Technology Business Incubator

Government: India

Responsible government entity: Department of Science and Technology (DST)

External partner: Incubators, including Indigram Labs

Target type of innovator: Early-stage technology start-ups needing incubation to develop their business idea

Links: http://nstedb.com/institutional/tbi.htm

Key elements:

• Various not-for-profit incubators are funded by the government for up to five years. The funds are used to cover their operational costs and to take equity stakes or provide debt to the start-ups that they incubate, with any proceeds used to fund more start-ups and a sustainable long-term incubator business.
• The supported incubators cover different technology areas and provide a channel through which several different funding programmes and services are distributed.
• Participating incubators are eligible to receive funding from multiple government departments and programmes, which helps them to create a more diverse portfolio. However, it can also increase administrative complexity.

The DST covers the operational costs of selected incubators for five years under the Technology Business Incubator (TBI) programme, largely through the National Initiative for Developing and Harnessing Innovations (NIDHI).1 The incubators are generally hosted by universities or research institutes. The TBI programme, launched in 2015, provides a platform for accreditation of start-ups through which the DST and other government departments channel financing and support to start-ups. As of 2021, there are around 125 TBI incubators supported by the government.

An example of a funded incubator under this programme is Indigram Labs, which was established in 2015 to support start-ups in the agriculture, food and cleantech areas. Indigram Labs is hosted by the Indian Society of Agribusiness Professionals. In addition to DBT funding, it has received funds from the Department of Biotechnology’s (DBT) Biotechnology Industry Research Assistance Council (BIRAC) to run its acceleration programme for start-ups at a technology readiness level (TRL) of 8, starting from 2021. Indigram Labs has incubated several companies, such as New Leaf Dynamic Technologies Pvt Ltd, developer of a bioenergy-based off-grid refrigerator and ripening chamber.

Selection of start-ups for support is at the discretion of participating incubators.

In the case of Indigram Labs, most applications come via a permanently open call, and the incubator supplements these with region-specific calls and thematic calls (including climate action and clean energy) to address gaps in government priorities. A committee of experts from the Indian Association of Agriculture Professionals reviews the applications for technical potential.

Start-ups selected for incubation by TBI incubators can get access to a range of funds available from the DST and other government departments. These include:

• Entrepreneur-in-residence. An INR 30 000 (Indian rupees) (USD 400) per month grant paid as a stipend to individuals with a technology business idea, mostly recent graduates who might otherwise leave the idea undeveloped and take a more highly paid job elsewhere.
• Seed Support System. Funding between INR 1 million and INR 2.5 million (USD 13 000 and USD 34 000), and exceptionally up to INR 10 million (USD 130 000), to be spent on a wide range of eligible costs, including product development, marketing, mentoring, intellectual property issues and personnel. Participating incubators are able to choose whether to award the funds as equity, debt or a combination of both. However, equity is encouraged, and must be used for sums above INR 2.5 million (USD 34 000). Seed support provided to participating incubators to disburse to their selected start-ups is conditional upon use of the proceeds from equity investments or repayments as seed support for other start-ups. The government's objective is for the TBI incubators to recoup the disbursed seed funding within seven years, including 30% of any large soft loans within the incubation period.
• NIDHI Accelerator. A fast-track two- to nine-month programme that provides up to INR 15 million (USD 200 000) to a participating TBI to support around 10-15 potentially high-impact start-ups nearing market readiness, through which TBI incubators can provide grant or equity finance.
• Investments by the TBI incubators. The DST (and MSME) earmark part of the funding to TBI incubators for investment as dilutive equity or debt.
• Other public grants channelled by government departments via TBI incubators.

In the case of Indigram Labs, start-ups are considered for different funding options once positively evaluated. In general, Indigram Labs invests 2-5% equity in incubated start-ups and gives priority to start-ups with no prior funding. An investor committee with experts from companies, investors and the DST evaluates equity investment proposals.

Indigram Labs offers Seed Support System grants of INR 2.5 million (USD 34 000) over five years and Entrepreneur-in-Residence grants of INR 450 000 (USD 6 000) over 18 months. It also administers BIRAC’s Biotechnology Ignition Grant scheme, a grant of INR 5 million (USD 67 000) to develop and validate a prototype. Under this programme, if recipients successfully reach the market and generate revenue then they are required to pay BIRAC 5% royalty on net sales of the product or technology that was developed though BIRAC support. These payments continue until they cumulatively reach the level of the financing provided by BIRAC.

Part of the funding allocated by the DST (and MSME) to TBI incubators is earmarked for the incubators to upgrade laboratory and prototyping equipment. In addition, TBI incubators are eligible to apply to the PRAYAS (for “promotion and acceleration of young and aspiring” technology entrepreneurs) programme. Under this programme, up to ten incubators each host ten start-ups per year and are awarded INR 1 million (USD 13 000) per start-up to improve their scientific facilities and help start-ups to reach prototype stage more quickly (the start-up is expected to begin at TRL 2 and finish at TRL 4‑5).

In the case of Indigram Labs, it charges incubated start-ups a nominal monthly fee to rent office space and use the facilities. The MSME provided funds to Indigram Labs to establish a laboratory for agriculture and food technologies.

TBI incubators are funded to be able to provide business services to start-ups.

In the case of Indigram Labs, a team of 50 mentors helps and guides start-ups. Indigram Labs offers:

• business mentoring with monthly e‑meetings where start-ups can present progress and request support
• pitch presentation training
• market analysis
• intellectual property and legal support
• human resources and recruitment support.

NIDHI runs several programmes that support the TBI programme to foster stronger networks. The Grand Challenges and Competitions initiative funds TBI incubators to undertake marketing and encourage applications from innovators with new ideas. Successful applicants can receive short training courses and potentially longer-term incubation under other initiatives. NIDHI Centres of Excellence funding helps selected TBI incubators to offer more services, including market research and contacts internationally. NIDHI Startup Corridors is a network of experienced and new institutions collectively promoting start-ups.

One of the TBI programme’s objectives is for the participating incubators to establish a network among academic and financial institutions, industries, and other institutions. In the case of Indigram Labs, it has developed collaborations with a range of R&D institutes and the companies in the Indian Association of Agriculture Professionals. It has set up WhatsApp sector-specific subgroups to help start-ups find partners across their value chains. Indigram Labs is involved in the EU-India Bridge programme and with the Uganda based incubator Excel Hearts.

In the case of Indigram Labs, incubated start-ups complete a greenhouse gas emissions tracking template developed by the incubator. This is used for evaluation during their participation.

Clean Energy International Incubation Centre (CEIIC), a joint initiative of Tata Trusts and DBT, BIRAC, Tata Power and Tata Power Delhi Distribution Limited. It is the first international incubator under Mission Innovation offering support specifically to clean energy start-ups in the areas of energy access, energy efficiency and clean technologies.

Biotechnology Industry Research Assistance Council (BIRAC)

This publication has been produced with the financial assistance of the European Union as part of the Clean Energy Transitions in Emerging Economies programme. This publication reflects the views of the International Energy Agency (IEA) Secretariat but does not necessarily reflect those of individual IEA member countries or the European Union (EU). Neither the IEA nor the EU make any representation of warranty, express or implied, in respect to the article's content (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.

The Clean Energy Transitions in Emerging Economies programme has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 952363.