This article has been contributed by Latika Lakhani Kukreja, Assistant General Manager – Strategy & Transformation, Luminous Power Technologies (P) Ltd.
Business Incubation started as a concept of providing support to new business entrepreneurs, or small businesses who lack enough resources. But practically, the concept has evolved way beyond the theoretical concept of establishing new business. Its essence lies in crafting the right business model based on market research, providing the necessary support, resources, and mentorship to help startups/companies navigate the complexities of new business ideas and then scale the operations effectively.
Incubators are usually non-profit organizations that aim to provide platform to new ideas, enable execution and help ideas to scale to full-fledged businesses. Incubators usually believe in the idea and develop a shared vision for the idea. In the process of converting that idea into real business, it plays the critical role of enabling by providing physical facilities, networking opportunities, securing finances from various sources, and providing support services. Incubators help fill the resource gap wherever required. They are very different from business accelerators who partner for short-term for some gains or commercial reasons.
Basically, they play a pivotal role in nurturing startups and helping them thrive
As a seasoned strategist and consultant, I have coined a 5-step framework “IVORY – Ideate, Validate, Operationalize, Revise, Yield” for business incubation.
5-Step Framework for Business Incubation
As part of business incubation, Early-stage funding fuels life into start-ups, helping founders build Minimum Viable Product (MVP), test markets, and attract talent. Angel investors and seed funds step in, believing in the vision before the world does.
Venture Capitalist, Angel investors, Mentors, and Coaches support the business incubation process in unique way.
Globally, there are many private business incubators such as Accelerace, Antler, Bnethal Green Ventures, Y Combinator incubator program. Apart from this, various academic institutions, Fortune 500 companies, and industry associations have launched their own business incubators e.g. infoDev by World Bank, Harvard Innovation Labs, IIM Ahmedabad ventures, SAP.io, NTT DOCOMO Ventures, and T-Hub HealthTech (Healthcare).
Many startups have achieved huge success through incubators. Prominent are Airbnb, Dropbox, Reddit, DoorDash, and Stripe.
Airbnb, founded in 2007, received huge support from the Y incubator program in terms of refining its business model, connecting with investors, and developing a growth strategy. Within 7 years, it achieved the status of unicorn by reaching USD 10 billion in 2014.
Stripe, founded in 2010, transformed the online payment industry with the help of business incubators. Y incubator, supported the founders of Stripe in refining their product and business model.
The success stories are unlimited and inspiring. Considering the positive impact of the business incubator, its role is only expected to grow manifold. In the next 10 years, the Global business incubator market is expected to grow 2x from USD 236.49 million in 2023 to USD 517.22 million by 2033 (according to the Brainy Insights). In terms of geographical split, China has the highest number of active incubation and accelerator programmes (over 3000), followed by 1500 in the USA and ~520 in India (according to National Association of Software and Service Companies).
The future of business incubation looks promising, with evolving models and trends that cater to the changing needs of startups. Here are some key aspects shaping the future of business incubation:
Virtual & Hybrid Incubation:
Remote incubation programs will become more common, allowing startups to access mentorship, funding, and resources from anywhere. Hybrid models combining physical and virtual support will be the norm.
Sector-Specific Incubators:
More incubators will focus on niche industries like AI, clean energy, biotech, agritech, hydrogen mobility, alternate chemistries, and drones. Deep-tech and impact-driven incubators will see significant growth. India announced the Biotechnology Ignition Grant (BIG)
Corporate & University Collaborations:
More corporations will establish incubators to foster innovation and integrate startups into their value chains. Universities are expected to continue pushing innovation and incubation, with research-driven startups gaining more support.
AI & Data-Driven Incubation:
AI-driven mentorship and analytics will help incubators assess startup potential more efficiently. Data analytics will guide decision-making in funding and resource allocation.
Decentralized & Web3-Based Incubation:
Blockchain-based incubators may emerge, using tokenization for funding and governance. DAOs (Decentralized Autonomous Organizations) could support startups through community-driven incubation.
Government & Policy Support:
Governments will continue to support incubation through grants, tax benefits, and startup-friendly policies. Small Business Innovation Research (SBIR) provides business incubation to startups in the US. Israel Innovation Authority sponsors business incubation.
Focus on Sustainability & ESG:
Green incubators supporting sustainable startups will gain traction. ESG (Environmental, Social, and Governance) criteria will play a bigger role in incubation program selection.
Business Incubation in Conglomerates:
In today’s fast-changing world, Business Incubation is not restricted to start-ups. Conglomerates and large corporations also follow the concept of business incubation every time they try to foray into new areas, develop new revenue streams and keep themselves updated with technology transitions.
