Strengthening the incubator ecosystem in India

During the past decade, India has seen a huge rise in its incubators and accelerators. Today, it ranks 3^rd amongst the entrepreneurial ecosystems in the world, based largely on the count of its Unicorns and tech startups, and its incubators and accelerators.

Ostensibly, India counts 20+ Unicorns, 6400 funded startups and 250+ incubators and accelerators. Additionally, there is a maturing investment portfolio, substantiating the strength of the ecosystem with its critical mass of startups, significant VC funding, number of exit M&As.

This development is certainly very positive; however, it is not enough to declare a victory. The entrepreneurial outcomes in the two ecosystems ahead of India – US and China – is manifolds that of India, leaving it a very distant 3^rd. So the question is, what does India need to do to reach higher echelons of success with its startups?

This question deserves attention and requires us to recognise that the incubator ecosystem cannot be a freestanding one, but is part of the continuum of the startup development and growth cycle. When considered in totality, the key challenges that persist and require pro-active urgent solutions become more evident:

• Survival rate of startups in India continues to be very low despite a large number of incubators and accelerators. A key factor cited for this is the lower levels of innovation in technology and business models in the Indian startups, a fact further highlighted by India’s decline in innovation ranking in a recent global study by StartupBlink.

• Only four Indian cities show up on the global top 100 entrepreneurial cities in 2020. For a country that has 1/7^th the world’s population, this is abysmally low. Tier 2 and 3 cities of India while steadily recording a higher intent and interest in starting up, still do not have robust ecosystems that can support that aspiration.

• Startup ecosystem in India has not yet seen good exits and or returns for its later investors. As a previous research stated ‘India has the worst multiple in terms of M&A exits’. This could be a major stumbling block for the entrepreneurial ecosystem and one that raises a question about our support ecosystem for growth startups and their ability to build strong fundamental value and profitability in the business.

So what does all this mean? Clearly, larger numbers of incubators and accelerators are good for the startup ecosystem of the country. In addition, for truly catalysing startup growth and maximising the startup outcomes, we must strengthen the weak links in this ecosystem in India.

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Some things that deserve careful consideration and considerable work include:

- Expand the spectrum of support in the startup ecosystem – support should not be limited to startups via their access to incubators, accelerators, angel and VC funding. We need to start viewing the startup ecosystem as a continuum which supports and incentivises all stages of the life cycle of a startup.

This includes intermediaries that support: a) innovation and commercialisation in higher education and in small businesses, b) aspiring entrepreneurs via a pre-incubation preparatory phase to build a stronger pipeline of emerging entrepreneurs, c) idea and early-stage startups so more of them survive and get to market, d) growth startups and small businesses so that they are able to continue to innovate, and build nationally, regionally, globally competitive, profitable and scalable business models.

- Agree on a set of metrics for the support intermediaries to show that we are creating the desired output at every stage of the startup ecosystem; as an example:

1. Building a wide enough pipeline of innovative, entrepreneurially-skilled young people with the inspiration, ideas, application and confidence to startup with the right opportunity.
2. Supporting startups within incubators and accelerators such that there is a significantly higher rate of survival and growth in the early years.
3. Handhold scaling startups to become profitable, continue to be innovative and be able to move to quality exits, comparable with the best markets.

- Diversify the nature and type of startup support intermediaries to suit the needs in different parts of the country.

Develop the incubator ecosystems for the next tier of cities in India. Also evolve outcome-oriented sustainable incubator models that support competitive, businesses that may not be venture funded but will be key for the health of local economies.

- Build the next cadre of leaders with relevant skills, networks, knowledge, know-how, incentives and accessibility to support the aspiring and existing startups in their life cycles. This should include:

• Leaders of incubators and accelerators
• Expert mentors, consultants
• Lawyers, accountants, and other technical experts and vendors

- Integrate information, infrastructure, funding and other efforts across the stakeholder groups that include government agencies, private incubators, funding institutions; and stages of startup support to enable an aspirant or young startup to easily navigate the ecosystem and find the right fit for its development.