Start-up incubation is witnessing significant growth, especially in deep-tech sectors like AI/ML, data analytics, and biotech. These sectors show a strong incubation rate of 12%, reflecting their potential for innovation. A recent study by IIM Bangalore’s NSRCEL and IIT Madras’ Centre for Research on Start-ups and Risk Financing (CREST) reveals over 1,100 active incubators in India.
Southern India Leads the Way in Incubation
According to the study titled India Incubator Kaleidoscope 2024, the southern region of India houses 45% of the country’s incubators, leading the incubation wave. While Tier-I cities like Bengaluru, Chennai, and Gurugram accommodate 48% of incubators, their focus varies. Chennai tops with 82% of academic incubators, while Bengaluru and Gurugram have 71% and 84% industry incubators, respectively.
India’s Incubator Density Lags Behind Global Leaders
Despite growth, India still has a low incubator density of just 0.8 per million people, compared to 8 to 10 incubators per million in countries like the US, UK, and China. This gap presents an opportunity for expansion, especially in smaller cities and underserved regions.
Incubation’s Role in Supporting Start-ups
The report highlights that only 8.2% of India’s start-ups undergo incubation. Interestingly, 98% of incubated start-ups are supported by just 10% of incubators. Incubation is particularly beneficial for students, young professionals, women founders, and entrepreneurs with limited financial resources, indicating the system’s positive impact on inclusivity.
Deep-Tech Sectors Show Higher Incubation Success Rates
Deep-tech sectors such as AI, data analytics, and biotech see a higher rate of incubation, with start-ups in these fields achieving a 12% incubation rate. These sectors show promising growth, attracting attention for their innovative potential.
Incubation Drives Start-up Success
Incubated start-ups perform better in securing early-stage funding. The report notes that 27.1% of incubated start-ups received their first-round funding within a year, compared to 15.4% for non-incubated start-ups. Additionally, incubated start-ups generate higher revenue, with an annual average of Rs 1,590 crore per 100 start-ups.
Challenges and the Path Forward
While incubation has proven to be an essential support system for entrepreneurs, the study points to a need for greater activity and higher quality in incubation efforts across India. Professor Srivardhini Jha from IIM Bangalore commented, “Incubators play a crucial role in making entrepreneurship more accessible and inclusive, but their activities and impact are not well understood. This report highlights the need to increase incubation efforts and improve their quality nationwide.”
India’s start-up ecosystem is rapidly growing, but expanding and enhancing incubation efforts will be key to sustaining this growth and fostering innovation in the country.
