Morpheus Venture PartnersLast weekend, Bangalore-based Morpheus Venture Partners, a startup mentoring firm, announced the third batch of companies that will be mentored by the firm’s three partners Sameer Guglani, Nandini Hirianniah (in photo) and Indus Khaitan. See the list of companies in the press release here. Guglani and Hirianniah started Morpheus in mid-2008, modelled on the Paul Graham YCombinator startup business acceleration programme. VC Circle reported yesterday that the firm is also raising a Rs 2 crore seed fund — see the post here. In an email interview, Hirianniah talks about the proposed fund and the shift to broader sectors with the firm’s third batch of ten startups. Edited excerpts: In a very short period we have built a portfolio of 20 talented, progressive and young startups and helped them accelerate. The only reason these 20 companies work with us is because they see value in our time and contacts. We are quite happy with the results so far and don’t feel a strong need to raise a fund. Money can also start attracting the wrong type of companies. But, as an experiment we are considering raising a Rs 1-2 crore fund. Work on that may start in about three months.
How many companies are you mentoring at present, including previous batches?
We have a total of 20 companies in the portfolio.
What is the size of the Morpheus team? How do you allocate bandwidth in terms of time spent with each startup during the four-month business acceleration programme?
We are a team of three partners. Between us we spend 10-15 hours per week with each company which is part of an active batch. With companies who have graduated from previous batches, we typically do one review meeting a month and are available to them on an on-demand basis.
How do you sustain yourselves, i.e. how do you make money?
Currently all the partners have invested money to run Morpheus. We sustain ourselves from our savings. We take an equity stake of 4-8 per cent in each of the companies. Like every other business we need to make money too! We plan to do that by selling the shares that we hold in our portfolio companies. Shares can be sold through one of the three events: initial public offering, merger and acquisition, sale of our shares to a new or existing shareholder of the company. We are happy to wait 5-7 years. But by taking a small equity stake without any special rights what we are saying is, ‘We make some money when you make a lot of money’.
Would you say you have seen reasonable success in being able to transition your startups to the next stage of funding?
Yes, three companies have raised Series A funding and one company from the current batch has raised seed investment. But we don’t measure our success by the number portfolio companies which have raised money. We focus on helping our companies build strong, sustainable businesses which are cash flow positive and can take care of their own costs. They are not dependent on external capital to survive and grow. That’s our yardstick. We focus on building strong, real businesses and eventually if you build a strong business, money will find you.
What are some of the challenges in attracting Series A venture capital for your startups?
As I said our approach is to build strong business. If you have a strong business, raising Series A is no longer that big a challenge.
How many startups in your portfolio actually don’t need venture capital? Who are they?
From the previous batches Deskaway and Sutra Services are growing fine with self-funding and strong revenues. Hence they don’t need venture capital. For the current batch, it is too early to say.
In Batch III, was the shift away from web technology startups to broader segments deliberate? Why?
India’s online market is nothing more than ‘tiny’ – only four per cent of the population is online and there are about 9-10 computers per 1000 people. On the other hand India has a lot of fundamental unsolved problems that lead to large markets opportunities. That’s the reason our portfolio is focused on domains like education, health, automotive, apparel, retail, real estate, advertising and financial services. Even in previous batches, we have had only three pure online plays (Instablogs, Deskaway and Fachak) and all of them are focused on the US market. The rest have a fair amount of offline component.
Do you eventually plan to morph into a full-fledged venture capital investor?
No. We plan to continue engaging with startup in their early days and work with them closely as ‘limited co-founders’. That’s what we are passionate about.
Isn’t this old news. They’ve been talking about raising a fund for a year or so… I remember hearing this comment last year.
I am really surprised entrepreneurs are so gullible that they give 4-8% equity for advice with no track record.
-Startup Dude
@Startup Dude,
Fund raising is a grill, takes anywhere between 3-6 months to raise a small size fund. While we wanted to raise a fund sometime ago; we did not not want to take focus away from our core – the Business Accelaration Program. for startups.
Regarding your second observation, I’ll leave at that as only time can vouch for that.
Nice coverage Nandini – crisp and to the point.
@Startup Dude: I dont know which part of the globe you are from but here in India people think thrice before investing even a 100 bucks – leave aside a funding of 2 cr. As Indus mentioned – raising funds is a very elaborate and tedious process – getting people to hear you out is an achievement itself
Regarding 4 -8% equity: MVP may not be world famous or have a significant track record like the big fishes – but then again neither do we!
We are new in the business world and having a partner like MVP gives us the necessary edge and expertise to grow our business. We have a 2 – 3 week session with MVP with no strings attached where we can have a fair idea of whether the partnership is working out or not
In our case, for Robots Alive, MVP has significantly accelerated our growth and we have been able to penetrate the market through MVP very quickly – something which we could never imagine otherwise.
Over and above that MVP is a young dynamic team where we also develop ideas for other business opportunities while having a lot of fun! I would recommend all entrepreneurs to at least take a look into MVP
The only regret I have with MVP is that I should have approached them earlier!!
Cheers
4-8% for Mentoring looks a bit steep. Especially after looking at Vijay Anand’s presentation at Dare event where he talks of 1-2%.
Or am I missing something? The difference between Mentors and Advisors?
@Ranjan,
At Morpheus, we spend 10-15 hrs per week with a startup — we don’t come in as advisors, but as a “limited co-founder” for the same, where we do pretty much everything end-to-end from creating your pricing model to hardening your architecture.
Go for it Morpheus. I cannot agree more with your model. In a limited manner I have been able to do that a couple of times in the past, where I have traded mentoring/consulting for equity.
Several VC funds could beneift from your shortlist, so I wonder why you need to raise 2 cr at all. Once you get into providing funds though, the entire expectation of the startup changes completely.
VIjay I am sure, threw a ball park figure of 1-2%. Must have been sorely pressed for a view, to have proffered that figure. But I am sure, even he will not treat it as sacrosant. I would argue that startups need this value. A lot depends on what advice you are able to meaningfully bring to the startup. Obviously it is considerable, given the 15 ours per week that you are willing to put out.
I have been involved with startups in the past, and this is a service that they could well do with.
Naru