How can a software company reach success in today's market without losing its core vision and principles? When is the right timing to take your business to an IPO? And what makes a successful IPO anyways? Many organizations change their business focus to make specific companies and customers happy. As a result, their products become irrelevant to the market. Some don't have the infrastructure and metrics to go public or act at the right moment.
To help businesses tackle this problem, we asked today's guest, Tyler Sloat, the Chief Financial Officer at Freshworks, to share his experience and expertise on how organizations can develop easy-to-use products for the masses and how to correctly measure the scale, growth, and efficiency required to go public.
Megan: [00:00:00] Tyler. Thanks for being my guest today.
Tyler: Megan, thank you for having me.
Megan: Yeah. Today, we're going to be discussing a bit about you and your career and what led you to your current position with fresh. Then we'll turn the conversation specifically to fresh works, which recently underwent an exceptionally successful IPO and is just generally a great success story that should inspire millions.
I'm really excited to hear your story, Tyler, as well as the fresh work story. So let's get started. Awesome. First, tell me about your career progression and how it is that you got to where you are today.
Tyler: I think like a lot of college students out there, I had no idea what I wanted to do in school. I was actually an econ major with a pre dental. Um, so which was the same as pre-med. Um, but I got a job [00:01:00] graduating and interviewed with a bunch of companies, including like sales roles and all those kinds of stuff, and ended up getting a job with Coopers and like, Uh, which was, you know, one of the big six at the time, uh, which is now Pricewaterhouse, Coopers, and started in their computer assurance services group, um, worked in Boston with them for an hour, but that's like it internal controls before socks existed.
Can't say I really had a great grasp on what I was doing, but I think I did. Okay. Um, and then transferred out to the San Jose office and I transferred into the audit. Um, and I remember C car reading, a fundamentals of accounting book because I'd never had an accounting class before. Um, and honestly learned on the job because I got put on like five deals back to back, you know, either IPO's or M and A's.
So I was working a ton and I pretty quickly, you know, realize I also needed [00:02:00] to educate myself. So I enrolled in. Night class, it sounds a state. And then I convinced Coopers to send me what they called Cooper's academy, which was like a eight week intensive program at USC. Uh, gave me all the accounting credits I needed for CPA.
Um, and, and, you know, worked on long enough to get a CPA in terms of experience. And then kind of just entered industry from there. And accounting is one of these things that either you kind of get it or you don't. Um, and, uh, I started as a, you know, General county manager and quick that part of the controller of a company called poet software, that was a private business that we ended up taking public, um, kind of pre.com days.
And that afforded me the opportunity to go back to business school, which I did, which was awesome. And from there just kind of had this journey in Silicon valley. And I don't know if it's luck or, uh, by grace that know I've had the opportunity to have some great roles start at Siebel [00:03:00] systems, but just kind of.
Six weeks into the job at Siebel, they asked me if I wanted to go run finance for this new division, they're starting, which is called Siebel on demand. And it was to compete with this little company that had just started called Salesforce. And we bought two companies and, you know, I, as my first foray into to SAS and figuring out everything, you know, how those businesses were run, which was completely different than Siegel's business.
And. I ended up staying at Siebel probably a year and a half more than I thought I would because of that. And then went to a private hardware encryption business called the crew. And we ended up selling that much earlier than I thought we would. I ran finance there and operations. We sold it to net app.
Uh, about nine months after I got there, then given the opportunity to be the controller of the emerging products group at NetApp and. I don't know every kind of series of events where I've [00:04:00] chosen a company. I go through this book analysis, call it like, it's kind of dumb, but I call it the five finger analysis.
I go, okay, what's what's the market. And you know, what's a problem in that market as the first. And then second, what product is being brought to solve that problem? And third, what is the team that's building the product to go solve that problem and fourth, or who are the investors backing the team to build a product to go solve that problem.
And then lastly, what is the role? And I put it in that order and I kind of just go through that and, you know, that's how I found Decrew. I stayed at NetApp for a couple of years, which was really fun. Um, then I found a company called OBO pay, which had a huge market opportunity. I just think it was too early, but I was a CFO there.
It was my first CFO gig, uh, then from opaque, that's where I landed at Zuora. And that ended up being a almost 10 year journey, which was really fun. Um, and I decided to leave Zuora and that's where I [00:05:00] found FreshWorks. Um, and that's kind of where I, how I, how I got here. Um, And, you know, I've had plenty of friends.
Who've worked at a lot of private companies in Silicon valley and never really had an opportunity to go experience one that had an incredible growth. I consider myself blessed.
