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Mentoring, the new seed capital investors bring to start-ups

Early-stage investors plug the gaps in the start-up ecosystem

Sudipto Dey  |  New Delhi 

Early-stage investors, start-up incubators and business accelerators are finding newer ways to connect with new entrepreneurs. Currently, there are some 40 such incubators and accelerators that 'mentor' start-ups in return for equity in the ventures. According to industry estimates, these early-stage investors guide - and fund - around 400 start-ups a year. Roughly, one new business accelerator joins the fray every month or so as the nascent start-up ecosystem falls in place.

Suddenly, there seems to be a lot of action on this front.

Take, for instance, Chandigarh-based The Morpheus, one of the oldest in the business of mentoring start-ups. Change has been constant in the five years of its existence, says Sameer Guglani, co-founder of The company regularly taps into 50-odd start-up ventures - and 150 founders - that have come out of its fold to help new ventures hire talent, get business leads, and connect with prospective investors. It recently did a three-city road show to hire fresh hands, which saw participation from 30-odd portfolio

is now putting in place a software platform to enable founders of portfolio ventures to share their contacts with each other. The company recently did away with the practice of holding a pass-out day - popularly called Demo Day - for each batch. Instead of that, the whole batch now tour Mumbai, Delhi and Bangalore to showcase their business proposition to prospective investors as well as potential customers. "This helps them connect with wider cross-section of investors and customers, and bond better with each other," says Guglani.

Inc, a venture advisory-cum-early-stage investor, launched earlier this year by co-founders Pearl Uppal and Gaurav Kachru, positions itself as a mezzanine player sitting between angel or seed funds and the venture capital funds. "We will not be the first cheque for a start-up, but come in after angel or seed round of funding," says Uppal. Typically, will look up for investment ventures that pass out from accelerators, and mentor them through the venture capital round. Ticket size of funding is larger, starting with anywhere around Rs 25 lakh, and can go up to Rs 2 crore in subsequent rounds. "We roll up our sleeves and work with start-ups to build their operational muscles, such as customer development, distribution reach, and brand building," says Uppal.

Another platform for start-ups, Mumbai-based AntFarm India, positions itself as a hybrid mix of incubator, accelerator and a fund for building global brands out of India. "We are kind of an idea factory. We put in place an entrepreneurial team to execute the idea, fund them through a seed fund, support the business through mentors, human resources and other support functions," says Rishi Khiani, a serial entrepreneur and former CEO of Times Internet Limited. The ideas that AntFarm backs have to have global appeal and be scalable across countries, says Khiani. Currently, several ventures are in the incubation stage in travel, fashion, and fitness segments.

At Delhi-based Aegis Center for Entrepreneurship, a business incubator founded by a group of entrepreneurs from India, the US and Singapore, any mentor to a start-up has to have a stake in the venture. "The mentor must have skin in the game," says Sanjeev Kakar, one of the founding members of Aegis, who has funded several start-up initiatives. The mentors are carefully hand-picked with experience in the industry segment that the start-up is from and should be in a position to bring in Rs 20-30 lakh as seed fund. In the past 18 months, Aegis has incubated six start-ups, two of which attracted external funding.

At Microsoft Accelerator, which has had two batches of start-ups pass out from its programme over the past 10 months, the ventures are not promised any funding in course of their four-month incubation. The tech-major backed accelerator does not take any equity position in any start-up. "Our focus is on building up a business, help them connect with customers, and build a revenue flow," says Mukund Mohan, CEO-in-residence at Microsoft Accelerator. What the accelerator does is to get the start-ups mentored from seed and angel investors. Many of these investors end up taking equity positions in the start-ups.

Delhi-based 91Springboard positions itself as a hub for start-ups offering plug-and-play work space for a monthly rental, along with shared services such IT infrastructure, marketing, legal, HR, design, among others.

Launched in January this year, 40-odd start-ups currently work out of 91Springboard's 10,000-sq feet facility, which has 160 workstations with 300 seats, 10 conference rooms, and a cafeteria that doubles up as a venue for events.

At a premium
"Co-working helps start-ups to grow frugally," says Apurv Agarwal, vice-president of 91springBoard. Plans are afoot to take up equity position in few "bright" start-ups working out of the facility, says Agarwal.

In a tight money market, mentoring comes at a premium for any start-up, says Ravi Kiran, co-founder of angel-backed accelerator VentureNursery. "Budding entrepreneurs must realise that customers' money is best to build their business," says Kiran, an advertising industry veteran.

VentureNursery puts extra emphasis on taking start-ups through the paces when it comes to understanding of customers, money management and techniques such as lean start-up.

As Kiran puts it, an entrepreneur must realise that venture money, mentoring or acceleration is not an easy meal ticket.

First Published: Sat, July 20 2013. 22:22 IST