tracxn technologies ltd share price Management discussions


1. INDUSTRY OVERVIEW _ GROWING PRIVATE MARKETS

Private companies across the world are increasing in numbers and playing a key role in launching new products and services, improving workforce skills, introduction of cutting edge technologies and more importantly, creating better work opportunities for the skilled workforce worldwide. The growth is fueled by decreased cost of launching a product and company, access to global markets, availability of capital and increased ease of doing business. These private companies have not only become a large part of products and services which global enterprises and consumers use, but have also helped in creating millions of jobs globally. As per the report on Economic contribution of the US private equity sector prepared for the American Investment Council by Ernst & Young - In 2022, the US private equity sector directly employed 12 million workers earning $1 trillion in wages and benefits and generated $1.7 trillion of gross domestic product (GDP) in the United States in 2022.

In line with this growth, the private market AUM has crossed $9 trillion globally in 2021 and private markets have become a sizeable allocation for most LPs (limited partners) today. The capability of private market investments to provide capital to a wide range of companies at different stages and various sectors, including high-growth technology startups, makes private market investments an integral part of the portfolio of limited partners for diversification and generating alpha.

Note: Approximate values based on the secondary inputs

*Source: As per the report on Global Information Services by Frost & Sullivan, commissioned by the company

Private Market Asset Under Management Growth, CY2015-2025 (USD trillion)

*Source: As per the report on Global Information Services by Frost & Sullivan, commissioned by the company **Projected numbers

Public markets have already proved the need for financial data platforms and this space has created multiple large revenue companies. Most of these are also highly cash-rich, profitable companies generating good amounts of free cash flow. As per our internal estimates, the combined revenues of companies providing data for the public markets exceed $30B annually.

Private markets have also become significant in terms of the AUM as well as the number of institutions and investors investing in this asset class. Hence we believe that this space will also create multiple large data companies. As per our internal estimates, the number of addressable organizations as potential subscribers for private market data - across venture capital funds, private equity funds, large corporates, investment banks, family offices, limited partners, accelerators & incubators, debt funds, etc. - are in excess of 100,000 organizations globally. Currently, the market penetration in the private market data sector is low, presenting a unique opportunity to establish a large private data company.

2. COMPANY OVERVIEW

Tracxn is a leading market intelligence platform providing data & software for the private markets globally. We offer comprehensive private company data through our subscription-based platform, used by private market investors and corporates for deal sourcing, identifying M&A opportunities, deal diligence, private markets analysis and tracking emerging themes across industries. Based out of Bangalore, India, Tracxn was founded in 2012 by venture capital investors - Neha Singh & Abhishek Goyal. As investors both of them struggled with lack of enterprise grade information similar to what public market investors had, so with a background in computer science engineering, they decided to leverage technology to solve this problem for private market investors and started building Tracxn.

Catering to the large and fast growing private market, our customer segment includes private market investors & investment banks which includes venture capital funds, private equity funds, family offices and investment banks; M&A and corporate development and innovation teams at large corporations, including many Fortune 500 companies.

Our customers also include government and educational institutions. We have a global customers base, with nearly 70% of the revenue coming from international spanning over 50 countries.

Tracxn follows a SaaS model where access to our platform is available by subscribing on a user basis upon upfront payment of subscription fee, similar to the business model of many companies that provide public market financial data. Our platform provides comprehensive information on the private markets including global private company data, transactions, financials, shareholding, valuations, competition mapping, benchmarks, emerging technology sectors, reports and more. Our business model has a high operating leverage, since post the initial investment in the technology and data platform, the cost to serve incremental customers is very low. This has resulted in a steady margin expansion across the last three financial years. Additionally, though we cater to a global customer base, our entire production is based in India. This helps us with a significant and long-lasting cost advantage of make-in-india while selling globally. The business is asset-light and has been debt free since inception. The business has also been profitable in FY23 with positive EBITDA, PAT, and free cash flows. Prior to the IPO of the company in October 2022, the company raised INR 113 Cr. from private market investors such as Elevation Capital, Accel Partners, Sequoia Capital, Prime Venture Partners, 3one4 Capital KB Global, WGG International, Beenext, Venture Highway Capital, Apoletto Asia, Millways fund and marquee Angel Investors like Mr. Ratan Tata, NRJN Family Trust, Sachin Bansal and Binny Bansal (founders of Flipkart), Sahil Barua (founder of Delhivery) Rathna Girish Mathrubootham (founder of Freshworks), Amit Ranjan (founder of SlideShare) amongst others. The companys shares were listed on October 20, 2022 on NSE and BSE mainboards, with an anchor book participation from marquee investors like Abakkus, BNP Paribas, ICICI Prudential, Kotak Mahindra Mutual Fund & Kotak Mahindra Life Insurance, Motilal Oswal, Nippon Life, Reliance General Insurance, Tara Emerging Capital and White Oak_Capital.

3. CUSTOMER SEGMENTS

Our customer base is global and includes the investment industry in terms of private market investors & investment banks - venture capital funds, private equity funds; corporate development teams, M&A teams and innovation teams at large corporations including multiple Fortune 500 companies and others including government agencies, academic institutions, accelerator & incubators, amongst others.

a. Customers segments by geography

Nearly 70% of our revenue in FY23 was from international customers, the ratio of our India & international revenue has been in this same range across the last three financials years as shown below. Our coverage of private companies is global. We aggregate information about private companies from English as well as non-English language sources including in languages like German, French, Swedish, Korean, Dutch, Greek to name a few. The customers in each country typically use it for scouting companies within their local geographies.

As on March 31, 23, we have an active customer base of 1,230 customers spanning over 50 countries and the top 5 countries by number of customers were India, USA, Singapore, UK and Germany.

