Of funding, acquisitions and growth - how 16-year-old Fractal Analytics became the big-data powerhouse of the worldVishal Krishna
In 2000, when websites were growing rapidly, a set of entrepreneurs realised that they could build algorithms that could track sentimental analysis and then build analytics as a service business on top of the data generated. Back then, Fractal Analytics, started by Srikanth Velamakanni, Nirmal Palaparthi and Pranay Agrawal, began to challenge the conventional world of IT-led data services. Even in 2008 investing millions of dollars in databases or data repositories was the talk of the town in large corporate companies. They were aided in the argument by IT companies such as Infosys Wipro and TCS.
By 2010, the argument had shifted in favour of the digital world and that brought analytics at the forefront of an organisation’s transformation. CIOs and CTOs were hungry to know insights in all markets and were asking clients to build real-time analytics platforms with teams to drive analysis. Fractal, along with the likes of MuSigma, began to tell clients this story. Their argument was that data had to be actionable for business insights instead of just having them tabled in a readable format or storing them in a database. What more, corporates would junk data in the database every six months. MuSigma was the first to raise money and become a well-known analytics giant.
But now that Fractal has raised $100 million from a Malaysian sovereign fund called Khazanah, in its third round of funding, the analytics industry is alive and kicking. In 2013, the company had raised $25 million from US-based TA Associates. With a sizeable valuation – sources say 12 times of its revenue of Rs 350 crore (its global revenues) – it is set to become one of the largest analytics companies in Asia. It is investing the money in new markets, and is going to employ data scientists, data engineers and technologists to build heuristics (where the machine is made to solve complex problems and is a self-learning algorithm) aided data platforms.
The market presents plethora of opportunities for a company to be of value. Research firm IDC predicts that the market for big data technology and services is growing at a 23.1 percent compound annual growth rate (CAGR) to reach $48.6 billion in 2019.
Becoming an analytics giant
The world loves a MuSigma versus Fractal story. But, both have a lot of things in common and 90 percent of their revenues come from the USA. The only difference between the two is that MuSigma scaled up its business faster and its revenues have reached close to Rs 1,300 crore. Their engagement models are similar and both have big clients.
Fractal works with the likes of the $80-billion Proctor & Gamble on their digital-first initiatives and the Indian company leverages P&G’s analytics platform to give insights to business leaders to make real-time decisions across market.
According to the latest forecast from Gartner Inc, global revenue in the business intelligence and analytics market is forecast to reach $16.9 billion in 2016, an increase of 5.2 percent from 2015.
According to Gartner, the BI and analytics market is in the final stages of a multi-year shift from IT-led, system-of-record reporting to business-led, self-service analytics. As a result, the modern business intelligence and analytics (BI&A) platform has emerged to meet new organisational requirements for accessibility, agility and deeper analytical insight.
"The shift to the modern BI and analytics platform has now reached a tipping point," says Ian Bertram, Managing Vice President, Gartner. He adds that organisations must transition to easy-to-use, fast and agile modern BI platforms to create business value from deeper insights into diverse data sources.
“Analytics is getting better as computers get better at computing data with insights, the future is in deep learning and every industry wants data scientists to work on technology platforms that can provide knowledge,” says Srikanth, who is CEO of Fractal Analytics. He says that Pranay and he are building a business that can scale rapidly in revenues by signing Fortune 100 companies. With clients like P&G, Philips and Kimberly Clark making inroads in complete digital transformation experimenting in heuristics, Fractal is preparing their teams to help use such platforms to deliver efficiency in corporate business.
“It is no longer about automation. It is about doing what humans cannot do with proliferation of data,” says Srikanth.
The journey until now
In 2006, Pranay, Nirmal Palaparthi and Srikanth followed up an RFP released by P&G, which was shopping for analytics partners. Twenty-five companies applied at the time, Fractal was one of the three companies selected for a six month project which included Bengaluru-based Marketics. Although they were a startup at the time, they went ahead and executed a marketing mix statistical model for P&G in the USA. “The pilot was an important because it changed our fortunes after that,” says Srikanth. Winning clients has been easier now than eight years ago because the top management talks to every large corporate that wants to use analytics to transform the business. Home-grown electronics giant MIRC Electronics' Chairman Gullu Mirchandani, of the Onida fame, was one of the first investors in the company. The third founder, Nirmal Palaparthi, now runs his own startup.
Last year, the company acquired two startups to help it build natural language processing and deep learning capabilities. Prashant Warier, Founder of Imagna Analytics, is now Chief Data Scientist at Fractal, and is known to have pioneered work in machine learning and AI. Imagna’s research in artificial intelligence will add to the IP of Fractal. Last January, Fractal acquired Mobius Innovations, a company that created a platform to be aware of a context based on location and social media data of the customer. The company is investing in an enterprise app, where the technology allows the manager of the enterprise to search all sales data of his company’s brand – by region - and compare sales in other regions too. “Deep learning and AI are the future and the next five years we are investing in building this technology,” says Srikanth.
Surely, the Indian analytics ecosystem is going to be the next best acquisition target for global companies like IBM and Dell. Perhaps these companies are also a great match for Indian IT Services companies because they have not been able to win over many projects in analytics.
For now, Fractal is crunching the numbers to become a $100-million business in a few years. But the worlds of data and technology have just about converged and it is all about having machines that can understand massive patterns to provide insight. Fractal has discovered how far it can go in this journey, which is a billion-dollar valuation based on credibility.