On October 5, Fractal Analytics, a leading company in the artificial intelligence and analytics space, announced that Theremin.ai, one of their subsidiaries, had raised funds from OLMO Capital. Theremin.ai is one of its AI product businesses after Qure.ai which has been able to successfully bag external financing.
Announcing the development, Fractal Analytics co-founder, group chief executive, and vice-chairman, Srikanth Velamakanni said, “We are excited about two of our AI product businesses (Qure.ai and Theremin.ai) raising external equity financing during this extraordinary year. It validates our approach of finding great entrepreneurs within and outside Fractal and building AI businesses with them while staying consistent with our mission of powering human decisions with AI.”
Velamakammi further added that they have a few more products, most prominent of them — Cuddle.ai and Eugene.ai, which will be going down the same route of raising external equity financing and hiving off as separate subsidiaries in their own rights.
The company has adopted an ‘Ideas2Business’ program that includes four AI companies and over eight software solutions programs. What Fractal Analytics is doing is a very interesting business proposition and strategy of hiving off companies as separate entities altogether. Let us explore it further.
About Fractal Analytics
Essentially an analytics service provider, Fractal analytics is one of the world’s most well-funded AI providers. Apart from this, consultancy makes up one of the bulk of Fractal’s business. It has prominent names among its clientele, working in areas of financial services, healthcare, retail, and technology and media. Besides, Fractal incubates a few internal AI startups. Last year, the company had vowed to devote up to $30 million towards internal incubation.
Healthcare startup Qure.ai was founded in 2016 and was incubated in Fractal Analytics. The startup leverages AI and deep learning to diagnose diseases using radiology and pathology imaging. It also aims to create a personalised cancer treatment plan from psychopathology imaging and genome sequence. Some of its most prominent products are — qXR for detecting abnormal chest x-rays and qER tool, designed specifically for head scans. Earlier this year, the healthcare startup raised $16 million in a funding round led by Sequoia India.
Much in the news from last week, Thermin.ai was founded in 2019. This startup provides quantitative investment strategies using deep reinforcement learning. It identifies unique investment opportunities in financial markets using conventional and alternative data sources.
Other products in the pipeline include — Cuddle.ai, which nudges users with AI-powered insights by scrounging through enterprise data to identify key business events every day; and Eugenie.ai, on the other hand, helps businesses in identifying risks and growth from data through its decision-based alerting mechanism.
Speaking of the AI products incubated within Fractal Analytics, Velamakanni said that most ideas erupted from conversations with their clients. “It’s not that clients necessarily ask for something, but we know what they might ask two or three years from now. The idea is to build it before they ask,” he added.
Fractal Analytics and several other companies are developing into corporate incubators as a step towards overhauling their innovation strategies.
Are Corporate Incubators the Way Ahead?
Organizations often feel the need to constantly innovate. These companies look at startups as upcoming innovation hubs. To compete and benefit from the innovative dynamism of startups, increasing large numbers of companies are setting up corporate incubators.
Moreover, India has always been known for its service provider capabilities. Product development, to a large extent, has not worked for various reasons. Having said that, consulting firms still see tech products as a lucrative area to capture.
Apart from Fractal Analytics, Zoho Corp is another such company which is looking at rolling out subsidiaries with operational autonomy. Sridhar Vembu, the founder of the SaaS giant, in a 2017 interview said that over a period of five years they intend to create ‘additional brands’ on the lines of Zoho. However, Vembu also added that such subsidiaries will have autonomy but whether or not they would exit and form a separate entity (such as Qure.ai) was still undecided upon.
Building startups with established companies is beneficial to both parties. On the one hand, the corporate’s need for innovation is satiated and on the other hand, for upcoming startups, having corporate backing works as a cushion against industry disruptions.
AI is, and we’ll continue to challenge and trigger a change in the way we view organisational setups. It is expected that business models will be redefined using data, design, and AI. Corporate incubators are just one step in this direction.