Megan: Yeah. It sounds like you've had some great adventures along the way. And I liked that five finger method sounds like it's led you to some great choices.
Tyler: It's pretty simple. I think it
Megan: works. Yeah. And funny. I was actually a pre-med major too, before deciding on accounting. Uh, I couldn't pass organic chemistry.
Tyler: I think it's an incredible way to destroy a GPA. I'll tell you that.
Megan: So as you look back on your career, are there stories or moves that stand out in your mind as turning points?
Tyler: Yeah, I think, um, I, look, I look back at those, those companies I was at, and I think the one that like wasn't, so I've been with five private [00:06:00] companies, um, and three of them now, you know, gone public. One of them was sold. Uh, and then the last was this company. Oh, we'll pay. But old PE was actually my first CFO job and really.
Drove me to like really own a bunch of stuff. So I own kind of our, our business development efforts there and we didn't have any direct sales. So it was all through partnerships. I ran all the financials cause I was the CFO. I also ran our treasury operations, which was the movement of all of our, uh, all of our customers money.
Um, and that was really exciting. Cause we were just a little company. We were doing like a ton of really big. Uh, but it also like really educated me on the inverse perspective of how like really large companies, cause like we did, we had pretty big deals with Citibank MasterCard society on our all Nokia, um, and how, you know, those [00:07:00] companies really, you know, what they can do to a small company, if that small company isn't ready.
And I just had a ton of learnings through that. Um, and also. Realize then that the one thing is the market was too early, but our products just, they weren't built to scale. And we had such a big vision, but it didn't match the product that we were bringing to market. And I look at that and I look at the piece parts moment, other experiences, and, and that was the biggest learning came back.
Things like companies can get so far with marketing and vision. But the reality is it'll all catch up. If you don't have the product and technology, and if you don't stay true to building products right away, and really, you know, focusing on the customer, uh, it's going to catch up to you. And, uh, and that I think is probably my biggest learning of all the companies that I've been with.
Uh, and honestly, one of the reasons [00:08:00] I ended up choosing fresh.
Megan: Yeah. I feel like so many companies lose sight of the customer at the end of the day.
Tyler: Yeah. And at the reality you lose sight of a customer, but maybe you do so because you're making decisions for other customers, but you lose sight of the customer, the, the macro customer voice.
Right. What is, what do, like, what do all customers need as opposed to one or two? And if you design for the map, Then, you know, you and you make it so that your product is easy to use for the masses, then it, then you inevitably will just serve so many more. Um, and then you can always just tweak and make it a little bit more flexible toward the end.
But if you go down a path of designing for rigid, Uh, you're going to get stuck, right. We really minimize that market. That first finger that you just narrow out that [00:09:00] market. Um, the other place I saw this with Siebel, right, were CBO had, you know, on-premise, they'd, you know, created an entire category called CRM.
Uh, but with these big, heavy, uh, software, uh, engagements that they're living in dying by the 20, $30 million deal or. And then they try to create an on demand products, a SAS product, um, by really kind of just thinking they could take that hit big heavy system, throw it in almost like an ASP model and host it for folks and get small companies to use it.
And, you know, they weren't listening to it. They weren't really paying attention at all to what customers wanted in that space. I knew it was just, that was a great learning as well. Just like exactly what not to do. Um, in, in that kind of environment.
Megan: Yeah. Sometimes those are the best learnings and, uh, speaking of design for the masses and easy to use, tell us about fresh works.
Um, maybe a bit [00:10:00] about their history, their mission and what it is they do.
Tyler: Yeah. So at FreshWorks, you know, we designed products for the end user. And what that means is you're really thinking about the person, the individual who's doing their day-to-day jobs and your product. So fresh work started as fresh desk, which is our biggest product.
Uh, and it's, you know, customer support software at its core, allowing our customers to engage with their customers, uh, but building that software, you know, and now innovating on it for over 10 years while still staying true to the DNA of building for the end user. So what does that mean? It means it ha the software has to have an incredible user experience, has to have a great UI.
Uh, it has to be really easy to navigate. And really importantly, it has to be, you know, a really fast, uh, ROI. I mean, like, it should be very easy to [00:11:00] get started, uh, and start using, um, over time FreshWorks, you know, started with fresh desk, then saw a bunch of customers using the fresh desk product for internal it purposes, and then to realization, well, they don't really, they need a purpose-built product for that.
And so we built fresh server. Uh, and then, you know, as we continue to journey realizing that there's going to be this desire for our customers, to be able to see the entire life cycle of their customer's journey with them. So we have, we built fresh marketer and fresh sales, uh, and have fresh, fresh success as well to do this customer kind of 360 view.
