Incubators & Accelerators in India: Driving or Supporting Innovation? Unpeeling the Start-Up Ecosystem: Part II

A result that seemed to align itself with our previous analysis of the start-up ecosystem was that more than 50 percent of these incubators are located in the metropolitans of Delhi, Bangalore, and Mumbai, in that order. Perhaps there is a direct correlation between the location of incubators and the upcoming start-ups and if so, India requires a widespread presence of incubators and accelerators across the country to fully support its budding entrepreneurs.

Also interesting to note are the types of incubators and accelerators that currently exist in India. Our analysis shows that nearly 60 percent of the incubators are managed by institutes or colleges, while only 25 percent are investor-driven, and the remaining 15 percent are supported by companies or governmental organizations. Some of the well-known college-based incubators include SINE (IIT Bombay), Villgro (IIT Madras), CIIE (IIM Ahmedabad), while GSF, The Morpheus, Startup Center are a few examples of known investor driven incubators.

Another issue we analyzed addressed the ambiguity surrounding the definition of impact and success of incubators. According to Kunal Upadhyay, the CEO of Center for Innovation Incubation and Entrepreneurship (CIIE) at IIM-Ahmedabad, ‘It is important we create the right definition of success.’ Based on the findings of a series currently in progress, The Start-up Hatch by Yourstory.in, it appears that most incubators measure success in terms of the number of start-ups graduating and their subsequent survival. Poyni Bhatt, COO of SINE, IIT Bombay considers ‘number of companies incubated, their survival and growth after graduation from the incubator’[1] as metrics to measure the success of SINE. Arya Kumar, Dean SWD & Chief Entrepreneurship Development & IPR Unit at BITS Pilani, notes ‘successful ventures, employment generation by start-ups’[2] as other factors that determine the rate of success of incubators. As Shonali Advani rightly observes, ‘An incubator would consider a job done if your start-up could get any or all of these—external investment, revenue growth, geographical expansion, a certain number of customers or a buyout.’[3] She also goes on to say that based on anecdotal evidence, as many as ‘40 percents of incubatees are able to build sustainable, profitable and scalable businesses over the long run’. However, we find, that there is not as much discussion on the unique value-added and support provided by incubators versus what the founding team would be able to achieve itself.

Another important aspect is the sector focus, with most incubators and accelerators in India focused on technology. It is no surprise then that as our previous analysis reported nearly 30 percent of the funded start-ups in India are internet- based on IT services accounting for another 20 percent. There has been talking about the introduction of industry-specific vertical accelerators, with the debate being around the high value to start-ups on one hand and the challenges of structuring such structures on the other. Notes Jubin Mehta, ‘Setting up a vertical accelerator in India would mean picking start-ups like one would pick a needle from a haystack.’[4] Considering how the start-up scene is still picking up in the country, Rajesh Sawhney, founder of the GSF Accelerator thinks ‘the Indian ecosystem is still nascent for vertical accelerators, though there may be a case for one or two industries.’ Agreed Sundi Natarajan, investor, and MD, Tabtor India, ‘Education is a no-brainer in the Indian context. Given the next 4-5 years horizon, we are going to see a huge change in the education landscape in India.’ While education and healthcare are two broad sectors that can definitely sustain vertical accelerators, the overall picture continues to be dominated by technology-based start-ups in India.

In summary, the concept of incubators is gaining momentum in India, directly reflective of the growth of the start-ups in the country. While there is certainly room to grow there are also important questions to be addressed as to how they will further encourage entrepreneurship i.e. to expand in the next set of cities, focus on specific industries and functional aspects of achieving scale, etc. We look forward to seeing what choices players make and how this space evolves over the coming years.