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The first $1 billion is always the hardest. In valuation, and even more so in revenues.

It took Fractal Analytics 21 years to be valued at over $1 billion—it raised $360 million from TPG Capital in January. Its revenue is within kissing distance of the annual run rates (ARRs) of the best-known and the highest-valued software-as-a-service (SaaS) companies in India. But even though often used interchangeably, artificial intelligence (AI) is not SaaS. And Fractal is no textbook services company.

Unlike many services firms, Fractal incubates tech products. Its first in-house startup, Qure.ai, raised $40 million in March. Health-focussed investors Novo Holdings and HealthQuad joined Sequoia in backing Qure.ai, which uses AI for medical imaging diagnostics.

Six other startups have been incubated at Fractal which, evidently, is preparing for a looming concentration in the AI world. Globally, AI companies received 103% more 103% more Stanford University - The AI Index Report Measuring trends in Artificial Intelligence Read more funding in 2021 than the previous year. However, the number of new startups also shrunk dramatically. Larger rounds, $500M and above, went up 4X.

Over the last year, Fractal has turned into an acquisition machine. It has five tucked tucked Business Today Fractal acquires Neal Analytics to scale AI offerings Read more under its belt, and it’s looking for more. Co-founder and group chief executive (CEO) Srikanth Velamakanni says he is “investing” and “inventing” on behalf of his clients.

In geometry or nature, a fractal is a never-ending, self-similar pattern. (Think broccoli, snowflakes, air bubbles.) Velamakanni admires companies that last forever, 100 years and more, and is taking a very long view at Fractal. For now, though, it’s about adding hundreds of customers—it added 52 in the last 52 weeks—to reach the $15 billion revenue mark. In this interview, we dive deep into his math and psychology.

The Ken: Fractal just turned a unicorn. What’s the most happening thing at Fractal today?

My lawyers have advised me not to speak about it. (Laughs.) But some of it is in the public domain; you can piece it all together.

The Ken: In that case, let’s back up. In one of your IIM-A talks, you said 98% of companies shut down in 10 years. Fractal is kicking in high gear in its 21st year; how does that feel?

Entrepreneurship is about struggle and survival, and then you hit it out of the park. Unless, of course, you die. Mortality in startups is also a thing. All those overnight sensations are 20-30 years in the making. I have always been very proud of how many years we’ve survived.

AUTHOR

Seema Singh

Seema has over two decades of experience in journalism. Before starting The Ken, Seema wrote “Myth Breaker: Kiran Mazumdar-Shaw and the Story of Indian Biotech”, published by HarperCollins in May 2016. Prior to that, she was a senior editor and bureau chief for Bangalore with Forbes India, and before that she wrote for Mint. Seema has written for numerous international publications like IEEE-Spectrum, New Scientist, Cell and Newsweek. Seema is a Knight Science Journalism Fellow from the Massachusetts Institute of Technology and a MacArthur Foundation Research Grantee.

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