Mohandas Pai joins others to start Rs 125 cr product focused fund

T V Mohandas Pai
Prominent startup investors T V Mohandas Pai, Naganand Doraswamy, Arihant Patni, Amit Patni, Prashant Deshpande and Rajiv Mody have come together to launch a Rs 125 crore fund Ideaspring Capital to back early stage product startups in the country.

The fund will look to invest in entrepreneurs and startups that have a deep technology focus in areas such as machine learning, augmented and virtual reality, internet of things and enterprise software. Ideaspring has allocated Rs 50 crore from the corpus to invest in seed stages, another Rs 50 crore will be used to back companies in pre-series Series A rounds, while the balance will be used as a buffer for bridge rounds and for fund expenses.

"We wanted to work with entrepreneurs that had IP as the key differentiator. When I say IP it's either some algorithms they're working on or deep technology as a differentiator that they are bringing to the table.This typically means the entrepreneur has worked in the domain for some period of time," said Naganand Doraswamy, MD and CEO at Ideaspring Capital.

The success of Indian companies such as Zoho, Freshdesk and Capillary at a global level has shown how lucrative the product space can be, and Ideaspring is looking to specifically target such firms. The fund will focus on companies which proceed to the series A round in a span of 12-18 months, a period much longer than what business focused startups are allowed today.

Mohandas Pai, general partner at Ideaspring said that this time will be utilised by the startup to develop their product and get validation from customers. Moreover, the companies would not have to worry about aspects other than building their product during this time, with the Ideaspring team mentoring them on product management, customer management and design thinking for serving clients globally.

"In terms of Indian companies building products for global scale, we have no choice. However, the trend that we're seeing is that larger startups are buying software from smaller startups, so that change is coming and I'm so glad that we have some unicorns in India," added Doraswamy.

While product companies are seen to provide less returns than business or e-commerce companies, the investment required is also much smaller. Ideaspring has set Rs 3 crore as the benchmark for every seed investment it makes and plans to fund four to six startups a year. It will also help these startups connect with more institutional investors for their pre-series A and Series A investments, but says companies it invests in should begin showing intent to buy from customers after a year.

Ideaspring expects to receive Rs 90 crore of the targeted Rs 125 crore fund within a month, while the remainder will be closed four months down the line. While the fund has already selected a few companies, it declined to disclose which companies these were. Ideally, entrepreneurs with experience working in research arms of multinationals, Indian entrepreneurs returning from the US and people who have done academic research are potential investment targets for Ideaspring.

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