DARE - Because Entrepreneurs Do

You have a great idea which requires specific equipment and skilled resources. You are convinced about your business model but are not able to muster up enough resources to support the initial run. You have the blue-print of an innovative new technology but require expert help on taking it to the market. Your innovation promises a particular lifestyle revolution but you would rather go for limited market test before jumping head on with your business idea...

If you read through the lines on the facing page with a smile and think “how familiar they sound,” then you are a prime candidate for an incubation center.

Business incubation in India goes back to 1984 when the Department of Science & Technology (DST) set up the first scheme to help entrepreneurs bootstrap their business. Twenty six years later, the business incubation landscape is actually going through a catch-22 situation. They are not seeing enough quality projects to incubate. So the ball is in the budding entrepreneurs’ court. Go submit your proposal to an incubator close to you.

We spoke to a wide spectrum of incubation managers and incubated company CEOs to put together a small Do-It-Yourself  kit—for those of you looking for a bootstrap plan. We have tried to answer various questions you may have and have attempted to give you a larger picture of the incubation landscape to help you make up your mind.

How does an incubator help start-ups? An incubator provides mentoring and business advisory services to a start-up and networks it with businesses, thereby reducing the chances of failure and speeding up growth. Incubators provide the following services: • Infrastructure and connectivity • Financial support • Access to technology, mentors and advisory services • Networking with potential investors, partners, clients and employees • Mentoring • Networking and experience sharing with other start-ups and entrepreneurs • Branding and credibility. Sushanto Mitra CEO, Society for Innovation and Entrepreneurship (SINE-Incuator), IIT Bombay

The learning we came away with, is this: India is a prime destination for incubation centers. The Technology Development Board has an interesting program running. There are over 60 incubators sponsored by TDB and another 30 to 40 incubators run privately. Yet, the state of incubators is far from being desirable. Every stake-holder acknowledges this fact and extends hope that there is only one way to go from here—upwards.

Yet, it cannot be denied that a winning incubation program is a two-way street. A good incubator requires good projects. If more students and wannabe entrepreneurs bring their plans to an incubation center, it naturally enhances the quality of the ecosystem. On the other hand, government support has to increase, a corporate culture should be brought to the incubation management and a nation-wide ecosystem should be actively nurtured.

How important is the role of an incubator in promoting entrepreneurship? An incubator can play an extremely vital role in promoting entrepreneurship. There are three levels at which an incubator should operate: Fundamental Level: An incubator should engage in changing the mindsets of the youth, especially young students, while they are still in college. It is extremely important to make a shift from the job seeking mindset to the value creating mindset and the incubator must enable this shift to create a sustainable framework. Operational Level: An incubator must provide start-up assistance (infrastructural, legal and business mentoring, to name a few). Policy Development: This is something that is becoming increasingly important for the country. There are hardly any government policies that support start-up companies. For example, the government should have discounted or subsidized infrastructure facilities for technology start-ups. Tax exemption policies would also be extremely welcome.

Tarun Mishra Director, Covacsis Technologies Incubatee@ IIT Bombay

Who can get into an incubator?
The answer to this is a short, ‘Yes’, thankfully. Most of the incubators sponsored by NSTEDB (National Science and Technology Entrepreneurship Development Board) are open to everyone and not necessarily to the students of the parent institution alone. There are very few exceptions such as IIT-Bombay which requires at least one member of the founding team to be its student or a faculty member.

Once you decide to get into an incubation center the procedure is straight forward. You will be submitting your project proposal to a screening committee. The selection process is stringent. Manohara Pai, in-charge, MUTBI & Associate Director-Innovation Centre, MIT, Manipal says, “We look at promoter’s credibility and future potential while selecting a project to incubate.” According to Prof. Mrutyunjay Suar, Director, KIIT School for Biotechnology, the success rate of applicants is roughly 10 per cent. “I have learned that a lot of people come here with the sole intent of getting money,” says Prof. Suar . The evaluation committee picks out only those who genuinely need help from the incubator’s ecosystem.

How do you think incubators are performing in the country today? I think the government is very proactive about supporting incubators but things are not moving fast enough to assist them. Our incubator has been faring well because of the support we got from the NSTEDB. In my opinion, if the government recognizes something as an incubation center, they should at least provide seed funds to them. Without giving them support if you ask how many got graduated, you’ll probably not find a good number, because of lack of quick support. In my case, I know where to get money, where to get support, it is has been an individual effort. But there should be institutional or government effort. There should be a mechanism in the Government which provides at least seed fund of 1 crore to each incubation center and then question performance.

