FNCE 6002 Tracxn Valuation

Janvi Sanghvi
Jaskaran Jaiya
Ken Chew
Ma Guandong
Wu Rong
Xing Yueheng
Outline
1. Introduction

2. Valuation

3. Ownership & Exit strategy

4. Q&A
 Brief Introduction Business Model
• Established in May 2013, Tracxn is recognized to be the “Bloomberg” in the private • Tracxn implements a subscription-based revenue model.
equity industry.

• Tracxn is an analyst-driven market intelligence firm that offers deal discovery,

analyst support and other tools for exploring private market investment
opportunities.

• Main product: A software-as-service platform that allows paid users to find deals in
460+ sectors until 2018.

• Primary customers: VC, PE and other corporates that need private equity market
investment service. It provides them data and information for their investment, M&A
or strategic partnership purposes.
• Pain points solved: Remove information asymmetry between investors and startups.
• In 2017, Tracxn has a 400+ customer base globally. U.S. is Tracxn’s largest market,
accounting for about 50% of overall revenue while India makes up an estimated 25%
of business.

Team Funding History

Date Round Investors Amount
Neha Singh Abhishek Goyal 1 Jun, 2013 Founded Neha Singh and Abhishek Goyal
• Former investor at • Former investor at Dec, 2013 Initial A group of angels, led by Flipkart Rs 1 crore
Sequoia Capital Accel Partners founding founders Sachin Bansal
• Ex – BCG Consultant • Ex – Amazon & 29 Apr, 2015 Series A SAIF Partners $3.5M
• Alumnus of Stanford Yahoo
19 Jun, 2015 Series A A group of angels $10M
GSB & IIT Bombay • Alumnus of IIT
6 Jan, 2016 Series A Ratan Tata undisclosed
Kanpur
18 Feb, 2016 Series A A group of angels undisclosed
24 Apr, 2018 Series B $3M
• Tracxn had 600+ people strong team in Jan 2017.
• Had 200+ Analysts tracking 460+ sectors globally until 2018. • In Tracxn’s last round of financing, Tracxn’s post-money valuation is 70
million.
 Competitor Analysis

Data Fox
Tracxn Inside View
• Perceived as one of Tracxn's
biggest rivals.
• Founded in 2013
• A top competitor of Tracxn.
• Generates $3M less revenue vs.
Tracxn. • A Private company that was founded
in 2005 in San Francisco, California.
•
AngelList Like Tracxn, InsideView also operates
in the Business Support Services space.

• AngelList is Tracxn's #3 rival. Compared to Tracxn, InsideView has

• Headquartered in San Francisco, California, and was 314 fewer employees.

founded in 2010. Like Tracxn, AngelList also works

within the Business Information Research sector.
• Generates 55% the revenue of Tracxn.
Valuation
Fee Structure
Fee Structure of Tracxn Platform

Subscription Options • Fee Structure remains

Packs Single User Small Team Large Team
unchanged
• Small team pack is best seller
Pricing/year(in USD) $6,000.00 $12,000.00 $24,000.00

User Logins 1 3 7

Analyst Query/month 1 3 7

Billing options Annual Quarterly/Annual

Proportion of users for each product 20% 60% 20%

 Valuation
=E10*(1+E13)J$4-E4
Market Share
Computation of # of users of
Jan-19 1 2 3 4 5 6 7 8 9 10 Terminal
Tracxn
Total Market of platform
Users 46,547 48,176 49,862 51,608 53,414 55,283 57,218 59,221 61,294 63,439 65,659 67,957

Growth of total market 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

Market share of Tracxn users 1.5% 2.94% 4.12% 5.29% 6.23% 6.99% 7.74% 8.31% 8.87% 9.44% 10.00% 10.00%

Total number of Tracxn users

(customer base) 711 1,416 2,053 2,732 3,330 3,863 4,429 4,919 5,437 5,986 6,565.93 6,796

• Terminal market share is 10%

• User market grows at the rate of GDP
Valuation
Revenue Generation

• It takes Traxcn 10 years to reach the steady state

• Revenue increases at the rate of inflation (i.e. 4%) annually
 Valuation
Operating Cost
Year 1 2 3 4 5 6 7 8 9 10 Terminal