Small and Medium Enterprises (SMEs) play a vital role in enhancing the standard of living by generating employment opportunities, both in developed and developing nations. Despite numerous studies on business incubators, the significance of entrepreneurial skills in the success of such incubators remains uncertain. Business incubators are instrumental in not only launching startups but also supporting the entire entrepreneurial journey.
Business incubators have emerged as a valuable resource for startups seeking to overcome business challenges. Business incubators provide startups with the necessary support, resources, and guidance to help them grow and succeed. The primary function of business incubators is to enhance the chances of success for innovative startups and facilitate the entrepreneurial process. Initially, incubators were centered around the IT industry; however, they now collaborate with businesses from various industries and orientations. This article delves into the fundamentals of business incubators and incubation, their significance, the various types of incubation services, and the phases that make up the development of business incubation.
A business incubator is an organization or program that is designed to support the development and growth of startup companies. They provide services such as management training, mentorship, co-working space, networking opportunities, access to funding, and much more. Business incubators are perceived to be the mainstay of economic development programs. They create value by combining the entrepreneurial drive of startups with the resources generally available to new ventures.
The people working for a business incubator perform intensive research before supporting or funding startups. The primary objectives of business incubators are creating employment opportunities in the local economy and commercializing technologies.
The National Business Incubation Association (NBIA) defined Business Incubators as a Regional and National Development catalyst tool.
The whole idea behind business incubators is to offer a range of business development services, full access to small spaces on flexible terms, and to meet the needs of new firms. The services offered by a business incubator are designed to enhance the success and growth rate of new enterprises, maximizing their impact on economic development.
The number of incubators has grown considerably in recent years. This rise is attributed to factors such as corporate downsizing, increased entrepreneurship, new technologies, economic globalization, and the transfer of technology.
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Business Incubation is the name given to the process that involves supporting the development and growth of startups through the provision of various resources and services. The goal of business incubation is to help startups overcome the initial hurdles that come with starting and growing a business. There are numerous startups working on revolutionary ideas. But these ventures often need assistance. Business incubators provide this much-needed support. The goal of incubation in a nutshell is to increase the success rate of emerging startups and entities.
Types of Business Incubators
There are seven main types of incubators prevailing in the market today. These are:
1. Corporate Incubators
Their objectives are to enhance entrepreneurial skills and to help startups keep up with other industries/competitors. Corporate incubators target internal and external projects related to the activities of the company. The most common challenge corporate incubators face is the conflict between top-level executives and committees regarding objectives and management-related decisions.
2. Local Economic Development Incubators
They work on economic development by supporting SMEs and specific groups for the overall upliftment of society. These groups include small enterprises, handicraft-related businesses, and locally-sourced companies. Governance risk, volatility in management quality, long hours of negotiation, and conflicts are often associated with such incubators.
3. Private Investors’ Incubators
They assist high-potential businesses (such as technology-intensive startups) and then reap benefits by selling shares. These incubators lag in terms of quality and durability.
4. Academic Incubators
They offer new sources of finance while supporting the entrepreneurial spirit and focusing on civic responsibility. Academic incubators target external projects and projects internal to academic institutions.
5. Venture Capital Incubators
Venture capital firms have become a popular topic in the business world lately. They see incubators as a way to generate profits, and thus invest in new companies or offer funding in exchange for a share or ownership in the company. These firms may also provide management teams with access to angel investors and financial management as part of their incubation package.
6. Kitchen incubators
Kitchen incubators provide a safe space for entrepreneurs, chefs, and restaurateurs to develop their ideas. They offer a commercial kitchen or kitchen space where they can experiment with specialty foods, create new restaurant concepts or even start a ghost kitchen. Kitchen incubators are similar to other business incubators as they support and guide the development of “kitchens” from the initial stages to the full launch. Throughout the process, they provide mentorship, access to funding, and educational opportunities.
7. Social Incubators
A social incubator is an organization that fosters and supports individuals with innovative ideas for businesses that can bring positive change in the world. These businesses could be non-profit organizations or companies that aim to create products or services that contribute to environmental sustainability or social progress in society.
The process of business incubation typically involves several stages:
Application: Startups apply to a business incubator program by submitting an application and business plan. Some incubators have selective application criteria, while others may have a broader range of eligibility criteria.
Screening: The incubator reviews the application and business plan to determine if the startup is a good fit for the program. The screening process may involve an interview or presentation by the startup.
Incubation: Once accepted into the program, the startup works with the incubator to develop and execute its business plan. The incubator provides the startup with access to resources, mentorship, and other support services to help them achieve their goals.
