Freshworks, a Nasdaq-listed Software-as-a-Service (SaaS) firm, has laid off around 90 of its employees or 2% of its total workforce across teams, particularly sales, marketing, and engineering, citing 'performance and staffing redundancies' as the software industry suffers from tight macroeconomic pressures.
The company has a workforce of around 5,200 employees globally.
In an email to the employees, founder, and chief executive, Girish Mathrubootham said that this is not a company-wide layoff but rather a structural change.
"In all the changes we undertook we have deployed and retained the majority of our teammates, however a few around 2% of 5,200 people or approximately 90 employees for whom we do not have a readily available open position," Mathrubootham said in an email that Moneycontrol has seen.
"We are doing everything we can to help impacted employees with transition support including extended healthcare coverage and outplacement services," he added.
Two sources Moneycontrol spoke to confirmed the development and said that the severance packages and other settlements were paid off. “It’s a hard time for many software firms and it is inevitable thing is we did not get any prior information or notice,” the person said.
Another source said that many employees on the sales team were kept on a Performance Improvement Plan (PIP), in which an employee is given a warning and a time period to improve performance.
“Many people were asked to move to other teams and some were kept on PIP. Mainly those employees were laid off, I think,” the person said. “We are promised severance however it differs across teams,” the person said.
Sources also said that the company's HR Solution Freshteams is merged with yet another product and the Sales and Support departments of Freshteams will continue running.
Freshworks joins the list of global and Indian SaaS firms that have recently announced layoffs.
Freshworks did not respond to Moneycontrol’s queries.
Yourstory was the first to report the story.
Chargebee, a San Francisco and Chennai-based software firm, laid off about 10% of its workforce, or about 142 people, due to tight macroeconomic pressures and to reduce the startup's accumulated operational debt, said co-founder Krish Subramanian in a LinkedIn post.
Salesforce announced in November that it would lay off approximately 2,000 employees in order to cut costs. Last month, Zendesk also announced the layoff of approximately 300 employees.
As recession looms over the key US market, Indian SaaS companies have been conducting various cost-cutting exercises such as freezing hiring or recruiting judiciously.
Mathrubootham previously stated that Freshworks is not hiring aggressively due to the US Fed's stance and a concern about a global recession. “Not just SaaS but all companies are staying very cautious,” he said.
Interestingly a VC on LinkedIn said in November that Freshworks is a cautionary tale of why Indian founders should incorporate in India and look to list in India.
"Freshworks is down from its listing price of $43 to $12, having lost nearly 75% of its market cap. Further, it's now facing a lawsuit for having misled IPO investors," wrote Rehan Yar Khan, managing partner at Orios Venture Partners.
Taken in by the "glamour" of overseas incorporation whereby founders believe, those are easier operating environments, that customers (for SaaS) will be more attracted to them, they will be able to raise more capital and they will IPO there to do much better than in India. The reality is difficult, he wrote.
Freshworks reported consolidated revenue of $128.8 million for the third quarter that ended September 2022, an increase of approximately 37 percent year on year.
During the company’s earnings call, Mathrubootham said that the company is staying cautious of the slow growth in the economy.
“While we have reported a strong quarter, we are not immune to this slower economy. While new businesses picked up, expansion slowed down even as we reduced our growth forecasts and headcount needs,” he said.
Mathrubootham added that despite the slow economic growth, the firm witnessed steady growth in markets like North America, in the mid-market in the enterprise segment.
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