Geography

FY 21 FY 22 FY 23 2Y CAGR
Americas 12.5 18.6 24.1 39%
APAC (excl. India) 4.8 6.9 8.1 31%
EMEA 13.6 19.2 20.8 24%
India 12.9 18.8 25.0 39%

Total

43.8 63.5 78.1 34%

b. Customers by type

The main customer segments that we work with are:

• Private market investors and investment banks which includes venture capital funds; private equity funds, family offices and investment banks.

• Corporates, where we work with multiple accounts like, the corporate development teams, M&A teams and corporate innovation teams - of large corporations including many fortune 500 companies across industries.

• Other customer segments include universities, government agencies, industry bodies etc.

In addition, the chart below gives the number of customers across the different revenue buckets where the accrued revenue from operations from the customer accounts exceed 20L for that financial year. We saw growth in customers across all the mentioned revenue buckets indicating continued headroom for growth in the realized pricing from customers.

Revenue

FY 21 FY 22 FY 23
INR 20L+ accounts 13 26 33
INR 30L+ accounts 5 11 22
INR 40L+ accounts 3 6 12

While we do count some of the very large corporations as our customers, we do not have any material customer concentration. Our largest customer account contributed to only about 1.6% of the revenue from operations in FY23.

4. PLATFORM OFFERING

Tracxn is a comprehensive private market data intelligence and software platform. Our customers including private market investors and corporates use it for their daily investment activities including deal sourcing, identifying M&A targets, deal diligence, analysis and tracking emerging themes across industries and markets, among other uses. Our extensive global database of private companies, coupled with personalized modules and features, allows customers to source and track companies across sectors and geographies to address their requirements.

a. Modules

Our offering spans across multiple modules across Private Market data, Workflow Software & Tools. Some key modules_include:

i. Global private company coverage: Private company profiles including curated data, factual details, detailed competition mapping, industry classification, sector and business model mapping, and much more.

ii. Private company financials: Detailed private company financials across over 15 countries including India, UK, Germany, Singapore and more.

iii. Private company captables & valuations: Detailed private company captables and valuations across over 10 countries, including detailed shareholding historical valuations, etc.

iv. Emerging sector coverage: Comprehensive coverage of companies, detailed sector taxonomy, market map, sector trends, news and reports.

v. Investor database: Of private market funds and_investors.

vi. Global funding, M&A transactions: Latest transactions data of funding rounds and acquisitions globally, including deal value, round type, participants and facilitators.

vii. Leaderboards & benchmarks: Companies leaderboard based on our proprietary Tracxn score and benchmarks against other private and public companies. The same is also available for the investors.

viii. Advanced search: Global search allows for keyword based search of all the databases in one go. Complex queries and operators can be used to refine the search further.

ix. Reports: Numerous repor ts every month analyzing activities and trends across various companies, sectors and geographies. The reports are periodically updated and published on the platform.

x. MyAnalyst support: Dedicated team of analysts that provide support through email, platform chat and select social media platforms.

xi. Personalized dashboards & newsletters: Helps source relevant deals and track relevant activities in specific sectors and geographies mandates. Newsletters are delivered directly in the inbox to help one stay updated in their mandated sector or geography.

xii. Multiple workflows, softwares and tools like APIs, integrations & plugins: API pack which enables users to query and access our platform database directly; excel plugin to pull data into user sheets; browser plug-ins through which users can obtain companys information such as the companys primary business, funding and valuation, competitors, investors, in one click.

xiii. Others: Other modules include deal flow CRM, Tracxn score for companies and investors, editor rating for companies, and more.

b. Global coverage

Our coverage of companies is global and typically investors look at companies in their respective local regions for sourcing & scouting. As of March 31, 2023, our platform was scanning over 700 million web domains, and had profiled over 2.1 million entities across more than 2,400 Feeds, categorized across industries, sectors, sub-sectors, geographies, a_liations and networks globally.

c. Industry & emerging technology coverage

We provide comprehensive coverage of the private market across industries. Currently we cover 24 industries on our platform as given below:

Each industry is divided into multiple sectors and further within each sector, multiple business models are mapped. Each entity uploaded on the platform is mapped to one or more of these business models and tagged to that respective node. As of March 31, 2023, we had over 2.1 million entities mapped across 2,400+ Feeds categorized across industries, sectors, sub-sectors, geographies, a_liations and networks globally. Examples of sector feeds include Generative AI, Electric Vehicles, Cybersecurity, Enterprise Networking, Drones, Payments, Hospital Chains, etc.

d. Proprietary taxonomy

We provide proprietary and detailed industry taxonomy for the private market sectors and companies, with key focus on new-age emerging technology sectors. Taxonomy helps map the industry, sector, sub-sector, technology and business model for the companies; and also provides a top-down map of all the sectors. Each of the 24 industries are mapped into over 2,400 sectors, and these sectors are further split into more than 52,000 taxonomy nodes. This taxonomy enhances the accuracy and granularity of data categorization, allowing users to navigate and analyze information more effectively.

Each company covered on the platform is mapped in one or more of these taxonomy nodes. These industry taxonomy nodes are defined by a team of sector-based analysts. Every day over 1,400 companies are added onto the platform and mapped to their corresponding nodes through a mix of inputs from technology and sector-based analysts.

e. High pace of data addition

We maintain a high pace of data addition to the platform ensuring continuous enrichment of our coverage everyday while helping our customers track the evolving private market landscape. Using our technology infrastructure, we are able to process massive amounts of data on the backend at a very high pace. This ensures augmentation of data on the platform for the users and enables users to have access to the latest information. In FY23, the entities profiled on the platform saw a 21% increase from 1.8 Million in FY22 to 2.1 Million. We added over 1400 companies to our platform on average every day across 2,400+ feeds and 52,000+ taxonomy nodes. Similarly in other modules, we had added over 20,500 reports, over 100,000 funding and M&A transactions and over 16,000 investor profiles during FY23.

f. Demo and trial accounts

For platform demo and setting up a trial account, please see below: i. Product Demo Video [Link] ii. To help set up a trial login, please mail us at investor.relations@tracxn.com

5. BUSINESS MODEL & PRICING

Our business model is subscription-based for access to data and software, similar to many other financial data platforms. All our revenue from operations is subscription based and the business has negative working capital since our customers pay upfront for the subscription period.