Graduation: Once the startup has achieved its goals and is ready to operate independently, it graduates from the program. Graduation typically involves leaving the incubator’s physical space and resources but may still involve ongoing mentorship and networking opportunities.
What is the Role and Function of a Business Incubator in Startup Growth?
Incubators provide resources and services to entrepreneurs, including working space and offices, technical expertise, management mentoring, assistance in compiling an effective business plan, shared administrative services, technical support, business networking, and advice on intellectual property, sources of financing, markets, and strict admission/exit rules.
An incubator concentrates its effort on helping innovative and fast-growth startups that are likely to have a significant impact on the local economy. The role of business incubators in this context is pivotal, as they provide a supportive ecosystem and resources that empower these startups to thrive and contribute substantially to economic development.
Some of the Roles and Functions of Business Incubators Include
They guide startups/ventures on how to compete with established industry players.
Business incubators help with the basics of business.
Business incubators organize comprehensive business training programs.
They act as advisory boards and mentors.
They help in management team identification.
They offer marketing and PR assistance to new companies for brand establishment.
They help with business etiquette.
They provide technology commercialization assistance.
They help with regulatory compliance.
They provide intellectual property management.
They create jobs for mid-career personnel and veteran executives, benefiting communities and driving economic growth.
Features of Business Incubators
Industry-Specific Expertise: Some incubators offer specialized support tailored to specific industries.
Access to Research and Development Resources: Incubators offer startups R&D facilities for research, prototyping, and testing without high upfront costs.
Government Liaison and Advocacy: Business incubators assist startups with regulatory frameworks and foster government connections to streamline processes and address challenges.
Global Market Expansion Support: Incubators help startups go global by providing market insights and partnerships.
Corporate Partnerships: Incubators partner with corporations to offer startups resources, mentorship, and collaboration opportunities.
Focus on Sustainable Practices: Some business incubators prioritize eco and social responsibility. The role of the incubation center in this context is crucial, as it plays a pivotal role in fostering a supportive environment.
In-House Acceleration Programs: Some programs offer an accelerated phase with intensive mentoring, resources, and a condensed timeline to rapidly move startups toward scalability.
Exit Strategy Support: Incubators can assist startups with exit strategies like IPOs, mergers, or acquisitions for a smooth transition to the next phase of growth.
Market Intelligence Services: Startups can access market research, trend analysis, and competitive intelligence.
Incubator Alumni Network: A strong alumni network fosters collaboration and mentorship among successful graduates of the incubator program.
Choosing the Right Business Incubator
Understand Your Needs: Before picking an incubator, know what your startup needs. Incubators focus on different areas, so you need to identify the resources, mentorship, and networks that will help your business grow.
Research Incubators: Look into different incubators to find one that matches your business. They’re often supported by local schools, governments, or business organizations and offer more than regular business programs, focusing specifically on startups.
Evaluate Benefits and Costs: Once you have options, compare what each incubator offers against its costs. Incubators usually provide services for 1-2 years and may charge fees or take equity in your business. Make sure the benefits are worth the cost.
Make the Decision: After evaluating your options, choose the incubator that best fits your needs. The right choice can provide the resources, mentorship, and connections to help your startup succeed.
Assist ventures with both long-term and short-term growth.
Assist ventures only for short-term growth and that too for a small duration.
Allow companies to grow at their own pace.
Companies are under pressure to grow quickly.
Are generally non-profit organisations.
Are usually for-profit organisations.
May not be able to offer access to funds.
Offer access to funds and are also known as angel investors.
Don’t promise extensive growth to ventures.
Promise substantial growth to ventures.
They provide services such as Office space, mentorship, networking opportunities, business development support.
They provide services such as Mentorship, networking opportunities, access to funding, training, and education
Overall, business incubators are more focused on providing long-term support to early-stage startups, while accelerators typically work with startups that already have some traction and are looking to rapidly grow their business. Incubators may offer a broader range of services and have less selective application criteria, while accelerators are typically more focused on funding and may require equity in the startups they work with.
Startup Incubators and Accelerators: Definitions, Differences and Benefits
The performance of business incubators is often affected by incompetence in business management, financial handling, human resource management, and the lack of interpersonal and people skills.
With regard to the role of incubation centers in entrepreneurship development and the skills required for them to be efficient, several studies revealed that administration, technical, financial management, marketing, human resource management, and interpersonal skills were extremely important.
Access to advanced technology-based facilities, self-sustainability measures, support structures, and funding were found to be the major challenges confronting business incubators. It is also recommended that incubation managers who lack the necessary entrepreneurial skills enroll in business courses at local colleges or universities.
