ACADEMIC ANGLE. Incubators – the new fads of entrepreneurship?

As the entrepreneurial ecosystem in India develops, translators, incubators and accelerators are the topic of much public attention.

Given that these terms are yet to diffuse widely into the common business professional’s daily lexicon, it is useful to start by briefly describing what they stand for.

Translators help scientists and engineers take their work from the laboratory to a point where it can be developed for commercialisation. They usually do not develop the idea to the point of manufacturing and marketing the product on a commercial scale. They are especially relevant in the fields involving deep science such as drug development where once the molecule is developed in the lab further work needs to be carried out on how to make it ready for industrial production.

Incubators are facilities where entrepreneurs can develop a business plan for an idea they have identified. They also support product development and testing, starting from the building blocks of technology. A more contemporary extension of incubators, accelerators, as the name suggests, help accelerate the commercialisation of an idea by enabling quick and efficient customer acquisition.

For the sake of ease of reference, we will refer to all of them as incubators. The distinctions that we note are also broad and indicative of their roles in general. In specific instances, there could be a fair degree of overlap.

Translation facilities support longer residency times of 18 months or more, incubators support residencies of 12-24 months while accelerators almost always work with this magical figure of thirteen weeks, even if some of us do not consider that number very auspicious. All of these entities have one thing in common: They all endeavour to take an idea as close to commercialisation as they can. They do so in a somewhat controlled environment which assembles and provides many of the non-fund based resources that are commonly required to start and grow a commercial enterprise.

Examples of such resources are mentors, aspirational models and access to a talent pool of human resources. Some of them provide a select amount of funding. A few others facilitate access to investors from the capital market by arranging networking sessions.

Incubators build on a key idea in contemporary discourses on entrepreneurship: Entrepreneurs can grow their enterprises more efficiently if they have access to a relevant network. This network could include fellow entrepreneurs who are dealing with similar challenges in their business and so the tenants in an incubator could benefit from each other’s experiences.

Crafting a business strategy The stage at which incubators accept enterprises for tenancy could vary as could the period of residency and the nature of engagement. At the most basic level most of them provide physical infrastructure such as offices, labs or workshops. Some of them engage at a deeper level by providing soft resources such as access to experts who can help them with solving their science or engineering problems or helping them craft a business strategy. In a more recent variant known as virtual incubation the entrepreneur is provided only the soft resources, thus avoiding costly investment in physical infrastructure for the service provider. What also emerges is that while these entities must be serving an important purpose for entrepreneurs they are also turning out to be fairly specialised in the way they are organised and function.

Do we really need incubators in India? Can a business case be made for incubators? This question assumes significance in the light of the attention that has been given to incubators in the current and previous budgets. In the next part of this article I will present some reasons why it might make economic sense to set up more incubators.

(The writer is Chairperson, NS Raghavan Centre for Entrepreneurial Learning at IIM Bangalore. Views expressed are his own.)

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