The pricing of our subscription primarily depends on the number of users that the customer subscribes to. The pricing model is similar to the seat based or license-based pricing of many public market financial data companies. Our subscription pricing tiers range from - $6,600/year for 1 user, $13,200/year for 3-users, $26,400/year for 7 users, and custom packages are also available. The pricing is available in USD and INR and is standard for all customers globally. Besides the regular subscription plans, many customers have also subscribed for additional licenses on per user basis and additional services such as API access for automations for subscription fees in excess of $50,000/year.

Our subscription contracts typically have a payment schedule of annual fee or quarterly fee based on the customers preferred payment frequency. In FY23, 63% of billing was_annual.

6. GO_TO_MARKET FUNNEL

We have customers across the globe. We have been able to achieve this using our robust go-to-market funnel: a. Sales team

We had an internal sales team of 168 members, as of March 31, 2023, that covered Asia-Pacific, Europe, Middle East, Africa and Americas. Our sales team, which is based out of India, works across time zones which ensures that we maintain our sales activities for 20 hours a day to address global leads. The team manages all inbound and outbound leads through online channels for platform demonstrations, online meetings and calls.

Our sales operations are supported by a custom-built technology infrastructure that has been developed and is maintained by a sales enablement team. The custom infrastructure includes automated processes and systems for improving efficiency, increasing productivity, measurement of key performance indicators, CRM for lead management, automatic generation of daily work plan for each sales representative, opportunity management dashboards, central collateral repository, pipeline review and reporting dashboards.

b. Marketing lead generation

We drive our marketing mainly through the use of digital marketing activities like SEO optimization, email marketing and social media marketing. Our primary focus is on content marketing where we have a content-driven acquisition _ywheel for generating a high velocity of leads. Since we are a data company, we are able to generate a lot of content around private company data, companies in emerging sectors, reports, etc., through which we get a lot of organic tra_c. In FY23, we had over 9 million organic visits across our website, which is a ~19X increase between FY20 and FY23.

To build our brand awareness, we provide data to leading media both in India and globally, to use our data and quote us as sources in their articles and news reports. In FY23, we got over 1000 press mentions in prominent media. We do negligible paid marketing since our marketing is fairly cost effective and we do not have a large digital marketingflexpense.

c. Customer success

We aim to provide enterprise-grade support for our global customer base. Our customer success team focuses on customer onboarding, support, ongoing engagement initiatives and account expansion.

Onboarding: The customer success team provides the platform demo during onboarding, keeping in mind specific use cases of different types of customers. We also offer customized onboarding guides that enable users to start exploring the platform on their own and are focused on features relevant to the use case of the respective customer category. An account manager is assigned to every customer who supports the customer in the initial set-up, customization of the platform, resolution of queries and is available to the customer for ongoing support.

Support: The support team operates across multiple time shifts to provide prompt resolution to customer queries. We have an automated ticketing system through which all queries are logged into our system and tracked for timely closure.

Ongoing engagement initiatives: The customer success team also conducts monthly webinars on newly launched features and modules, and does periodic touch points with customers to increase engagement.

Upselling and account expansion: The customer success team is responsible for the renewal and upselling within customer accounts. Our largest customer account paid us more than INR 1 Cr. in FY23.

Our GTM funnel has the support of skilled and carefully recruited teams with 13 members in the marketing team, 168 in the sales team and 50 members in the customer successfiteam.

Our recent growth initiatives has been covered further in the ‘Strategies and Outlook section.

7. TECHNOLOGY PLATFORM & DATA ENGINES

There are millions of companies to be evaluated and tracked in private markets as compared to less than 60,000 companies which were publicly traded and had fairly structured information about them available as of the end of FY22. The data about private companies is fairly fragmented and unstructured, which makes tracking of data/disclosures for private companies very difficult.

Hence, to provide enterprise-grade information in a comprehensive, standardized and structured manner. We rely on a combination of technology and human-in-the-loop systems. This makes information actionable and aides decision making for our users. The following pointers describe the key features about how we source data, key components of our technology stack, analyst and data team engines, that we have built in-house over the past decade. a. Source of data

Our data on private markets includes a wide set of information spanning data on private companies, industries and sector coverage, transactions (funding, M&A), private company financials, captables, valuations, amongst others.

Our key sources of data are the following

Publicly available information

This includes factual information like funding related news, founded year, office locations etc. These sources are unpaid and this information is generally publicly available on the internet, like company home pages, blogs, news articles, social media and other secondary sources. We combine and capture relevant factual information to be included in the company profiles after verification from various such sources. We mine information from over 700 million web domains at the backend and add over around 60 million new web domains every year. We extract and process data across these millions of pages to identify interesting companies across sectors every day.

Proprietary data

We generate our own proprietary data using various models that we have defined, along with the assistance of our analyst team. This includes sector-based coverage, industry classification, taxonomy, understanding of company business models, among other factors. Our in-house developed taxonomy forms a key data point which is attached to the companies which are profiled on the platform. As of March 31, 2023, we have mapped over 2.1 million entities across more than 52,000 different taxonomy nodes in more than 2,400 sectors amongst more than 20 different industries. This unparalleled and well-structured depth of classification enables our customers to track companies in a more focused manner, drawing global comparables, applying niche search criteria, and facilitating prompt and effective decision-making.

