Builder Turned Fundraiser: Raising $63M for Tractian (Igor Marinelli / Tractian)

By Jason Yeh
February 27, 2024
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Builder Turned Fundraiser: Raising $63M for Tractian (Igor Marinelli / Tractian)

While most kids were occupied with typical childhood activities, today's guest was already knee-deep in the world of technology. From coding PHP to deconstructing old computers with his pops, his early passion for innovation set the stage for an extraordinary entrepreneurial journey. Fast forward to the present, Igor Marinelli stands as the visionary co-founder of Tractian, a cutting-edge machine intelligence company that has gained significant attention in the startup ecosystem. With an impressive $63 million in funding raised within just four years, including a substantial $45 million Series B led by renowned investor General Catalyst, Igor's achievements are nothing short of awe-inspiring. Join us as we delve into Igor's insightful narrative, exploring the pivotal moments that shaped his entrepreneurial trajectory and propelled Tractian to success.

Episode Transcript


Igor Marinelli: if an investor is not going to reach out to you, you're just not that interesting if you're reaching out to them. It is literally their job, right? Your job is to run the company. Their, their job is to invest on you

Jason Yeh: Now, this might be an assumption, but I guess that most of us at 10 years old, We're spending our time doing things like running around with friends, maybe learning how to play a sport or trying to figure out whether or not our crush also liked us. Then there are people like our guests today, who at 10 years old was spending his time learning how to code in PHP and disassembling computers with his father for fun.

Today I get to talk to Igor Marinelli, a crazy [00:01:00] talented entrepreneur from Brazil who decided to drop out of college to start his company traction, an AI assisted industrial maintenance company that has raised over $63 million in just four years. 45 of that came in his most recent series B round led by general catalyst. I don't know.

It's more impressive. The fact that he grew his company that fast. Or that that last round was raised in one of the most difficult markets we've ever seen.

Whenever I hear crazy background stories like this. I'm always curious to learn what that founder was like as a little kid. And based on what I said before, you might not be so shocked to hear that Igor has had an itch for entrepreneurship. Ever since. He was a little kid.​

Igor Marinelli: I started out coding PHP when I was around 10 years old.

Um, I remember my father, Uh, was an electrical engineer and we were building [00:02:00] circuits just together in, in like embl, you know, old computers and so on. I started out in Ms. Dos and then changed to Windows 9 98, so most of my childhood that operated Windows 98. programming for me was a, a reason to build my own stuff and I had the, uh, a tendency as well to wanting to be independent from very early on.

uh, if I could join those two things and if I could build things for people, if I could earn money as well, that would be, you know, fantastic. So, um, I built the first system that I built when I was 13 years old. I got emancipated from my dad and I was working with this manufacturer of motorcycles in Portugal over Skype.

And we were just chatting over text and emails and so on. Um, my father would eventually jump in in some calls that would be like price, discussion and so on and so forth. I [00:03:00] didn't want to say so much because my voice was so thin at that time. And, and they could, like, if I really, if I, if we would speak on a mic, they would literally notice that I was a kid.

So, um, I didn't like, I, I, I, I didn't like, you know, exercises or things or like courses that I would go and how to learn PHP. So I never learned things like that. was always like, what is the challenge? And then

reverse engineering the code to get there. So when people ask me, you know, what did you study to learn that?

How did you get it into this? And so on. I never did any formal study regarding programming, uh, in any languages like PHP, the main one, both Python, JavaScript, and so on. It was always Stack Overflow, stack overflow, stack overflow, a lot of forums. Asking a lot of people and building that. So I earned quite some decent money building this inventory management system for this manufacturing in Portugal, which would be essentially a [00:04:00] Jurassic

version of Tractian nowadays.

Uh, because we also do offer inventory management system for, for manufacturers and industries. But, um, it was, you know, for, for funds. So, um,

Jason Yeh: Well, Igor, let me pause

you really quickly. You s you said something very quickly, which was that you, you were emancipated from your, your parents at a very young age. So you started Jo jumping into entrepreneurship super early. Is that because someone in your family was an entrepreneur that, that inspired you or you just had this like innate urge to build and build a business?

Igor Marinelli: my grandfather owned a. mechanical car shops. So we had like slightly an entrepreneurial spirit at the family, but for sure my father and my mother, they were all like, uh, employees of of companies. My father worked, uh, as a, uh, factory worker for 35 years his [00:05:00] life. Started out in basically as a maintenance technician and then went up the ladder.

Maintenance supervisor, maintenance coordinator of pulp and paper industries. Uh, and my, my mother was a psychologist, um, worked for the city hall and, we just had that little, you know, experience as a family, as building small shops around the town. I that go as, as far as it goes, uh, and I think wasn't so much because of that, uh, spirit.

I just remember having like a very rebel, um, way of thinking that I. Didn't for sure. I didn't like, uh, people telling me what I should do in anything. Uh, whether it was schooling, uh, what I should study, what I should do. I tried to work for other people, uh, for a period of my life, and it was disaster. and I used to joke with my co-founder, like, you know, we could build like a, any, any business together, even like a bakery.

And I think I would be more satisfied [00:06:00] in working, uh, at a, at a, at a multinational company. So, um, I had that that, like, I had to do things for myself, uh, otherwise I wouldn't fulfill, uh, an achieved happiness. And it's like that up to nowadays. So for me, it's not so much about, uh, where we're going exactly, but it's really about how we're going there.

So that's why I'm so obsessively focused on the details, because I'm like, I'm thinking one day after another, after another, I. We have vision for sure. We, we tell things here, but for me, like it's super really important that the day-to-day is making sense. You know? whether it's for the company or for my, my marriage and so on, I always ask like, is is today making sense?