Mrutyunjay Suar Director, KIIT School for Biotechnology Incubator: KIITCIE

If all goes well you should be operational within months with ready office space and connectivity. Since most incubators operate out of educational institutions, theoretically at least there should be no dearth of skilled manpower.

Once inside an incubation center, your next stop should be to look “to graduate.” To do so means, you have been funded by a venture capital or you have struck a self-sustaining commercial deal and you move out to set up your own shop. Typically, incubated companies take three-four years for graduation.

What does an incubator do?
An incubator provides infrastructural, technical and business mentorship to start ups. If your start-up is essentially technology intensive or requires a process management rigour as its USP then an incubator which has access to such unique skill sets is perfect. Comcubator’s Roshan Kumar says, “An incubator offers, among other things, a mentorship network, access to investors, quality infrastructure and above all a vibrant ecosystem.”

Not all start-ups are incubator-friendly. Dr. Jitendra Kumar, Vice President, Life Science Incubator, IKP Knowledge Park puts it succinctly, “Incubators like innovative product or service companies that could make a difference to large, underserved populations.”

An incubator typically is headed by a manager at the vice-president level and is assisted by people with the skills required to nurture new-born companies. It is supported by academic or scientific institutions and is funded by the government or a private sponsor until it is strong enough to run on its own.

But they don’t support my domain!
So the common refrain is: None of the incubators in the country support my domain. Well, the diversity of incubators in India is something which is not matched by many countries. We have specific incubators for agri-based technologies, biotechnology and nano-technology, energy and power electronics. (See listing at the end of this story).

What is the focus of an incubator?
The frequently asked question is: Why incubators in India have not been able to produce a Narayana Murthy or Mark Zuckerberg? While this sums up the inherent expectations and a slightly upside-down world-view. However, this question requires to be answered so that we put it away permanently. Tenet’s (IIT-Madras) Vijay Anand, hits the nail on its head when he says, “The outcome of an incubator is an enterprise, not necessarily an entrepreneur.”

Anand goes on to list substantial exits (graduations) and success stories from incubators: SMSGupshup, Seclore from SINE (IIT-Mumbai), Desicrew, ROPE, Uniphore from RTBI, Gridbots from IIM-A and the list goes on.

“It has taken Infosys about 25 years to get to where it is and for N.R. Narayanamurthy to get his credits. Our own Narayanamurthy might yet be in the making,” says Anand.

Why aren’t there enough companies being incubated?
There appears to be a serious deficit of good incubatable projects. For instance, Dr Vinay Panda who is building a bio-informatics laboratory from scratch at the Strand-Gwenyth Labs in Bangalore talks of a total lack of concern for tooling and instrumentation in India. This may come as a surprise to those who still believe India to be a tinkerer’s heaven. “We really do not make even the simplest of the instruments in India anymore,” says Dr Panda. “We wanted a shaker for our lab which is made of a simple motor and we had to import them. What was available was of very poor quality which could not be used,” said he.

Dr Panda is not alone in airing such views. Prof Suar says, “There are actually not many startups that are doing anything innovative in technology.”

Let’s take a look at the benchmark of innovations in Indian technology landscape: The TR 35 (Technology Review India) list of young entrepreneurs under 35 years. In 2010, the editors of Technology Review India shortlisted 20 innovations from hundreds of nominations. Out of these 20, six innovations were from MNCs. And 13 of these 20 were from ICT domain.

Innovation in India is still largely led by multinationals and it has more than a fair share in the ICT domain. What about the hundreds of business plans one receives during contests? “You will be surprised to note that only 5-10 per cent of them are worth considering.” Has this got anything to do with the bad showing by incubators in India? “Yes,” says Prof Suar. “The answer to why we receive so less number of entries at our incubator lies in the fact that many of the startups are me-too, some are just not feasible, while some may not make sense at all with respect to financial modeling.”

What is lacking in Indian incubators? Incubators are still a new concept in India as compared to the First World countries. So, the process and time required to get funds is slower than the benchmark. What changes or modifications do you recommend for Indian incubators? Incubators need to provide seed funding and consistent mentoring to their incubatees. The intention should be to help the incubatees complete the prototype stage and reach the level where their business plan complements user feedback and market response during pilot testing. Pankaj Sehjowalia Founder & CEO, Lotusutra Incubatee@ National Design Business Incubator

What is wrong with our incubator program?
From the administration point of view, we need to fix our Business Incubator program. The good intentions of the Technology Development Board notwithstanding, the progress made by the various academic incubation programs are inadequate and unjustifiable for a country which has over one fourth of a billion people who virtually peg their future on the advent of technology and its applications. In major Indian cities and 200 odd economically active towns, we see people yearning for progress and look up to academic and public funded institutions (including CSIR and defense research labs) to give them the power to gain competitive advantage. We are just not measuring up.
The reasons are manifold. Dr Panda sums it up well when he says, “The divide between industry and academia in India is pre-historic.”

