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How analytics firm Mu Sigma attracts investors

How analytics firm Mu Sigma attracts investors

Analytics firm Mu Sigma, which dissects large amounts of data helping firms make sense of it, has gone from zero to $70 million revenues in six years and now employs 1,500; it expects to clock $110 million in 2012 with 2,100 employees.

The black Land Rover makes its way to a muddy lane in Brookefield, a suburb in Bangalore, stopping at a nondescript complex full of shops and a tiny restaurant, Punjabi Tadka. Dhiraj Chidambaram Rajaram, Founder and CEO of analytics firm Mu Sigma, steps out of the driver's seat, makes his way to the eatery, settling down around a plastic table with three colleagues. It is time for a mid-day break and some gossip. Chatter on ownership and competition moves on to employee poaching and personal habits.

"My entrepreneur friends eat in five star hotels," Rajaram, 37, tells BT, wolfing down a large piece of kulcha dipped in cottage cheese and spinach curry. The Land Rover is preowned, Rajaram shares hotel rooms with colleagues while travelling, and the lunch bill costs Rs 450.

Rajaram's thrifty habits may not change, though he no longer leads a cash-strapped start-up pounding corporate pavements asking for business. Still, his cost-savvy nature helps. Investors love him. On December 28, 2011, he raised $108 million, or Rs 573 crore, from private equity firms General Atlantic and Sequoia Capital - which valued the company at about half a billion dollars.

Dhiraj Rajaram, Founder, Mu Sigma
I took the problem to my employers and to other people but nobody was willing to listen to a 28-year-old: Dhiraj Rajaram
His firm has raised nearly $150 million in all; in June 2011, Sequoia had pumped in $25 million. The big dollars have followed a meteoric, almost dream-like rise. Mu Sigma, which dissects large amounts of data helping firms make sense of it, has gone from zero to $70 million revenues in six years and now employs 1,500; it expects to clock $110 million in 2012 with 2,100 employees.

Already, it has five times the headcount of its nearest competitors, Fractal Analytics and AbsolutData, and nearly four times revenue. Mu Sigma's ability to hire people quickly has attracted 50 of the world's top companies to it as clients.

These include Microsoft, Walmart Financial Services and Dell. Microsoft was Mu Sigma's first customer and what began with a pilot on understanding consumer behaviour in 2005 has now expanded into doing web analytics for MSN, live auction monitoring for its search engine Bing, and work around search engine marketing. "Mu Sigma has really cracked the nut on hiring the right kinds of resources and training them so that they are usable in a fairly short ramp time," says Jason Hoffman, Microsoft's senior director of monetisation for paid search.

But how did the start-up scale where most others struggled ? McKinsey says India produced about 13,000 statistics and machine learning (a branch of artificial intelligence) graduates in 2008, the latest estimate available at the firm. Business process outsourcing firms, technology companies, management consulting firms, and large corporations all feed from the same pool of talent. How did Mu Sigma hire its 1,500? Some answers can be found at its 100,000 sq. ft. brightly painted office in Bangalore.

In one corner of the office is a boardroom, named Normal, after the statistical term 'normal distribution'. It has a poem by Robert Frost, The Road Not Taken, etched on one of its walls. An opposite wall has mathematical equations. Analytics, says the Mangalore-born Rajaram, is a combination of art and science. The remaining walls in the office are packed with pictures and quotes of Albert Einstein, Rabindranath Tagore, Enrico Fermi and Steve Jobs.

Rajaram, in certain ways, has modelled himself after Jobs. He believes, for instance, in assembling an A-team: just one in 16 people interviewed is hired, and many more are rejected before they get to that stage. The newcomers are not appraised for the first three years. The company's 45-people human resources, or HR, team is large for Mu Sigma's size.

The seven Indians on its core sales team never held a sales job before; four have less than a year's experience. "If there is a bigger way to say 'F*** You' to the world, tell me how," asks a grinning Rajaram during an interview at his cabin, named 'Jugaad', a Hindi word more associated with ingenuity and innovation today. For all his contrarian thinking, Rajaram has a conventional track behind him: an electrical engineering degree from Anna University in Chennai, computer science at the Wayne State University in Michigan, US, and an MBA from the University of Chicago Booth School of Business.

The Mu Sigma founder is a natural storyteller, a trait he traces to his paternal grandmother's habit of telling him stories in his childhood from Hindu epics. He likens Mu Sigma's edge - "a collection of stochastic processes and elements that come together to deliver a powerful whole" - to the sambhar his grandmother makes.

Luck, Guts, and Luck

The entrepreneur in Rajaram first sensed the Big Data - that is the buzzword for analytics today - opportunity while working with Booz Allen Hamilton in the US as a strategic consultant. The amount of data generated in businesses was soaring with the adoption of software, but there was a dearth of talent to analyse it. "I took the problem to my employers and to other people but nobody was willing to listen to a 28-year-old," says Rajaram, who sports a trendy soul patch under his lips.

He decided to quit his job and start a company. He sold his home in Schaumburg, Illinois, to raise $250,000 in 2005. By then, he and his wife Ambiga, who runs HR at Mu Sigma, had also saved another $200,000 and the corpus went into bootstrapping the firm.

For the first nine months, there were no employees or clients. After rejecting 75 people, he finally managed to hire his first employee, Sayandeb Banerjee from GE. Banerjee had started analytics offshore for one of the multinational's businesses and went on to set up Mu Sigma's Indian operations. Around mid-2005, Microsoft agreed to consider it for a small pilot project on analysing consumer behaviour. The firm never looked back ever since.

"When we started, the industry was hiring analytics experts to do this business. We said we do not necessarily require analytics expertise," Banerjee says of the Mu Sigma bet on processes over individuals. Mu Sigma University, as the firm's training facility is now called, which grooms talent ground up, is the company's silver bullet and something the rest of the industry missed.

The firm, however, got more things right than just the people piece. It started playing in many sectors - from financial services to healthcare - which helped it gain scale. But, while the firm has done well thus far, it could be a bumpy road ahead. Talent retention will become a challenging affair: Mu Sigma currently has an annualised attrition rate of 23.5 per cent. As a long-term fix to the problem, it has distributed 15 per cent of the firm's equity among senior employees. Rajaram owns 45 per cent of the company.

The competition is playing catch up as well. Fractal, with $15 million revenues today, expects to more than double its revenues to between $35 million and $40 million in 2012. AbsolutData, with similar revenues as Fractal, expects to grow 80 per cent this year. "We see 50 resumes from each of our competitors at any point of time and this makes us feel that we must be doing something right," says Srikanth Velamakanni, group CEO at Fractal.

In the days ahead, Rajaram will need lots of luck - the sort he had in 2008. Ten days before Lehman Brothers went bust in September that year, Financial Technologies Ventures deposited $15 million in Mu Sigma's bank account in the analytics firm's first institutional round of fund raising. "We don't know if the deal could have closed after 10 days," Rajaram says, leaning back on his chair with a smile.

Published on: Jan 18, 2012, 3:28 PM IST
Posted by: Navneeta N, Jan 18, 2012, 3:28 PM IST