And so it's really cut products. FreshWorks has products that help our customers delight their customer. And have products that help our customers delight their employees. Is there a kind of inverse facing, you know, fresh service and fresh teams help our customers, you know, work, engage with their employee base, fresh [00:12:00] sales, fresh market, or fresh dash fresh, fresh desk, fresh success.
Help our customers engage with their.
Megan: A bit of a tongue twister. Um, so what differentiates fresh, fresh works from their rivals, such as salesforce.com. And do you guys have an ideal customer?
Tyler: We don't have an ideal customer. I'll answer the second part first because you know, we're not verticalized. Uh, we have.
Customers, you know, from the long tail of SMB. So really small customers all the way up to this mid market enterprise business. Um, we don't go after what we call elephant hunting. If you are a very large enterprise that wants to heavily customize, uh, the software that your mind, um, and really, you know, kind of.
Almost make it a [00:13:00] consulting project, as opposed to out of the box software that that's not for us. Uh, and we actually would walk away from those deals. Uh, we've created a product that it can be, you know, uh, extended with a ton of applications. And kind of open API APIs, but it's not built to be kind of a custom built or customized incredibly the difference between us and our competitors.
And you mentioned Salesforce, is that, you know, when Salesforce started, it was, it probably had a very similar DNA that it was built for small companies, supposed to be really easy to use, really easy to navigate, and they were competing with on-premise at the time. So it wasn't like. Uh, if you turtle to, to make that distinction yet over time, I think a lot of the SAS companies that started early have, you know, fallen prey to the desire to go serve those mega companies [00:14:00] and really go after those mega deals and as such they've, you know, they've had their product roadmaps hijack.
They now have these just. Uh, massive code bases that are just really tough to navigate and products that are really hard to, to use. And aren't actually self-servicing anymore. Whereas FreshWorks has stayed true. The DNA of building for the end user stayed true to the kind of those core concepts of great usability and UI, but really fast to onboard.
Uh, and then over time, just added feature functionality. That now our products are relevant to that mid-market enterprise customer base because they have the feature functionality and need, but we've also stayed true that DNA and that's, that's hard to do. And you know, if you actually look at software companies out there today, SAS companies included, like I would challenge anybody to name a company that started with the big enterprise and built products for them, but successfully moved down to service the long tail of SMB.[00:15:00]
Uh, versus the companies who kind of had started by building products for the SMB, and then just slowly moved up as their products became relevant to those larger organizations. And that's what FreshWorks has done. And that's why we're
Megan: different. Yeah. I'm sure those huge enterprises can be enticing, but I, I guess sometimes you have to sell your soul for those opportunities.
Tyler: Absolutely. Absolutely. It's arguably shortsighted.
Megan: And what are your proudest accomplishments since joining fresh works?
Tyler: I think, I mean, your immediate thought goes to the IPO, but the IPO is just an event. Right. And it's an event that was earned over a long period of time. I think my proudest accomplishment right now is, uh, the team that we've built. Uh, over the last year and a half and the individuals that we've brought on board, but also the, uh, the readiness that we've instilled within the [00:16:00] organization and, uh, you know, to become a public company, you have to, um, you need to have.
Operational readiness, uh, and kind of execution readiness and operational readiness is you gotta be able to, you know, close your books on time. You have to be able to do it accurately. You have to have systems that can help scale and, and, uh, help the company operate. And you need to have compliance, uh, execution readiness is that you need to be able to do what you're say you're going to do, and you have to be able to forecast your business.
Uh, and you have to be able to see a little bit around corners, uh, in order to operate like a, like a public company. And I think we have worked really, really hard for the last, uh, two years to, to get us to a point that we were comfortable to in going public.
Megan: And I know we've mentioned it a few times now, but FreshWorks recently underwent an [00:17:00] IPO.
And why was this so significant or historic.
Tyler: Th there's a lot of software companies going public. There we are. The first SAS company founded out of India. And to be clear, we're a us company and have been since day one, but we're really founded at an India. And our, our heartbeat is in Chennai. Uh, and we're, we're the first company, uh, to really, you know, build itself, uh, with India as its core to go public in the United.
Uh, first kind of SAS software company. And it's historic because we look at it as kind of this turning point where, uh, number one, we can be an example for so many other, uh, you know, software companies coming out of India. But in general is G would like to say his dream is to turn India into a product nation.
