Listen to this podcast to find out more about :
00:45 - What Does Tracxn Do and The Explosive Growth of Private Markets
05:15 - How to Leverage Tracxn as an Investor & an Entrepreneur
07:47 - What it Takes to Build a Data Business.
13:30 - Building Moats in a Data Business
19:45 - Tracxn’s Go To Market Process
22:13 - The ‘zero’ to IPO journey
29:06 - Most Valuable Lessons Learned as a Founder
Read the complete transcript below
Amit Somani 00:23
Welcome to the Prime Venture Partners podcast. I’m your host Amit Somani, and I am delighted to have with us one of our very own, and co founder and CEO of Tracxn, Neha. Neha, welcome to the show.
Neha Singh 00:37
Hi Amit, glad to be here, excited.
Amit Somani 00:40
Yes, it’s a long time coming, we invested in Tracxn many years ago, and we finally get you on the show and hopefully at a very exciting time in the company’s journey. So I’m looking forward to exploring all that. So why don’t you tell our listeners what Tracxn is and what you guys do?
Neha Singh 00:58
Sure, so, Tracxn essentially, is a private market intelligence platform, before Tracxn, both me and my co-founder were earlier investors. And we used to really struggle with data, I would say earlier, even to do simple things, like finding interesting companies, we would actually do a variety of things, so we would find out companies through billboards, or through ads, or through newspaper clippings, and we realise that as private market investors, you’re really struggling for data.
Whereas if you look at public markets, they have so much data, and they’re spending sort of more time in the next level of analysis. And we really wished that a platform like this exists when you are private market investors.
So that was the initial thesis of Tracxn, that the public market has platforms like Bloomberg, and private markets, now that it is becoming large and important, should also have a platform similar to that. So essentially, that’s what Tracxn set out to build. And now we are in our eighth year, and have come a long way in that vision. So we track essentially private companies, startups globally. And we work with private market investors and large corporates who want to invest in startups, acquire startups, or are looking at emerging trends in their industries. That’s Tracxn in brief.
Amit Somani 02:19
Makes sense, I have a lot of follow on questions, but let’s start with the data itself, and the data pipeline and the breadth. I know that when we started working together, you were tracking a few 100,000 companies. Now I’m sure it’s in the millions, if not the 10s of millions. So talk to us about just how the whole private markets have exploded globally. And I know that initially, you’re focused on the US and India, now you’re truly global in terms of all the various countries and sectors you track. So just give us a scope of the depth and the breadth of the market first.
Neha Singh 02:56
Yeah, so private markets have actually expanded a lot in the past few years, right from the fact that when we started probably looking at private markets, which was more than a decade back, the whole ecosystem, I would say, has multiplied multiple times, I’ll give you a very interesting statistic. So just in 2010, which is just a decade back, 10 years back, the total number of unicorns that Got created, globally, was just one.
And today in 2021, in just the first seven months, we have over 260 companies that have become unicorns. So it’s like, in a decade, there is a 300x increase in just the quality of companies and the size of companies and the scale of companies. And this is just one of the stats, if you look at the number of people who have started investing, number of corporates, who started looking at the sector, I think that has exploded. And I think it is just getting started.
So we are sort of excited about the market, also how it will pan out in the next 10 years, I would say. And I guess more and more people are also coming into this market of private market sort of data. And interestingly, as you see companies scaling, also, the whole exit cycle happens in companies, I think that will increase sort of the capital, which comes into this asset class. So, I think we are just getting started in this market.
Amit Somani 04:29
I read a statistic, something like about $2 trillion have been invested in over the last 10,15 years in the private markets. And therefore, that obviously, has to lead to a lot of innovation. I’m in particular interested in the early stage, as you know and so if you are an early stage investor, or an early stage entrepreneur, by the way, I recommend a lot of entrepreneurs to go to Tracxn, to check out what are the trends, to check out your famous blue boxes, maybe you can tell People what that is, to check out even sometimes opportunities for jobs to say which are the companies that are doing well. So how should someone leverage Tracxn if you’re looking more at the early stage rather than the 261 unicorn stage?
Neha Singh 05:16
Yeah, so our core customer segments are the more richer ones, which is the PE, VCs, corporates, we actually don’t charge from founders, but if there are founders who wants to do that, please feel free to write to us, and we will surely figure out a way to help them. But I would say, for founders who are looking at this , so I’ve actually shared it with some of my friends who were looking at ideas in a sector or looking at companies, and both of them have actually been fairly like, I’ve got very good reviews from them.
