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The Indian startup ecosystem has grown steadily, with more than 1,100 active incubators, but the density of these incubators per million remains low, a joint report by NS Raghavan Centre for Entrepreneurial Learning (NSRCEL) – the startup incubator at IIM Bangalore – and the Centre for Research on Start-ups and Risk Financing (CREST) at IIT Madras.
There is a critical need to establish more incubators in the country, said the report, ‘India Incubator Kaleidoscope 2024’.
“The narrative on the Indian startup ecosystem has centred around startups and investors. This report turns the spotlight on incubators – a significant link in the startup value creation chain,” IIT Madras professor Thillai Rajan A said. “Incubated startups are two and a half times more likely to get funded compared to the non-incubated,” he added.
With only 0.8 incubators per million population, India lacks in comparison to the US, UK, and China, which have 8 to 10 incubators per million population, the report said.
Currently, South India houses 45% of all incubators in the country and has the highest density of incubators out of the 1,100, it said.“Tier I cities house almost half of all incubators (48%). However, the mix of incubators—those hosted by academic institutions, industry, and the public sector—shows significant variation across cities. Chennai has a high proportion of academic incubators (82%), whereas Bengaluru and Gurgaon have a high proportion of industry incubators at 71% and 84%, respectively,” the report said.The extensive study on startups found that the rate of incubation is high among deep tech sectors such as AI/ML, data analytics and biotech. All of them have an incubation rate upward of 12%.
The report stressed that there is an urgent need to improve the performance of incubators that are underutilised. They need to be engaged in outreach efforts to raise awareness about the benefits of incubation, it added.
Former Niti Aayog CEO Amitabh Kant said incubators play a crucial role in India.
“Conceptualised initially to facilitate the formation of startups, today incubators perform multiple roles, such as bringing together scientific and business expertise, channelising capital to promising startups and increasing awareness,” Kant said. “For the government, incubators are becoming the last link in identifying startup beneficiaries for various schemes and monitoring their progress.”
Incubated startups are funded early
Startups that are incubated have a better record of securing their first-round funding when compared to those that are non-incubated. The report found that 27.1% of the incubated startups received their first-round funding within one year of incorporation; however, only 15.4% of non-incubated startups were funded within a year.
“Incubated startups have also been engaged more actively in the creation of intellectual property – the percentage of incubated startups that have published patents is about five times more than that of the non-incubated,” the research teams of IIM Bangalore and IIT Madras said in an official statement.