Regulatory Filings

We also mine information from various regulatory filings that the private companies have to complete across various countries. These include registrar of company filings, transaction filings, labour filings, etc. These filings by companies, wherever available, are obtained from the respective registries. The information obtained through these fillings is then curated and verified to get financial and shareholding data for the companies.

b. Scalable & proprietary in-house technology platform

Our in-house technology platform has been developed keeping high performance and the massive data assimilation, processing capabilities in mind. At the back-end, the platform is scanning more than 700 million web domains for signals to identify interesting companies, and using intelligent algorithms to capture the relevant companies that are bubbled up in the queue for processing.

The front end of the platform is modular and based on micro frontends architecture where each module uses SPA (Single Page Application) for enhancing user experience across the platform. The frontend of the platform is responsive (adaptive to different interfaces like laptops and mobiles) and accessible on web browsers, Android and iOS applications. The backend of the platform is built using microservices based achitecture, which makes it highly scalable and yet modular enough for easy maintenance without any downtime. At the core of the platform is our databases which are built over widely used and proven technologies for managing large data based business. Further, use of performance enhancing technologies like JSON Web Tokens alongside the CDNs (Content Delivery Networks) helps us to load huge amount of data at a very fast pace, thereby reducing the load time and enhancing the user experience.

We host our servers on the leading cloud servers thereby increasing the reliability and scalability as per the demand of the business and that of our customers. We have also automated the management and utilization of our cloud resources to keep our costs under control. So while our database at backend has been increasing at a very fast pace, our cloud server costs have remained range bound.

c. Proprietary models and human-in-the-loop for enterprise grade data

We have built proprietary models and automations for curating enterprise data across various data modules for private companies globally. Our automation models extract, parse and standardize data from multiple sources such as images, documents, scanned portable document format or pdf using optical character recognition technology, and map relevant data to respective fields. These models are continuously developed and enhanced by the automation engineers of the respective data teams, as per specific requirements and processes. We also use automations and other internally developed models for quality assurance using a 2-layer, automated and manual, check process.

Our human-in-the-loop methodology helps to deliver high quality enterprise grade information and address the data and intelligence gaps that technology alone cannot solve yet. We have a 90+ member sector specialist team which performs the review of the system outputs, develops taxonomy, provides editor ratings and defines new report formats and data points to be covered.

In order to provide enterprise grade data, we also have data teams for addressing the data gaps and performing quality checks. They span across modules like company profiles, funding transactions, mergers and acquisitions, company financials, captables, valuations, industries & sector coverage etc. This is very useful where the information is highly subjective and does not follow a standard pattern of dissemination.

d. Generative Artificial Intelligence (AI)

Technology has been a key enabler for us in building a global private market data platform. We are excited about the recent developments in artificial intelligence, particularly in generative AI, and want to be pioneers in using generative AI as an enabler. In addition to the central Technology and Product team, each business unit and data teams have their own technology and automation engineering teams. There are multiple projects being worked upon leveraging generative AI, examples of these include - querying framework - making it easier for customers to get answers to common question formats; code development assistance and code review; sales outreach including content personalization and response review; across data modules for data scanning, extraction, categorization, etc.

8. KEY BUSINESS ATTRIBUTES a. Large, growing market and rich customer segment

The private market data industry is large with more than 1,00,000 addressable organizations across the investment industry, corporates and others. Our customer base spans these key user segments of the industry. We currently work with only a small single digit percentage of this market and the market remains largely untapped.

b. High operating leverage and margin expansion

Our business enjoys high operating leverage. Post the initial investment in building the technology platform, data and workflow software, the cost to serve customers is very low and hence the business has high gross margins. The offering is productized and there is no custom servicing or development work required for each new incoming customer. This can be observed in our relative revenue and expense growth. For instance, between FY20 to FY23, the revenue grew at a CAGR of 28% while the total expense grew only at 8%. Leading to margin expansion across the last 3 years. Our EBITDA and PAT Margins have been continuously increasing for the last 3 financial years.. In FY23, the EBITDA Margin expanded by 6.3% and the PAT margin expanded by 7.4% Y.oY

c. Significant India cost advantage

We serve customers globally, with nearly 70% of our revenue coming from international customers, while our entire operations are based out of India. Hence, we enjoy a significant cost advantage because we make-in-India while selling globally. This spans across the following key ways: (i) Our data-production and technology platform is built from India, while our data on private companies and markets is global (ii) global sales happens from India (iii) we have an efficient content-driven customer acquisition _ywheel. This provides us with significant and long lasting cost advantages d. Profitable operations and increasing free cash flow

With the consistent expansion of the margins, we had a positive EBITDA of INR 2.6 crores and a positive PAT of INR 5.3 crores in FY23. Our free cash flow increased by 143% YoY from INR 4.9 Cr to INR 11.9 Cr. Additionally, our cash & cash equivalents have been increasing continuously and at the end of FY23 they stood at INR 60.3 Cr, a 32% increase YoY.

