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Business Incubators: The Morpheus (Part 4)

Posted on Thursday, Oct 28th 2010

By guest authors Praveen Karoshi and Prashant Sachdev

Prashant: Out of all pitches you receive, how many deserve a closer look?

Nandini: We go through all of them, and based on past data, I can say that we have an initial interaction with at least 50% of them. Sometimes, it will be a great founder but a wrong idea – that can be changed.

Prashant: Do you hold regular meetings where selected entrepreneurs have a chance to present? If so, how often?

Nandini: We are constantly engaging with entrepreneurs who have applied or even gotten in touch with us, if we see potential in them, because The Morpheus’s philosophy is to help contribute to the quality of the startup ecosystem in India. So, even if the startup does not make it to the BAP, if we have helped them strengthen their business model, figure out their idea, or anything else, we are happy!

Also, as part of our selection process, we interact regularly with potential candidates. We do something called a live-in before we formally short-list candidates for the BAP. It’s a two-week live-in where The Morpheus’s approach is as if the BAP has started, and we start giving out true value. This gives the startups and us information about each other that may have been missed through just dialogues.

Prashant: What factors do you give the most weight to when debating whether to accept a company for incubation?

Nandini: There are a couple of things:

  • The attitude of the founding team matters a lot in such an early stage. If the team is hung-up or closed to change or input, then it’s a disaster. Therefore, a strong founding team with a “never say die” attitude and the will to learn, listen, and do the right thing for the business is something that we look for the most.
  • Closely related to that is the founding team should have core expertise of the business. The journey is clueless and difficult if the core idea is Hard-ware driven and the founding team has no engineers.
  • The other factor is the business idea: How important to the end user is the problem the business is trying to solve? We also consider the scope for innovation of the idea.

Prashant: How long does it takes for a company to get into the incubation program?

Nandini: Two months. We call for applications twice a year. We do an initial short list based on the application form. We then have an initial telephone call with the first-level short lists. If there is potential, we keep in touch with them till we short-list the first set of live-in companies. This process usually takes two months, and the idea is also to see how the team progresses in this time, because we want companies that execute and execute fast!

We then short-list potential companies for the two-week live-in. After the live-in and a mutual selection, we start our four-month BAP (Business Accelerator Program) with select companies. But our interaction with our portfolio is for life.

Prashant: How do you conduct due diligence, and what are the key areas that you focus on?

Nandini: In such an early stage, our core focus is on the founding team. It’s their attitude, and will to do and act, that we lay our bet on. Our due diligence is also in terms of testing their attitude, openness to things, team dynamics, and their ability to execute fast.

Other things we check on are the founders’ backgrounds and their credentials, the company accounts, if the company is formed, and some basic fact figure checks for companies that are already functional.

Prashant: What do you do with the businesses that you reject?

Nandini: Our policy is, “We are open to any entrepreneur who sees value in us.” For teams that do not make it, some will be premature; we engage with them on and off and consider them for the next batch. Some may be more mature, or the timing may not be right, and so forth. Such teams we engage with as “friends of The Morpheus” where we provide need-based help and value.

Prashant: How often are the companies you accept at idea or concept stage, and how often do they have some decent revenue?

Nandini: It’s a mix; we are more inclined towards companies at an early stage. Let’s say 80/20 with the greater percentage in the early-idea stages.

This segment is part 4 in the series : Business Incubators: The Morpheus
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