The Morpheus raises seed capital to invest in startups

Bangalore: Startup incubator Morpheus Venture Partners, which has renamed itself as 'The Morpheus', has raised a seed capital fund to invest in startups. The fund plans to invest Rs. 5 lakh ($10,000) in each startup from its new batch starting end of March, reports Madhav A Chanchani from VC Circle.

Morpheus has managed to raise Rs. 2 crore which it plans to invest over the next one or two years in its incubatee companies, said its co-founder and general partner Sameer Guglani. Morpheus has till now incubated 20 companies including its current batch of 10. "Based on our performance with these 20 companies, we have managed to raise the fund," said Guglani in an interview to VCCircle. Morpheus has raised the amount from high net worth individuals (HNIs) in India and the United States. 

Guglani had earlier Co-founded online DVD rental company Madhouse.in which was acquired by Seventymm.com. Nandini Hirianniah, also one of the Co-founders of Madhouse, and Silicon Valley entrepreneur Indus Khaitan are also part of the Morpheus team.

The firm has raised Rs 25 lakh from each investor. While they do expect their investment return, "the investors are mainly people who have a soft corner for startups in India," added Guglani. He added that the firm would look at a larger fund in the future.

Morpheus, which is based on the Ycombinator model, runs a 4-month Business Acceleration Programme (BAP). As a limited co-founder to startups under its portfolio, it extends assistance in product development and launch, team building, devising a revenue model and customer relations for a 4 percent to 8 percent stake. Morpheus is also starting to look at applications for its new batch starting next month. It has already received applications from each one of the Indian Institute of Technology (IITs).

With the incubator also making a financial investment now, this stake will increase to between 7 percent to 12percent, said Guglani. But Morpheus continues to remain primarily an advisory firm. Three companies from Morpheus' earlier batch have managed to raise venture funding. These include local community site Commonfloor (Accel), background verification firm Crederity (Ventureast) and citizen journalism platform Instablogs (Indiagames founder Vishal Gondal).

With risk appetite for very early stage startups drying out, most venture capital investors in India are looking to put over $2 million per deal. This presents a funding gap, where firms like Morpheus handhold startups till they mature.