Incubators as catalysts for innovation

Executive Summary
This report is part of a study that IIMA Ventures (formerly IIMA-CIIE), and Economic Research Institute of ASEAN and East Asia (ERIA) are conducting to open collaboration and peer learning between India and the Association of Southeast Asian Nations (ASEAN) and share knowledge and tools relevant to entrepreneurship ecosystems in South Asia. It dives into the evolution of the incubation ecosystem in India and ASEAN and presents a comparative analysis of some of the major policies. This report is based on the joint roundtable held by IIMA Ventures and ERIA on ‘Incubators as Catalysts for Innovation’, as well as previous research by both organisations on incubators in their respective countries and/or regions.


Key Messages

  • The Indian startup ecosystem went through an evolution in three phases. Phase 1 began in the early 2000s with a focus on commercialisation of technology. Phase 2 came around 2008 when Internet 2.0 came into the picture, which shifted focus beyond research and towards tech startups. Phase 3 began in 2016, when the government developed the startup policy. The ecosystem has grown multifold between 2016–2021 with more than 40 startups that reached a valuation of US$1 billion (or unicorns) emerging only in 2021.
  • The innovation and entrepreneurship ecosystem in Southeast Asia is maturing, as evidenced by the increasing number of exits and a growing number of unicorns mainly in four ASEAN Member States: five in Indonesia, four in Singapore, two in Viet Nam, and one in Malaysia (Ajmone Marsan, Sabrina, and Jin, 2021). During 2023–2025, 700+ are expected to exit, mainly through mergers and acquisitions and initial public offerings through the Special Purpose Acquisition Company. Even though countries in Southeast Asia are at different stages of development, because of the maturing ecosystem, there are also more venture capital and resources available in Southeast Asia.
  • Per Chintan Vaishnav of Atal Innovation Mission (AIM), ‘The innovation ecosystem in India is a transducer with creativity as input and innovation and entrepreneurship as output.’
  • Where there is a lack of funding, there is a lot of innovation focused on solving bigger problems and supporting local communities. There are examples of startups in rural areas that have thrived over bigger brands in Southeast Asia because they are locally driven and focused on providing value to their customers.
  • Funding agencies should consider the three Cs for incubation programmes:
    • Capital. There should be enough for the incubator to cover expenses, grow, and become sustainable in the long run.
    • Connections. Incubators should be able to connect the entrepreneurs to the right people. The incubation manager should be well-connected in their respective region.
    • Competency. To help and support startups, an incubator itself needs to have certain competencies and expertise, especially in operational areas such as human resources, compliances. 

 

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