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Technology Business Incubators: Building a Robust Entrepreneurial Ecosystem

10 Jun 2022

Technology Business Incubators (TBIs) are one of the key enablers in the Indian startup ecosystem. In particular, academia inked TBIs have a natural advantage of continuous availability of research and development, robust technical infrastructure and access to young bright minds. For a founder in the early stage of his/her venture, it is critical to focus on building a strong value proposition.

A study by IBM Institute for Business Value and Oxford Economics has shown that 90% Indian startups fail within the first five years. Considering such scenarios, a TBI can add considerable value and reduce the probability of failure for a first-time founder. Incubators provide a safe testing ground to entrepreneurs, while nurturing them within a transparent ecosystem with peers and lending infrastructure support.

A typical life cycle of a startup comprises two stages, viz. the formation stage and the accelerator stage. Both the stages form the foundation pillars for potential medium to large scale companies in the company operating in a sustainable and profitable manner. TBIs typically engage with startups at a very early stage of the venture, say during the initial three years of existence.

A typical TBI support for core business activities would include providing plug-and-play office space, mentoring and enabling access to technical and business networks. Essentially, TBIs are expected to provide services and support, create their own ecosystem and engage with stakeholders that would help startups in derisking their technical and business models.

Studies show that such mechanisms help not only in the growth of technology based new enterprises, but also in improving their survival rate substantially. It has been established that the startups participating in business incubators have higher success rates (in the range of 70% to 87%).

Support and services

With the evolution of technologies, the need for new formats of enablers arose to quickly turn them around into commercially viable solutions with physical and other value-added support offerings such as market survey, marketing assistance, business planning and training, funding and promoting new products. Thus, the Government started setting up of TBIs in academic and R&D centres

TBIs provide a host of support and services to new enterprises (and also to existing SMEs in the region) necessary for faster growth of startups. In addition, they also facilitate an atmosphere congenial for their survival and growth of the fledgling start-ups. The essential feature of a TBI is that the incubatees (tenant companies) leave the incubator space within two to three years.

A comprehensive academic linked TBI support includes the provision of tangible and intangible benefits to ventures in the take off stage of their businesses. Service offerings may include support for infrastructure, networking, funding, expert advice, visibility and outreach, soft skill development, etc. An ideal incubation support should include specific offerings with startups, availing services that are needed depending on the sector, stage of evolution and specific needs.

For example, healthcare specific incubators would need to build early synergies with hospitals and regulators for proving early validation for healthcare products and solutions. Agritech incubators would need to add field trials and testing capabilities for their startups.

Conclusion

The number of TBIs is increasing in academic and R&D centres with an objective to create an impact by way techno commercialisation activities in form of entrepreneurial ventures. Missions like ‘Atmanirbhar Bharat’ have enhanced expectations from TBIs in terms of their effectiveness, impact and sustainability.

The long-term sustainability of the incubator is the most challenging aspect for any incubator. It is important that the incubators also identify a feasible economic model which will help them sustain themselves. Achieving financial sustainability with an appropriate economic model with short-term and long-term revenue sources is an important performance indicator for business incubators, specifically those who are at mature stage.

For more information read the CII report Performance Parameters for Academic Linked Technology Business Incubators.