Mindtree founders turn VC. Their aim: Create 8-10 mini Mindtrees

Parthasarathy NS (left) and Krishnakumar Natarajan , co-founder, Mela Ventures

Life’s a mela (fair), and rarely does one get a third chance to browse through the stalls and discover a gem that only needs the right polish. But that’s pretty much the journey that Krishnakumar Natarajan and Parthasarathy NS have earned the right to embark on.

The co-founders of Mindtree—senior jobs at Wipro in their first innings—recently announced the final close of the inaugural fund at their early-stage venture capital (VC) firm Mela Ventures at ₹320 crore, well exceeding their initial target of ₹200 crore.

Among the institutional investors in the firm are the fund of funds from India’s Small Industries Development Bank and Japan’s Nippon India Digital Fund. Strong interest from several prominent family offices and ultra-high-net-worth individuals took the total inaugural fund to ₹320 crore.

After exiting Mindtree in 2019, they got offers from large global private equity firms who wanted them to build promising ventures on their portfolios, but in the end that would have been more of the same, the IT services entrepreneurs decided.

They’d already been angel investors and knew that only about 4 percent of startups reach a stage where they are able to raise institutional capital, and even some of those fail. They also thought of a proprietary option with their own money, but decided that a full-fledged VC firm with high-quality limited partners would bring discipline and purpose to the whole effort.

In May 2020, markets regulator Securities and Exchange Board of India signed off on their fund and in under three months, by August, they had their first close.

“At the next stage in our life, the focus is not on us, but on the entrepreneurs… the light should really shine on them,” Natarajan says. “And in an eight-10-year time span, if we are able to create eight to 10 mini Mindtrees, we would have delivered back to the ecosystem from where we got so much.”

Mela Ventures has made about five investments so far. In total, Natarajan expects to make maybe another 10 investments, typically at the pre-Series A stage, as the first institutional investor. Mela typically will invest ₹7-15 crore as its first cheque in a startup and take between 15 percent and 19 percent equity, and a board seat.

“We want to create the next generation of business-to-business category leaders with deep tech IP. We see that there will be a global technology refresh over the next decade, and the companies we want to back will have to be at the intersection of important trends,” says Natarajan.

Consider, for example, the combination of advances in computer vision and AI-based data analytics that has the potential for revolutionising retail inventory stock keeping. Infilect, a Mela Ventures portfolio company, offers such a technology.

At General Aeronautics, founders Abhishek Burma and Kota Harinarayana—father of India’s Light Combat Aircraft—are combining drones and spectral imaging for applications, including precision delivery of pesticides, that can save millions of farmers from painful chest and lung ailments, and also make the chemicals a lot more effective while reducing their use by as much as 90 percent.

“Our model is not just to be a financial investor who will just review companies on a quarterly basis. We intensely work with the entrepreneurs, evolving their strategy, fine-tuning, helping them make breakthroughs with customers, helping them build the management team, helping them put operating processes in place,” Natarajan says.

Some of Mindtree’s other co-founders, including Subroto Bagchi, S Janakiraman, and Rostow Ravanan—who is also on the investment committee—and former senior VP Kalyan Kumar Banerjee, have also invested in the firm.