The software-as-a-service (SaaS) delivery model was little-known when Fractal Analytics was launched in 2000. In that sense, the Mumbai-based firm was ahead of its time.
“We started Fractal in 2000 and immediately began working with banks. Our software would sit on their on-premise servers and help them with actionable insights,” Srikanth Velamakanni, Fractal Analytics’ co-founder, group chief executive and executive vice chairman, told TechCircle.
Fractal was set up by five men with experience spread across finance and marketing — Velamakanni, Pranay Agrawal, Nirmal Palaparthi, Pradeep Suryanarayan and Ramakrishna Reddy.
While Palaparthi and Reddy knew each other from their IIM-Ahmedabad days, Agarwal, like Velamakanni, had worked at ICICI Bank.
The company got a head start as its founders were able to identify business areas where mathematical models could be deployed using algorithms. This would help companies from different industries cross-sell products and increase productivity by automating processes.
Over the past two decades, Fractal has evolved from a company addressing database queries into a firm catering to the analytics and AI decision-making needs of enterprises. According to media reports and sources, Fractal is valued at $500 million. This makes it the second-largest India-based data analytics company in terms of valuation as compared to Alibaba-backed SenseTime, which is valued at $4.5 billion, followed by Mu Sigma whose valuation stands at $1.5 billion, according to data available with market research firm Statista.
One of the first projects that Fractal worked on was automating HDFC Bank’s loan approval or credit risk system.
“What we did was see the nature of transactions done by the consumer applying for the loan and then match it with his historical data,” Velamakanni explained. “We could categorise the risk propensity by attributing a score which represented a band.”
The automated system allowed a bank employee to approve a loan and time to conduct background checks, he added.
In those days, the challenge was to deal with ‘messy’ or ‘unclean’ data.
“Most of the time, the transaction data was sorted and was a good indicator of past history. The hard part was to understand the already captured data, which was complex. We always successfully filtered out the noise i.e., the correct data, in a very sustained and robust way,” the chairman said.
Fractal Analytics has since graduated to working with Fortune 100 companies, offering them consultations and solutions as required.
According to Velamakanni, there is no specific reason why the firm no longer works with Indian banks. “We helped them start off with analytics but over time, their tech employees and leadership got acquainted with processes and (acquired) the capability to design things themselves,” he said.
Over the years, Fractal has secured capital from a wide range of investors.
It entered the big league last month when private equity firm Apax Partners agreed to acquire a significant minority stake for $200 million (Rs 1,400 crore) through a mix of primary and secondary share purchases.
This was more than a decade after Fractal got its first big cheque, when early-stage venture capital firm Kae Capital invested close to $500,000 in the analytics firm, data from VCCEdge, the research arm of News Corp VCCircle, shows.
In June 2013, the company raised $25 million from US-based investment firm TA Associates. The following year, Montreal-based analytics firm Aimia acquired a minority stake in Fractal.
In 2016, the company raised another $100 million from Kuala Lumpur-based government wealth fund Khazanah Nasional Berhad.
Shashank Singh, the head of Apax Partners India, told TechCircle that the investment in Fractal, which was the PE firm’s 12th in the analytics segment, reflected its thesis of investing in young, native digital firms with the tailwinds of digital behind them and growing rapidly.
“Our thesis is to help these companies build the infrastructure for real scale. What really impressed us about Fractal is the level of customer impact it has had,” Singh explained.
Acquisitions, expanding product line
Fractal Analytics has grown on the back of four acquisitions till date, which has helped it design new products and solutions and scale faster.
In 2015, it bought big data startup Mobius Ventures, which was set up by Fractal co-founder Palaparthi after leaving the company in 2012. This acquisition helped Fractal boost its genomics solutions. According to Velamakanni, the solution can be used by any company to understand customer behaviour at any given point so that companies can take the next best action to smoothen experiences or keep customers engaged.
Also in 2015, Fractal acquired analytics startup Imagna, founded in 2012 by SAP executive Prashant Warier. After the acquisition, the Warier and Fractal teams developed an AI software called Qure.ai, which assists radiologists in understanding X-rays. The solution has already been deployed in the Philippines and India and is awaiting approval from the US Food and Drug Administration. Velamakanni said that it has received approval from a central European drug regulatory body.
Later, in 2017, Fractal acquired Chicago-based strategy and analytics firm 4i, and in 2018, it bought behavioural architecture firm Final Mile.
According to Apax’s Singh, with Fractal’s growing revenue base, it now has the ability to buy much larger companies going forward.
The company’s largest market is the US where it serves 90 clients, followed by Europe and Australia.
Fractal Analytics employs about 1,300 people globally and in India, its employee strength stands at 1,000. According to Velamakanni, India represents the perfect pool of engineering talent for the company.
Fractal has offices in Mumbai, Bengaluru and Gurugram in India, and global offices in the US, UK, Singapore, Ukraine, Australia, China, Canada and Germany.
Fractal claims to have crossed $100 million in revenue run rate in December last year. But Velamakanni’s ambitions do not end there.
“Now our goal is to take the business from $100 million to $1 billion. We have a lot to do on organic growth. We are growing at 40% year-on-year,” he said.