaders are going to be taking decisions in a more real-time manner breaking the artefacts of quarterly or annual reporting cycles.

Dennis: 18 months ago, we partnered with Device42 and started bringing the product to our sales situations. When a customer has a mix of assets in both the online and offline world and needed something more than our IT service management product Freshservice, then we co-sold Device42 to them on such deals. Then a natural discussion of acquisition followed. Going forward, there are a lot of areas in IT and support and AI where there are companies ahead on the roadmap and we will always be on the look-out for such companies. Our big balance sheet and cash is to our advantage.

Girish: I am a fan of a product founder leading the start-up and that’s what I prefer in my own investments. But the problem is that, being a public company, CEO requires a lot of time commitment on activities like preparation for investor calls, interpreting the numbers, attending investor conferences, etc. That, for me, is time taken away from product vision.