Business incubators provide resources and services to entrepreneurs, including working space and offices.
What are the types of business incubators?
Types of business incubators include corporate incubators, academic incubators, local economic development incubators, and private investors’ incubators.
What is the role of an incubator in startup?
Business incubators provide networking activities, help startups save operational costs, help with presentation skills, and get access to loans and funding.
What is the primary purpose of a business incubator in entrepreneurship?
Business incubators provide startups and entrepreneurs with the funding they require and provide access to industry mentors.
When was the first business incubator started?
The first business incubator was started in 1959 by Joseph L. Mancuso. It was opened at the Batavia Industrial Center in Batavia, New York.
How long does a startup typically stay in a business incubator?
The length of time a startup stays in a business incubator can vary depending on the program and the needs of the startup. Incubator programs can range from a few months to several years.
Do business incubators provide funding for startups?
Many business incubators offer startups access to funding sources, including seed funding, venture capital, and other types of financing. However, not all incubators provide funding, so it’s important to research individual programs to determine their offerings.
What types of mentorship do business incubators offer?
Business incubators offer various types of mentorship, including one-on-one mentoring from experienced entrepreneurs and industry experts, as well as group mentoring and peer-to-peer mentoring opportunities.
How do I apply to a business incubator program?
To apply to a business incubator program, startups typically need to submit an application and business plan. Some incubators may also require a presentation or interview as part of the application process.
Describe the functions of the incubation centre?
The startup incubation centre acts as a catalyst for growth, providing necessary resources, mentorship, and a collaborative workspace. It fosters innovative ventures, accelerates their development, and creates a supportive ecosystem for entrepreneurial success.
What is the role of incubator in startup?
An incubator helps startups by providing resources, mentorship, and networking opportunities. It supports early-stage businesses with guidance, funding options, and a collaborative environment to grow and succeed.
A startup incubator is a collaborative program designed keeping in mind to help new startups succeed. The main goal of a startup incubator is to help entrepreneurs grow their businesses. Mostly, startup incubators are non-profit organizations that are usually run by both public and private entities.
Startup incubators play the most needed and important part of the startup ecosystem. Read the full article to know more about startup incubation centers in India.
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Startup incubators are organizations that help business people to build up their business, particularly in the underlying stages. Incubation facilities are typically provided by institutions that have experience with the business and innovation world. Startup Incubators in India support incorporates giving technical facilities and advice, initial development fund, network, and linkages, collaborating spaces, lab offices, tutoring, and advisory help Indian startup Incubators.
Here’s the list of top 10 startup incubation centers in India:
1. CIIE IIMA
Centre for Innovation Incubation And Entrepreneurship – IIMA
Startups Funded:
EzySolare
Glowship
Glass
At the heart of IIM Ahmedabad lies this center for innovation incubation & entrepreneurship which stands as a pioneer in the field of the entrepreneurial sector as an incubator which has given birth to many startups. Established in 2007, CIIE is a not for profit company governed by a board comprising government, industries, and IIMA representatives. It helps in cultivating a rare breed of entrepreneurs by incubating, accelerating, mentoring, and funding the startups. This Indian startup incubator engages with ventures across tech and impact areas like energy, environment, agriculture, healthcare, and affordable technology.
2. IAN incubator
Indian Angel Network
Startups Funded:
FarMart
NativeSpecial
Starting in April 2006, the IAN startup incubator is established by India’s angel network (IAN), India’s largest group of angel investors established with the support of DST. The members of the sector being prime leaders in the entrepreneurial sector, in addition to money, also provide high quality mentoring, vast networks, inputs on strategy as well as execution. Sectors of the investment are agriculture, e-commerce, gaming, internet, mobiles, etc.
3. Sine
Society for Innovation & Entrepreneurship
Startups Funded:
Aqua
Bhugol
ideaForge
Established in 2004, sine stands for the society for innovation & entrepreneurship. This Indian startup incubator is hosted by IITB as an umbrella for the promotion of entrepreneurship, financially assisted by DST and technology development board to provide seed support in form of grants, interest-free loans, soft loans, or equity participation over 5 years. Sine provides help to startups in the impact areas of technology-based entrepreneurship.
4. STEP
Science and Technology Entrepreneurship Park
Startups Funded:
iKure Techsoft.
Science and technology entrepreneurship park (STEP) was established as an Indian startup incubator for new startup ideas in IIT Kharagpur in the year 1986. it receives financial support from the department of science and technology (DST) and the national science and technology entrepreneurship development board (NSTEBD). Its goal is to nurture successful indigenous technologies and growth-oriented entrepreneurs/enterprises. It provides space as well as seed fund to the startups.
