Mela Ventures, which was floated by software services company Mindtree Ltd’s founders Krishnakumar Natarajan and Parthasarathy NS, has marked the final close of its maiden fund to raise Rs 320 crore (around $42 million), exceeding its target.
MV Core Tech Fund I, with an earlier target corpus of Rs 200 crore, has invested in four companies so far deploying around Rs 32 crore. “The fund will be closing three more investments in the next 45 days,” Parthasarathy said in a joint interaction with VCCircle.
The fund plans to make total investments in around 15-16 companies.
Limited Partners (LPs) or investors in the fund include government-owned SIDBI (Small Industries Development Bank of India) and Nippon India Digital Innovation Fund.
Around 40% of the LPs, Parthasarathy said, are primarily high networth individuals (HNIs) who are chief executives from the technology industry and 20% of the fund’s capital comes from the founders, Parthasarathy said without divulging in further details.
Parthasarathy was previously the vice-chairman and chief operating officer (COO) at Mindtree while Natarajan was chairman of the software services firm. Both quit Mindtree after engineering giant Larsen & Toubro (L&T) completed its hostile takeover in mid 2019.
In August 2020, Mela Ventures had announced the first closure of this maiden fund at Rs 132 crore.
The MV Core Tech Fund I is Category-II alternative investment fund (AIF) registered with the markets regulator Securities and Exchange Board of India (Sebi).
The fund seeks to invest in startups in business-to-business (B2B)-focused software as a service or SaaS companies which have proven its product-market fit and has a revenue of $250,000 or more.
“We only invest in B2B companies, mainly because all our lives we have built businesses only to serve large enterprises. So we only understand B2B and we don't want people to see us as a pure financial investor. We want to return good money to our LPs but more importantly, we want to select a few startups and help them become successful by getting involved in a little deeper fashion than being a passive investor,” Natrajan said.
Mela Ventures’ initial aim was to build next-generation entrepreneurs out of India by supporting early-stage companies using cutting-edge technologies to build B2B solutions targeted at global enterprises.
“When we launched, the fund’s cheque size ranged from $750,000 to $1 million but due to increased interest in B2B companies and founders' willingness to raise larger capital, the fund now backs companies with up to $2 million in the first round. Around 40% of the funds are allocated towards the first investment and 60% will be deployed in follow-on investments in portfolio companies,” Parthasarathy said.
The portfolio companies of Mela Ventures include customer data platform FirstHive, media tech company Voira, Unmanned Aerial Vehicles focused General Aeronautics and SaaS firm Infilect.
One of the reasons Mela Ventures was launched, according to Natarajan, is that India requires a strong domestic capital environment.
“When we think of successful exits in India, (such as Flipkart) a lot of the money just went out of India because the investors were all foreign. However, for India to become one of the top two startup ecosystems in the world, we need a strong domestic capital ecosystem, which is why 90% of our capital is domestic. This means that when we exit and return money to LPs, the money will hopefully stay in India to generate investments into this asset class,” he added.