And I think [00:18:00] historically. Uh, it, India's probably been viewed as more, a headcount, arbitrage play through services, uh, and you know, consulting or, uh, uh, uh, kind of shared services or outsourcing, uh, where that, you know, we are a product business, uh, and the capability to build world-class software out of India is I think pretty soon.
Megan: Yeah, I love India. It's one of my favorite countries and I'm sure this has inspired millions of entrepreneurs there. And I find them, I find, um, India as a country to be so innovative. So, yep. Very excited, uh, that, that you guys were successful in doing this. And, um, so why, why the decision to go public in the U S rather than, than maybe in India?
Tyler: Yeah, I don't think there was ever a D uh, even a conversation of do you [00:19:00] go public in India versus us? And we are, we're a us company, first of all, uh, we have, you know, primarily U S investors. Uh, and, but most importantly it is, you know, if. It's probably the toughest place to go public in the world. Uh, and it, it, you know, the rigor that's required, the maturity that's required, but the validation that's provided, uh, it, you know, I, I don't think can be, uh, can be rivaled.
And so, uh, for that, you know, we kind of earned the right through the metrics that we have through the business that's been built, uh, and the expectations that we have in front of. Um, I don't think it was ever a question of whether it was someplace else other than us. So it was more of a question of, okay, is this the right
And what made this the right time?
Tyler: I think it has to do more with the operational readiness and the execution readiness that I mentioned before, [00:20:00] because there are companies who are public SAS companies who are public core, smaller than us who don't have the operational metrics that we do, meaning that we have the.
Kind of at say this rare combination of scale, right. Being over 300 million growth, you know, in that kind of 40% range, uh, but also efficiency where we actually produced cash, uh, in the last 12 months where there are companies that have gotten to scale and efficiency, but most of them, you know, kind of in our peer set would probably be burning a lot of capital to do so.
Uh, and you know, we've been able to do it again. Uh, and I think that is, you know, because of that, you know, we already had those numbers. And so I think we had already earned the right to go public based off of those metrics. The question is where you were, were we able to operate like a public company? Uh, and that's what the work we've been doing.
And, you know, it felt like, okay, we are now ready. [00:21:00] Uh, cause we've, we've been, we've put in that infrastructure. Um, and so, but the metrics are already there. So that's why the timing.
Megan: And you also led Tamara through a successful IPO. So how did this experience differ?
Tyler: Yeah, for me personally, it was different because I joined Zuora when we had about 4 million in revenue.
Uh, and over time, you know, I'd like to think I helped build the company. Uh, I managed every function at Zuora at one point or another, except for engineers. Um, and then over time, the other thing we did was we were created a different, a new category, a category that really didn't exist prior. So there's a lot of education on not just, you know, is the category going to have a Tam that would be relevant for a company to survive as a public entity, but also Wood's war be the winner of that Tam, [00:22:00] uh, you know, once that Tam presented itself, I didn't build FreshWorks I helped get FreshWorks ready.
Uh, um, I'm going to help build it going forward. Uh, but fresh trucks had already met on a 10 year journey almost. Uh, and secondarily FreshWorks, wasn't creating any new categories. Uh, we're just building software a little bit different in the existing categories that, uh, that are already there. And so those are the two main differences for me personally, as well as kind of for the.
Megan: And as you look out over the next two to three years, what are your specific goals for the company?
Tyler: Our goals are to keep growing. I mean, it's, it's actually not, um, for us, it's not complicated. It's all about execution because as I just mentioned, our, our markets are already there and it's really, how do we have the discipline to stay true to what we've been doing for the last 10 years and the way we build ourselves.
But then continue to execute on how we're bringing that software to [00:23:00] market. And then once we have customers, how we engage with them, uh, secondarily, a lot of my job is focused on making sure the company can support that growth, uh, both, you know, through our own human capital, but, but you know, in our infrastructure and everything else, uh, and you know, scale globally, uh, and that, and that's what we're going to be focused on for the next quarter.
Megan: And I'm always interested to know as a CFO, are there any tools or technologies that you or your team are using right now to help make your life easier in the workplace?
Tyler: Uh, we do use all of our own fresh work software, which I think is important. I think it's really important for software companies to, you know, Yeah, the drink, your own champagne or eat your own dog food.
You want to refer to it. Um, we have, you know, part of the readiness that we went through over the last year was putting in an entire back, you know, back office stack, um, and, [00:24:00] uh, you know, you know, new financial systems, uh, new, uh, systems that surround those financial systems. Um, I think for CFOs today, One of the most important things is data and the integrity of data.
