Data analytics company Mu Sigma has raised money from MasterCard in a deal that values it at more than $1 billion ( Rs 5,400 crore), racing to the milestone within just eight years of its founding.
Dhiraj Rajaram, the 38-year-old founder who left consulting firm Booz Allen Hamilton to start the company with $200,000 in savings, will be counted among the country’s wealthiest entrepreneurs by virtue of his holding of around 50% in the company that is based in Bangalore and US President Barack Obama’s hometown Chicago.
The strategic deal, in which Mu Sigma gets $45 million from a MasterCard arm and a group of global financial investors, including Fidelity Investments, combines money and access for ceding a stake of less than 5%. The company will partner with MasterCard Advisors, the analytics arm of the payments provider, to build products that can predict consumer behaviour and define business strategy, not just fine-tune it.
“Data is the new ‘oil’ and there is a growing need for the ability to refine it,” said Dhiraj Rajaram, the 38-year-old founder of Mu Sigma, which has now raised $195 million, including investments from General Atlantic and Sequoia Capital.
Rajaram is gaining a reputation as an outlier in a high-value, high-growth business area. By 2018, the market for data analytics is expected to be worth $48.3 billion. And there will be a demand for at least 200,000 data scientists, according to a study by consulting firm McKinsey.
While peers in the business have built and sold companies, including Marketics (acquired by WNS Global) and MarketRx (snapped up by Cognizant), Rajaram has been dogged in his insistence that data analysis, or decision sciences, will emerge as the next big outsourcing opportunity after IT services.
“He has gained from a combination of focus on solutions rather than services, great execution, funding and perfect timing,” said K Ganesh, a serial entrepreneur who co-founded the data analytics firm Marketics that was bought for $63 million in 2007. “The explosion in big data that has come from consumer Internet and social media use in the past two years happened after we sold out.” `A maths buff who majored in computer science from Anna University in Chennai, Rajaram named his company after Greek letters used for mathematical notations, and hired a posse of mathematics majors to provide business intelligence to Fortune 50 clients from day one.
Prescience was His Strength
Prescience is now being seen as one of Rajaram’s strongest suits as he sets out to increase his company’s footprint in global markets. This year, the company which employs 2,500 people across a development centre in Bangalore and offices in the US, UK and Australia, will build a data analytics lab in the US and hire 400 data scientists there.
“It is no longer enough to analyse data from a single source; we now have to draw information and derive insights from multiple sources,” said Rajaram, who expects to drive more strategic tie-ups. Investors who were unsure of how fast and big a niche business such as data analytics could become, now believe the blistering pace of growth points to greater opportunity ahead. Rajaram estimates the company is posting a growth of 9% every month.
While Rajaram declined to state the exact revenue of the company, industry estimates indicate a revenue target of $200 million this year.
“The company is only just scratching the surface,” said Shailendra Singh, a managing director at Sequoia Capital.
As the quantum of data doubles every 18 months, the cost of memory drops and computing power increases, businesses are expected to face ever more complex problems. “There is need for an interdisciplinary approach that Mu Sigma offers, which is a clear differentiator,” said Singh, who watched the company for over two years before he decided to invest in it.
In bringing together alliances of the sort that it has now struck with MasterCard, Mu Sigma expects to offer IP-driven products to customers that combine business intelligence, econometrics and predictive modelling. These are not new businesses, but in bundling them as a holistic product Mu Sigma is creating a new game. “We chose Mu Sigma after an extensive search and selection process,” said Gary Kearns, executive vice-president, information services, for MasterCard Advisors.
Rajaram takes pride in the unconventional culture he has built within his company. There is zero tolerance for alcohol, but office romances are encouraged. Training is rigorous, but there are no performance appraisal ratings for the first three years. “We are not an easy company to understand; we come in from the left field,” he said. “We have a poem by Robert Frost on one wall and mathematical equations on the other, the whole point being that we are a mixture of art and science.”