We pride ourselves on being your go-to source for information on listed companies, but what about private companies? As a retail investor, private companies may be of little significance to you, but private investors do need their own Value Research. This is where Tracxn Technologies comes in.
Understanding Tracxn's business
A SaaS (software as a service) company, Tracxn provides data on private companies to its clients. It also provides various other features in its service, such as a CRM tool, monthly reports on sectors and industries, and immediate availability of data. The data has a wide spectrum of uses, from deal sourcing and identifying M&A opportunities to tracking emerging trends. Tracxn has profiles of over 1.8 million entities with 2,003 fields categorised across sectors and industries. As of June 2022, the company has 1,139 customer accounts with 3,271 users from 58 countries. This vast network of data sources ensures that clients keep coming back. The graphic below shows the various information provided by Tracxn:
Competitive strengths and weaknesses
Data is the new gold. Decision-making and analysis in most industries have become heavily data-driven, and the financial world is no exception. However, it is an ocean of data out there, and PE (private equity) firms and investment banks need help navigating it. While the private market AUM has grown from $3.4 trillion in 2015 to $10.2 trillion in 2022, the number of private equity firms and investment banks has also grown more than 10 per cent. With both the volumes of data and the number of potential clients on the rise, Tracxn, as one of the leading data providers globally, is expected to benefit from this trend.
- Global leader: Tracxn is one of the top five private market data providers in terms of the number of companies profiled, with over 1.8 million companies profiled as of June 2022. In addition, between March 2020 and June 2022, the number of companies profiled increased by 35 per cent. Apart from this, Tracxn has 14,00,000 competition maps, 3,90,000 funding rounds, and 50,000 investor profiles, and it publishes over 7,000 reports every quarter on various sectors, sub-sectors and trends.
- Strong client growth and repetition: Tracxn has witnessed strong growth in its customer base in the last three years. The number of accounts grew by 29 per cent per annum, and the number of users grew by 22 per cent per annum. Moreover, the customer base is diversified, and all categories have witnessed significant growth, with PE clients growing at 28 per cent per annum and corporate clients growing at 24 per cent per annum. Apart from this, 23 per cent of accounts have been active for over three years.
- Asset-light nature and cost advantage: While Tracxn has global competitors, it has a pricing advantage. With the company being completely based out of India, it has a significant cost advantage, helping it to set lower prices and attract customers. Furthermore, due to the asset-light nature of the company, this cost advantage plays an even more significant role.
- Loss-making and inconsistent cash flow: While Tracxn's revenue grew by 30 per cent in the last three years, the company is yet to see any profits due to high employee expenses. In fact, in FY21 and FY20, employee benefit expenses as a percentage of revenue were more than 100 per cent. In addition, it has also had inconsistent cash flows with negative CFO in FY21 and FY20.
- High attrition rate: With the high employee expenses, one might be swayed into thinking the company's attrition rate (rate at which people leave) will be minimal. However, Tracxn's attrition rate has been increasing, with an attrition rate of 49 per cent in FY22
- Data security risks: While the company may be well protected, any fault in its servers or system is possibly the biggest risk, as the entire business relies on its data.
Not sure if you should invest in Tracxn Technologies? Read Tracxn Technologies IPO: How good is it? for a comprehensive look at the company's financial health.
Disclaimer: The authors may be applicants in this Initial Public Offering.