5. Nsrcel
Nadathur S. Raghavan Centre for Entrepreneurial Learning
Startups Funded:
Science Hopper
Gamatics
BubbleNut Wash
Highway Delight
The Nadathur S Raghavan center for entrepreneurial learning (NSRCEL) at IIM Bangalore hosts the biggest nonprofit startup incubator set up with the support from the Michael and Susan dell foundation for nurturing startups in their early growth state. It aims at grooming entrepreneurs to bring about innovation in public sectors of the society. It provides a few lucky startups with a robust set of wrap-around services including mentoring support, consulting services, and training programs, thus enabling them to get the most exposure. NSRCEL currently nurtures almost 18 startups probably the highest number to be taken up by an educational institution in India. Since the foundation in 2000, NSRCEL’s rapidly growing open mentoring initiatives have conservatively estimated that it may have directly impacted more than 10,000 entrepreneurs, aspiring entrepreneurs, or other participants in the ecosystem.
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Centre for Entrepreneurship and Innovation (CEI) is one of the centers of excellence established by the Indian Institute of Management (IIM) Calcutta to accomplish a more prominent understanding of an effective mechanism for the promotion of professional management practices in Indian organizations, as well as to stimulate the development of these startups in india for societal benefit. CEI’s vision is to be recognized as a program of worldwide prestige, where students, faculty, alumni, industry, and policymakers collaborate, learn, and innovate. The team comprises faculty from different functional areas and disciplines which makes it easier to get inputs and mentoring. Some of its areas of work are entrepreneurial research and case development and venture creation.
Kerala Startup Mission ( previously Technopark TBI) came into existence as a startup incubator in 1990 at Kerala State Capital. KSM companies employ more than 50000 IT professionals. Spread across 760 acres of land with 9.33 million sq. ft built up space ( completed ) & 3.5 million sq. ft (Work in Progress) and over 350 companies operational at present. This startup incubator has successfully provided a platform to attract investors for their startups.
The brainchild of IIM Lucknow, IIML – Incubator stands as a pioneer in turning entrepreneurial ideas into viable businesses. managed by a separate council under the institute, it receives. all directions of functioning from it. IIML – Incubator ensures that the startups growing under it get all the benefits from it which include financial, mentorship, and infrastructural support throughout incubation. It also promises technical assistance from trained professionals in their areas of expertise.
9. pupilfirst
pupilfirst Incubator (previously Startup Village)
Startups Funded:
MindHelix Technologies
finahub
tagNpin
pupilfirst (previously Startup Village) is a not-for-profit startup incubator based in Kochi, India. It started in April 2012. On January 1, 2016, Kerala Startup Mission assumed control over the physical space of the famous pupilfirst at Hi-Tech Park in Kalamassery. The association meant to launch 1,000 innovative new businesses throughout the following ten years and start the quest for the following billion-dollar Indian organization. It focuses primarily on student startups and telecom innovation. It is India’s first incubator that is supported financially together by people in public and private divisions. The promoters of pupilfirst are the Department of Science and Technology, Government of India, Government of Andhra Pradesh, Technopark, Trivandrum, and MobME Wireless. Since 2012, pupilfirst has helped nearly 590 physical and virtual incubates in Kochi and 200 in Vizag.
10. Villgro
Villgro
Startups Funded:
Yostra Labs
VAHAN
SkillTrain
BEMPU
Villgro, earlier known as Rural Innovations Network, is one of the top from the list of incubators in India. Villgro is India’s most established and first social venture incubator. This incubators is also one of the social entrepreneurial firms in India. Villgro funds, mentors, and incubates early-stage, innovation-based social enterprises that impact the lives of India’s poor. It was established in 2001 by Paul Basil with the mission of hatching early‐stage, imaginative organizations and has since worked in finding a huge number of advancements and pioneers, and brooded over 100 businesses.
All these startup incubation centers has given a boost to the growth of startup ecosystem in India. We have tried to discuss the startup incubation centers in India that have helped many startups from the scratch.
Feel free to reach us and share your feedback. We would love to hear from you. Do comment us in the comments section below. Happy Reading.
Startup incubators are institutions that help entrepreneurs to develop their business, especially in the initial stages. Incubation function is usually done by institutions that have experience in the business and technology world.
How do Incubators help startups get funding?
Most incubators run demo days where the entrepreneur has a chance to present his idea before investors to secure funding. Investors also like startups from incubators as they have a certain amount of faith in well-known incubators and expect the ideas and startups to be vetted to a large extent.
How many Incubators are there in India?
India has the 3rd highest number of incubators with over 250 incubators being present in India.
Piyush Mishra
