EMERGING ENTREPRENEURS.

Incubation centres are meant to help entrepreneurs concentrate on conceptualising their idea and getting their business off the ground, rather than be worried about the office infrastructure and the amenities that are required.

N. Ramakrishnan

Chennai

Ms Saloni Malhotra, an engineering graduate from Pune, founded and runs a company that is based in Chennai but does all its work from six offices in rural Tamil Nadu. She is the Founder and CEO of Desicrew Solutions, a start-up that is into non-voice business process outsourcing.

Her office is on the first floor of IIT Madras Research Park, where there are a few other start-up and early-stage companies. The first floor houses IIT Madras Research Park’s incubation centre, where more such start-up companies will be developed, mentored by faculty from the Indian Institute of Technology-Madras, and nurtured to grow.

By locating an incubation centre at the research park, where serious research can pursued by companies in collaboration with IIT faculty, the intention is to provide an ecosystem to foster entrepreneurship. One where entrepreneurs will be mentored by IIT faculty, network with peers, learn from the experiences of the established companies and not have to worry about getting their office ready with the necessary infrastructure.

Desicrew started with the Telecommunications & Networking (TeNet) Group of IIT and has benefitted immensely from the incubation and mentoring provided by it. Says Ms Malhotra: “It has been tremendous because it gives you significant exposure, it brings discipline in you because there is someone evaluating and monitoring you. Plus there is a huge advantage when it comes to networking.”

Incubation centres are meant to help entrepreneurs concentrate on conceptualising their idea and getting their business off the ground, rather than be worried about the office infrastructure and the amenities that are required.

It is the ready availability of incubation centres that spawns start-up companies in the US, especially in the Silicon Valley. In India, too, there are a number of incubation centres, including those attached to the IITs, the Indian Institutes of Management, and a few other universities.

Says Mr R. Ramaraj, Adviser, Sequoia Capital and a mentor to many an entrepreneur, incubation centres play an important role in fostering entrepreneurship.

They offer a place to start and at a low cost too. Entrepreneurs may also be able to attract talent at incubation centres. More important, there may be other companies in the incubation centre and on a bad day, there are others the entrepreneur can talk to and discuss the problems.

According to Ms Malhotra, it is easy in an incubation centre to connect with people and learn from them. “Or when there is a problem, which all of us face, it is easy to just walk across and ask for help.” She cites the labour laws. The moment the number of employees crosses 10, the entrepreneurs have to worry about labour laws. “They are not something that any company comprehends. Every time you want to structure something, right from salaries, you can ask for help in an incubation centre,” she says. She feels that she spends just a tenth of her time on administrative matters.

‘symbiotic influence’

By co-locating an incubation centre in a research park, according to Dr Sandhya Shekhar, CEO, IITM Research Park, the idea is to provide an ecosystem where the entrepreneurs can interact with like-minded people. “There is a lot of symbiotic influence between larger companies and smaller ones.” Apart from the formal mentoring by the faculty, there are a number of issues that the entrepreneurs can imbibe by being in a community that is the incubation centre.

There is no dearth of good ideas. But, says Dr Shekhar, there is a gap in nurturing those ideas into something commercially viable. “That is where they (the entrepreneurs) require all the hand-holding they can possibly get. VCs (Venture Capital firms) provide the financial support but not necessarily the mentoring that start-ups require,” she adds.

For instance, an entrepreneur may be technologically good and think he or she has a fantastic product, but then the realities are such that having a brilliant idea does not necessarily translate into success in the market. Issues such as how to constitute a company, the paper work involved, the regulations that need to be followed, the business proposal, financing, managing the funds and marketing the product require a lot of learning.

Most of the companies at the research park’s incubation will be by IIT-Madras alumni, although there may be a handful of those from outside. “But the most important thing is that there should be a strong level of stickiness with IIT-Madras,” says Dr Shekhar.

Without getting into details on the rentals, Dr Shekhar takes pains to emphasise that the research park, not just for the start-ups but for the established companies that will be doing research, is not a real-estate proposition.

The rentals will be much lower than the market rates, she says. As for start-ups or early stage companies, the amount of subsidy will be determined by the percentage of equity they share with the IIT faculty members mentoring them. The slabs are: less than one per cent, one-two per cent, and more than two per cent. This is to ensure there is total commitment from both sides.

Start-up companies can remain in the IITM Research Park for three years, while there will be a mid-way review to assess how the venture is progressing.

That review will determine whether everybody believes it is worth putting their energies into it and supporting it further and whether they could continue. Or, it can be that within 18 months the venture has grown enough that it may have to move to a bigger space.

Rural Technology Business Incubator

This is one more venture of the IIT-M, where start-ups with a strong rural focus in their business are incubated.

There are very few incubation centres that are focussed on the rural areas, says Mr Vijay Anand, Vice-President (New Ventures), Rural Technology and Business Incubator (RTBI).

The requirements of the rural people are being met either by the government, where the delivery mechanism leaves a lot to be desired, or by NGOs, which depend on donations and are project-specific.

The RTBI group believes that entrepreneurship is a much better way of tackling the problems and requirements of the rural areas. For instance, a low-cost weather monitoring station or a tele-medicine kit, tailored to the requirements of the rural areas will meet their demands better.

According to Mr Anand, the RTBI has three divisions — market research, technology and business development. An entrepreneur’s concept note is the first stage in incubating a business. Once the concept note is submitted, the market research team studies the potential with hard facts on the ground. A screening committee goes into the proposal thoroughly and will decide within six weeks whether the idea can be supported or not.

After that, the technology and business development teams take over. The RTBI even provides some seed funding.

Not only is a good domain knowledge important, but the entrepreneurs need to know how rural India works. “You need to have a bit of business sense, you need to know how to manage money,” says Mr Anand. An entrepreneur who is good in either of these two can be supported to build a company.

According to him, the RTBI now has 14 companies, six of them have graduated in that they have obtained funding from outside. “This is a huge milestone for us,” says Mr Anand. Three companies shut down half-way after the entrepreneurs realised that this is not what they wanted to do. Failures are also important, says Mr Anand.