It's really, it's really interesting. It sounds like there's this, um, Obsession with details and control and independence, which sort of, and, and that little bit of a rebel spirit, that mixture as a little kid, really drove you to kind of [00:07:00] do these things on your own, start making your own money. And now we'll fast forward very, very soon to building a really, really big company. Yeah.

Track 1: said one thing that I remember now, but you've said who inspired you at that time? Um, and for sure there, there, there are sort of like two figures that I get most inspired for an early, early age. And, mark Zuckerberg and Elon Musk for sure are the two main ones. I remember

I was chatting with people like, why do you think Mark Zuckerberg's succe successful?

Right? Everyone would answer because he had like an amazing idea of creating Facebook and I think this is wrong. I think like those are people that are, are seeing like one part of the movie that doesn't understand, uh, anything regarding his past. And the reason Mark Zuckerberg is successful is because he calls BHP, right?

if you checked like his, his history from early age, he didn't depend on anyone to go there and execute his idea. And I was [00:08:00] obsessed with that. Like, it doesn't matter having good ideas if Wendy's idea come to you and you're not able to execute that yourself. So I always wanted to be self-sufficient. And, and the reason I started learning PHP was literally because of that.

Mark Zuckerberg coded Facebook on PHP. I need to learn PHP first, then having a great idea. And that's why I started like learning the language.

squadcaster-12ja_1_11-25-2023_091806: Amazing. So inspired by builders becoming a builder, all that is, is really important to you. that's great. So you, I was looking at your background and we've talked before and you kind of had this really quick education, um, jumping into, you were eventually at Berkeley, um, but you started building companies almost immediately,

and you, you'll probably do other interviews where they Or they talk you through the

Jason Yeh: genesis of Tractian. Um, I'm

squadcaster-12ja_1_11-25-2023_091806: more interested

in how you thought about the business that you were building and whether or not immediately [00:09:00] you were like, this is something that we're going to have to raise capital for. So, at the beginning

Jason Yeh: of Tractian,

squadcaster-12ja_1_11-25-2023_091806: do you remember, you know, as you were building it, if you were like, I'm definitely gonna raise money for that, or were you just like, I'm gonna build a business and we'll see what happens.

Track 1: Yeah. So when I was in high school, I built that, um, a business I told you, which was the interim management system. And when I shift to college, I remember choosing the, the, the degree computer engineering, because I, I was like, I had already the, the, the idea that I would build something. So it really didn't matter to me so much.

And I remember having a conversation with my parents, what should I choose? And they're like, well, if you think college is really not that important for you and you're gonna have your own stuff, just choose engineering . Like, just have engineering on the name because it is easier to open doors and, and it's gonna like just build resilience, right?

So remember first day of, of, of, of class, like already feeling that, yeah, this is just not for me, [00:10:00] you know? And, and shifting on to, to building, uh, completely again. Um, and interesting, like I met my co-founder Gabriel, that's building Tractian with me on first day of, of school,

and we were just building, like, we built, you know, two

Igor Marinelli: companies before Tractian, um, two

Track 1: in the health sector.

Igor Marinelli: and Tractian was sort of like the, the, just the combination of our two phasers from the past,

Track 1: So that was sort of like the ignition that led me to drop out of college. Uh, 'cause I transferred to Berkeley at that time and, and dropped out of Berkeley and dropped out of University of Sao Paulo. So I don't have any degree basically. And like

squadcaster-12ja_1_11-25-2023_091806: But But because you could, because you could build, right? You and your co-founder, I think could build, there might be a tendency or there might be the thought that let's go build it and let's go sell it. We don't need anyone else to do anything. Remember like that idea of pure independence that drove you in the beginning [00:11:00] when you take on investors, that is a bit of a symbiosis, a feeling like I depend on capital. Now, when you


Jason Yeh: Tractian, did you

squadcaster-12ja_1_11-25-2023_091806: feel like we can build this, we can do this on our own, we can make money on our own, or did you immediately go, we need money

Track 1: No, we thought we could build everything on our own. Um,

Igor Marinelli: I we basically, from the first day of the company, I remember we bought the com domain com.vr com.Us um, we bought 40 domains on the first day of the company. Um, and because we we thought like, this needs to be global, right? And we need to have that already.

Track 1: So, um, but for sure we, I sold my car the first week of the company and then Gabriel sold his car the week. Following, um, it was a Honda Fit and his, his car was a Ford Fiesta. So tons of money. yeah, like 20 K there, 50 K here. [00:12:00] Um, collectively also with our savings, we deployed over 500 k, to run the first year, hire the first 20 people and so on.

And we thought we, we wouldn't need, you know, venture capital at all. We

squadcaster-12ja_1_11-25-2023_091806: what? So what was the turning point? Because I, I think you would be able to get to initial sales,

but at some point you Were you, you decided to leave behind this pure independence mindset and say, we need to find partners. We need to go grow this company. Do you remember what the triggering, um, mechanism around that or the instigating force behind

that was?

Track 1: again, I remember, and this is sort of contrary to popular opinion, that think that you gotta have an idea to start a company. We didn't have an idea, okay, I'll make it this very clear. We

Igor Marinelli: we didn't have

Track 1: any solution idea. When

Igor Marinelli: we started Tractian We had a

Track 1: problem

Igor Marinelli: idea. We liked the problem

Track 1: that our fathers are facing.

We like the sector and the people that we talk in industry, we think they're honest, [00:13:00] transparent, they need help and we want to help them. So it was totally different than what we're gonna build is X. It took us one entire year to understand what the solution would look like to start. and for sure when we found out about what is the solution going to look like, then we entered the rabbit hole, which is like there is such a high standard entry point.

