ECONOMY

The Geography Of Startup Incubation In India

The number of startup incubators in India grew 15 times between 2000 and 2020, with southern and western states contributing the most and non-metro cities gearing up to become future startup capitals.

Prolific, expansive, and promising – these are some common adjectives used to describe India’s startup ecosystem. Incubators are a prominent part of and contributor to this ecosystem. In 2017, National Association of Software and Service Companies found over 140 incubators in India and placed the country third in the world for the number of incubators, behind the United States of America and China. By October 2020, this number had multiplied. While the number of incubators is believed to be much higher, we have listed and verified over 326 incubators in India. This translates roughly to one incubator per 150 startups in India. Incubators are predominantly housed within academic institutions (such as Indian Institutes of Technology, Indian Institutes of Management, universities) or as part of industry bodies and organisations (such as Nasscom) and research agencies (such as Centre for Cellular and Molecular Platforms).

As the startup ecosystem is emerging from Covid-19, we pause to reflect upon the evolution of startup incubation in India over the last two decades. Incubation can be analysed in three ways – spatial or geographic spread of incubators, affiliation and focus of incubators, and temporal or growth of incubators over time. In this article, we focus on how incubators have sprung up across different regions of India along with their affiliations and focus.

Geographic Spread Of Incubators In India

The growth in the number of incubators comes predominantly from the southern states (Tamil Nadu, Karnataka, Telangana, Andhra Pradesh, and Kerala) and the western states (Maharashtra, Gujarat, Rajasthan, and Goa). There can be several reasons driving this skewed regional growth, including blossoming business activity. As an after-effect of Covid-19, incubation may move to virtual platforms in a substantial way. Hence, the location of incubation centres may perhaps also be determined by the availability of affordable and quality talent and infrastructure.

At present we find incubators across the geographic landscape of the country, including the regions that have even remained physically or socio-politically difficult to reach (such as the states of Assam, Manipur, and Jammu and Kashmir).

Tamil Nadu (46), Maharashtra (38), and Karnataka (34) have the greatest number of incubators. The National Capital Region has the highest physical density, with one incubator every 138 square kilometres. While the high number of incubators in Maharashtra and NCR can be linked to these being centres of economic activity, in Tamil Nadu, the high density of incubators is linked to that of academic institutions. 84% of incubators (about 39 in number) in Tamil Nadu have been hosted by academic institutions. As expected, this high density of academic institution-based incubators matches the concentration of higher education institutions in the state.

If we were to zoom in further from the states into the locations of incubators, we would find some promising trends. Over 60% of the 326 incubators are located in non-metro cities; of these, over 70% (about 160 incubators) are located in cities and towns that are not state capitals. This trend foretells a more balanced future for the startup ecosystem in India. To reiterate, the location of incubators in smaller towns may also be impacted by a movement towards virtual incubation.

Incubators are also found in smaller cities and towns with populations of less than 6,00,000, such as Bagalkot, Karnal, Koovapally, Ajmer, and Berhampur. Most of these incubators are housed within higher education institutions, and it is imperative for them to expand their remit of activities beyond technology commercialisation. Many of these smaller towns and non-metros have a thriving ecosystem of family businesses. While business communities in these cities may be thriving in limited pockets, the startup ecosystem would be in its infantile stages. Incubation centres set up in these cities and towns must consider engaging with the local family business ecosystems to create market linkages, investment, and other support mechanisms for the incubated startups. The incubators could then become the germination bed, not just for startups, but also for the entire startup ecosystems in the respective towns, cities, and regions.

Almost half the incubators in our dataset are affiliated with the Department of Science and Technology, Government of India. Other ministries and departments that have active incubator programmes include –

The affiliation of incubators over a period of time indicates a pattern related to their age – some of the oldest incubators have been affiliated predominantly with either DST or MoMSME. In the last 10 years, MeitY and AIM have scouted and onboarded incubators with fervour, under their schemes (TIDE, launched in 2008 by MeitY and the Startup India Initiative, launched in 2016, being operationalised by AIM).

More often than not, an incubator is affiliated with multiple agencies. This may be due to reasons of financial sustainability or a quest for the incubator to better use its available resources (such as talent and physical infrastructure). However, this multiplicity of affiliation may also add to the pressure on the incubator to deliver upon the mandates of all the schemes as well as report progress to multiple agencies.

Four challenges and questions are important to reflect upon when it comes to the future of incubation: Do incubators create entrepreneurs, enterprises, or ecosystems? What are valid measures of incubators’ performance? How might incubators become well-functioning and effective organisations? How can incubators remain steadfast in their mission?

This article contains excerpts from Sharma, S, Vohra, N, and Shukla, S. 2021, The Past, Present and Future of Start-up Incubation in India. In the book Shifting Orbits: Decoding the Trajectory of the Indian Start-up Ecosystem, edited by Thillai Rajan A, Srivardhini K Jha, Joffi Thomas, and Rohan Chinchwadkar, 62–73. Universities Press (India) Pvt.

Rohan Chinchwadkar is an Assistant Professor at SJM School of Management and Associate Faculty at DS School of Entrepreneurship, IIT Bombay.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

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