1 EBITDA and PAT have been adjusted for IPO Expense (reimbursable to the company) and Deferred tax.

2 PAT adjusted for Fair Value gain/(loss) on CCPS for FY20 & FY21 e. Scalable and proprietary technology platform

Our technology and data platform have been built in-house on leading technologies and architectures. This makes it highly agile and scalable. In addition it also employs AI based analytical concepts for capabilities like auto-extract and auto-recommendations. In addition to the central 95 member technology and product team, we additionally have automation engineering teams reporting to the various data and business units. This allows us to be very proactive in leveraging the latest advancements in technology for our data and software building.

f. Low cost, content driven acquisition _ywheel

Since we are a data company, we are able to use the large amounts of data that we own to do content-based marketing which helps us in acquiring a high velocity of leads without having to spend on paid marketing. In FY23, we got a tra_c of 9 million visits across all our public pages and got over 1000 press mentions in prominent news media.

g. Asset-light model, debt-free

Our business is asset-light, which is evident by the value of the fixed assets on our balance sheet being INR 0.4 Cr., depreciation and amortization expense which was INR 0.2 Cr. in FY23 and capex of INR 0.3 Cr. in the entire FY23. This enables us to be fairly capital efficient and be able to scale with more flexibility. Furthermore, the company has also been debt-free since inception.

h. Proven playbook of large financial data companies

Multiple large companies have been created in the financial data markets that cumulatively have generated over $30B revenues in a year. We have taken inspiration from these large financial data companies that have stood the test of time. Most of these companies are highly-profitable companies generating large amounts of cash, and have continued growth even after decades. We believe that the private markets today is how the public market data space was a few decades back and we can learn from the proven playbook of these large financial data companies that have been built for the public market investors.

9. FINANCIAL PERFORMANCE a. Abridged profit and loss statement (in INR Crores)

Particulars

FY 23 FY 22

Revenue from operations

78.11 63.45
Other income 1.31 1.10
Other gains/(losses) - net 1.76 0.61
Total Income 81.18 65.16

Expenses

Employee benefits expense 66.98 58.57
Depreciation expense 0.19 0.15
Other expenses 8.55 6.80

Profit/(Loss) before exceptional items and tax

5.46 (0.36)
Exceptional Items - IPO Expenses (4.49) 4.49
Income tax expense/(credit):
Current tax 0.12 -
Deferred Tax (23.26) -

Profit/(Loss) for the year

33.09 (4.85)
Less: Other income 1.31 1.10
Less: Other gains/(losses) - net 1.76 0.61
Add: Depreciation expense 0.19 0.15
Add: Current tax 0.12 -
Add: Deferred tax expense (23.26) -

EBITDA

7.06 (6.41)

EBITDA Margin

9.04% -10.10%

EBITDA excl IPO expense

2.57 (1.92)

EBITDA Margin excl IPO expense

3.29% -3.02%

PAT excl IPO expense and Deferred Tax

5.34 (0.36)

PAT Margin excl IPO expense and Deferred Tax

6.84% (0.56%)

Total comprehensive income/(loss) for the year

33.64 (4.85)

b. Result of operations i. Revenue from operations

Revenue from operations grew by 23% YoY from INR 63.5 crores in FY22 to INR 78.1 crores in FY23. We have seen consistent growth in our revenue from operations despite challenging times like funding winter and economic slowdown.

Revenue split by geography (in INR Crores)

FY 22 FY 23 FY23 % Contribution FY23 % Growth
Americas 18.6 24.1 31% 30%
APAC (excl. India) 6.9 8.1 10% 18%
EMEA 19.2 20.8 27% 8%
India 18.8 25.0 32% 34%

Total

63.5 78.1 100% 23%

ii. Total expenses

The total expense increased by 16% YoY from INR 65.5 crores in FY22 to INR 75.7 crores in FY23.

Employee benefit expenses accounted for 88.5% of our total expense. This increased from INR 58.6 Cr in FY22 to INR 67.0 Cr in FY23 on account of headcount increase for key growth initiatives undertaken. Cloud hosting charges were our second largest expense item and accounted for 3.3% of the total expense. The remaining expenses include depreciation expense, rent expense, and remainder of other expenses. These add up to 8.2% of our total expense.

Total expense breakup

FY 23 % Total Expense

Employee Benefit Expenses

67.0 Cr. 88.5%
Salaries, Wages & Bonus 57.9 Cr. 76.5%
Employee stock option expense 5.4 Cr. 7.1%
Other Employee Benefit Expenses 3.6 Cr. 4.8%

Depreciation Expense

0.2 Cr. 0.3%

Other Expenses

8.5 Cr. 11.3%
Cloud Hosting Charges 2.5 Cr. 3.3%
Rent for Building 1.8 Cr. 2.4%
Remaining Other Expenses 4.3 Cr. 5.6%

Total Expenses

75.7 Cr. 100%

The increase in total expense was higher than usual in FY23 due to the (i) increase in Employee Benefit Expenses primarily due to an increase in the average headcount by 23%, due to various growth initiatives, (ii) increase in Rent for building, since the company took additional seats, with employees coming back to the office and (iii) increase in Other Expenses which include compliance and governance related cost post listing and others. iii. Profitability and margin expansion

EBITDA margin expanded by 6.3% YoY from -3.0% in FY22 to 3.3% in FY23 PAT margin expanded by 7.4% YoY from -0.6% in FY22 to 6.8% in FY23

We have experienced consistent expansion of EBITDA and PAT margins historically.

1 EBITDA and PAT have been adjusted for IPO Expense (reimbursable to the company) and Deferred tax.

2 PAT adjusted for Fair Value gain/(loss) on CCPS for FY20 & FY21

iv. Cash flow position

Free cash flow grew by 143% YoY from INR 4.9 Cr in FY22 to INR 11.9 Cr in FY23. This is in line with the historical growth. Cash and cash equivalents1 stood at INR 60.3 Cr. in FY23, a 32% growth YoY from INR 45.8 Cr. in FY22. For more details, please refer to the financial statements forming part of this annual report.

Key Financial Ratios

Particulars

Numerator

Denominator March 31, 2023 March 31, 2022

Remarks

Trade Payables Turnover Ratio

Purchases of services and other expenses

Average Trade Payables 11.84 6.9

Increase is on account of increase in other expenses during the year and substantial payments made during the year.

