A third to a fifth of the incubated firms make it to the big league.
The success rate of incubated companies in India is 60-70 per cent, comparable to that in America, says the first such survey conducted by the Department of Science and Technology (DST).
The ‘First Status Report on Technology Business Incubation’ in India also stated that 20 to 30 per cent of incubated companies make it big.
The survey is based on the responses of 28 incubators supported by the DST. Each of these incubators have, on an average, 10-15 companies they are fostering. DST supports 55 incubators; there are 120-130 incubators across India.
“For us, a successful entrepreneur or business is one which has managed to survive for five years and above after they graduate from an incubation centre.Those 20-30 per cent who manage to make it big are the ones who have a turnover in excess of Rs 100 crore,” said S K Mittal, the head of DST’s National Science and Technology Entrepreneurship Development Board.
DST provides Rs 2-8 crore funding to each of the incubators, with a target of providing seed fund of at least Rs 50 lakh per company. Over the past two years, said Mittal, DST and the Technology Development Board have jointly provided funding of Rs 20 crore.
| SEEDING GROWTH | ||||
| Type of Incubators | Occupany | Age profile | Qualification | Funding pattern |
| 71% of the incubators are linked to technical institutions or universities | 52% space is provided by host institutions | 49% are in the age group of 25-30 years | 55% graduate | 35 % have invested on own and 17 % loan |
| 7% is linked to R&D lab | 36% is dedicated | 35% in the age group of 30-40 years | 25% post graduation | 27% borrowed from family |
| 2% linked to management | 5% vocational 9% doctorate | 7 % angel 10% seed | ||
The study also notes the rise of ‘angel funding groups’ like Indian Angel Network, Mumbai Angels and TiE Chennai Fund, and how this has given an impetus to entrepreneurial ventures in the country.
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“The next step from DST is to tie-up with other ministries. Rather, some of them have already approached us, like Ministry of Micro Small and Medium Enterprises, Ministry of Agriculture, Department of Information Technology and banks like the Small Industries Development Bank of India,” said Mittal.
DST is also partnering with the Wadhwani Foundation’s National Entrepreneurship Network (NEN) for development of mentor programme. “A lot of startups die in the early stages, which is healthy. This allows them to come up with a sustainable business model. NEN will partner with DST to develop some mentors to provide support and guidance to entrepreneurs,” said Laura Parkins, Executive Director, NEN and Wadhwani Foundation.
Private venture capital funding backed by US fund houses started to invest in India only from 2000 onwards, and clearly win in terms of the investment when compared to government-funded support.
The National Science and Technology Entrepreneurship Development Board (NSTEDB) was established in 1982. That, in turn, started the Science and Technology Entrepreneurship Parks (STEP) and Technology Business Incubators (TBIs).
NSTEDB has so far catalysed 15 STEPs in different parts of India, which have promoted 788 units, generating annual turnover of around Rs 130 crore and employment for 5,000. More than 100 new products and technologies have been developed by STEPs or STEP-promoted entrepreneurs. In addition, over 11,000 have been trained through various skill development programmes conducted by STEPs, say the official figures.
There are four types — business incubators, technology incubators, technology innovation centers and technology business incubators.
Companies incubating at government-funded programmes also get other benefits. In the case of most incubatee firms at the various Indian Institute of Technologies (IITs), other than providing space to these companies at one-third the market rate, each firm gets other infrastucture support.
While 2009 was a slow year in terms of investment due to the economic slowdown, for the first nine months of 2009, venture capitalists made a total investment of $201 million (Rs 918 crore) across 46 deals, from $709 million (Rs 3,240 crore) across 124 deals in the same period for 2008, said a survey from Venture Intelligence.