Business Incubation is a unique and highly flexible combination of business development processes, infrastructure and people, designed to nurture and grow new and small businesses by supporting them through the early stages of business progress. Though in the initial phase of business new entrepreneurs do bootstrapping – which is building a company from the scratch with nothing but personal savings and, waiting for the cash coming in from the first sales. In the initial phases of businesses entrepreneurs depend a lot on other’s help in areas such as management of funds, marketing and sales, networking, hiring the right people, maintenance of day to day expenses and accounting etc.
Incubators provide numerous benefits to owners of startup businesses. Their office and manufacturing space is offered at a low cost, almost below market rate, and their staff supplies advice and much-needed expertise in developing business and marketing plans as well as helping to fund, helping the businesses to grow. In India, startups typically spend an average of two years in a business incubator, during which time they often share telephone, secretarial backup, office, and production equipment expenses with other startup companies. This helps them to reduce the overhead and operational costs. While there are some independent incubators, there are many run by venture capital firms, angel investors, government, some major corporations, universities, educational institutions such as IITs and IIMs, and some renowned B Schools. Some incubators have an application process, but others only work with companies and ideas that they come in contact with through trusted partners. A good example of an incubator is Idealab.
Idealab was founded by Bill T. Gross in March 1996. Prior to Idealab, Gross founded GNP Loudspeakers, an audio equipment manufacturer. It got acquired by Lotus Software and Knowledge Adventure an educational software company, later it was acquired by Cendant. Idealab has historically hired many alumni of California Institute of Technology from where Gross passed out. Gross now sits on the Institute’s board of trustees. Idealab has created, invested in, and spun off a diverse array of companies such as AirWave Wireless, vendor of wireless network management software acquired by Aruba Networks in 2008, Answer.com, Aptera Motors, electric car manufacturer, Blastoff.com, CarsDirect, Citysearch, acquired by IAC/InterActiveCorp, Commission Junction etc.
Business incubation programs are often sponsored by private companies or government entities and public institutions, such as colleges and universities. Their goal is to help create and grow young businesses by providing them with necessary support and financial and technical services. There are approximately 150 business incubators nationwide in India, according to the National Business Incubation Association.
Not all business incubators are alike. An entrepreneur must however choose a suitable incubator to suit his/her business idea. For example, the Amity Innovation Incubator is a pioneering concept in the context of Indian Universities. Supported by DST (Ministry of Science & Technology) GOI, in a very short time of its existence it has earned desirable position for itself with start-ups which have regularly been on top of the innovation curve and have been recognized on platforms like ‘The Power of ideas’, Red Herring Global winner, Tata NEN and NASSCOM Innovation Awards to name a few. It is located in Noida and founded in 2008. Its focus area is Rural Innovation and Social Entrepreneurship, Information and communication Technologies (to include Social media and ecommerce, Mobile computing and technologies, Analytics, Cloud computing and Big Data), Education and Education Technologies, Food and allied Technologies, Biotechnology and Life Sciences, Nanotechnology and Material Sciences. It funds up to INR 1 Cr. Some of its notable startup projects are ApnaCircle.com which provides opportunities for careers and social networking. Anduril Technologies which specializes in the business domains of Payments, Microfinance, Telecom and ERP.
It is advisable for new entrepreneurs to visit National Business Incubation Association Website to find the incubator that best suits their requirements. You can find an incubator in your state, also you can visit economic development agency, located in the phone book under the listing for your state government. You can also call the information offices of your local colleges and universities to see whether they have any business incubation programs.
AnglePrime is another business incubator located in Bangalore which is focused on startups in the middle that need seed capital (initial capital required for a business) it invest in not more than 3-4 companies a year. Angle Prime was founded in 2011 and its focus area is Mobile internet, ecommerce and tablet/mobile app. It funds up to 2 lakhs to 6 lakhs; some of its notable startups are: Ezetap which is a universal payment platform and Hacker Earth which provides enterprise software solutions that help organizations with their innovation management and technical recruitment needs.
Centre for Innovation Incubation and Entrepreneurship (CIIE) was setup by IIM Ahmedabad with support from the Government of India and Gujarat Government it operates through an autonomous not-for-profit entity. CIIE comprises of IIMA faculty, alumni and other individuals and partners with like-minded organizations to foster entrepreneurship through incubation, ecosystem development and academic initiatives. It is located in IIM Campus in Ahmadabad; it was founded as a research institute in 2002 and was turned into a full-fledged incubation centre in 2007. Its focus area is Information Communication Technology, and Social Entrepreneurship. It funds up to INR 20 lakhs. Its notable startups are Travelyaari, which is largest online bus booking portal headquartered at Bangalore; Innoz, is a young and exciting venture on mobile & wireless innovation which was founded in 2008; Thrillophilia is India’s biggest online platform for adventure tourism for discovering and booking travel experiences.
If an incubation program seems interesting to you, be prepared to submit a well prepared and detailed business plan. The plan will be reviewed by a screening committee to determine whether or not you meet the criteria for admission. Incubators carefully screen potential businesses because their space, equipment, and finances are limited, and they want to be sure about their choosing to nurture businesses with the best possible chance for success.
Through running a business initially in incubation entrepreneurs can:
Share basic operating costs: Tenants in a business incubator share a wide range of overhead costs, including utilities, office equipment, computer services, conference rooms, laboratories, and receptionist services. In addition, basic rent costs are usually below normal for the region in which the new business is operating, which allows entrepreneurs to realize additional savings. It is worth noting, however, that incubators do not allow tenants to remain in the program for long; most lease agreements at incubator facilities run for two to three years.
Get consulting and administrative assistance: Incubator managers and staff members can often provide insightful advice and/or information on a broad business spectrum of business issues, from marketing to business expansion financing. Small business owners should remember that the people that are responsible for overseeing the incubator program are usually quite knowledgeable about various aspects of the business world. They are resourceful.
Access to capital is easy: Business incubators provide entrepreneurs with access to the kind of early-stage capital that emerging companies desperately need. According to a recent survey of National Business Incubation Association members, 83 percent of incubator owners and directors provide access to seed capital.
Respect and credibility comes easily: Many entrepreneurs have stated that when their start-up businesses are accepted into business incubator programs, the rewards include an aura of legitimacy and credibility among both vendors and customers. The fact that a business has been accepted into an incubator offers due diligence value to potential investors because incubators allow only diligent business plans.
It develops comradeship with fellow entrepreneurs: The presence of fellow entrepreneurs’ works as motivating factor. You see another business going through different stages; you witness ups and downs in other businesses as well as yours. Incubators by gathering entrepreneurs together under one roof, create a dynamic climate wherein business owners can provide encouragement to one another in their endeavors; share information on business-related subjects; and establish networks of communication that can serve them well for years to come.
All over world incubators run on common idea: The concept of incubation works in all communities, practically all industries, all demographics on a particular strength of an ability to aid companies that fulfill specific needs, technology transfer, stimulating mankind and creating jobs.
India’s largest incubator for startups is T-Hub also known as Telangana Hub. On 5 November 2015 the first phase of T-Hub was set in operation by E. S. L. Narasimhan, Governor of Telangana and Ratan Tata, Chairman Emeritus of Tata Sons, and Telangana IT & Panchayat Raj Minister K. T. Rama Rao. It is spread in a 70,000 square foot building called CatalysT, it is entirely dedicated to entrepreneurship. It is a partnership between the private sector and the Government of Telangana along with three of India’s leading academic institutes – IIIT-Hyderabad, ISB and National Academy of Legal Studies and Research.