Mentor service for the startup companies in software

[dhilipkumar]

Mentor service for the startup companies in software

Call them 'virtual' angels if you will. Shirish Deodhar, Hemant Joshi and Madhukar Bhatia are almost like your regular angel investors, minus the money. So what do they do? The three co-founders of Pune-based nFactorial Software provide mentoring services to software product companies that have just started out or those with some revenues and in need of scaling up to the next level.

"Software product companies need mentoring and there is a near absence of that in India," says Deodhar. "In the Bay area (US), people usually work in a company and then set out on their own so they can tap into a mentor or client. In India, there is no such role model for product development companies and hence no support system for them.

We come in by lending our experience to these entrepreneurs." The three co-founders of this mentoring, advisory and `virtual' angel funding company are all serial entrepreneurs themselves--Deodhar founded Frontier Software, which was later acquired by Veritas, which in turn was acquired by Symantec. Later, along with Hemant Joshi and Madhukar Bhatia, he launched In-Reality Software, which was acquired by Symphony Services.

The firm helps the startups identify investors who usually invest in their personal capacities. The method followed is that three-four investors make a small investment in the company, which has the benefit of reducing risk for the investors and gets the recipient company 3-4 investor-advisers. "We are operating on a venture capitalist's model--we sort out ideas, decide the best companies and the best fit for them," says Bhatia.

Factorial mentors 8-9 companies at a time, and its founders say they've deliberately limited themselves to companies that are either in "the white space" that is, brand new start ups which are pre-revenue, or early stage, that is, with annual revenues of Rs 2-4 crore but want to grow 10x. "We identify and mentor startups that aspire to become Rs 20 crore companies. We then ask for an equity stake in the pre-revenue firms.

In the early stage ones we take a small stake in the form of sweat equity and, if they can afford it, a retainer," says Deodhar. Mentoring, for the three industry-veterans, involves sorting out issues for the new entrepreneur. Since technology startups are usually launched by first-generation entrepreneurs, they don't come with much baggage. The downside is that they also do not have access to the inner workings of a business. This is often the area where they need help, or mentoring.