Employee Compensation
$16,081,454 $19,376,129 $22,820,942 $26,239,201 $29,690,824 $33,249,714 $37,008,912 $40,330,544 $43,678,929 $47,154,623 $50,629,394

Server rental
$2,400 $2,472 $2,546 $2,623 $2,701 $2,782 $2,866 $2,952 $3,040 $3,131 $3,225

Marketing costs
$1,944,257 $2,930,485 $4,056,061 $5,142,404 $6,203,909 $7,397,596 $8,543,793 $9,821,950 $11,245,538 $12,829,321 $13,809,482

Administration expenses
$972,129 $1,465,243 $2,028,030 $2,571,202 $3,101,955 $3,698,798 $4,271,897 $4,910,975 $5,622,769 $6,414,661 $6,904,741

Total Cost
$19,000,239 $23,774,329 $28,907,580 $33,955,430 $38,999,389 $44,348,890 $49,827,468 $55,066,420 $60,550,277 $66,401,736 $71,346,841

• Server Rental increases at 3%

• Marketing costs 10% of revenue
• Admin expenses are 5% of revenue
• Income grows at 5.5% annually
Valuation
Revenue & Cost
Year 0 4,000,000.00 9,386,667

Year 1 19,000,239.39 19,442,572

Year 2 23,774,329.05 29,304,855

Year 3 28,907,579.63 40,560,610

Year 4 33,955,429.85 51,424,042

Year 5 38,999,388.96 62,039,093

Year 6 44,348,890.33 73,975,963

Year 7 49,827,467.76 85,437,933

Year 8 55,066,419.62 98,219,496

Year 9 60,550,277.12 112,455,385

Year 10 66,401,736.44 128,293,214

Terminal year 71,346,841.45 138,094,815

Valuation
Cost of Capital

Market Return rate 17.21%

Risk Free Rate 7.00%

CAPM expected return 14.95%

Startup premium 4.35%

Total Cost of capital (based on average returns of sector within indian

19.30%
VC space)
Valuation
PV of cash flows during next 10 years $62,146,182.88

Terminal Growth Rate 3.50%

PV of terminal value $85,679,951.38

Value of operating assets $147,826,134.26

Probability of failure 10%

Adjusted value of operating assets $133,043,520.83

Money Needed $3,999,237

Ownership given out 3.01%

• Corporate Tax rate is 21%

• Tracxn plans to raise 1.8x of their required capital to turn cashflows positive.
• So we give out 3% ownership for USD 4mil.
Investment
1 Employee Compensation

2 Server Rental
Looking for:

$ 4M Series C Funding 3 Marketing Cost

3% Ownership in terms 4 Administration Cost

of preference shares

5 Business Development
Exit Strategy

4 yrs 21.5x $ 274M

Investment P/E Exit Exit Enterprise

Period Multiple Value ($M)
Assumption
• According to the Indian VC report, the average exit duration is 4.55 years, but for Internet
Software sector the duration is a bit shorter, thus we assume the investment duration is 4
years.
• The report also shows the average P/E ratio of Indian Internet Software sector is 21.5x.
• No debt. Because we project Tracxn will have positive cash flow in 2 years and because of the
light assets business model.
IPO or M&A?

17% 20%

IRR of IPO IRR of M&A

M&A is better
• The IRR of M&A is higher than that of IPO.
• According to its business model, M&A is a more realistic way to exit compared to IPO.
• The exit valuation is affordable for potential acquirers.
Potential Acquirer
Bloomberg, Thomson Reuters, etc.
Scenario Analysis

Analytical Approach: This scenario analysis simulates 3 economic states – “Depression” – “Normal” –
“Boom”, and on that basis projects the other parameters which then cumulatively projects the 3 different
valuations for each state.

Sensitivity Analysis Thank you

Analytical Approach: This is the sensitivity analysis adjusting the parameters of “Terminal Cost of Capital”
and the “Terminal Market Share” to derive the different valuation for each combination.
Thank you