The pressing need for digitization and AI in industrial operations

A new industrial revolution is unfolding in front of our eyes. Across all types of manufacturing and industrial processes, real-time information from sensors, progressively performant AI algorithms, and enhanced control and automation can change the game. These technologies promise to improve the volume and quality of production, boost operational efficiency, and reduce costs.

The need for such a transformation is urgent. A critical measure of industrial efficiency is unplanned downtime – those periods that a facility must halt operations without warning. Downtime has become an increasingly expensive proposition. According to a recent report from Siemens, downtime costs for the largest companies in sectors like automotive, chemicals, pulp & paper, and oil & gas can exceed 10% of total annual revenue. A single lost hour of production can cost nearly $1M, up 2X in the past five years. Forces driving this new reality include rising energy prices, supply chain disruptions, and challenges in hiring and retaining skilled labor.

The theme of enhanced industrial efficiency strikes a particularly powerful chord in the United States, where manufacturing self-reliance and reshoring are priorities not only for enterprises but also national security. According to the US Census Bureau, US manufacturing facilities are being constructed at a higher rate than any other type, with spending up 3X in the past 3 years. Proponents of an American industrial renaissance are eager to ramp output quickly while leveraging innovation to keep costs competitive.

The road to higher performance runs through machines. Motors, pumps, compressors, gearboxes, bearings, and similar equipment are the workhorses of industrial infrastructure. Maintaining constant visibility into their running condition provides insight into throughput, quality, yield, and other metrics tied to top-line revenue – and allows operators to better manage their assets and avoid unplanned downtime.

But therein lies the challenge. In reality, machine visibility in most plants remains limited. While major equipment may feature instrumentation and PLC control, most assets are barely digitized. Maintenance and reliability teams typically monitor machines with manual oversight and on are active basis. They rely on time-based schedules that lead to inefficiencies and invite unplanned downtime because warning signs are missed or disregarded. Workflows are often analog and unoptimized, conducted with clipboards or spreadsheets and marked by an absence of team coordination.

The Tractian solution – an AI-powered platform and pervasive sensing

Tractian stands at the forefront of this vast opportunity to introduce impactful intelligence to industrial practices. Given its huge market potential, exceptional business execution and what we believe is the most differentiated product in the space, we at NGP Capital are delighted to announce our investment today in Tractian’s Series C fundraise.

What Tractian delivers is a unique, comprehensive industrial operating system – one that synthesizes best-in-class AI models, workflow software, and sensing hardware. As a real-time system of record, Tractian harmonizes production, reliability and maintenance operations –traditionally siloed functions – to maximize business outcomes for customers.

The first part of the equation is physical sensing. Tractian’s flagship Smart Trac product is now in its 3^rd generation. Successively refined with customer feedback, it is a benchmark for measurement fidelity, ruggedization, battery life, and ease of installation. The sensor data flow into a tiered network of hundreds of AI algorithms that perform a complex “fingerprinting” of individual machines, decoding their vibration- and temperature-based signals. This translation gives Tractian a unique, real-time diagnostic health reading of each asset.

Smart Trac is the first in a suite of class-leading connected hardware. It is joined by synergistic proprietary devices with functions ranging from detailed tracking of energy consumption patterns, to seamless release of PLC data from siloed networks to gauge production availability. Individually, each device delivers powerful insights. When combined, they paint a facility-wide picture of physical status that can serve as the basis of holistic operational decisions.

This is where Tractian’s operational software comes in. TracOS is a supercharged computerized maintenance monitoring system (CMMS) – a control center for coordinating workflows, managing assets and inventory, tracking KPIs and masterminding scheduling complexities. A key differentiator is Tractian’s integration of data from its sensor network to “close the loop” – making physical intelligence immediately actionable from a single pane of glass.

Tractian has taken a further giant leap by integrating Generative AI into its foundations. It ingests millions of records from OEM service manuals, customer logs and checklists, and datasheets, combining these with its own operational data repository from tens of thousands of machines. Leveraging this rich volume for training, Tractian fine-tunes LLMs that propose and prioritize critical actions, query assets dynamically, create customized reports, and more. Its trained LLMs significantly outperform off-the-shelf versions for industrial tasks, in one of the best illustrations we have seen of carefully curated, domain-specific data driving superior Gen AI results.

Tractian’s business scale is compounding its data advantage. It has paired its product dominance with a powerful sales engine and go-to-market motion with quick cycles and lean implementation. The result is a global base of over 1,000 customers, ranging from mid-market to enterprise, that includes many of the world’s largest brands. The scope of addressed industries is expansive – from discrete and continuous manufacturing to process industries to transportation, mining and energy.‍

Investing in a perfect thesis fit – and reuniting with an exceptional team

In light of its extraordinary achievements and category leadership, we are thrilled to participate in Tractian’s Series C finacing round, led by Sapphire Ventures with participation from General Catalyst, Next47 and other insiders.

Tractian is a superb match to our thesis at NGP around digital-physical convergence. Their product-building sequence is one that we believe will maximize success: 1) Tractian attacked the most difficult problem first, in the physical domain using sensors; 2) the resulting data streams created a foundation for AI strength in the software layers above; 3) in parallel, additional sensing modalities were launched – generating more data and feeding the AI-virtuous cycle. The result is a HW-SW platform that improves at an accelerating rate and is broad enough to address the giant market opportunity ahead. We are also excited to back teams with deep domain expertise – and Tractian’s knowledge of industrials confers unfair advantages that will only build over time.

This financing milestone also holds particular significance for me, representing my third time investing in Tractian. I first met the company when it was seed-stage, saw something special, and subsequently led the Series A and joined the Series B while at Next47. Through my time on the Board and engagements with the team, their story increasingly resonated on a personal level. A deep bond was established with the founders  – Igor Marinelli, Gabriel Lameirinhas, and Leo Vieira – over nearly four years. I am exhilarated to be joining forces with them again.

The team is what makes Tractian special. There are no shortcuts or magic in their success. Their achievements can be distilled down to four key characteristics: 1) a hard-driving, always-learning, zero-complacency culture 2) high speed ideation and development of new products 3) customer obsession coupled with speed of business execution and 4) an insatiable drive and urgency to redefine the industrial category.

At NGP, we prize working with passionate teams that share these traits – thinking huge and working relentlessly to build a generational company with global impact. Tractian is at the tip of the spear of the data-powered shifts we are witnessing in industrial settings – and we cannot wait to join them on their incredible journey. We’re ready for the revolution.

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The global economic opportunity to be unlocked through digitalization, AI and automation in the industrial space is immense. If you are building a company at this intersection, please reach out to me. And if you are a super achiever interested in joining the incredible team at Tractian, please contact them here – and come prepared!

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