Athira Sethu
Kochi, 8 October 2024
Deep-tech areas like AI/ML, data analytics, and biotech are taking the incubation of start-ups to a big leap. These areas show a growth rate of 12% during incubation, indicating a greater scope for innovation. It was recently reported that India has over 1,100 active incubators according to a study conducted by IIM Bangalore’s NSRCEL and IIT Madras’ Centre for Research on Start-ups and Risk Financing (CREST).
According to the study India Incubator Kaleidoscope 2024, southern India accounts for 45% of incubators found in the country. While 48% of incubators are accommodated in tier-I cities like Bengaluru, Chennai, and Gurugram, the focus of each city has been different. Chennai is at the top with 82% academic incubators, while industry incubators stand at 71% in Bengaluru and at 84% in Gurugram.
India still has a very low density of incubators at 0.8 per million population, compared to 8-10 per million for developed countries like the US, UK, and China. Underserved market incubators can give a giant leap of small towns competing with one another for growth in their area.
Incubation programmes have only been applied to 8.2% of start-ups in India, but it’s interesting to note that nearly 98% of the incubated start-ups were funded by only 10% of the incubators. The system is found to have a positive impact on the inclusion of students, young professionals, women founders, and less financially affluent entrepreneurs mainly.
Incubation is highest in deep-tech sectors, such as AI and data analytics, which account for a 12% incubation rate among start-ups in these fields. These are among the fastest-growing sectors and attract much notice because of their innovative potential.
Incubated start-ups outperform their counterparts in terms of funding acquired in the early stages. The report further states that 27.1% of the incubated start-ups sought and obtained the first round of funding within one year compared to 15.4% of the non-incubated start-ups. The annual average revenue realized from every 100 start-ups from the incubated ones is reported to be Rs 1,590 crore.
While incubation has been found to be an important nurturing support system for entrepreneurs, the study suggests that there is a need for higher activity and better-quality incubation efforts across India. “Incubators play an important role in making entrepreneurship more accessible and inclusive, but the activities and impact aren’t understood well. This report showcases the need to increase incubation efforts and to have better quality incubation nationwide”, says Professor Srivardhini Jha from IIM Bangalore.
With the start-up ecosystem gaining momentum in India, this chapter of growth in the country will depend on investing more and better incubation efforts to ensure its sustainability.