To serve something for, for industrial companies. I think most B2B companies and most B2B enterprise companies for sure, there are B2B companies there that are building the product for three years without a single sale. And it's not, it's

Igor Marinelli (2): because like lean Startup

Track 1: just does not work for us. You know, uh, that that book you could just completely throw, in the trash because essentially MVP concept is, is, is for me, in that sector specifically, it doesn't add any value to be MVP.

people expect a minimum awesome product that already, you're competing heads [00:14:00] to heads with a German manufacturer. Again, like what is the standard that you're able to take your r&d to be able to compete in that with the flagging and the indications of product market fit on the way, right?

So that you just don't build, so you are selling and building at the same time, but it's rating those two things, but it takes a while to do the first sale. And when you understand like. It's not there yet. It's not there yet. It's not there yet. And then you need to keep hiring like hardware engineers, fewer, more engineers, software engineers, data engineers, what you're gonna do.

You know? So essentially that's when we realized we have something here, um, something global, something massive. We can prove that. Um, even though we doubt any sales, like we are very, very, very close to product market fit. Um, let's go there and raise capital. And then there's just a fuel, fuel, fuel, like small subset of venture capitalists that are able to bet on pre-product market fit and are able to bet on hardware companies.


So Igor, uh, [00:15:00] what you said was you had the builder's mindset. You still had it in you when you started Tractian. That idea of like being fiercely independent, we don't need anyone else. Let's sell our fiat for some money and actually build this to profitability.

squadcaster-12ja_1_11-25-2023_091806: But once you get into a big problem space and you realize how much needs to be invested in built before you even get to initial revenue, that's when you were like, all right, let's find partners.

Let's go raise

capital. Now you've raised a number of rounds of capital up until this most recent one that you, that you, uh, announced in August of 2023. We're not gonna spend a lot of time on those. But the thing that I find most interesting, Igor, is this. You went to YC in 21,

Track 1: Mm-Hmm.

squadcaster-12ja_1_11-25-2023_091806: everyone knows the lore of YC and what YC has been able to do in terms of pushing people to great heights. And I had

this theory about yc, this idea that, out of yc, [00:16:00] everyone will, most everyone will raise capital. But after that, if, after you take the YC money, if you don't grow into the, sort of outsized valuations that YC Graduates command,

then all of a sudden you're stuck at a high valuation and

you have to go talk to the market and convince them that you're worth that. And unless you're in that top one to 5%, that's actually growing into it and exploding beyond it, it can be challenging.

Now you graduated from yc. And proceeded to raise, I think two other rounds of capital.

And the most important one that I think we should talk about is leading up to, this most recent round is you announced in May of 22, a $15 million Series A right now. If you

announced in May, I'd assume you were raising, you know, I don't know when that lag was, but I assume you were raising at the end of 21, maybe the beginning of 22, somewhere around there, which [00:17:00] was the hottest market in the history of venture

capital, which means that if I, we don't have to

put specific numbers out there unless you want to which means that you likely were able to raise at an incredible multiple, like a very big valuation

Jason Yeh: relative to your Tractian,

squadcaster-12ja_1_11-25-2023_091806: pun intended, which. As we've been looking at the market today, raising in 2023 means that a lot of companies did what you did and when they got to try to raise their next round of capital, they hit a wall

But I, uh, given that you were able to raise, I think was announced $45 million from one of the premier venture capital firms in the world, general Catalyst,

it seems like you were able to manage all of that. So that's where I want us to fast forward to tell me a little bit about 2022

Track 1: Mm-Hmm.

squadcaster-12ja_1_11-25-2023_091806: and you know, where you landed that sort of large [00:18:00] valuation, I'm guessing, and then how the next year of the company went such that you were able to get ready to raise a big round from General Catalyst.

So we'll start there

in 2022. So first of all, re regard regarding Wacom neighbor. There is a saying from St. Altman's, um, recently that he said, when I read the blog post that I wrote when I was at Wacom na, I want to delete all of them,

I, I think I saw that.

Track 1: he's just like, go ship crap and, and build like MVP and, you know, uh, the Facer customers and so on, so forth.

All, all of that sort of like SaaS playbook that just doesn't apply to us. It never, uh, it was never applicable to us. So for us in that sense, like y Combin na was no knowledge added. and we had already that mentality that we were outsiders in terms of their playbook of building companies. And that, like, for us it was just like, you know, obvious that you should invest on [00:19:00] r and d slightly more than you invest in, in sales and customer and, and MVP and all this other stuff, and that the product needs to be like really, really high standard right out of the gate.

So in that sense, YC four US served as a gateway. It's an incredible gateway. It puts you on the map and it opens the, the portfolio of capital that you can access, right? So, um, especially being a hardware company again, that like, it makes other people feel more comfortable betting as well because why he bat, um, uh, if you see like, you know, it's just a very small number of like courageous people that went to build.

H SaaS business, uh, altogether, right? Um, and then the, the first round was for sure the hardest, which was the Series A. This was for sure the hardest round. Um, we had to build to be almost one year talking to [00:20:00] investors and pitching. And so, uh, getting to know then, uh, proofing that like we were post-product market fit,

Igor Marinelli: that we had Tractian, that we

Track 1: had thickness to our product.

That this was something that wasn't like a proof of concept innovation, like that, it was like a, you know, uh, generational technology that could change the way that industries operate. But again, all backed by a great product. So we, none of this is a lie, right? Like we would present our net revenue retention at that time to investors.

150%. So which subset of companies can, can, can retain revenue at 150% rate. Right? So our churn was like 0.3% cross revenue churn yearly. So not only we didn't churn, we were expanding, we were doubling revenue considering, considering our, just our existing customer database doubling revenue at every two years.

Um, so like the product had its thickness, so like backed to buy a huge product market fit, but it [00:21:00] still was the most difficult time to, to, to, to raise for us.

squadcaster-12ja_1_11-25-2023_091806: Were you pretty early in revenue then? Did you remember? Kind of revenue stats?

