Fractal Seeks To Capitalise On The Growing Interest In AI

Fractal Analytics Inc. is set to clock at least Rs 2,000 crore revenue in a year artificial intelligence has firmly embedded itself in public consciousness.

That's according to Srikanth Velamakanni, who co-founded Fractal AI with IIMA batchmate Pranay Agrawal in 2000 when the internet itself was in its infancy in India. Today, the New York and Mumbai-based startup provides AI and analytics services to a third of Fortune 500 companies globally.

“We are on track for Rs 2,000 crore this year. Pretty confident of achieving that. That is where we are,” Velamakanni said during a freewheeling chat with BQ Prime on Thursday. “If you ask me about next year, I can't say anything because given all the things that are possible [in AI], I would not like to speculate on that.”

To be sure, the company—which turned unicorn only last year after a $360 million fundraise from TPG Inc.—slipped into loss for the first time in the financial year 2022, its filings with the Registrar of Companies show. Its operating revenue, however, rose 48.3% year-on-year to Rs 1,293 crore.

“There's this very funny thing. A lot of [news] articles have come about that [loss]. But those are reported numbers, that include charges for ESOPs, one-time expenses and so on,” Velamakanni said. “I think what we need to look at is revenue, gross margin, adjusted EBITDA margins … Those are very, very solid.”

“I mean the loss is real, of course, but it's to do with the accounting norms. But even by those methods we will be profitable this year.”

The company, which according to a 2021 Bloomberg report was exploring an initial public offering amid a pandemic-induced boom in business, isn't looking to raise funds any time soon.

“We don't need a lot of capital [for our ongoing projects], because we have raised capital in 2022…and we are profitable,” Velamakanni said. “But if we have to do some game-changing investments or acquisitions—which we are constantly looking out for—then we consider fundraising.”

Any listing plans? “We would definitely want to become India's first listed AI company,” said Velamakanni. “But that's still some time away.”

‘Everything Can Change, And Everything Is Changing'

Velamakanni sees ChatGPT — the viral “ask me anything” chatbot developed by OpenAI — as a seminal moment in the brief history of artificial intelligence. For the first time, AI is in the palms of the everyday man, by way of a smartphone.

In less than six months, consumer expectations have changed dramatically and that includes clients that Fractal services. “Now that the tech has shown what is possible, clients want that to be real,” he said. “It is at once the scariest time to be alive and the most exciting as well.”

“For a disrupter, this is a huge opportunity. We, a company of 4,500 people, too can be disrupted. A 100-member team could be disrupting us,” said Velamakanni. “OpenAI is a 300-person company. 300 people and $1 billion. With that they have produced magic.”

‘Never Mistake Clear Sight For Short Distance'

The journey of Fractal, in a way, mirrors that of how artificial intelligence has evolved over the past couple of decades. Velamakanni and Agrawal started their company when barely anyone had a computer at home in India, let alone the internet.

“It was quite foolish to start an Analytics and AI company in 2000,” Velamakanni said. “It was like starting a computer company in the 1600s or something.”

There was no demand and no supply for analytics or the algorithm or technology. What was very clear, though, was that data and maths could help companies make better decisions.

“We started Fractal thinking this has to happen, and we should do it,” said Velamakanni. “We were the first AI company, anywhere in the world. I'm glad we didn't perish.”