So essentially, for two things, one is, if you are a founder, if you are interested in a particular sector, be it, Ed Tech is a sector that is of interest to you, and you want to just figure out a way globally, what is what are the large models getting created, which is just a proxy of, which are the markets which are scaling. So, you can actually just do that in a day or two, for which otherwise the research would have taken you one to two weeks. So, that is one thing.
Second is, like anyone who is looking at, in fact, one of my friends in the Bay Area, a Stanford friend, was looking for a job in cybersecurity. And she found a very interesting company. And when she reached out to the company, the founder said, Oh, how did you find us? Because we were under stealth mode, not advertising a lot. And then she actually talked about Tracxn. So that was interesting to hear that you can actually do that.
For the investors, two things that we solve. One is, if you’re looking at more thematic investing, so if you’re looking at some sectors, and if you want to do a full scan on those, and you want to figure out the companies, that job of thematic sourcing becomes very, very easy. And that is one thing that we actually spend a lot on technology as well as our team structures designed to be able to help investors to do that. That’s one core thing.
And the second thing is that if you’re looking at one particular company, if you want to figure out okay, who else exists? Who is the competition? What are the global equivalence, how big have they become? For instance, if you’re looking at NFT, you want to figure out, okay, how large have the companies become in that space? So that whole research actually becomes fairly efficient when you’re doing it. So this, I would say, is the ones which are most popular among the users.
Amit Somani 07:47
Absolutely. So we’ll come back to the depth of the Tracxn data in a second, but let me take a step back and talk about the anatomy of building a data business. You talked a little bit about Bloomberg earlier, you mentioned it anyways, there’s all kinds of data companies since the beginning of time. I mean, Dun and Bradstreet, Zoominfo, you name it, Standard and Poor’s, etc. So if we just take a step back, can you talk to us about what it takes to build a data business and how large some of these businesses are overall.
Neha Singh 08:21
So actually, when we started looking at data businesses, before starting Tracxn, we probably had a cursory sort of view. Over time, as we met more people who have worked in these industries, and these companies, our view actually got really enriched about data and the respect got really enhanced on the data businesses, if you look at, a good example is for instance, in Bloomberg, it has more than $10 billion in revenue highly profitable, and even after 40 years, it continues to grow and increase market share.
So these companies are fairly high margins, fairly defensible businesses with a very high sort of operating leverage. If you actually look at the top set of companies in data business, they actually generate about about $7 billion in free cash flow, which is one of the highest across industries. So even if you compare it to a tech industry, it’s fairly high, the size of that. So, this is a fairly rich industry, we realised and a fairly high margin is defensible and still keeps growing after years.
So there are different types of data, there is one data, the space that we play in, is basically your enterprise grade data for decision making, which is when you’re typically working with high paid professionals. So that is the thing that we see is among the meatiest in the types of data and then obviously every industry has their own needs. So for instance now you’d be hearing a lot about ESG data. There are companies in every sector, in every vertical industry that would become large behind this data, obviously one of the largest being the financial data space, which includes all these companies like Bloomberg, Refinitiv, Capital IQ, FactSet, etc.
Amit Somani 10:22
Alright. And so if I were an early stage entrepreneur looking to start a new “data business”, and it need not be in the financial sector whether it’s a public market or private market, because as we always say, data is exploding, and metadata is exploding even more exponentially. How would you go about analysing that opportunity as a founder to say, Is there something interesting here or not? One of my favourite businesses is, App Annie. I don’t know if you’re familiar with that. They basically give you data and metadata and analytics about app store data from Google and Apple. So, just curious about any thoughts on how one should evaluate this.
Neha Singh 11:05
So on evaluating the opportunity, I would say two things, one is basically the opportunity has to be large enough or the addressable market has to be large and growing. To give you an example, how do you size a market, for instance, if you do VC and PE, when we started, which is 10 years back, there was no market, so they were not using the software per se and this was a new wallet share created.
So, the size is not based on the actual what industry players are doing, you have to basically unfold the market and see if this is a large enough market, if data is going to be a critical part in the decision making, and the sector as such as growing. So that is what I would say is sizing the opportunity.
And again, it’s typically not the current wallet share, but what potential it can become that’s one, the second thing I would say is, your affinity towards the market, I think that is probably most important. How do you connect, what I would say, as a founder problem fit, or a founder market fit, I think that is also essential, because data businesses is, you’re typically selling to enterprises is B2B, it may not be the most sexy business, as a consumer business which is having a lot of eyeballs etc.
