The stunning, spectacular IPO of Freshworks on the NASDAQ is surely a Rajnikanthesque moment to savour for Indian business! Its the result of not just hard work & determination but also creativity, astute understanding of the value of employees and sheer brainpower, all focused and nurtured by the inspirational leadership of Girish Mathrubhootam and his top team. This really is the new business model for India!

Notwithstanding protestations to the contrary, governments everywhere in general and in India in particular are way behind the curve when it comes to responding to business and economic phenomena. To make sure that India does not miss out on the opportunities thrown up by the fresh young minds at Freshworks the Government of India must act with enlightenment in real time. 

In my article, The Post Pandemic World Order on LinkedInThe Post Pandemic World Order Madhav Mohan V.K. on LinkedIn Publish date April 22, 2020 April 22, 2020  I had mentioned that India’s First Innovation Revolution and Second IT Revolution are going to be sparked by the pandemic. Freshworks is a validation of that prediction. Its a watershed moment in India’s IT evolution and signifies the arrival of India, as Mathrubhootam calls it, as a “Product Nation”. Body shopping, ITES and related services are all milestones that the industry passed to arrive at homegrown SAAS and software products. Technology, innovation and customer need analysis have all crystallised into successful products. This is where the real action and profit margins begin!

The Government of India’s task therefore (in alignment with Atmanirbhar Bharat) is to create a policy framework that makes hundreds of startups blossom into product providers that can rival the success of Freshworks. So what are the policy lessons from the heartwarming, chest thumping moment that Freshworks has given us all ?

First, Government’s approach to innovation must begin with clarity of definitions. A unified definition of “innovation” must be developed to feature in all tax, subsidy, financing, IPR and legal protocols. From this will follow the definition of the Innovation Rate (say, sales of products developed in the last 24 months divided by total sales). The statutes on IPR must be re-examined and modernised to reflect the latest and emerging technologies and processes and improve protection and enforceability. Perhaps even a separate IPR & Innovation Judicial System can be visualised so that this national priority does not get lost in the general legal quagmire. Furthermore, a single portal to administer all aspects of Innovation Management can be introduced.

Second, benefits (like tax breaks, subsidies etc) must be provided to creators of Innovation ; so too for the Innovation Rate. Any payments made to acquire or use Innovations must also qualify for benefits for a specified period of time.

Third, the heads of “Training” & “Employee Engagement” must not be treated as expenses; rather, they must be treated as investment (in skilling, creativity, innovation, motivation and productivity); therefore, amounts invested in Training of employees and Employee Engagement must qualify for lending, tax credits and even subsidies. Remember, “Employees First ,Customers Second, Investors Third” is not just a fancy slogan but the guarantor of sustainable profits. My premise is that Employees First is directly linked to motivation, collaboration, productivity and therefore profits.

Fourth, NBFCs, banks and the broader financial services industry must be incentivised to develop products (loans, leases, hire-purhase options, rentals etc) so that the market for Innovation and Products (especially software products) is widened and deepened.

And finally, Government as a user must open up the entire purchasing ecosystem to SAAS and product rentals (including rentals of capital equipment) at every level. Today, the defence forces are renting/leasing armed Predator drones and other critical weapons systems. Government can widen and deepen this practice across its operating canvas.

That’s how India can capitalise on the trail that Freshworks has blazed!