Net Profit Margin

Net Profit after taxes

Revenue from operations 42.36% -7.64%

Net Profit ratio is a measure of a companys net profit as a percentage of its revenue from operations. Increase is on account of profit earned from operations during the year and recognition of deferred tax assets.

Return on Net Worth

Earnings before interest and tax

Net Worth 16.67% -23.49%

Increase is on account of profit earned from operations during the year as compared to loss incurred in the previous year.

Operating Profit Margin

Earnings before Interest, Taxation, Depreciation and Amortization

Revenue from Operations 3.3% -3.0%

Increase is on account of profit earned from operations during the year as compared to loss incurred in the previous year.

For more details, please refer to the financial statements forming part of this annual report.

* Cash & Cash eq = Cash & Cash eqv + Investments & Bank Deposits + Security Deposit for listing as on March 31, 2023+ adjusted for IPO expenses (reimbursable to the company)

10. STRATEGIES AND OUTLOOK a. New customer acquisition

We acquire new leads through a combination of inbound and outbound sales effort. Our customer accounts have consistently grown over the years. They grew by 13% YoY from 1092 in FY22 to 1230 in FY23. b. Expansion within existing accounts

We have built long standing relationships with our customers. We continue to expand within our existing customers by following a three-pronged approach that includes growing the number of users within an account, generating additional data downloads and adding more customer accounts or different teams within an organization.

c. Continued expansion across geographies

Close to 70% of our revenue comes from international customers. Our revenue from the 4 regions has continued to expand over the years. In FY23, revenue from the Americas grew by 30%, APAC (excluding India) by 18% , EMEA by 8% and India by 34% YoY. We will continue our efforts to expand our customer base across all the geographies.

d. Continue to grow platform offerings for customers

As part of our product development initiatives, we intend to introduce various product enhancements that we believe will offer value to our existing customers. In FY23, we made over 14,000 updates to our platform, and added data of more than 360,00 entities, 20,800 reports, and 100,000 funding rounds and acquisition transactions. We will continue to invest in deploying additional technologies for our platform that will enable us to scale our product offerings.

e. Expansion into adjacent customer segments

Our customers have organically found additional use cases of our private market and emerging technology data. These include product discovery where customers can search and find vendors for various software, tools and other use cases.

Limited partners use our platform for fund performance data whereas sales personnel rely on our platform for augmenting company information to improve their sales outreach. We intend to offer additional features and modules to enable us to tap into these segments thereby expanding our total addressable market and provide additional specialized modules to customers for incremental utilization of our_platform.

f. Select recent growth initiatives

Apart from the above mentioned strategies, we have also been working on select growth initiatives, some notable ones include:

i. Increase in organic tra_c: Using digital marketing strategies like content marketing and SEO optimization, we have built a large organic inbound tra_c funnel. In FY23, our platform had over 9 million organic visits, 19x times higher than FY20.

We expect this organic tra_c to further increase, thereby increasing inbound leads pipeline.

ii. Press mentions: We have been increasing our reach through various media partnerships, data contributions, reports, and regular newspaper columns. In FY23, we had more than 1000 press mentions across various media.

iii. Increased coverage of financials and captables across countries: We currently process data in English and more than 35 non-English languages which include German, French, Swedish, Korean, Dutch, Greek, Indonesian among others. We have financials of over 15 countries and captables of over 10 countries available on our platform. We will continue to add data for and from more geographies.

11. HUMAN RESOURCES a. Overview

The Tracxn family was 847 members strong as on March 31, 2023. Our team split as on March 31, 2023 is as follows:

Function

Number of Employees
Analysts and Data Operations 445
Product and Technology 95
Sales, Marketing and Customer Success 231
Business Support 76

Total

847

b. Equal Opportunities @ Tracxn

Tracxn strongly believes in creating equal opportunity and providing a sense of belongingness to all the employees. We are proud to share that we had 44% women workforce at the end of FY23 as of March 31, 2023.

c. Building a High Productivity Workplace

Our endeavour is to build a high productivity workplace for all our team members. Over the last few years, we have implemented multiple things across the organization to maximize efficiency, enhance collaboration, and achieve optimal results in our workplace environment.

These span across how all the leaders manage their time & calendars, to meeting structures, to using technology & IT for automation, and more. Following are some examples of these. i. Time boxing

Our days are meticulously planned and managed through our calendar. This structured approach enables us to efficiently handle meetings and ensure that all priority tasks receive the necessary attention.

ii. Written notes for each meeting item

As a standard practice, we prepare comprehensive notes that outline the key discussion points. These notes serve as a reference during the meeting, promoting clarity and_focus.

iii. Clear agendas

Every meeting is accompanied by a clearly defined agenda, which is documented as a separate event in the calendar. This practice enables us to address the agenda items efficiently, leading to the timely conclusion of meetings and maintaining focus on the intended course of action.

iv. Milestone/stage-based project management

Our project management approach follows a unique methodology. At every stage of a project, stakeholders synchronize, review, and update strategies based on the insights gained. We categorize the stages as Ideation (M1), Solution (M2), and Execution (M3), ensuring a systematic progression throughout the project lifecycle.

v. Automate (almost) everything

Our primary objective is to optimize internal systems and processes by leveraging automation wherever possible. We actively seek opportunities to automate either specific parts or entire workflows. To facilitate this goal, each department maintains a dedicated automation/ technology team. For example, our HR department has its own automation team, reflecting our commitment to streamlining operations. vi. Internal IT

We have established an internal IT team to cater to our organizations technological needs. This dedicated team allows us to promptly address any IT-related issues, ensuring a swift turnaround time for problem resolution.

d. Employee well-being initiatives

Employees are invaluable assets of any company, and ensuring their excellent mental and physical health sets them up to perform well. Some of the ongoing initiatives are described_below: i. Health and fitness initiatives

We believe in staying healthy, both physically and mentally. In our attempts to encourage the employees to actively take care of their health, some of our initiatives include gifting fitness kits to new joiners as well as all existing employees, conducting yoga sessions, expert talks with psychologists etc. Employees are encouraged to share their experiences on what has worked for them for physical and mental fitness and promote any such initiatives.

ii. Employee engagement activities

We strive towards creating a sense of belonging in the organization. These engagement activities enable us to increase employee motivation and help in establishing positive feelings about the work environment.