So, you have to, and it takes time for you to get better at data. So this is something that requires also a little bit of investment, and you have to bear with it. So I would say, the second thing would be how deeply you connect to the problem, because it will take you a few years to become really good and your sales to become really easy.
Amit Somani 13:04
Understood. How do you evaluate the moat in your business or the defensibility of your business? And for that matter, any data business really, because a lot of the data that you are today presenting and making it easily accessible, searchable, analyzable is data from the kind of public sources of information or semi public sources of information. Do you guys think about that? And if so, what do you think about it?
Neha Singh 13:32
So this is a very interesting question. A good, easy way to think about it, is actually thinking about the parallel from the public markets. If you look at public markets, all the data is public. A lot of it is structured information. But still you have companies like Bloomberg who keep growing, and a lot of people who have come into that market are not able to take enough market share.
So you have free solutions like Google Finance, or even a lot of other solutions like that, but still enterprise grade data, which is very usable, curated, that still has value. So in general, I guess, in data businesses, building enterprise grade data is not trivial. And once you have that, I think there’s inherent defensibility that is there in the business.
Just to add to that point, so that’s in the market, but if you are a company who’s building that there are a few things that you obviously have to get right. I think the top two things I would say is definitely tech because you’re going to be working with a lot of data, you have to be intelligent at mining those etc.
So you really need to invest in tech upfront from day one. I think that goes a long way to build defensibility in your business. All the companies interestingly, actually, in our cohort, there were actually two or three companies which got started, which did not own the IP for the data which actually licenses the data, and none of them actually exist today.
So in the data, you have to really own the IP of your core data, you have to have the tech to be able to build it at a fairly fast pace. So that is one thing that goes with long term defensibility. And I think the other thing is that if you’re building don’t shy away from also having people, the ones which are required to build enterprise grade data, because again, tech can solve probably 90-95% of the problem. But that 5% is actually very valuable for the users. So you cannot actually even if you sell it up by 1/10 of the price, by just doing a tech solution, you will probably not have users until you complete that 5% additional, by investing in your teams as well.
Amit Somani 15:59
Fairpoint. In fact, I was going to just ask about both the technology element of this, which is not data because to access and make meaning and structure out of so much sort of unstructured data, perhaps you can talk to us a little bit about the richness of the data. And I’m enthralled both as a customer and an investor in Tracxn, every time I log in, I see something interesting, it could be cap tables, it could be competitive analysis, it could be whatever. So just talk to us about some of the more interesting ones that are on the platform, and perhaps even a little bit of the backstory on that.
Neha Singh 16:35
So our main goal is, if you are a private market investor, if you’re looking at a company, anything that is relevant to you, we should ideally be able to have it on the platform. So for instance, if you met a company, you want to figure out the factual details of the company, we should have that, if you want to figure out the competition set, who else should I be evaluating as well, we should have that, if you want to look at how large this market has become by looking at the global appearance, you should have that, if you want to figure out people that you can speak to, to get a ref check on the team, as well as on the market who have worked in this space, you should be able to do that. So our eventual goal is whatever things that you actually do, when you’re looking at a company, we should be able to help you do that much more efficiently.
And so all the things that we have launched across, over the last few years have been in that direction. Be it cap tables, financials, from labour filings you actually get people information, in your competition set, etc. And then now people also want to have benchmarks on top of it. So people want to, when we are looking at a SaaS company, for instance, you also want to figure out what are the multiples in which the public SaaS companies are trading in that geography or globally? So all the things that you would intuitively do, we should be able to provide you with that.
Amit Somani 18:06
Absolutely I think you just towards the end mentioned some of my favourite ones there, which is the competitive landscape, the number of employees in the company and how that is kind of trending. So I think there are lots of interesting insights. And now actually, interestingly, you have this data globally as well. So I think that that also really helps. Another interesting one I was thinking of is, you guys have a service where you can suggest follow on investors for this company. So I don’t know how much of that is automated, but it’s definitely very useful.
Neha Singh 18:39
And one underlying trend that is happening also in this industry is that the information about companies is becoming more and more digital. So they are publishing information about themselves for hiring candidates, or for acquiring customers or for various needs. So that is an overarching trend, which is basically the digital footprint of companies is basically increasing.
Amit Somani 19:01
Absolutely, and one of my favourite features of the platform is letting founders and companies themselves go and be able to provide information about themselves. I mean, it can be calibrated as such that this is Tracxn verified. And this is from the founding team or the company, but I think that there’s really rich data out there. So I applaud you guys for doing that. Now, let’s switch a little bit about talking about the sales process. I know that you do business in several dozens of countries across the world, and uniquely, while you’ve tried many experiments, the entire team is based out of India. So talk to us about how the whole kind of sales journey has gone in terms of selling Tracxn, and some of the learnings there.