Uh, and then kind of with integrity, goes to control of that data, uh, and then being able to get data to the businesses so that you can make decisions, uh, for the business. And so we've spent a lot of time working on operational flows. Uh, and then what data is created during those flows and then capturing that data so that we have the right information to help run the business.
I, that's probably one of the bigger areas that we focus on right now.
Megan: Yeah. So much data out there these days, but actually making good use of it is I guess, sometimes more difficult than. Having access to it,
Tyler: exactly data for the sake of data doesn't help [00:25:00] anything. Right. But actually data that helps to inform decisions is really powerful.
Megan: And obviously we're living in pretty tumultuous times right now. But as a CFO, what, what keeps you up at night?
Tyler: I think the. The asked G it's like when can get back in the office. Cause he he's focused on culture and whatnot so much and I am as well. But I think for us is just, what's going to keep me up at night is continued execution and making sure that as a company, you know, we're placing the right bets, uh, and you know, it's my job to help, you know, help the company, you know, make decisions, uh, and, uh, to help the management team make this.
Um, and you know that that's just, that's just, you wake up every day and you try to make a little bit more progress on continuing to build the next great software company.
Megan: And lastly, if our listeners take [00:26:00] just one thing away from this episode, what would you like it to be
Tyler: one? Uh, I guess one thing, uh, first is. Just that for any technology company, the thesis that is that it always comes down to the product and the technology and the rigor that you have at, in building. Uh, but to that, uh, the way we operate as organizations today that, you know, companies are truly global.
And if you look at what FreshWorks has been able to do. Founded out of India, you know, with the majority of our employee base in India, but to be able to, you know, really reach to success and scale that we have, but also doing it truly on a global basis. I think it is a, is a somewhat of a wake-up call that the traditional, uh, [00:27:00] traditional method of founding your company in Silicon valley, hiring all your engineering.
Uh, starting your sales in north America and then slowly moving to Europe and moving on, you don't have to do that. Uh, in fact, there's much more efficient ways to do it, uh, a little bit differently. And I think you're going to, and we're going to see a lot more of that, uh, going forward. So I think it's, it's pretty exciting time.
Megan: I love that. And it's such an amazing story. Thank you so much. Thank you so much for being my guest today, Tyler.
Tyler: Absolutely. Megan, thank you for having me.
Megan: Yeah. I really enjoyed speaking with you and I appreciate you taking the time to be here with us today. It sounds like you and fresh works are doing exceptionally well, and I wish you both continued success and to all of our listeners, please tune in next week and until then take care.
In this episode, we discuss how Freshworks' products allow customers to engage with their customers and employees, how a company can determine the right timing to go IPO, why going IPO became a historic event for Freshworks and the software industry, and why organizations going IPO must focus on operational readiness and execution readiness and more interesting topics related to IPO.
Focusing on Customer Needs
Many companies come on the market with products that don't match their vision. Some organizations lose sight of the macro customer on the market. Businesses should ask themselves what all customers need as opposed to one or two. That way, they can design their products as easy-to-use for the masses to serve more people.
"If you don't have the product and technology and if you don't stay true to building products right away and really focus on the customer, it's going to catch up to you. That, I think, is probably my biggest learning of all the companies I've been with," Sloat said.
From Startup to IPO - What Makes a Successful IPO
Freshworks is an Information Technology and Services company that designs products for the end-user. Their main product is Freshdesk which has customer support software at its core, allowing customers to engage with their customers. Apart from Freshdesk, the company also has products like Freshsales, Freshserver, Freshmarketer, and others.
A significant event for Freshworks is that it recently went through an IPO. To become a public company, Tyler admits that businesses need operational and execution readiness. Operational readiness is when you can close your books on time and have systems that can help scale and help the company operate. And also compliance. With execution readiness, you need to do what you say you're going to do, and you have to forecast your business. But also, you need to be able to see around corners to operate as a public company.
"Freshworks has products that help our customers delight their customers," Sloat said.
Acting at the Right Moment
Coming out of India, Freshworks set an example for many other organizations. Tyler believes that India is probably being viewed more as a destination of outsourcing for businesses. But Freshworks is a product business, and it can build world-class software.
Deciding to go to an IPO requires acting at the right time. Tyler believes that this has to do with the operational readiness and the execution readiness that he mentioned. Freshworks has the rare combination of scale, with over 300 million dollars; growth, in the 40% range; and efficiency, where the company produced cash in the last twelve months. Tyler believes that they earned the right to go public based on these metrics.
The question is where they can operate as a public company. With the infrastructure and the metrics, the time was right for Freshworks to go public.
''You wake up every day and you try to make a little bit more progress on continuing to build the next great software company,'' Sloat said.
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