This week CNBC-TV18's special show India Angels highlights the hottest trends in Indian entrepreneurial space, accelerators.
Reports peg the number of accelerators operating in India at about 35. This number includes the traditional IT business school variety, institutional accelerator programmes by Microsoft – Citrix and the likes and the latest variants which have grown in the last couple of years - accelerators by entrepreneurs for entrepreneurs.
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Like in a democracy we believe that while the rubble will rise it will function to sensitise a nascent entrepreneurial eco-system that is perhaps just beginning to walk on its own feet. CNBC-TV18 met the duo that set up India’s first independent accelerator programme - Nandini Hirianniah and Sameer Guglani of The Morpheus.
Nandini and Sameer formerly set up The Morpheus in 2008. The Morpheus is similar in structure and philosophy to Silicon Valley’s most celebrated accelerator, Y Combinator, which provides more than just money to start-ups.
Like Y Combinator, The Morpheus provides advice to start-ups in batches. They are currently on their eighth batch and have a community or a gang of a 130 plus entrepreneurs most of whom continue to actively participate in mentoring and sharing even after their four months bootcamp is complete.
Building the support system was a mission for Nandini and Sameer given their own trials and tribulations with entrepreneurship. It wasn’t an easy ride in naming their first entrepreneurial venture an online DVD rental business, Madhouse, captures what seems like an irrational life choice for this young team.
Nandini Hirianniah, co-founder, The Morpheus says," Madhouse was more accidental. This was the time when we were coming back to India. Sameer and I were in the US where he held a software job and I was figuring out what to do. I was also trying to work with the local independent film circuits in San Francisco. We had to come back to India for Sameer’s brother's wedding and also explore what we wanted to do. We came back and then we didn’t get our visa stamped."
Sameer Guglani, co-founder, The Morpheus says,"Today, if I find the guy who rejected our visa, I will go ahead and give him a hug. What we did in the beginning is a very typical thing of somebody who comes back from Silicon Valley into India and starts a company. So, we read all the books on making business plans and created a 35 page excel sheet and came to know that we wanted to raise Rs 1-2 crore. Spent about 2-3 months trying to make contacts with people who can help us raise money – one of our mentors was in Mumbai and he said, looks like nobody is giving you money and we said yes. Then he suggested us to go back to Chandigarh and do a pilot and if we build great business, money will find us."
The two pulled in their savings, borrowed money from family and got started and soon enough money did find them. Angel money of about Rs 25 lakh from IITians based in Silicon Valley and then a bigger round of about Rs 1.5 crore from the Indian Angel Network put them in the hot seat.
While there are no set rules to entrepreneurship one must have the basics or the fundamentals right. So we caught up with associate professor of management practice in marketing and entrepreneurship at the London Business School and the author of the "New Business Road Test" and "Getting to Plan B".
CNBC-TV18 also spoke to John Mullins, professor of management practice in marketing and entrepreneurship at the London Business School and the author of “Getting to Plan B”.
Meanwhile, John Mullins, think that an entrepreneur must be more passionate about the problem that he wants to solve than his idea for solving it. He also believes getting customers to pay is the best validation and one that will keep risk capital out of the entrepreneur's way.
Mullins says," In my view venture capitalist money is money of the last resort, not the first resort. VCs can add enormous value to a firm, but there are many kinds of companies that VCs just aren't interested in, investing in for many reasons.
Even if they do, the VC has very high expectations of the return he makes on each deal because it is going to have to pay for other mistakes that VC makes, most of the VCs investments won't pan out for that reason you are taking a big risk when you are taking money from a VC.
Now you have a high potential upside, but if you can get better terms, money from family, friends or fools, as they say the three Fs, they are better choices than VC. VC is not the first place to go.
In fact the first place to go for money is your customers because if you are solving a customer problem that is so significant that the customer will pay you to solve that problem then you really know you are onto something, so that's really the place to start."
But Mullins admits in the same breath that investing is risky business and here is the checklist for angel investors.
Mullins further says, "so being angel investors is not only a lucrative thing to do financially, even though it is high risk, it is also important for India.
When practice at its best, good angels do a couple of things - they invest in what they know because not only does that mitigate their downside, but it gives them a chance to really add value to the business and help it achieve against what are all these wrong odds. So they invest in what they know and they also always invest in portfolio fashion.
They don’t say I found the perfect entrepreneur, I am going to just dive into this one. They say I am not going to win all my bets, so I have got to do a bunch of them.
You have to do it with a portfolio mentality and then the last thing I would say is that unfortunately the lemons always ripe in early. If you have a portfolio 10-20 deals, which ones you are going to find out about first the ones that fail and it is only the others that over time will turn into ripe and delicious fruit to harvest."