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December 19, 2010

Have academic incubators lost relevance?

From a Businessworld article
Far from being hotbeds of student-driven entrepreneurial activity, like in a Stanford University or an MIT (Massachusetts Institute of Technology), India’s B-school incubators now find themselves on the sidelines of the powerful entrepreneurial wave that is sweeping the country. During 2000-10, close to 150,000 startups have sprung up outside such incubators; 37,500 of these are in the five metros, according to Amit Grover, member of angel investment firm Mumbai Angels.

Among the eight incubators the IITs and IIMs set up nearly two decades ago, SINE is tagged the most successful. Since 2004, it has incubated 35 startups, of which 20 are ‘graduated’ and are in various stages of progress. Three have shut operations due to reasons including their inability to raise fresh capital, difficulties in finding customers and gaining scale at the right time. Others have been in the incubator well beyond the incubation period of three years for similar reasons. For example, Vegayan Systems, a communications network solutions venture founded by IIT-Bombay faculty Girish Saraph has been on campus for four years. Saraph, who teaches at the electrical engineering department at IIT-B, says, “The infrastructure at SINE and the credibility of IIT-B help us. But we need time to take the product to the market.”

It’s a similar story across most IIT- and IIM-run incubators. The first one, Science and Technology Entrepreneurship Park (STEP), set up at IIT Kharagpur in 1986, has incubated 80 firms. But only 40 have graduated so far. Worse, 12 shut down after they moved out of the incubator. The situation at IIT Roorkee is even more bleak. In spite of grants from the state-run Department of Science and Technology in 1987, there is no functional incubator on campus. The only entrepreneurial activity is in the form of an Entrepreneurship Development Cell started by a group of students four years ago. “The Cell is run like a club,” says Aditya Sahay, alumnus and founder of Radbox, a video bookmarking service, which was born three years after he graduated from IIT-R. Sahay says he never sought mentorship from the IIT as it lacked faculty commitment and industry interfacing.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at