Inside Tracxn's pursuit of building an iconic global data company

Tracxn founders Neha Singh and Abhishek Goyal gave up their venture investing careers not because the husband-wife duo compulsively “wanted” to start up but because they came across a problem that was “compelling enough” for them to solve.

Back in 2012, before Singh and Goyal quit their respective jobs at Sequoia Capital and Accel India, data discovery around start-ups, especially in India, was a huge challenge. The internet economy was still finding its feet in mainstream conversations. Even though venture capital (VC) and private equity (PE) firms were on the lookout for interesting start-up bets, there was no fool-proof way to ascertain a company’s financial and operational health. “Start-ups were beginning to create impact but discovery was broken. Everything was manual,” Singh tells Business Today. Echoing her, Goyal says, “The way of discovering companies was very inefficient. So, we zeroed in on a white space that required an Indian presence and data curation.”

The public markets already had Bloomberg—a money-minting machine—and Singh and Goyal were convinced that the private markets needed a “large data platform”, too. And that was the genesis of Tracxn.

With the singular vision of building a “Bloomberg for the private markets” out of India for the world, the founders incorporated Tracxn (pronounced ‘traction’) Technologies in 2013.

Inception to IPO

Tracxn launched its B2B platform in 2015, where it blended data analytics and research to provide incisive insights and market intelligence on thousands of privately-held companies. Its goal was to provide “high-grade enterprise data at high price points” across sectors, sans the trappings of discounting.

Seven years, 1.84 million listings, and 1,139 customer accounts in 58 countries later, Tracxn filed for a Rs 309-crore IPO in August this year. Its stock listed in October at Rs 84.5—a premium of 5.73 per cent over its issue price of Rs 80. Some early investors believe the IPO was “unusually early” for a company of its kind while some market watchers have even termed it “lacklustre”. Then, why did Tracxn go public so soon?

Says Singh, “Two years ago, we turned cash flow positive; then, bottom line positive in FY22. We got our approvals [from Sebi] in 2021 that would have expired in November. We are pretty excited with... the fact that we were able to do it in the first shot.” Like most tech stocks, Tracxn’s share price has declined and is currently trading under Rs 70, but its pre-IPO investors aren’t too concerned. They believe there’s enormous value to be unlocked.

Amit Ranjan, Co-founder of deck-sharing platform SlideShare (acquired by LinkedIn in 2012; in 2020, Scribd, another content-sharing platform, acquired it) and angel investor in Tracxn, says, “It was a fairly early IPO. Tracxn is at a $10-million annualised run rate (ARR) now and it can grow much bigger. There have been higher ARR companies going public and then failing. And between their transitions—from the private to the public markets—companies have been completely juiced out by investors. Tracxn is trying a different model. It can grow more on the public side and reward retail investors better.”

Ranjan, who had invested around Rs 20-25 lakh, has held on to his shares even though pre-IPO investors had the option to exit. Now, there’s a one-year lock-in period. But what really attracted him to the company? “I came in at the Series A stage in 2016,” he says. “What they were trying to build was pretty clear. We didn’t see anybody in India doing this. Plus, they are founders with a great background.”

It helped that Tracxn managed to attract high-profile angels early on such as Flipkart Co-founders Sachin and Binny Bansal and Delhivery Co-founder Sahil Barua. Also backing it was institutional investor Elevation Capital (then SAIF Partners) in 2015. A year later, prominent angels such as Ratan Tata, Infosys Co-founder Nandan Nilekani and former Infosys CFO Mohandas Pai, among others, also invested in it.

Goyal says many of its clients such as Elevation Capital and Accel India became investors after working with the platform. “Elevation was our customer. All our initial rounds were led by inbound interest. Our last funding came in 2017 and since then we have grown through profits,” he adds.

Says Vivek Mathur, Partner at Elevation Capital, “We’re super proud of how they’ve [Neha and Abhishek] built an indispensable data platform. Even back then, they stood apart from their peers due to the user-friendliness of their product and their ability to retain customers. It is their focus on capital efficiency that has helped them become sustainably profitable.”