Track 1: I remember the first, uh, the, the series A, the $15 million raise, we were, we raised at 40 x revenue.

squadcaster-12ja_1_11-25-2023_091806: 40. Wow.

Track 1: yes. So that is a big multiple. But at that time, like you were saying, it was just average, right? Yeah, it was average. Exactly. x. Uh, a RR, right?

Uh, and, and, and took on like big down rounds later. Um, so I would say we took on an average multiple and sort of like, this was incredible because, you know, as founders you don't choose multiple, right?

The investors choose it for, for you and you analyze

proposals essentially, right? Um, and because people were doubting so much our model, we couldn't serve the hype at that time. And I'm grateful for that because it just like, you know, again, [00:22:00] allow us to build like realistic company and stick with market multiples, right?

So then when it come, when it came like series B, I thought I want a multiple that the public market is paying so that I don't have any corrections for now. And then, you know, so, um, Igor before, before we go on to that, um, you, you also said something else that I want to pick into, which was the Series A, even at the hottest market was maybe your most difficult round to date. Um, I imagine it's like what you said, you have a interesting model H SaaS, hardware, SaaS, um, you're international, you know, you're,

squadcaster-12ja_1_11-25-2023_091806: you're, you're based in South America. Um, but you said this thing where you said, you know, it took a year of essentially fundraising, building relationships. Tell me a little bit about that year. Was it you started fundraising in earnest saying, talking and pitching companies, and then it took a year to finally get to a close? [00:23:00] Or were you building relationships before actually running a full fundraise? Um, tell me a little bit about that.

Now, it was actually interesting to hear that during one of the hottest markets venture capital has ever seen. Traction actually had its hardest fundraise ever.

Let that be a lesson to everyone out there that no matter what you hear in the media, whenever you see a founder close a big round, it probably wasn't as easy as the media made it out to look.

. When we come back, we'll dive deeper with Igor into what it was like to run that year long process. And you might be surprised at some of the things that he had to share.

Track 1: [00:24:00] Yeah. Some founders believe that, um, fundraising is a full-time job. And I never believed that because of the way I operate. So fundraising for me was [00:25:00] always 10% of my agenda. And I thought sort of like, if this 10% of my agenda is not enough, there's nothing else that I can do because I, I need to be here building.

You know? So I didn't have any sophisticated, you know, investors tracking sheets or anything like that. I was just more like, just more a natural way of like, do I like this investor? Does it make sense what they're saying? To be able to even follow ups, for example, one thing that I don't do as well, I don't ship any investors update to anyone.

I have never done that, right? So I'm totally against investor updates. If investors want to know something, they come and reach to us and then we update them. Why will I update a bunch of people that are just like, you know, uh, putting weight there on my cap table. , like, if I could, I would remove it already.

Like they're just not adding value, you know, so why I'm gonna update them? So there's, there's for sure this not beautiful part of like, fundraising [00:26:00] that nobody talks, which is that, that, that background, right? So I think partially because of our company, but partially because of me as we are like, okay, they're not interested enough already.

I'm not gonna follow up, I'm not gonna send any emails, I'm not gonna send any reminders. I'm just gonna go and do it again. You know? So, um, some founders, they try to push and hit the wall and like investors are saying, yeah. You know, like, maybe with slightly more revenue we can consider. And then they're like following up, following up week after week and being so insistent that eventually they would get there.

And I was like, okay, yeah. Okay. Uh, six months from now we talk then. And just, you know, and if, and, and I would, or not, depending on if like Anil persona would, you know, come in the middle and, and meet us and, and that we would just have more. Um, more, more glue into what we're building, right? So it was difficult because it was a, a, a long process, um, but which allowed us to, to sort of like meet the, the first, [00:27:00] um, you know, um, courageous, uh, investors on, on the line.

squadcaster-12ja_1_11-25-2023_091806: Yeah.

Track 1: Um, and, and, and yes, we had to, to prove and check a lot of boxes because of like, a lot of things. And, you know, imagine like, you know, being a migrant international founder saying that you want to be global, saying that you're gonna serve like a variety of industries worldwide and and so on, is there's a lot of like layers to that, that we believed internally that we could do that, um, that for sure the market.

They, they, they, they were questioning every tiny little bit of our plan.

squadcaster-12ja_1_11-25-2023_091806: So, one clarification, when you say you don't send investor updates, you mean you don't send updates out to investors who are interested in investing in you? Or like you, you just,

if they want to hear more about it, they meet you, right?

Track 1: Exactly. And not even to our current investors.

squadcaster-12ja_1_11-25-2023_091806: Oh, even your current investors

Track 1: Yeah. Even our current investors,

squadcaster-12ja_1_11-25-2023_091806: So I can see, oh, go ahead. be updated and, and, and, and keep reminding me of of like, Hey, update me. Okay, this person is interested, this person will [00:28:00] continue to add value. I don't have like updates list where I ship investor things.

Got it. So, um, next 47 ended up leading your

series A. Do you remember how long or when you first met them? And how long it took for them to finally do the deal. About how many months?

Track 1: Yeah. Yes. Um, we met Bel right after I yc and they looked into our seed, uh, which was like, you know, YC is like a seed machine, right? You enter, you, you exit with a seed sort of. So they looked into our receipt. and that was a raise of like $3 million. I think our first raise was $3 million. Um, and they look at it, they're like, you know, great to meet you and so on.

It's still early for us. and

squadcaster-12ja_1_11-25-2023_091806: Wow. So that was,

like a year and a half

Track 1: yes. So it was like a relationship that we built over time. But again,

nothing [00:29:00] sort of forced or No, you know, religiously updating them with anything. They would reach out from time to time. Say, Igor, you have any updates for us? You want to hop on a call?

So they were doing that work. They were interested. I'll give them that. I wasn't updating anyone.

