The report, titled ‘India Incubator Kaleidoscope 2024: Democratising Entrepreneurial Dreams’, was produced through a collaboration between NSRCEL, the startup incubator at IIM Bangalore, and the Centre for Research on Start-ups and Risk Financing (CREST), IIT Madras.
It offers insights and prescriptions to business leaders and policymakers on creating and nurturing startup incubators, which it says are pivotal to job creation and economic growth.
“Incubators play a crucial role in making entrepreneurship more accessible and inclusive across the country, but their activities and impact are not well understood,” said Srivardhini Jha, chairperson, NSRCEL.
The report highlighted the need to improve the performance of underutilised incubators in engaging outreach and raising awareness about the benefits of incubation, saying that only 8.2% of startups in the country undergo incubation.
Additionally, only 10% of incubators in the country support 98% of startups that are incubated, it said.
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Incubation is sought after by those with modest financial resources, students, women founders and young professionals, according to the report.At around 12%, the rate of incubation is higher among deep-tech sectors, such as AI/ML, biotech and data analytics, it said.
Incubated startups secure their first round of funding earlier than non-incubated ones, as per the report.
Within a year of incorporation, 27.1% of incubated startups received their first round of funding, while the corresponding figure for non-incubated start-ups was 15.4%, it said.
Thillai Rajan A., head, CREST, IIT Madras, said, “Our research finds that incubators enhance the credibility of the startups that they support. This manifests more compellingly in startup funding. Incubated startups are two and a half times more likely to get funded as compared to the non-incubated.”
Incubated startups are more actively engaged in the creation of intellectual property, according to the report, with the percentage of incubated startups that have published patents about five times that of non-incubated ones.
The contribution of incubated startups to the economy is significant, it said, with the annual revenue on average in the initial years for every 100 incubated startups at about Rs 1,590 crore. By the ninth year, the average value of assets for every 100 incubated startups has been an estimated Rs 10,627 crore.
Having grown steadily, incubators total more than 1,100 in the country, with the southern region housing 45% of them and having the highest density.
Almost half (48%) of the incubators in the country are housed in tier-1 cities, according to the report.
The geographical mix of incubators hosted by academic institutions, industry and public sector, however, shows variation across cities. Gurgaon (84%) and Bengaluru (71%) have a high proportion of industry incubators, whereas Chennai has a higher proportion of academic incubators (82%). However, the revenue performance of startups associated with industry incubators is 50% higher than those supported by academic institutions.