A new report released today reveals that India boasts over 1,100 active incubators that are pivotal in nurturing the country's burgeoning startup ecosystem. The joint research report, titled India Incubator Kaleidoscope 2024, was published by NSRCEL, the startup incubator at IIM Bangalore, and the Centre for Research on Start-ups and Risk Financing (CREST) at IIT Madras.

The report highlights a steady growth in the number of incubators within the Indian ecosystem, with Tier I cities housing nearly half (48%) of all incubators. Chennai leads the charge, showcasing a remarkable 82% proportion of academic incubators, while Bengaluru and Gurugram are home to a high concentration of industry incubators at 71% and 84%, respectively.

Despite this growth, the incubator density in India stands at only 0.8 incubators per million people. In stark contrast, countries like the United States, the United Kingdom, and China report figures ranging from 8 to 10 incubators per million. This disparity signals a pressing need for the establishment of additional incubators across the country.

Amitabh Kant, G20 Sherpa and former CEO of NITI Aayog, emphasized the vital role of incubators in the growth of the Indian startup ecosystem during the report's launch. “Initially conceptualized to facilitate the formation of startups, incubators now serve multiple functions, including bringing together scientific and business expertise, channelizing capital to promising startups, and raising societal awareness about entrepreneurship”, he stated.

Prof. Srivardhini Jha, Professor of Entrepreneurship at IIM Bangalore and Chairperson of NSRCEL, added that while incubators play a crucial role in making entrepreneurship more accessible and inclusive, their activities and impacts remain poorly understood. “This report addresses that gap and highlights the necessity to both elevate the level of incubation activity and enhance the quality of incubation efforts nationwide”, she noted.

The findings indicate that only 8.2% of startups undergo incubation, with 10% of incubators supporting a staggering 98% of the startups that are incubated. This underutilization underscores the urgent need to improve the performance of less effective incubators and actively engage in outreach efforts to raise awareness about the benefits of incubation.

Interestingly, the report reveals that incubation is particularly sought after by students, young professionals, women founders, and individuals with modest financial resources. Sectors focusing on deep tech, such as artificial intelligence, machine learning, data analytics, and biotechnology, exhibit a high incubation rate, exceeding 12%.

The advantages of incubation are tangible. Incubated startups tend to secure their first round of funding significantly earlier than their non-incubated counterparts, with 27.1% of incubated startups obtaining funding compared to just 15.4% for non-incubated startups. Additionally, despite their smaller numbers, incubated startups have earned more accolades in leading startup awards and are more actively involved in creating intellectual property.

Economically, the report indicates that the contribution of incubated startups is substantial. The average annual revenue for every 100 incubated startups in their initial years has been approximately Rs 1,590 crores. By the ninth year from incorporation, the estimated average asset value for every 100 incubated startups is around Rs 10,627 crores. Notably, the revenue performance of startups associated with industry incubators is reported to be 50% higher than that of those supported by academic incubators.

This report sheds light on the growing importance of incubators in the Indian startup landscape, calling for a concerted effort to expand and improve the quality of these vital institutions.