Morpheus hits the startup big league with 72% success rate, can it sustain it?
The Morpheus (TM), a startup accelerator founded in 2008 by the husband-wife duo Sameer Guglani and Nandini Hirianniah, has emerged as a major player in the Indian startup ecosystem. In four years, TM has mentored 43 startup companies in six batches (the seventh batch is on), and Morpheus commands a success rate, or the percentage of companies that are still functional, of 72 per cent, which is significant even by global standards.
This means 32 companies are still up and running, three have been acquired and only eight have shut shop. Of these 32 companies, 17 have raised follow-on funding, while five are not looking to raise funds because they are either cash-flow positive or profitable.
Shravan Shroff, founder of VentureNursery, a Mumbai-based accelerator, says a success ratio of “50 percent should be a good number.”
While startup accelerators as a business concept is relatively new in India and TM is one of the first movers, there are many established players in the US. Startup accelerators bloomed after players like Y Combinator and TechStars were set-up in 2005 and 2006, respectively. TM has been inspired by that model.
Of the 114 companies that have completed the TechStars program, 92 per cent are active and profitable. On the other hand Y Combinator has a success rate of over 75 per cent and according to co-founder Paul Graham, the average valuation of a Y Combinator-backed company is $22.4 million. The accelerator has been behind companies like file hosting service Dropbox and private home rentals website Airbnb, which have commanded billion-dollar valuations.
Although while Silicon Valley accelerators are mostly focused on e-commerce startups, Indian ones also look at companies which are into products and product services, according to VentureNursery’s Shroff.
But Guglani and Nandini’s success story doesn’t start with TM. They earlier co-founded Madhouse Media in 2004, an organised movie rentals company that was acquired by Seventymm in 2007. Post acquisition, they worked in the Seventymm, before realising their real calling.
Guglani was approached by a startup for tips and before he could reply, he was asked the fee. “I told him it’s free but he insisted on giving me a fee so that he could officially command my time. So I agreed on the amount I was earning from my job at the time,” he says. That is how the idea of The Morpheus evolved, and the startup that had sought Guglani’s mentoring was Shimla-based content network startup Instamedia, which later went on to become a part of the Morpheus portfolio.
TM also has four part-time partners- Sarvjit Ahuja (technology), Anant Gopal (design), Pankaj Jain (legal) and Ashish Singla (finance).
The Morpheus school of thought
The Chandigarh-based accelerator does not have a physical office. The mentors instead allot 10-15 hours per week including calls, video chat and messaging, etc to the selected companies.
They work with the startups as part-time co-founders assisting and guiding in functions including product design, technology, operations, marketing, sales, fund raising, team building and finance for four months, which is the duration of the TM programme.
The startups also gain from the mentors’ experience with past batches and have access to Morpheus’s existing business relationships and contacts in India and Silicon Valley and its community of portfolio entrepreneurs - The Morpheus Gang, as they like to be called.
“We discuss everything from how to develop a great product and who to raise funds from to what is going on in their personal lives. And the work doesn’t end with the programme, our involvement is lifelong. We continue to be in touch with the companies,” says Guglani.
Initially, the company was only providing mentoring. But from its 4th batch, which started in March 2010, TM also started investing Rs 5 lakh in each of the startups in exchange for an equity stake. The stake varies from 7 to 12 percent, depending on the companies.
TM has so far made investments in 34 startups, taking its total investments to 1.7 crore.
The accelerator has mostly worked with startups focused on Internet, mobile and Cloud sectors, although Guglani says TM doesn’t necessarily sift industry trends while selecting startups, but rather bets on the idea and the people behind them.
The more the merrier
“India needs many good accelerators to ensure a good pool of value creators since in comparison to the number of startups in the country; the number of accelerators are too few. Also, competition lends more credibility to the domain and ensures that existing players don't become complacent,” says Guglani.
Shroff agrees with Guglani and says the local industry is at a nascent stage.
“We are in constant touch with the folks running these outfits and always explore opportunities to collaborate,” Guglani added.
Other accelerators running similar programmes include iAccelerator, The Startup Center, VentureNursery, The Hatch, TLabs and MyFirstCheck.
“Unfortunately, till now there hasn’t been active mentorship and hand-holding of startups, and that is how the idea behind Venturenursery came about. Accelerators are an important addition to the eco-system and as of now, the funda of ‘the more the merrier’ applies,” said Shroff.
TM is seeking applications for Batch 8 till 30 June, 2012.
The Morpheus Tritiya is a $0.77 million seed capital fund managed by Morpheus Venture Partners. It provides early-stage seed capital to companies operating in India. It typically invests $0.01 million in its portfolio companies.
VentureNursery is an angel backed start-up accelerator. It provides capital to young and pre-revenue startups. The firm seeks to invest in media & entertainment, retail, e-commerce, consumer technology, education and cleantech sectors. It also provides office space, operational infrastructure and access to a pool of expert service providers, such as law firms, company secretary, finance and accounting professionals services. It typically invests between $9k and $19k per company. The company was founded by Shravan Shroff and Ravi Kiran in 2012 and is based in Mumbai, Maharashtra.
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