Following are some of the activities that we at Tracxn conduct, • Monthly department level meetings to convey all updates in the team, welcome new members • Department level team lunches to increase interaction and engagement in the team• Monthly team-wise fun event (online/o_ine) along with gift vouchers provided to winners• Monthly group activities as per the engagement calendar: contests / celebration / indoor sports tournaments • Weekly birthday celebrations

iii. Ensuring work-life balance

Work-life balance is a key part of a healthy and productive work environment. We encourage all teams to follow streamlined work timings and follow office timings to ensure balance and productivity. We dont encourage doing work after the office timings and avoid any work during weekends and holidays.

iv. Satisfaction surveys

We have created feedback mechanisms to measure the pulse of our employees and organization. These surveys help us to compare different departments, spotting trends, identifying gaps and doubling down on the measures that work towards organizational growth.

• Daily Satisfaction Surveys - Daily survey for employee to evaluate their experiences at the end of the day

• Monthly employee satisfaction survey - Monthly survey for employees to evaluate work satisfaction, rapport with manager and team members, work-life balance, etc.

• Monthly Non-anonymous survey - Department wise, monthly surveys are rolled out and the corresponding metrices are derived and analyzed at the organization level.

v. Employee training and skill enhancement

Skill enhancement provides the opportunity and knowledge for an individual to develop and strengthen the necessary skills to gain, maintain, and advance in a chosen area. We encourage employees to upskill themselves by taking up online courses relevant to their role and responsibilities for which they can claim the reimbursement

vi. Reward and recognition

We believe in rewarding and recognizing our employees, to acknowledge and appreciate their work. It also leads to greater employee engagement and a positive workplace. A few examples of such rewards are monthly and quarterly star performer awards, long service recognition awards, etc.

e. ESOP policy

Employee Stock Option Plans provide employees ownership interest in the company in the form of shares of stock. ESOPs encourage employees to give their all as the companys success translates into financial rewards. Individual employees will directly benefit from the success of the company and will feel a sense of ownership. This in turn can lead to an increase in productivity and an overall performance improvement for the company, and an opportunity for better wealth creation for the Employees. We have created a robust ESOP policy keeping the interest of employees in mind, covering most of our leadership - AVPs & above, Tech teams, Product teams, etc.

12. TR ACXN IN SPOTLIGHT

Tracxn Technologies Limited attracts regular media attention. The companys success story and IPO listing were covered by leading media companies such as Business Today, Business India and Money Control, which published elaborative articles about the Company. Following are a few notable press mentions:

Inside Tracxns pursuit of building an iconic global data company

Source: Business Today : November 28, 2021, 8:34 p.m.

Private market data and insights provider Tracxns unique tech stack and low-cost; built in india for the worlds growth model augurs well for the start-up ecosystem at a time when high-burn rate consumer tech ventures are facing a funding winter

How Tracxn accelerates innovation

Source: Business India: November 28, 2021, 8:34 p.m.

Techie duo Neha Singh and Abhishek Goyal are _ying high with their business intelligence platform Tracxn Technologies

Tracxn Listing Day : Goal is to build an iconic data providing company from India, like how Infosys is an iconic software company from India: Founders Abhishek Goyal and Neha Singh.

Source: moneycontrol : OCTOBER 20, 2022 / 08:25 AM IST

Tracxn Technologies, a private markets information provider, is all set to list later today, in what will be the first listing of a venture capital-backed software-as-a-service company in India this year.

13. RISK AND THREATS TO THE INDUSTRY AND

BUSINESS

1. Political, macroeconomic and demographic changes could adversely affect economic conditions globally thus impacting the private market investment industry. Such risks may impact our revenue and earnings.

2. We derive, and expect to continue to derive all of our revenues from operations from subscription by customers of our Tracxn platform. A substantial portion of our revenues is generated from existing customers and such customers may not renew or expand the use of their subscriptions after the expiration of their current subscription. If our customers do not renew or expand their subscriptions, or if they renew on less favourable terms, our future revenue and operating results may be adversely affected.

3. The market for private market data platforms is competitive and characterized by rapid changes in technology, customer requirements, industry standards and frequent new product introductions and improvements. If we are unable to anticipate or effectively react to these competitive challenges, our competitive position could weaken and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations, and we could experience a decline in our growth rate or revenue.

4. In order to gather private market data, we primarily rely on secondary sources, and there is no assurance that the information provided therein is accurate or reliable. If we are not able to obtain and maintain accurate, comprehensive, or reliable data, it could have an adverse effect on our business, results of operations, and financial condition.

5. Our success depends, in part, on our ability to expand use of our platform by customers globally and accordingly, our business is susceptible to risks associated with international operations. We expect to continue to expand our international customer base, which may include opening offices in new jurisdictions. Any additional international expansion efforts we may undertake may not be successful. We may be unable to keep up with changes in government requirements as they change from time to time. Failure to comply with these regulations could harm our business, financial condition and results of operation.

6. Any fluctuations in foreign exchange rates may have an impact on our profits generated from overseas markets. Since we have significant international sales, any fluctuations in the foreign currency exchange rates resulting from, inter alia, economic, geo-political or social factors may result in an asymmetric and disproportional impact on our profits, revenue, results of operations and cash flows.

