Tractian, a Brazilian startup that offers industrial monitoring systems, especially preventive maintenance, to manufacturers from different sectors, has expanded its activities to another Latin American country. Although it already has customers in five countries, the company is physically opening a development center in Mexico City because it believes it can replicate in the region’s second-largest economy the success it had in its homeland. To confirm the thesis, it wants to acquire at least 30 new customers and earn BRL 5 million (the equivalent to 10% of its total revenue forecasted for the period) in its first year of operations in Mexico.
Tractian customers in Brazil that also have factories in Mexico, such as Danone, are the startup‘s first targets in the new market. But there are other strategies at play, even acquiring a media outlet specializing in the industrial sector.
Igor Marinelli, co-CEO and co-founder of Tractian alongside Gabriel Lameirinhas, says that the company has already hired five people for its sales and marketing teams at the new office, which has officially opened in March. “We also intend to take people from our engineering and product teams to expend some time there (…) Most companies do these expansions superficially. We are really investing in the new market, planning to take our leaders to live there for a while, and even probing to acquire a specialized local media company, as we did here when we bought [part of the control of] Revista Manutenção. It’s a strategy that brings awareness to the product because it’s not just us talking, but other players discussing, talking [about the industry’s problems and solutions],” he explains.
The acquisition of the magazine took place in June of last year, following the $3.2 million seed round led by DGF Investimentos with the participation of the family office Citrino and Cláudia Massei, CEO at Siemens in Oman. Combined with the magazine’s acquisition strategy, the company also invests in training – and consequently in contacting – with technicians and workers on the front lines of the industries through webinars, e-books, and other types of content.
“Most companies focus on outbound [marketing], but in B2B, your reputation matters the most, and there are a number of things for people to look at [in this context]. [Customers ask] In my neighborhood, who is using it? Has the product been tested? Is it in any ranking? Will I gain something more with the product, such as courses and certification? These are essential things for those in the industrial sector. And, unlike other sectors, our first point of contact is the engineers and technicians on the factory’s front line. They are the ones who take the solution, word-of-mouth, to the decision-makers (coordinators, managers, etc.),” says Marinelli, emphasizing that at least half of the industries that close deals with Tractian reach the startup this way.
That is also why, in November of last year, Tractian acquired a second content and e-learning platform, called Clube do Técnico (‘the technician club’ in Brazilian Portuguese). Counting on both platforms, the company has a community formed by half a million professionals, and more than 5,000 certificates of free courses on predictive technology, maintenance management, and Industry 4.0, among others, have been issued.
Another interesting feature of Tractian’s business model is its ability to scale revenue with the same customers, its upselling potential. Industries usually start by monitoring a part of their machines, but the number of equipment observed increases over time. According to Marinelli, 60% of Tractian’s revenue in the first quarter of 2022 came from sales to the same customers. That also explains why the startup‘s customer retention rate is high, having reached 148%.
Tractian’s technology: how the startup monitors equipment and helps with preventive maintenance in the industry
Tractian’s sensors measure four things: vibration, temperature, power consumption, and runtime (via a horometer). Tractian’s software, on the other hand, is able to analyze the data coming from the sensors to predict when a machine may need maintenance.
The sensors are sent to companies, which pay monthly to access the analysis software. On average, industries have started monitoring 50 machines and spending around BRL 9,000 per month. According to Marinelli, this cost is compensated in two to three months.
“A machine, whether in Brazil or Mexico, has the same operating characteristics. That’s why Tractian’s technology can be applied to any rotating machine with a vibration pattern. Our sensor-combined monitoring system has already proven effective with our international customers. Our main objective is always to democratize access to these tools for small and medium-sized companies,” explains Marinelli. Unlike what happened in Brazil, where it started already serving giants, Marinelli believes that Tractian will first reach small and medium-sized industries in Mexico.
Recently, Tractian also launched an industrial management system that competes with software such as SAP and offers the basics to map the routine of an industry’s operations and manage work orders and inventory, for example, albeit without sensors. Called TracOS™, the software has not yet been launched on a large scale, being offered to those customers who are unsure if they need to monitor their assets. However, sometime later, after understanding the value of management and preventive maintenance, the same company tends to upgrade and ask for Tractian’s sensors.
A few months ago, Tractian also released a third software capable of monitoring energy costs, but, for now, this product is offered only to current customers, such as Embraer.
A little about Tractian’s trajectory
Marinelli and Lameirinhas’ first venture as entrepreneurs was with a crowdfunding startup in 2015, which didn’t work out. After that, they founded a startup for predicting chronic diseases called Blue AI, which still exists today, although Marinelli and Lameirinhas are not part of the company anymore.
Tractian’s seed was sown when Marinelli was hired as a software engineer for the maintenance teams at the industrial paper giant Klabin. It was there that he developed a solution to predict ‘chronic diseases’ in machines for Klabin, which would give rise to Tractian. That means that Klabin was the startup‘s first client in September 2019, even before its official launch in January 2020.
“Most startups starting in the industrial sector believe the tale of ‘we’ll pay you to build your product.’ And they are held hostage by these companies. What truly happens is that you are not building a product for the market; you are solving an internal problem for that company.” This insight led Marinelli to break his contract with Klabin. “We had to bleed at first. We had a team of five people, and we had to put more capital out of our own pocket in the business.”
The two entrepreneurs sold their cars and added BRL 40,000 from their savings to get the company up and running in a total of BRL 100,000 in equity capital.
In April 2020, the company nearly ran out of money. But the product developed by Tractian was mature enough and already being tested, which caught the attention of executives from Volkswagen and Stone. Both companies ended up becoming the startup‘s first investors. At the beginning of 2021, Tractian also attracted Y Combinator and other funds, such as the Brazilian Norte Ventures, raising its first external round of about BRL 2 million.