And, but, and I think that's like, come on, that's just basically, that's the job of an investor, right? Like,

uh, if an investor is not going to reach out to you, you're just not that interesting if you're reaching out to them.

squadcaster-12ja_1_11-25-2023_091806: It's, it's totally true. I mean, it, it's kind of a, a dating mindset too. It's like, you know, they're probably just not that into you if they're not actually leaning in and trying to get more information.

Track 1: It is literally their job, right? Your job is to run the company. Their, their job is to invest on you. So, um, or, or other people. So yeah, absolutely, like, um, but again, when they, they would reach out, then I would be kind and, and and, and open and so on. But otherwise, I'm just here. Beauty man, like I could forget that you exist for six months.

[00:30:00] It's totally fine. You know,

squadcaster-12ja_1_11-25-2023_091806: yeah. No, that's a, that's like a I, I wouldn't call it extreme, but like one of the prototypical examples of this idea of being chased and it's like, Hey, I'm gonna keep building a company and if investors want to be part of this, they're gonna see me continuing to march and build and build.

And that's a great signal.

Um, okay, so that gives us a good backdrop for leading up to this, this round that I wanna focus, you know, another 15 minutes on at least, which is you are sitting at a 40 x multiple by your own admission in terms of numbers from your series A, um, entering in maybe one of the more difficult markets I've ever seen for sure.

But a lot of investors have talked about, um, you know, the market that we're in right now being very difficult. Can you tell me a little bit about, you know, that, that essentially about a year passes before. I think you start fundraising based on the [00:31:00] numbers

or based on the dates that I see on Crunchbase. And so at some point something in the company, runway metrics and opportunity opens up, something hits your mind that you're like, we should raise now. Do you remember what that was? Um, and I

imagine it, I was gonna say, I imagine it's not runway because it wasn't that soon after you announced the last round that you went to start raising it.

You hit some sort of revenue.

Track 1: It, it is for sure is revenue. Like, uh, series A, we passed $1 million of revenue. We're like, that's the flag for Series A, series B. When we passed $10 million of revenue, we're like, that's the flag for, for,

for series B. So it was purely revenue.

squadcaster-12ja_1_11-25-2023_091806: Okay. Let's talk about that. So you had, um, that means you probably had still quite a bit of runway before you would quote unquote, have to go raise.

Do you remember how much runway you had when you, when you, um, Past that $10 million mark.

Track 1: more than [00:32:00] a year for sure. Uh, still considering the growth, um, business plan, hiring people and so on. Like not, it was our, with our most aggressive plans.

squadcaster-12ja_1_11-25-2023_091806: Cool. So over, over a year, which means if you wanted to keep building for another six months, you, you should still have that, you know, good six to eight month runway to run a fundraise. Tell me how you thought, how you've thought about building this company and why raising at that period made the most sense to you.

Track 1: Um, I think about longevity here. And when I think about Tractian, I really, really like wish and desire an opportunity to open the capital of the company in 10, 15 years. But we were just not in a hurry. So when we thought about raising, it was clearly like, can we do a raise now that could give us four years of runway of operating at like, you know, um, full secrecy in what we're building because we're already so sure of the path that [00:33:00] we're choosing here.

So our last fundraise, or it's really more like we're so sure and so aware of where we're going. that we want fuel in the tank and the opportunity to build like for longer periods of time without raising any cash.

Um, and so it's about longevity for sure. Um, it's about profitability, longevity, and things like that.

And that, that balance in into however, maximize the, the business. And Series B was the easiest round that we've ever

squadcaster-12ja_1_11-25-2023_091806: Yeah. Tell me about, tell me about this time around. So Series A I, I feel like you just kept having conversations at a series B. B. The universe of investors get smaller right there, there are less people writing

those size checks. And of the, of the quality that I'm sure you were interested in, how did preparing to go have conversations at the series B feel like this time, what, what was the preparation and, and the

execution of the round? [00:34:00] again, like series A we raised at the peak, right? And series B, we race at the valley. Um. And the lowest peak in history. Like people tend to forget that, but just basically the market was closed. Um, but I think none of those things sort of influenced us that much. You know, uh, I think companies that are backed up by net revenue, retention, low churn, and revenue are always going to have opportunities.

Track 1: So we always try to think like, let's not maximize anything. Let's do our jobs into increasing revenue and our r and decreasing churn. that's, the three things that you should matter. That should matter to you. Right? So, luckily we're able to meet our goals and General Catalyst, we met in Series A and they looked at our series A and they're like, I think it's still too

Igor Marinelli: small when are you gonna hit 10.

And we're like,

Track 1: in one year from now. So they're like, in one [00:35:00] year you're

Igor Marinelli: gonna go from 1 to 10, you're gonna 10x your revenue.

Track 1: I was like, yes. They're like, okay, call me in one year. We didn't have a single touch point in 12 months. And then after I hit 10, I still have the email where I messaged the partner at General Catalyst saying, Hey, we hit 10.

Like, can we talk now? And they're like, yes, sure. Like, and you know, I think that's one of the best things that you can do to, to investors. Like set goals to them

and, and show that it, that you can, that you can reach them, right? Like it's one of the, the best flagging possible. So it's not about the relationship that you're building between, it's about trust, right?

You set something, you hit something that's incredible. This founder has the guts to do it. And,

and, and, and, and like when he says that he is gonna just go after something, he goes after something.

Um, and then it was one month to close the details of the round and, and we were done after that email,

squadcaster-12ja_1_11-25-2023_091806: so, so let's, let's pause there. I, I, you know, this conversation is unlike many [00:36:00] of my other interviews where we pull out the details and how it all went. And this was, we, we built a relationship at our last round. They passed.