7. Security breaches and attacks against our systems and network, and any potentially resulting breach or failure to otherwise protect personal, confidential and proprietary information, could damage our reputation OUR and negatively impact our business, as well as materially and adversely affect our financial condition and results of operations. Our cybersecurity measures may not detect, prevent or control all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, trojan horses, malicious software, break-ins, phishing attacks, thirdparty manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar disruptions that may cause service interruptions or jeopardize the security of data stored in and transmitted by our systems subjecting us to legal and financial liability, reputation loss and revenue loss.

8. Failure to innovate in response to changing customer needs, new technologies and other market requirements may lead to current or prospective customers finding competing products or services more attractive. If we do not keep pace with market innovation and do our best to innovate and provide superior products and services, the demand for our platform may decline for any of these or other reasons and thus our business, results of operations, and financial condition could be adversely affected.

9. Our future success will depend, in part, upon our ability to internally develop and implement new and competitive technologies, use leading third-party technologies effectively and respond to advances in data collection, cataloguing and curating private market information. If we fail to respond to changes in data technology competitors may be able to develop products and services that will take market share from us, and the demand for our products and services, the delivery of our products and services, or our market reputation could be adversely affected.

10. We are dependent on our Key Management Personnel and our senior management, in terms of their expertise, experience and services which helps us to execute our growth strategy and expand our business. Our failure to hire or retain senior management personnel could materially impair our ability to implement any plan for growth and expansion.

11. We have experienced rapid growth in recent periods and our recent growth rates may not be indicative of our future growth. We have also encountered in the past, and expect to encounter in the future, risks and uncertainties frequently experienced by growing companies in evolving industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our growth may be adversely impacted and our business, financial condition and results of operation would su_er. 12. Wage pressures in India may prevent us from sustaining our competitive advantage and may reduce our revenue. We may need to continue to increase the levels of our employee compensation to remain competitive and manage attrition, and consequently we may need to increase the prices of our services.

If we are unable to sustain or increase the number of employees as necessary or are unable to pass on such increased expenditure to our customers without losing their business to our competitors, our business, financial condition, results of operations and cash flows could be adversely affected.

13. If the market for the private market data platform develops more slowly than we expect, or platforms for data collection, curation and management do not achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, decreases in corporate spending or otherwise, it could result in decreased revenue and our business could be adversely affected.

14. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business.If we are unable to hire and train a sufficient number of effective sales personnel, we are ine_ective at overseeing a growing sales force, or the sales personnel we hire are otherwise unsuccessful in obtaining new customers or increasing sales to our existing customer base, our business will be adversely affected.

15. Our platform relies on the collection and use of private market information to provide effective insights to our customers and users. Changes in laws, regulations, and public perception concerning data privacy, or changes in the patterns of enforcement of existing laws and regulations, could impact our ability to efficiently gather, process, update, and/or provide some or all of the information we currently provide or the ability of our customers and users to use some or all of our products or services.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

We have robust and well-established internal control systems in place, commensurate with the size and nature of our operations. The control mechanisms are followed diligently at all levels across the Company, which helps in creating business efficiencies and streamlining our processes. We have appointed Singhvi Dev & Unni LLP, an independent CA firm, who conduct an internal audit to ensure adequacy of our internal control systems, and our compliance with applicable regulations. The Audit Committee, composed of Independent and Non-Executive Directors, periodically reviews the audit plan, findings of the internal audit, adequacy of the internal controls and monitors the implementation of the audit recommendations. Design and operating effectiveness of controls are tested by the management annually and later audited by the statutory auditors. Controls testing is carried out as per the Guidance Note on ‘Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). Management also updates the control systems as per findings / changing operations and follow-up actions thereon are reported to the Audit Committee.

15. DISCLOSURE OF ACCOUNTING TREATMENT

The financial statements have been prepared, in accordance with Indian Accounting Standards (referred to as ‘Ind AS) prescribed under Section 133 of the Act read with relevant rules issued thereunder as amended from time to time. The details of accounting treatment and policies form part of the Notes to the Financial Statement.

16. DEFINITIONS

(1) Customer Accounts refers to the distinct contracts entered into by our Company with each customer, at the time of measurement. A customer account may include access for a single or multiple number of Users.

(2) Users refers to the number of activated user accesses on the platform at the time of measurement and does not include bulk users like university/educational institutes accounts

(3) Contract Price is net invoicing done in a given period adjusted for unbilled revenue for the period, till the time of measurement

(4) Entities Profiled refer to the profiles published and available on the platform to the user at the time of measurement.

(5) PAT refers to Profit / (Loss) for the Year, plus Exceptional Items - IPO Expenses, plus Deferred tax

(6) EBITDA refers to Profit / (Loss) for the period, minus Other Income and Other gains / (losses) - net, plus Depreciation and Amortization Expenses, plus Finance Costs, if any, plus Income Tax Expense, plus Exceptional items - IPO Expenses

(7) Free Cash Flow refers to Net Cash Flow from / (used in) Operating Activities, minus Capex (ie, payments for purchase of property, plant and equipment), minus IPO Expense reimbursement plus cash outgo towards Security Deposit for listing

(8) Cash and Cash Equivalents includes balance with banks, investments in liquid mutual funds, bank fixed deposits, security deposit towards listing and cash on hand

(9) Organic Search Tra_c - Tra_c originating from an organic search result

(10) Existing Customer - An account which had also contributed to the accrued revenue prior to the given financial year / period.

(11) New Customer - An account contributing to the accrued revenue for the first time in the given financial year/ period

(12) Headcount - Number of employees as on the close of business hours.