Neha Singh 19:52
So the sales cycle that we have. The sales process or the go to market process that we have is, we do a lot of content marketing. Because of the fact that we are a data company, we can actually produce a lot of content, we actually do a lot of content marketing across, through a variety of ways. And that is closed by our sales team. And our sales team is actually based all out of India.
Though we have customers in over 50 countries today, and the bulk of our revenues, obviously, is international from EMIA to the US, etc. I think the way it works out for us is because our price point is, for instance, less than $100,000 users are actually fine with buying remotely. I think that is the one thing that we wanted to test when we were starting eight years back.
So we actually set up the team, both in India as well as the US, which were the key markets for us. And then we realised that customers don’t want to meet you physically, they are fine with closing, seeing the demo and closing the deal over zoom calls. So even when I’m meeting the fund in the Bay Area, though, I’m also situated there, people are fine with doing a VC and then closing that and obviously, this accelerated right now, even if I’m sitting in HSR and the fund is sitting in HSR, they still prefer that I close it over a video call. So I think that is a trend that we’ve seen overall.
And there is, in general, in SaaS, you would hear about more increase in inside sales, which is happening. And so we have also benefited from that. And because of our price point, customers are fine with buying remotely. So right now, the way we have done it is that we have all our teams centrally in India. They work across different time zones, so they cover right from Japan to APAC to EMIA to the East Coast and West Coast. So they work across the time zones. And they close accounts over, like zoom calls like these.
Amit Somani 21:56
Got it, you also have an amazing new development in the company. You guys have filed your DRHP for going IPO. So congratulations on that. Can you talk to us a little bit about the journey from zero to IPO? At least the filing of it? And what is that experience? How did you decide that you wanted to at least start the IPO process and so forth.
Neha Singh 22:25
So I think the day we probably raised our first institutional capital, the day the IPO was given. So if you raise institutional capital, there are essentially two ways, you can either do an M&A or do an IPO, obviously you can postpone that, or there are other options, like buyback, which, in practicality, are probably not there.
So, essentially, the companies have two options, either an M&A or an IPO. And because of the fact that we believe that the market is very deep, and it’s just getting started, and we are at a fairly interesting point in time of the company, we want to actually keep leveraging on the current state and keep building it.
So that is why IPO was a preferred option for us. And I think then it was a matter of time,when do you do that? So for us, we had thought mentally that when we become profitable, that’s a good time for us to do that. And interestingly, both of them happened together for us. So one is we became cash flow positive, bottom line positive.
And secondly, the market timing was also right. So the markets, not just in India, but also globally, like you see the number of SPACs which are happening, the number of IPO filings, which are happening in India, that’s at an all time high. So the markets overall are very conducive, and I think the combination of both of them led us to starting the process formally.
Amit Somani 23:53
Absolutely. There’s a lot of talk about listing in India versus abroad for many, many years now, and obviously, so heartening to see not just your company, but many others listing here. So can you talk a little bit, I know you’re early in the journey here, and maybe can’t talk too much about it, but just what has the experience been so far?
Neha Singh 24:11
So earlier, I would say probably five years back, all the investors would say, list in the US or that’s why the incorporation in the US and Singapore were to happen so that you can list overseas easily. The initial logic was that Indian markets are probably not deep enough, or they don’t understand tech stocks or just the multiples were not there.
So I think in the last few years, that has completely changed. If you look at it there are large companies, large tech companies that have listed, Zomato is obviously one of the early ones, they’ve been able to raise like a billion dollars, which is also oversubscribed. The second is, if you look at just the acceptability and understanding of tech stocks among the investors here that has also come a long way.
So I think right now, I would say India is a very good option. Very interesting option, if you can list that, because I think you’re just familiar with the regulatory environment here. And if either your team or your market is over here, it just makes sense to sort of list here. So I think probably five years back, the answer was different. But I think right now, given also the fact that there are so many companies, which are, which are hitting the market, I think it’s a very good time for tech companies to also leverage the Indian markets for listing.
Amit Somani 25:32
Makes sense, how about Neha, the whole notion of how the journey has been? So what are some of the lessons learned along the way, IPO or otherwise, and both at a company level and interestingly at a founder level, what are some of the things that you have learned, or things that you had to unlearn? Because you were also on the VC side, both you and Abhishek before you guys started. So maybe just talk to us a little bit about the journey, some interesting lessons learned along the way.