Track 1: Mm-Hmm.

squadcaster-12ja_1_11-25-2023_091806: in what we were gonna do, we did it, and then we emailed them and we just had to hire iron out the details. Does that mean you didn't bring other options to the table to help Create a competitive dynamic to negotiate? Or did you just single stream it with General

Catalyst? Um, assuming that you get to something fair, how did you think about that?

Track 1: I for sure failed at creating a competitive dynamic because, um, s other funds, they were pissed. They were so pissed with us because like I literally told them like, Hey, like, you know, I'm opening a fundraising opportunity from X date to Y date, and you're gonna have 30 days. And I expect term sheets, uh, within this weekend, uh, of the Y date.

and they're like, yeah, sure. And I had a lot of opportunity on the table. I had a opportunity to create battles, [00:37:00] competitive dynamics, all of that. I had big logos, uh, competing for this route. But then something happened. I liked the fund that I was working with, like, you know, we sat down on a meeting, they showed me their plan for the company.

They show how they operate. I just liked it. We negotiated a, a price in which I think it was fair. They were like, yeah, sure. We shook hands. Like, so in that situation, I, I just like, and that's just my way of operating. Like, I'm like, this is a fair deal to me. I like who I'm working with. I have no other reason to go there and consult the market or even finalize the conversation that I started.

But other funds, they were pissed, but I was like, you know, I just like them and I want to work with them. And, and sort of even, and, and I told other funds, even if you do like a higher price, I would go with. The one that I choose still, because it's not about maximizing valuation and things like that. It's about like putting the right people on on our cap table.

Igor Marinelli: And I payed the price of putting the wrong people on my [00:38:00] cap table. Like I had in the last round. It was actually $55 million, to the pocket of the company and 10 to buy out investors that I wanted off, uh, to clean, basically clean the cap table for real, and, and reset the company for good. You know,

squadcaster-12ja_1_11-25-2023_091806: Wow. Okay. Um, Igor, a, the, the description of your three or four rounds of fundraising has

been, has sounded like it's been smooth sailing. You had that series A that took a while though. Um, I don't think any fundraising is without its fair share of rejection and, and, um, moments that don't make you feel great. Do you remember any of the, the worst stories or the worst experiences you've had talking to investors? Any, anything come to mind?

Track 1: We went through all sorts of red flags and, um, we learned how to really respect our intuition into that. And I know exactly what you're saying. The [00:39:00] amount of investors out there wanting to do like a shortcut, right? I remember like, you know, receiving a term sheet 10 pages long, which is generally already weird when there's like, you know, top funds.

There should put like a term sheet that is one pager or something like that with one like condition that they would, you know, issue. They would make that fund raise, but they, at the, at the valuation that the other funds . We're already paying it around, but they would issue more options to them so that theoretically the valuation that they're paying is lower because of how much value they would add in this smart money thing, and so on and so forth.

So for sure we went through, through, through things that were like, this clearly doesn't make any sense. Um, and you go through this moments of almost right. Sometimes you, you, you just, like, you, you don't create a competitive dynamic, uh, especially early on. That is [00:40:00] harder because people need to believe like the, the founding team, the story, the vision more than they believed the

Igor Marinelli: revenue and atTractian.

squadcaster-12ja_1_11-25-2023_091806: Right.

Track 1: Uh, so it happened a lot in this beginning, um, especially when we were even before entering Y eCom. They were, um, me and Gabriel, we again remember like we were bleeding money, um, paying, paying paychecks from our own personal accounts. Because the per the account of the, the, the company was basically emptied and, and, and passing opportunities off investor because we just didn't like the person we were.

We would go and have a coffee with them, the terms look looked clean and so on. But I would just look at Gabriel like, we are not comfortable with this guy. Therefore that's just not risky, you know? So it's, it, it's a lot about how we run the, the culture on a day-to-Day as well and how intuitive we are.

We're just like, sometimes you just cannot explain it. We learned how to respect that, [00:41:00] uh, because it's so hard to reason why you didn't like certain person, because like you have a backlog, backlog log of like success and fails that you've seen and you get good at it. But sometimes other people force you to explain why you don't want a certain person and you just feel that it's just not the right person.

So we do that for talents now. We do that for, for investors. We're like, . . I just don't feel like it. And, and that should be like a reason, enough of someone who's seen many fails in their lives, you know,

squadcaster-12ja_1_11-25-2023_091806: Yeah. And then on the flip side of that, you know, I always try to ask about the uncomfortable bad. Experiences fundraising. Um, but you had a particularly good feeling, with General Catalyst.

Uh, do you remember, do you remember that moment when you were like, I'm not gonna talk to anyone else. Like, when, when did you get to that point and what was the, what was the thing, the, the major emotion that came over you or, or the thing that you saw in the partner that made you [00:42:00] go, we're done.

We don't need to spend any more time on this.

Track 1: Yes, for sure. Um, it comes down to first the intuitives intuitiveness of like liking someone wanting to work together. Um, it is just that, you know, cultural layer, uh, first of all, like. Are they wired to think like us? Are we gonna have the autonomy and freedom here to, to make our own decisions? Do they have the same shared vision and things like that?

And then when you check all these boxes, it comes down to one of the most simplistic things. It's like if you ask for something and they're giving exactly what you asked. Like, you sit down on a table and like, I want X money, Z evaluation, X number of board seats, and this and this and this. We build a term sheet on the room together.

Um, and then after this meeting, they're like, yeah, sure. You know, we're gonna, we're gonna be able to, to, to meet all, all [00:43:00] of those. And, um, it's about your word, right? Like, why would you maximize after saying this is what we want?

squadcaster-12ja_1_11-25-2023_091806: Yeah.

Track 1: And then come back and say, you know, I fought again and maybe we want slightly more here and slightly more there.

