RIO DE JANEIRO, BRAZIL – São Paulo-based Tractian assists client facilities of all sizes, from large plants to airport machinery, logistics conveyor belts, hospitals, and shopping malls. It produces and installs software and sensors for machine monitoring
Thei goal is that all maintenance teams have access to online equipment monitoring and a “right-hand” platform that can analyze, provide valuable insights, optimize routines and allow decision making in a much more practical and effective way.
Industry has not escaped the impact of the pandemic: the interruption of working hours and industrial plant shutdowns led to a lack of inputs and disorganization of the production chain. It has never been more necessary to be more efficient – and startups like Tractian are taking advantage of this.
The startup installs sensors and uses artificial intelligence (AI) to alert companies about predictive maintenance on their equipment. The operation has prompted a comparison with the Shazam app, which discloses the name of a song after listening to it for a few seconds.
AI is among the technologies with the greatest potential to promote changes in industry in coming years, according to a study by the National Confederation of Industry (CNI). According to the research, the artificial intelligence innovation market will generate US$60 billion a year in the world until 2025.
The startup’s proposal has attracted not only 45 industries, from factories to shopping malls, but also a new investment. Tractian on Tuesday, June 1, announced a R$17 million seed funding round. The investment will be used to expand the startup’s team and to develop sensors for more types of machines.
Igor Marinelli, Tractian’s co-founder, explained the business strategy and future plans.
Predictive maintenance in industry
Tractian was founded by entrepreneurs Gabriel Lameirinhas and Igor Marinelli in 2019. Their parents work in industrial plants, and mentioned lack of maintenance as a constant issue. The classmates had previously tried to create other ventures, such as the non-profit crowdfunding platform We Are All Heroes and the chronic disease prediction startup Blue. As a software engineer at the pulp and paper company Klabin, Marinelli also developed a prototype to predict when a machine was going to break down.
“In addition to that experience at Klabin, an extension of my computer engineering degree in California also opened my eyes. I saw hardware startups that turned into unicorns, a feat that is uncommon in Brazil,” says the co-founder. Tractian is inspired by Uptake, an American startup that develops a predictive analysis platform to prevent failures in production processes. The business raised US$218 million from investors, according to the Crunchbase database.
Lameirinhas and Marinelli invested R$100,000 in the business, funds from savings and the sale of two cars. Tractian is an evolution of Klabin’s prototype, serving several industries of various sizes – from large plants to machines in airports, logistics conveyors, hospitals and shopping malls.
The startup installs sensors that gauge temperature and vibration in hydraulic pumps, compressors and motors. Tractian’s platform monitors the sensors in real-time and alerts to problems such as excessive power consumption, unbalance and insufficient lubrication with 75% to 95% accuracy.
The decision making comes from Tractian’s proprietary artificial intelligence technology, which analyzes data from previous problems, performs simulations and proposes solutions to prevent similar occurrences.
Companies pay a monthly fee to use the hardware and software solution. The average monthly fee is R$9,000. “We are placing more alerts and therefore we take care of all the client’s maintenance. The strategy increases the lifetime value [money that the client generates during his relationship with the company] and reduces the churn [dropout rate of a product or service],” says Marinelli.
The co-founder estimates that the industrial maintenance market represents R$80 billion, based on information from the National Confederation of Industry (CNI). Half of the value would be generated by 450,000 small and medium industries nationwide. These are businesses with between 100 and 1,000 employees, according to Marinelli.
“Our focus is on SMEs even in nearby markets, such as Argentina and Chile. The focus on large companies creates greater vulnerability due to changes in management. Losing a client that generates R$90 million per month is a much larger loss than one that generates R$9,000 per month. The sales cycle is also faster in small and medium-sized industries,” says the co-founder.
Tractian began operations in April 2020. According to Marinelli, the pandemic caused layoffs of technicians and a more asynchronous communication – a context that would have increased demand for the startup. Currently, Tractian serves 45 industries from segments such as agribusiness, food, hospitals, and shopping malls.
“It doesn’t seem like a huge number in comparison with other software as a service. But we have the particularity of serving a client that is difficult to open its doors: there are companies with years of history in the industry that serve the same number of clients as we do,” says Marinelli.
Nevertheless, expansion plans are ambitious. In 18 months, the startup expects to serve 600 industries. In five years, 5,000 industries. Between May and December 2021, Tractian projects to increase its revenue five-fold with the acquisition of clients. Internationalization is also in the plans. “We are not as focused on upsell [selling more expensive products], but in planting flags in the industries. Our lifetime value is capable of increasing revenue,” says Marinelli.
But there are several competitors to Tractian. Keyence (Japan, 1974) and TOTVS (Brazil, 1983) are technology companies with more time in the market and that offer predictive maintenance solutions for the industry. Some other examples of Brazilian startups that compete with Tractian are Dynamox (2007), GoEPIK (2017) and Ubivis (2014).
R$17 million for team and development
The new investment will help Tractian’s plans. The startup had so far raised R$400,000 with angel investors and R$2 million with funds in a pre-seed round. Among investors was Y Combinator, a Silicon Valley accelerator that has housed businesses such as Airbnb and Rappi. It was Y Combinator that compared Tractian to the Shazam music app.
The current R$17 million seed contribution was made by the family office of industry groups Citrino; by DGF Investments, a fund that has invested in businesses like RD Station; and by Claudia Massei, CEO of the Siemens industry technology company in Oman.
“We thought about raising money abroad, because of the few investments and the few hardware startups in Brazil. But DGF came up with a very different proposal: they had already invested in Pollux Automation, a hardware startup that was sold to Accenture,” says Marinelli. “Citrino, on the other hand, comes in with experience in plant management, while Claudia is a top executive who knows distribution channels for industrial customers.”
“In these two years of existence, Tractian has been able to insert its solution in extremely important industries for the Brazilian economy. This trajectory of the company drew our attention, because it is in this type of company that we have our investment premises: a technology startup, recurring revenue, and with solutions that reach those who need them most. For us it is always a pleasure to find a team that, despite being very young, has already achieved great relevance in the market and has the potential to grow even more,” wrote Frederico Greve, partner at DGF Investimentos, in a statement about the investment.
“When I was director of operations, the manager’s life was much more difficult. We had to regularly talk to the maintenance technicians through WhatsApp groups so that they would report faults and perform inspections on the machines. With the tool developed by Tractian, which uses artificial intelligence for predictive maintenance, the routine of all those involved in an industry operation became easier,” added Marcelo Cabral, partner at Citrino, in the same statement.
“Today, predictive maintenance is, in a way, a luxury for companies that want to prevent unforeseen events and pains caused by machine breakdowns. In the not so distant future, predictive maintenance will be a matter of competitive advantage. It will be the differentiator of a company that delivers the manufactured product on the day and time promised to the customer, or that of a company that keeps operating costs within the planned budget. Predictability will be key in an increasingly digital world, and Tractian’s technology is well positioned to help both domestic and international companies,” Claudia added in the release.
The seed contribution will be used for hiring and hardware development. Tractian intends to expand from 30 to 100 employees. The business also intends to serve more types of machines. “Developing products takes a long time, which no startup has, or a lot of money,” Marinelli explains. A quarter of the 100 employees will be hardware engineers.
Source: Infomoney