Krishnakumar Natarajan, Co-founder of Mela Ventures and former CEO of Mindtree, discusses the Indian Venture ecosystem.
Sramana Mitra: I’m looking forward to catching up with you. We haven’t talked in a while, but we have followed each other’s work for a long time. Catch me up on Mela Ventures.
Krishnakumar Natarajan: Mela Ventures was launched two years back after I exited Mindtree. It was a publicly-listed company which I grew to a billion dollars in revenue.
Sramana Mitra: That’s where we originally met – at Mindtree.
Krishnakumar Natarajan: What we saw is something in the ecosystem. The quality of entrepreneurs is significantly improving and they have likely been mentored. If a fund was to take the onus of working with companies and help them scale, the number of successful startups increases. That was the thesis of Mela Ventures. We are an early-stage fund. We come in as the first institutional investor when the initial product-market fit has been established and revenues are anywhere from $250,000 to $750,000.
We believe that the challenge entrepreneurs face at this phase is different from the first stage where they raise angel funding. This starts translating into building an organization. That’s where we’re using our experience and network to help entrepreneurs navigate that stage successfully.
Sramana Mitra: Let me try to understand the specifics of the kinds of entrepreneurs to send you. I have actually one in mind. Let me first frame your investment thesis. You said you wanted to see some product-market fit. What is the fund size that you are operating with?
Krishnakumar Natarajan: Our fund is a little over $40 million. Since we typically are the first institutional investor, the check size varies from $1.5 million to $2 million. People like to have double-digit ownership of the company. Ideally, we are focusing on B2B. The experience of the partners is in global B2B and we can bring in our knowledge and network to help entrepreneurs navigate the GTM.
Also, help them in a variety of other areas like building the next level of the management team and helping them put strong processes. Our model of investing is that we do not intend to invest in a large number of companies. We’ll invest in about 12 to 14 companies. We are focused. We work intensely with them with the intention of scaling them up 8 to 10x in two to three years.
Sramana Mitra: When you say B2B, are we talking mainly B2B SaaS selling to enterprises?
Krishnakumar Natarajan: You’re right. A large part of our current investment is B2B SaaS. We are convinced that the enterprise tech landscape is ready for a big refresh. The system of records like ERP is not necessarily digital-friendly. The enterprises want to accelerate their digital transformation.
There’s an opportunity for a lot of B2B SaaS companies to be category leaders and global in nature. That’s a big part of our investment. Beyond that, we also look at business models in specific areas where the business model is B2B but not a SaaS model. I’d like to talk about one example of an investment that we’ve done in a precision agricultural drone company.
One of the thesis we have is that, in Asia Pacific and India, the land parcels are small. You cannot use other means that are followed in developed countries like helicopters to do the spraying. It results in human beings carrying and spraying these insecticides, which is a health hazard. It’s also not efficient to do that.
We identified this group of great entrepreneurs who had done fabulous work in the Indian space. They had built a drone with complete IP on both hardware and software. We have transformed it into a B2B model where we sell those services to large corporates, which are now taking huge parcels of land on contract farming. Essentially, we are looking at opportunities that lie at the intersection of, at least, two technologies.