How Incubators Can Keep Themselves Relevant Incubators adopt different models to achieve their mandate and fall into four broad categories- Education-based, Mentor-driven, Sandbox- oriented, and Resource-based.
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The Indian start-up ecosystem has witnessed a meteoric rise over the past decade. In tandem, we have seen the emergence of about 850 incubators across the country to support this rapidly growing ecosystem. Their primary goal is to nurture entrepreneurs and start-ups in their very early stages and help them navigate the business environment.
Incubators adopt different models to achieve their mandate and fall into four broad categories. These are - Education-based model that strives to nurture an entrepreneurial mindset and provide the tool kit to build a venture; Mentor-driven model that provides on-demand domain expertise; Sandbox- oriented model that helps R&D based start-ups with access to labs for rapid proofof- concept; Resource-based model that provides access to physical, financial, knowledge and market resources.
There Is a High Level Of 'Entrepreneurial Recycling' Where In Experienced Entrepreneurs are ploughing Back Their Experience And Knowledge in to the Ecosystem, Creating a Thriving Community
Each of these models have taken centre stage at different points in time.However, recently, there are several shifts in the start-up ecosystem that are challenging the relevance of entrenched incubator models. We elaborate on a few of the emerging trends and the questions they raise here:
1. PROLIFERATION OF STARTUP KNOWLEDGE: With more than 92,000 start-ups in the Indian ecosystem , they have become a mainstream phenomenon. There is extensive coverage of start-ups in the business press and social media, raising their general awareness and acceptability in society. There is a high level of 'entrepreneurial recycling' where in experienced entrepreneurs are ploughing back their experience and knowledge into the ecosystem, creating a thriving community.
Consequently, knowledge about venture building has proliferated widely, and even first-time entrepreneurs are more aware about how to navigate a start-up than they were, say a decade ago. Many second-time and third-time entrepreneurs may not even consider incubation. This raises important questions for incubators that have primarily adopted education-based incubation. Are they still relevant? Incubators need to consider moving towards customized offerings depending on the entrepreneurs' and ventures' development level.
2. AVAILABILITY OF RESOURCES: Incubators traditionally provided physical space that was valued by ventures, since it enabled teams to co-locate and assured them high bandwidth internet connectivity. Today, high connectivity is ubiquitous and many ventures operate as distributed, virtual teams. The importance of physical space as a resource has diminished. This has challenged incubators that have relied on creating value for ventures by providing access to physical resources.
Another development is the changing funding scenario. The Indian ecosystem has seen a surge in the number of investors (individual as well as institutional) who are willing to invest in ventures.
According to the India Venture Capital Report 2023 by Bain, 2021 and 2022 saw US $38.5B and US $25.7B respectively being invested in Indian start-ups. In spite of a slowdown, these are huge investments and are only likely to increase. This implies that financial resources are available to any entrepreneur with a great idea and the drive to execute.
3. DATA AND TECHNOLOGY: Venture data across the ecosystem is getting captured systematically. Several engines like ynos and tracxn are curating data from multiple sources and making them available. This creates an opportunity for incubators to leverage the data to sharpen their intervention. For instance, should they decide on focus sectors based on emerging clusters in their local geography? These type of data-driven strategies and actions can make incubators more effective. On the technology front, there are continuous disruptions. However, the recent coming of age of generative AI could have major implications for incubators.
