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Business Incubators: The Morpheus (Part 1)

Posted on Monday, Oct 25th 2010

By guest authors Praveen Karoshi and Prashant Sachdev

After a few hiccups, it was great to finally meet Indus Khaitan, partner at The Morpheus, an incubator out of India, face-to-face over lunch. We were talking to Khaitan as part of a new series, an exploration of how business incubators are doing their part in advancing the cause of entrepreneurship.

Khaitan talked about some of the key startups in The Morpheus’s current batch of recruits, who graduate after four months of mentoring in various aspects, a period which the incubator calls active engagement. But most portfolio companies end up staying much longer than expected because of the sophisticated guidance and all-around nurturing. As The Morpheus currently has more than 25 companies, the later batches have the added advantage of experience and collaborative support in areas such as hiring, lead conversion, and hand-holding. The incubator’s success is evident in the recent funding of Instablogs and the general stability of The Morpheus’s other startups.

The conversation then turned to other areas of the startup ecosystem in India: startups hitting the bull’s eye in mobile payments, digital media, and social media. We touched upon major trends that will invariably pick up pace in India, such as blogging uptake, Internet penetration, middle-class consumerism, and the build-up and busy period for startup upheaval in India. Khaitan’s technical knowledge, built on solid previous experience, enabled him to share insights with a fresh perspective.

We also talked about the future of The Morpheus. The partners’ vision is to accumulate around 100 companies in the next four to five years and have an even spread of allocations, maximizing the hit rate of positive exits in various domains. One of their newest additions is Siddharth Shastri’s Phitesla, which is doing work in speedometers in terms of automated electronics. We ended the conversation with a discussion of portfolio companies new and old and these companies’ viewpoints on the advantages of working closely with The Morpheus. Indeed, it was a refreshing exchange. – Praveen Karoshi]

[Our conversation with Khaitan was followed by an interview with Nandini Hirianniah, also a partner at The Morpheus. This is the first interview in our series. – Prashant Sachdev]

Prashant: Hi, Nandini. Let’s start with a brief description of the incubator.

Nandini: The Morpheus is not an incubator in a traditional sense. We are a business accelerator. We identify select startups and work closely with them after a mutual selection. We engage with startups in the most crucial phase of their existence, the first 12–18 months, the phase that’s otherwise known as the “valley of death.”

The Morpheus runs what it calls the Business Acceleration Program (BAP), which is designed to guide startups through this treacherous phase. During this phase, we work with startups as limited co-founders who are experienced and well connected.

The Morpheus’s true value comes from what it does for entrepreneurs. The Morpheus:

  • Works with entrepreneurs as a limited co-founder that is experienced and well connected.
  • Mentors entrepreneurs and offers hands-on participation across different functions such as product design, technology, operations, marketing, sales, fund raising, team building, and finance.
    Helps entrepreneurs to learn and gain from the experience of working with its portfolio of startups and watching them grow, falter, and grow.
  • Offers access to The Morpheus’s existing (and growing) business relationships and contacts in India, Silicon Valley, and other parts of the world
  • Offers access to the community of ever-growing Morpheus portfolio entrepreneurs (40 as of now)
  • Shares its passion for, love of, and commitment to early-stage startups.

The Morpheus invests 5 lakh rupees (~$11,260) in each of the companies it works with and takes an equity stake of 7% to 12%.

Prashant: Great. And what was the purpose of setting up the incubator?

Nandini: Sameer Guglani and I started our first venture, Madhouse Media, together. As first-time entrepreneurs, we learnt a lot of things from scratch, unlearnt a few things quickly, and made a lot of mistakes. In 2004, the start-up ecosystem in 2004 India was almost nonexistent. We often wondered if there were others like us whom we could connect with, exchange notes with, and learn from. But there were not many forums that discussed mistakes or learning; they spoke only of successes and “been thee done that” stories.

Closely related was another experience, where we had six advisors for Madhouse who had relevant experience to our business. But sadly, 50% of them never answered our phone calls even once. The other 50%, some of whom were our investors, were there to help, guide, and connect us as required.

This segment is part 1 in the series : Business Incubators: The Morpheus
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