Neha Singh 26:03
Right. So one of the things that a founder should actually think about a company should think about when they’re thinking about it, one of the things that people say in the public market, it is very helpful, it’s just the predictability. You don’t have to be exact, but essentially predictability in terms of the business and how you see the next couple of years standing out, I think, whenever you reach that point, that’s a good condition to have.
I think the other thing is just maturity across the organisation, of course, your finance and legal have to be at a different level, and have to be agile enough to be able to handle the regulatory, you have to be agile enough to be able to respond quickly to changes that happened both internally as well as externally.
So that is, of course, a team that you require fairly strong, but I would say even otherwise, even the other teams, need to be mature enough. For instance, one of the requirements is that you have to actually be aware of the people who are having information, which can be sensitive in terms of the forecast of the company.
So just those practices, and just those mechanisms, I think that is just hygiene, probably to have in a company when you are thinking about this. Apart from that, I guess one of the key things is you as a founder, how do you see this, this panning out, IPO is actually not an exit, it’s probably signing up for another decade, if you look at all the other founders, be it Sanjeev of Info edge or Deep of Make My Trip or Mani of Just Dial, they’re still actively working even after having IPOed so many years back. So you are essentially signing up for another decade. And that is probably one of the key questions that I see, as a founder you have to take a call that this is something that you want to continue to do.
Amit Somani 28:12
Absolutely, I always take, like it to be akin to an open book exam, So you have to not only have the time commitment, like you said, but there is a lot more transparency, openness, scrutiny, from the investors from your competitors, from your customers and everything else. So congratulations again, on that.
Any advice you would give the Neha of 2012 or 2010, for that matter, in terms of lessons learned for those of you, the folks that are starting out in particular. And in particular, I would say as a woman founder as well. So any advice for both in general, or things that you would advise yourself and then for any of the other women founders that are early in their journey?
Neha Singh 29:06
So actually so many, because as a founder, you’re probably learning new things every year. And you have to keep improving yourself, you have to keep taking feedback. But if I were to look back, and a couple of things that I would say, in the beginning, one is essentially, obviously investing in a team upfront. So as much cliched as it may sound and everyone talks about doing that.
But essentially, you as a founder cannot do everything. If you’re taking calls for marketing for sales. For all the departments, you’re probably not doing a great job at that because you only have so much time and mindshare for doing this. So just invest in getting sort of good folks initially. I think that is one thing.
The second thing I would say is, which Indian companies have not done that great a job is just the sales, especially when you are a B2B company doing enterprise sales, just invest in your sales. So if I have to look back, I would have probably hired my VP of sales like six months earlier than what we did today. So initially, for instance you have to do as a founder, you do a lot of sales yourself, which is great for getting the product market fit. But as soon as you see a repeatable pattern in the sales, you should have a person who’s able to do that, and scale.
So probably the next thing is hire your VP of Sales earlier than what you would have otherwise done in your normal course and in your normal course of sale, that’s probably the second thing. And I think third is again, there is a lot of problem solving, which is there, but I think it’s a marathon and not a sprint. So you cannot be working on deadlines, week after week, that is very exhausting for the team, you set up processes, you invest upfront in, in doing things so that for you, as well as your team, it becomes more of a marathon than a sprint, and then you chasing deadlines versus you doing it proactively.
For some sectors, it may not be possible, but if you are a product company, for instance that may be easier to do. So, I think that’s probably a couple of the things and coming to sort of women founders, obviously the number of female founders that are there in the industry, it should be higher than what is currently there. But I still see this number increasing every day, which is great to see. And I think just like women sharing most of the issues, I think, a lot of questions that people have, like I had issues around when I was starting, in hiring.
Because you were asking people to leave their jobs, their stable jobs and join a startup. And people are wondering, are you really serious about this? Or are you just going to do it for one quarter so just in building that trust in doing that, and be able to address those issues, I think having more women founders more examples like that is super helpful. And right now, I also see some forums, which are there for sharing a lot of these questions among women founders, which have been super helpful for everyone. So yeah, I do see that this number needs a lot of improvement. But I see all the winds in the right direction.
Amit Somani 32:45
Wonderful Neha this has been a great chat. Congratulations again on the Tracxn journey so far, both to Abhishek and you and the entire team. And best wishes for a hopefully successful IPO.
Neha Singh 33:01
Thanks, Amit. It was great speaking today. Thanks a lot for having me.
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