Role of incubators in ushering startups

We are living in an era where technology is growing at a rampant pace and innovation is the order of the day. Startups are mushrooming all over the world to cater to the needs and requirements of people. As the start-up community knows, the only way out of chaos and uncertainty is to innovate. Within this community there is always a way to make things better, and the worse a situation gets, the harder they work to find a creative solution.

Start-up culture comes with an attendant set of values, where doing something that matters is important, and where making a positive contribution can be more fulfilling than money or status. It is a culture wherein the organization evolves by working as a team – sharing ideas, being open and listening to criticism. The power of these new firms is obvious – they disrupt industries that have stood for over numerous years in just a few by offering many people around the world novel ideas and a better way.

With the increase in the number of startups, the significance of incubators has become paramount. A startup incubator is a collaborative program designed to help new startups succeed. Incubators help entrepreneurs solve some of the problems commonly associated with running a startup by providing workspace, seed funding, mentoring, and training. Incubators provide a setup wherein multiple startups are given space to operate and are mentored to scale up their business to a certain level. The primary purpose of a startup incubator is to help entrepreneurs grow their business.

While many people associate business incubators with the technology boom, this is not a new concept. The first startup incubator – the Batavia Industrial Center was formed in 1959. The Batavia Industrial Center was founded in response to Batavia, New York’s high unemployment rate and as a way to repurpose a vacant industrial building.

Startup incubators are usually non-profit organizations, which are usually run by both public and private entities. Business incubation is a means of meeting a variety of economic  policy needs, which include job creation, fostering a community’s entrepreneurial climate, technology commercialization, diversifying local economies, building or accelerating growth of local industry clusters, business creation and retention, encouraging women or minority entrepreneurship, identifying potential spin-in or spin-out business opportunities, or community revitalization. Incubators are often associated with universities, and some business schools allow their students and alumni to take part in these programs. There are several other incubators, however, that are formed by governments, social groups, startup organizations or successful entrepreneurs.

Unlike many business assistance programs, business incubators do not serve all companies. Entrepreneurs who wish to enter a business incubation program must apply for admission. Acceptance criteria vary from program to program, but in general only those with feasible business ideas and a workable business plan are admitted.

The amount of time a company spends in an incubation program can vary widely depending on a number of factors, including the type of business and the level of business expertise of the entrepreneur. Life science and other firms with long research and development cycles require more time in an incubation program than manufacturing or service companies that can immediately produce and bring a product or service to market. On an average, incubator clients spend thirty three months in a program. Many incubation programs set graduation requirements by development benchmarks, such as company revenues or staffing levels, rather than time.

Although most incubators offer their clients office space and shared administrative services, the heart of a true business incubation program is the services it provides to startup companies. The most common services provided by business incubators entail the following:-

  • Help with business fundamentals
  • Provide financial management assistance
  • Facilitate access to bank loans, loan funds and guarantee programs
  • Furnish networking opportunities and marketing assistance for the startup
  • Equip with comprehensive business training programs
  • Help in establishing connections with strategic partners, angel investors and venture capitalists
  • Advisory boards and mentors and management team identification
  • Intellectual property management and legal counsel
  • Help with regulatory compliance and business etiquette
  • Render commercialization assistance

Some of the top startup incubators in India are AngelPrime, Indiavest, Srijavan Capital, Veddis Ventures, UnLtd India, and Villgro. There is a dearth of incubators in India and to fill this gap, the government is trying to engage private organizations for providing mentorship facilities to entrepreneurs. There is a need to provide sector-specific services to startups. Catering to these needs in a streamlined manner is a major challenge which incubators face. Incubators thus play a pivotal role in fostering a self-sustained economy.

Amod Kulkarni, MMS