Zoho takes Freshworks to court in the first battle of Indian unicorns

Zoho alleges that Freshworks founders used its confidential documents, customer details, and revenue numbers to raise money, even though they were bound by confidentiality as former employees of Zoho.

28th Mar 2020
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Zoho, the SaaS cloud-based software provider, has taken Freshworks,  and its founders Girish Mathrubootham and Shan Krishnasamy, both former employees of Zoho, to court. A complaint has been filed at the United States District Court, Northern District of California. 


YourStory has obtained a copy of the complaint.


The plaintiff, Zoho Corp, has alleged that Freshworks founders "have worked Zoho for nine years prior to their founding of Freshworks, Messrs Mathrubootham and Krishnasamy were privy to confidential Zoho product, financial, pricing, and customer information and were well aware of Zoho employees’ creation of and access to Zoho competitive business information. After leaving to start Freshworks, Mr Mathrubootham improperly included Zoho confidential revenue figures in early Freshworks investor pitch materials to secure initial investments, leveraging his work at Zoho and suggesting his new start-up would perform like Zoho."


Sridhar Vembu_Zoho Corp

Sridhar Vembu




"On information and belief, Messrs Mathrubootham and Krishnasamy further used Zoho know-how, product development, and market data to start Freshworks. While at Zoho, Mr Mathrubootham was Vice President of Product Management for ManageEngine, Zoho’s IT Management software. In that role, he was head of customer support for ManageEngine, which offered him specialised and non-public knowledge of what Zoho (and thus other similar mid-size companies) would need in a tool to provide efficient and effective support to its customers," Zoho alleges.


In the complaint, Zoho mentions that "it requires its employees to execute non-disclosure agreements promising to keep any Zoho trade secrets, confidential business information, technical information and non-public know-how (including information regarding company finances, employees, compensation, research and development, manufacturing and marketing) in confidence and not to  disclose such information outside of Zoho both during and after their employment. Employee confidentiality obligations extend to all confidential business information, including technical information, product development roadmaps, marketing plans, and customer lists and potential leads tracked in Zoho’s databases."


Both Sridhar Vembu, Co-founder of Zoho, and Girish Mathrubootham, Co-founder of Freshworks, stay in the Bay Area, San Francisco. Over 6,000 people work for Zoho and the company supplies food to all its employees in Chennai from its own farms in Tenkasi, Tamil Nadu. Girish, on the other hand, has close to 20 years of experience in in cloud computing. They have been known to openly challenge the likes of Zendesk and Salesforce.

In an email sent to Your Story, Girish Mathrubootham, the co-founder of Freshworks, says:


"Freshworks is taking these allegations seriously. We plan on defending the case vigorously. I am working with our General Counsel to hire legal counsel to defend against these allegations."

Zoho continues to allege,


"Freshworks has continued the practice of misappropriating Zoho’s confidential and competitive business information to compete with Zoho. Knowing Zoho employees have unique knowledge of the market landscape, competitive pricing, and Zoho’s development paths for its business tools, Freshworks has recruited over a hundred employees from Zoho to gain access to such confidential Zoho information." 


The plaintiff adds,


“On information and belief, Freshworks has also been improperly accessing Zoho’s customer data. As recently as February 24, 2020, Freshworks has been systematically contacting Zoho’s customers using Zoho confidential information. In some of these instances, Freshworks contacted Zoho’s customers at email addresses the customers created solely for registration with Zoho’s cloud-based offerings. The only way Freshworks would have knowledge of the email addresses it used to contact Zoho’s customers is through unauthorized direct access of Zoho’s confidential CRM database, which houses Zoho’s confidential customer lists and leads, as well as confidential and competitive pricing and customer requirements data."


Both founders refrained from commenting as the matter was now in court.


Zoho (Adventnet at the time) was founded by Sridhar Vembu in 1996 and built the SaaS business in to a bootstrapped unicorn.


Girish founded Freshworks, which provides organisations with SaaS customer engagement solution, Freshdesk, in 2010 and had raised Series A funding from Accel. The company has now raised close to $399 million and is valued at $3.5 billion. Girish Mathrubootham had stated at SaaS Bhoomi, the annual conference for SaaS businesses, recently that Freshworks expected to close the FY at $250 million. It has 35,000 paying customers and close to 250,000 customers. On the other hand, Zoho does not disclose revenues and boasts an equal number of customers.
Girish

Girish Mathrubootham, co-founder of Freshworks




Sources say that this was to come to a head at some point of time because both companies were launching multiple platforms for SMBs and were moving forward them. Industry sources add that this was not good for the Indian SaaS industry as both companies had their own niche and have a large base to capture. 


"Both founders have the same work ethic. They want to make an impact. But, this was a surprise for all of us and this shows that in business one never really knows what the other is thinking," says a founder of an SaaS company in Chennai. 

 

Even though both Girish and Sridhar have known to be courteous to each other, this is turning out to be the first battle of Indian unicorns.


(Edited by Kanishk Singh)

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