In the Big League

Today, Tracxn is among the world’s top 5 private market data providers. Its peers include Crunchbase, CB Insights, PrivCo, and Pitchbook, which have a database of around 0.8, 0.5, 0.8 and 3.4 million, respectively. Tracxn is the world’s second-biggest such platform by data volume.

“They have one of the largest coverages of private companies in emerging sectors,” stated an Axis Capital report in October 2022. “Their human-in-the-loop model plays a strategic role, focussing on quality assurance and addressing data and intelligence gaps that tech alone cannot solve. This has helped them maintain a high degree of accuracy and effectiveness,” it added.

The subscription-based platform serves three sets of customers—private market investors (VCs, PEs, investment banks); corporates; and others like government agencies, start-up accelerators and incubators, and media publishers. Tracxn provides detailed profiles of each company, with information on its founders, board members, employee counts, funding rounds, M&As, investor charts, valuations and cap tables, taxonomy and a host of other financial and operational details.

Atop the data layer, Tracxn offers services such as workflow software, Excel plug-ins, deal-flow tools, personalised dashboards, portfolio tracker, etc.

Per its DRHP, Tracxn adds around 1,200 companies to its database every day. The number of entities it has profiled has jumped 37 per cent from FY20 to FY22. Its active customer accounts have also grown 30 per cent during this period. Additionally, the platform publishes 14,000 reports per year, which makes it one of the biggest data repositories globally. However, “Tracxn’s pricing has largely been stagnant over the past three years,” says Pankaj Pandey, Head of Research at ICICI Securities. “But with scale benefits in the future, we believe it could be one of the growth levers in the medium to long term.”

Tracxn’s average revenue per customer stands at Rs 5.8 lakh, significantly lower than its global peers. Pitchbook, for instance, charges around $25,000 (around Rs 20.4 lakh) for a three users’ annual licence. But, Tracxn enjoys a high retention rate of 74 per cent. “With continued strong growth in account additions, profitability is likely to sustain. Also, since the company is asset-light, it does not need to incur significant capital costs to scale up,” Pandey adds.

Tracxn reported a 28 per cent year-on-year (YoY) jump in operating revenues for Q2FY23. Its profit after tax stood at Rs 1.54 crore, compared to Rs 84 lakh in Q1FY23.

Built for the World

Like most home-grown SaaS platforms, a lion’s share (over 70 cent) of Tracxn’s business comes from overseas. North America is the biggest, contributing 44 per cent to its top line, followed by EMEA (28 per cent) and APAC regions (26 per cent).

Analysts say its global-first focus is another growth lever for the company, which has also been positively impacted by a strengthening dollar. Singh concurs. “We have become profitable because of this cost arbitrage,” she says.

She adds, “That’s the beauty of a subscription business. It adds a lot of predictability in revenues. Almost 60 per cent of our annual revenues are prepaid. Hence, despite Covid-19 and other headwinds, there has been no de-growth cycle.”

While Tracxn has achieved a captive customer base in the US, its entire 800-strong workforce operates out of India. Is that the right strategy? Brokerages say it offers the company definite cost advantages because tech talent in India is 10 times cheaper than in the US. However, angel investor Ranjan reckons Tracxn “should go after that market more strongly” by setting up offices and sales teams. “Expansion is a low-hanging fruit. There is an opportunity for them to pan out across the globe. These things can become growth drivers for the next two to three years,” he says.

Is foreign expansion on the cards then? Singh says, “India has been a back office for a long time. We want to build an iconic global data company out of India.”

While Tracxn has steadily grown its team in the last 12-15 months, especially in the sales function, it suffers from a high attrition rate that went up from 40 per cent in FY21 to 49 per cent in FY22. Analysts see this as a “key risk”. Besides attrition, “material defects or errors in the platform could harm its prospects,” according to ICICI Securities.

But the growth potential in this space far outweighs the challenges. The global B2B information services market is estimated to grow to $190 billion by 2025, from $154.9 billion in 2022, per a report by Frost & Sullivan. Tracxn is barely scratching the surface. Where does it see itself in five years?

Goyal sums up aptly, “Some of our parents bought Reliance or Birla stock, and 20 years down the line, married off their children with that money. If someone buys a Tracxn stock when their child is born, and that helps them get through college—that would be a dream come true for us.”

@mittermaniac