Why? Like, and, and risking, you know, not having one of the most important things, like you gave them your word, you gave what you wanted, and, and now you're having second thoughts of like, maybe we should maximize this and maximize that. And, and, and starting with like the, the wrong food already ready.

squadcaster-12ja_1_11-25-2023_091806: That's awesome. Um, did you and Gabe, did you and Gabriel celebrate, uh, do you remember if there was any sort of high fives or was it just like

Track 1: you know, the amount of celebration decreased from when we started until now, right? Like the first check, the first like check was from Michael Lehman, CF four Volkswagen. At that time, I think it was 100 K. We're like, yes, that's it. And everyone was like, you know, celebrating champagne and so on. [00:44:00] This was the hottest thing on earth.

And then the celebration of the, the, of the, the, the, the series B, we went to a bar drunk Guinness. Me and Gabe were looking at each other, looking at the team, we're like. . Yeah, this is great. You know, guess, guess we're just gonna have to keep building and you know, like it was just like

that mixture between like excitement, but like, you know, let's just come back to the computer and do what we have for tomorrow.

Before the interview ended. I asked Igor if there were any early stage founders that had caught his eye. His answer was very singularly focused and very Igor.That's the part that my wife says that I failed. She's like, you have no friends outside Tractian like

squadcaster-12ja_1_11-25-2023_091806: that's not true.

Come on. it is just, you just, you know, um, for sure at Parker was already here at your . [00:45:00] At your podcast, and I recommend the episode that he was in Parker's like, you know, a go-to-market genius, uh, founder of Goli.

Track 1: And apart from him, like I've spent very, very little time outside the company, very little time mentally with other people that are not from the company. I committed many mistakes of hiring my best friends. So now they're my employees, you know, and I, and I don't have any more best friends. So, so that's like

That was my conversation with Igor Marinelli co-founder and CEO of traction, the artificial intelligence platform, quarterbacking, your maintenance. And let this be a reminder to everyone that there's no one way or cheat code when it comes to fundraising. Put in the work and figure out what brings out the best version of you and your company. When we come back, I get to talk to my producer page to hear what she thought about Igor and this incredible interview.

Paige: [00:46:00] [00:47:00] Hi Jason. How are you doing today?

Jason Yeh: Paige, I'm doing very well. I'm excited to chat about this.

Paige: Yeah. Uh, and there's a lot to chat about. Um. It's funny to me, like we see so many founders on this podcast from

so many backgrounds. there's so much variability to the founders to speak to. and I just wanted to start off by saying how.

Crazy Igor's background was like, he was talking about how he started coding PHP at 10 years old and basically started a skeleton version of traction that he sold to a company across. In my mind, like I couldn't even conceptualize

Jason Yeh: were you doing at age 10? Paige?

Paige: Playing outside, playing manhunt, you know, like [00:48:00] literally. So my mind was just blown by that already, and I just thought maybe I'd give you a moment to speak on. Is, is this something you, you see a lot? Is

Jason Yeh: Well, I mean, you, you don't see it a lot like you, you really don't see it a lot. Um, but I, I heard this great analogy, which is there are a lot of working actors in Hollywood, but there are very few movie stars, and it's the

same thing in entrepreneurship. And I, I thought that analogy was so great because you can still find. Very good actors out there who are not movie stars and who have good careers, right? Same thing goes with startups and founders and entrepreneurship. You can have, um, really good entrepreneurs that build great business, even massive businesses, but every once in a while. Investors are really looking to meet those movie stars, those people you meet that are just like, [00:49:00] whoa, you know, this person has a thing, has an IT factor. And I've seen it very few times in my career. We've, we've met a lot of amazing founders via funded, um. But Igor is one of those, uh, you know, I, I've texted a few people after I, after this conversation and was like, wow, that, that dude is next level. Right? Um, and so I think the people that spotted it early on are on their way to getting rewarded for, for identifying that.

But no, that was not lost on me at all. He's a special type of founder.

Paige: He is like, when I was listening to this interview, it was like, this is the definition of a calm, confident founder,

ESP like,

Jason Yeh: confident, and, and he could, he could say non-PC things. He could say whatever he, he want. He's just, just

so overly confident in, um, his ability and his team's ability to execute. So everything else doesn't matter to him, which is cool.

Paige: and like, 'cause he [00:50:00] had a lot of different ideas around fundraising that maybe weren't. Mainstream maybe a lot of people wouldn't agree with. Um, but it worked for him because like genuinely he, he was so focused on making the best company that he could, that he wasn't. He, he's like, I don't even have time to try prove to investors what I'm doing.

He's like, I don't have time to that. I'm too busy building like an amazing company.

Jason Yeh: Yeah. Yeah.

Paige: that's what I think, you know, he did speak on, which is, this is something I wanted to bring up with you is he did speak on how. His series A was his most difficult round to raise, and that was also back in, I think it was end of 2021 or early 2022 when the market was super hot, the hottest it's like ever been.

and I just found it really interesting that he had. Such a hard time doing that. And then fast forward to series B. He had the easiest time ever during a terrible market, and I'm just wondering if you have any insights around that paradox that was happening for him or any reasons [00:51:00] why hypotheticals.

Jason Yeh: Yeah, I think that's, that's a good place to focus our discussion around. I think it'll help people understand what it means to, to meet a bar and, and also understand that the bar's always changing,

So he talked a little bit about how difficult it was for him to raise. There. There are these variables that he had to deal with, um, him being overseas. and he shared with us that he raised at a 40 x multiple, as in the revenue he was doing his valuation annually. Uh, the, the revenue he was doing annually, his valuation was 40 x that. Um, and so. Look, that is like a massive, massive, uh, valuation multiple. And just for you to understand what that

Paige: Yeah, please.