Dr Panda’s cryptic opinion is unravelled by what Sushanto Mitra of SINE, IIT-Bombay has to say about the problem in our incubators. “It is very important for incubator managers to have some business experience for them to guide the startups on their entrepreneurial venture.” But since the managers of the incubators are generally academicians with no or little hands on knowledge in business, startups are unable to get complete direction.
Anand brings up two vital issues: One is of close relationship with educational institutions and the other about territoriality.

“The biggest weakness of incubators in India is that they are all tied-up with some or the other educational institutions. As a result, the ones tied-up with B-schools are way too management oriented and the ones with tech-schools are extremely technology driven.”

Tarun Mitra, CEO, Covacsis, incubated in SINE, IIT-Bombay, lists out the changes he wants to see in the way we run our incubators
a) Incubators should run professionally with enough resources available (however, they should be a non-profit making entities)
b)  Incubators should have representation in government to devise conducive policy for startups
c)  Incubators should not only be limited to educational institutes

Bureaucracy and lack of funds is an issue most incubators see as a roadblock. Dr Venkata Ramana, Professor and Dean of School of Management Studies, Univeristy of Hyderabad says, “The missing link is that they (incubatees) have to pass through many levels of approvals and suffer at the hands of the bureaucracy.” And Prof Suar says, “If you recognize something as an incubation center, it should be given at least seed funds.”

What is ironical is that the NSTEDB began offering grants to incubators for seed funding as far back as 2004. Yet the word does not seem to have gone around. HK Mittal, Secretary, Technology Development Board says, “Most of the incubators have a kitty of `3 crores of rupees and the limit is `50 lakhs.” But Mittal admits that what NSTEDB and TDB is set out to achieve has not been widely publicized.

How much can an incubator help an aspiring entrepreneur? An incubator can be a great place for entrepreneurs, especially for those who are in the initial stages of their ventures, anywhere from conceptualization to early stage operations. The incubator acts as a handholding guide, mentor and support system and acts as a shield from the outside world so that the entrepreneur can learn to stand up on his own much more smoothly and swiftly. An incubator offers, among other things, a mentorship network, access to investors, quality infrastructure and, above all, a vibrant ecosystem, all or any of which may not be accessible to those outside. These go a long way in the maturing of both ideas and the entrepreneurs themselves, which helps them grow in their respective businesses. What are the conditions that make an enterprise eligible to be incubated? The idea should be exciting, innovative and implementable. More importantly, the person or team behind the idea should have the right skills and capability to learn, develop and weather the storms that will inevitably come their way. Ideally, the enterprise should have shown some proof of concept. That shows the seriousness of the entrepreneur(s) and also helps to decode what is needed for success more effectively. However, this is not compulsory; we also take absolutely new ideas if we see the potential. Why should incubators be promoted in India? Incubators can go a long way in creating an ecosystem in India, which is lacking in a big way. The entrepreneurial ecosystem is what has made Silicon Valley what it is today. Incubators bring about the belief that there are people to help you, people who believe in you, and that there is a system that you can fall back on for help in times of crisis. At the outset, incubators help a lot of budding entrepreneurs firm up their courage to start up, which they may have been reluctant to do otherwise out of fear of failure or lack of support. Hence, incubators should be promoted in India.

Roshan Kumar Manager, Comcubator (Incubator), Mudra Institute of Communications, Ahmedabad (MICA)

The New Ecosystem
The government and the industry have realized that business incubation is the way to go. The University Grants Commission has a program to set up Entrepreneurship-Cell (E-Cell) in engineering colleges across the country. The government through its communication services through PSU, BSNL, is planning to provide high-bandwidth internet connectivity to all colleges which have set up an E-Cell.

Venture capitalists and angel investor networks such as Indian Angel Investors and Mumbai Angels make regular rounds of various incubators scouting good investment opportunities.

In a survey conducted by Cybermedia on behalf of NSTEDB, it was found that over 30 per cent of the NSTEDB incubators were doing well. NSTEDB is now readying to take its program deeper into the country.

If you have a great idea and want help, it appears that this is the best time you could have. Consider getting incubated.

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