The Changing Paradigm of Incubation in India

Startup

Have you ever wondered about the mechanics of an aeroplane taking off? It’s much like throwing a frisbee up in the air, governed by the same four forces that help take flight, be it an aircraft or a frisbee. The principal forces of lift, thrust, drag, and weight. Today we take the unique juxtaposition of these four governing forces for granted, but they have been the very forces that have enabled the marvel of air travel as we know it today. 

Much like the principles of flight, certain governing forces determine an innovation’s take off into the larger universe that they desire to serve. These forces have been discovered through a long process of trials, tribulations and errors along the way by many a startup. Today, new entrants into the entrepreneurial world, not only benefit from the lessons gathered and shared by the ones who paved the way, but also from the knowledge that there is an ecosystem in place to enable that journey in the most frictionless manner and ensure that their flight to success doesn’t reach a screeching halt. 

One such force that enables a start-up’s thrust into the business atmosphere is an incubator. It is the take-off point that helps build the foundation of disruptive innovation as we know it in the world today. Be it booking an air ticket or a cab. 

An Ecosystem of Growth

The goal of an incubator is simple enough, to encourage innovation growth and eventually, commercialization while keeping all the lessons and pitfalls close enough for a startup to glean crucial lessons from. 

Incubators have bridged the gap between a great premise and a successful business. They give the infrastructure, feedback, and corrective recommendations required to strengthen the innovation. Mentorship, identification, and firming up of collaborations are all part of the hand-holding process for entrepreneurs. The availability of intellectual resources and counsel may make or break a company’s development and scalability pattern. 

In India’s larger business ecosystem, incubators play a critical role. They are crucial to the development of the Indian start-up ecosystem. The incubator’s role extends well beyond that of the corporate start-up office. They provide value to the whole start-up community’s business landscape.

As of January 14, 2022, India has 83 unicorns, with a total valuation of $277 billion. This exponential rise of India as a start-up hotspot has unleashed the potential of incubators to foster creativity and challenge old corporate practices. Start-up coaching assists ventures in transforming and catapulting themselves to the next level. India has experienced a massive increase in the number of incubators and accelerators over the last decade. It now ranks third among the world’s entrepreneurial ecosystems, owing to the number of Unicorns and tech companies, as well as its incubators and accelerators.

In 2017, the National Association of Software and Service Companies discovered approximately 140 incubators in India, placing it third in the world after the United States of America and China in terms of the number of incubators. This number had more than doubled by October 2020. We have listed and validated over 326 incubators throughout India. In India, this amounts to around one incubator for every 150 startups. 

Between 2000 and 2020, the number of startup incubators in India increased by 15 times, with the southern and western states contributing the most, and non-metro towns preparing to become future startup capitals. Bangalore, Mumbai, and Delhi-NCR remain the epicentres, with over 40% of all incubators and accelerators based in these cities. Tier-II cities, on the other hand, are gaining pace, with the number of such cities increasing by 66% year over year.

The majority of incubators in India are administered by academic institutions, with the balance being corporate, independent, or government-supported. Academic institutions (such as Indian Institutes of Technology, Indian Institutes of Management, and universities) or industrial bodies and organizations (such as Nasscom) and research agencies are the most common centres for incubators. However, Some multinational corporations, such as PayPal and the pharmaceutical giant Pfizer, have their incubators. Cisco and Pitney Bowes, a provider of e-commerce solutions, both have accelerators. Incubators like Villgro and Upekkha Ventures have also done extremely well over the years.

This is unquestionably a positive step; nonetheless, it is insufficient to declare triumph. The entrepreneurial results in the two ecosystems ahead of India — the United States and China – are far superior to India’s with China and the US reporting over 2,400 and 1,500 incubators and accelerators, respectively.

Government Policies

To develop the startup ecosystem in the country, various more dots must be linked in addition to the infrastructure. Mentoring, financing at all stages, and, most crucially, a startup-friendly strategy in each industry are all part of this.

So far, seven government ministries have created schemes and policies to promote startups, with some of them giving financial and procedural assistance and incentives to organizations and institutions for the establishment of incubators, workshops, and the upgrade of technological and physical infrastructure. Today, startup policies are pursued by 21 of the 29 state governments. 

Additionally, because angel investors and venture capitalists may not want to risk their time and money, the government can help entrepreneurs and businesses in the first risk phase, which is the most difficult period. Over the next three years, the government intends to significantly expand the network of incubators and accelerators.

Role of Private Companies

While the government has mostly focused on the formation and development of a thriving startup ecosystem, the private sector has aided this expansion by investing in the success of individual firms. 

Recognizing the importance of sourcing innovation, the private sector has increased its engagement in incubation, with over half of the country’s active incubators being managed by corporations or private organizations. These incubators provide access to a large network of the private sector and industry mentors, as well as more practical assistance such as proprietary software and tools, as well as free office space and equipment.

Incubators for Sector Growth 

Sector-specific incubators are necessary for the growth of different sectors as opposed to a one-all strategy. Like in the case of agritech, Over the last few years, official incubator-accelerator groups have rocked the Indian agriculture startup scene. 

Incubators have helped agri-preneurs develop sustainable business models by seeding potentially innovative concepts. Coworking space, structured finance, mentorship in the technological and financial areas, as well as an in-depth understanding of the business itself are all available to the companies. Incubators have also aided in mitigating the difficulties and hazards associated with the sensitive scale-up process. 

We at Afthonia have been able to drive more sector-specific growth when we see fintech startups, having a space where founders can get mentorship from entrepreneurs around the world is something that we have focused to have a more global approach rather than local. Similarly, incubators like Villygro and Upekha Ventures have been doing excellent with their work.

Although the country has a large number of incubators and accelerators, the ecosystem has to be enhanced to boost startup survival rates, accelerate development, and establish valuable businesses.

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