Jason Yeh: in simplest terms, is when you get a larger valuation multiple, what people are expecting is that you are going to grow, [00:52:00] you're growing really fast, and they're, they're sort of giving you credit for this idea of like. Well, right after we invest, he's likely going to continue to add more and more revenue. So even though his company, you know, might be worth a little bit less, actually right now, we're gonna give him credit for that growth. This overly simplified way of describing that. So they're saying like, wow, you're gonna grow really, really fast and 40 x is like. Really, really high end of the multiple food chain, especially for an international company. And so, um, I can see why even in a hot market it would've been challenging. I also know that in that market, like you kind of wanted to play the game a little bit in order to, to get the best opportunity. And Igor just hasn't been someone who wants to play games, right?

Paige: Do you think was also kind of just like hard to believe is like, is that what it, like people were trying to wrap their head around if they could actually, if those numbers were actually true or if like [00:53:00] it was growing that fast. 'cause it's, it's kind of one of those things where you see in, in like the medical field, like being able to break into the medical field super hard and everything's so set in stone.

And same with industrial. Like it's so. Old fashioned,

like it also could have that component where they didn't wanna believe it.

Jason Yeh: no, I, and I think this is one of the funny things about fundraising at any level is. If you are pitching your company and you're pitching at a competitive valuation, it is, there's always gonna be doubt, right? If it

were obvious that you would, you would be able to exceed this or be worth a certain valuation, it probably means that the valuation that you're trying to get is too low.

It's like, they're like, oh my God, like it's a steal. But if you try to get it to a valuation that is. Um, accurate and competitive. Well, there are gonna be some people that believe it and some people that don't believe it. And when you push the valuation really, really, really high, then there are gonna be more people that don't believe it.

So you're right, like [00:54:00] that is kind of what was playing out. And now I think what is most impressive about that is, we've talked about this on the show, right? The people that raise capital in 20 21, 20 22 at the height of the market. A lot of those people. When they went out to raise their next round, like had a really difficult time because they were starting from a place of gigantic multiples and all this expectation and all this expectation of upward growth. When the market came crashing down and people were like, well, no, like this is now. We believe that companies need even more traction in order to be worth. Certain valuations. That's when a lot of startups got flipped upside down. They're like they couldn't raise their next round, which is why with Igor coming from a very difficult raise, but a very, very high valuation coming into a series B. Hi. The fact that he had so much interest in one of the hardest markets to, uh, raise capital in where his last [00:55:00] round was at such a high valuation means that he must have grown like crazy over the two years between when he raised before and the ra, you know, this raise, which is just one of the most impressive things.

Paige: Yeah. And it goes to show, like I noted something because um, I thought it was interesting and I think it speaks to the importance of. Executing on milestones, which should be a given. But I feel like it can be easy to throw out milestones and be like, oh yeah, we're gonna hit that, and then you don't hit it.

You know? So it's like choosing your milestones so carefully and, and I remember when Igor was talking about, he was talking to General Catalyst during Series A and they were like, you're too small. You know, we want you to get to, they were saying, you are at one, we want you at 10. I don't know what the, I do not know what the number was stood for, but he was like, I will get there in one year.

And they were like, no. No. And he got there, and he came back and they were like, oh, okay, let's do this series B. Like, that's why it was the easiest thing, because he had went and said, I'm going to do this. They didn't believe him. [00:56:00] He did it. They had no other choice but to go all in because they're like, this is someone I can trust.

He did the impossible.

Jason Yeh: I mean, I, I, at the end of the day, it's like when you're betting on someone that is the, that's the string of data that you wanna see, that they put out a plan, they execute on it. They got to the milestones that they say that they were going to, so that when they say the next thing is coming up, you're like, well. I have no reason to not believe him. 'cause he, he's done it before. Right? And um, yeah, I thought that was so impressive. And then just because, uh, it's so different from me, I'm incredibly impressed with his ability to like, be content with what is in front of him. See, see an option. To take on an investor in a sort of marriage

as first one that he met and be like, this is fair.


I know this is fair. Uh, I know this is a good firm. I like this firm. I don't need [00:57:00] to see what's behind door number two or door number three. I. Let's just go with it. I find that to be incredibly mature and advanced for his age, he's still very, very young. Um, and

yeah, hearing that I was weirdly like, I don't think anyone else would've picked up on that.

That was the thing that I was maybe impressed with the most,

He's just impressive all around human. So I'm so happy we got to have him on the podcast. And now we've never done this before, but I'm gonna try something with you 'cause I have a question. I wanna get your quick

Paige: answer and and see what your answer is And this is again, around milestones 'cause it's something I'm thinking about a lot lately.

Do you think it's better to set a smaller milestone? Like not nothing huge. Right. And hit it and go over it. And tell an investor that, or set a bigger milestone, get close, but not reach it. What do you, what do you think?

Jason Yeh: Yeah, that's a good question. Um, I think it's somewhere in between, but if I had to lean to one side, it would be, I think you wanna [00:58:00] set a, a goal and hit it.

Um, I like that approach for communication with investors. I like it for internal teams. It's like, you wanna build momentum, right? And you wanna

build this feeling of like, yes, yes, yes. Even if, even if like, putting a really, really big goal out there and then missing it by a little bit is still getting somewhere big. It just feels different. Like, it feels

you have, you don't have as good of a control over your business as someone who's like. Is the this, I know we can hit this goal.

We need to hit this goal. And then hitting it and then doing it

again, and then doing it again, and just building momentum

Paige: It. I mean, I know Igor is like a amazing case, but it worked for him for General Catalyst. So

set something, you know, you're gonna hit and hit it. Um, I think that's all I wanted to talk about, but this was a good conversation. I, I hope we have him back again

a series C crazy.

Jason Yeh: uh, he's probably like marching towards, uh, profitability, but, uh, I think he's [00:59:00] got another raise in him at least.

Um, so we'll, we'll definitely have to get him back.

Paige: All right.

Jason Yeh: All Thanks Paige.

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