 Let me now describe the evolution of business incubators as we see them globally. Business incubation as a place where you admit the groups of individuals to set up large companies is not a very new notion but it is not a very old notion either. The idea of formalizing this notion of business incubation started somewhere in 40s primarily in the United States of America. If you see the evolution of the modern enterprise or a modern company the companies and the legal structures around it have been evolving in the entire 19th century and early part of 20th century. This is nothing new already 150 years old. In fact some of us will recall the chagrin that East India Company was also a company like this became too big and created problem but that is a different story altogether. It was realized that such companies help on the positive side help generation of wealth which helps the entire population of a society and therefore it has always been considered a good act and this is nothing new. I mean if you some of you have read Chanakya would recall that Chanakya in his Arthashastra specifically states that one of the important responsibilities of the king is to ensure that the wealth generation happens in the population so it is nothing new. However the incubation in some crude sense as we understand it promotion of entrepreneurial activities started taking roots in 40s. Some of the earliest examples that I have been able to decipher from the recorded information is in the early 50s establishment of sort of two environments in the United States. One the research triangle park in the vicinity of North Carolina area and the other of course in the Bay area you have heard of Xerox initiative famous things about internet protocols came out of those environments there. Today the largest number of business incubators exist in United States. Some of them are entirely private business incubators run for profit kind of company majority of them are not for profit endeavors a large number of them are either part of academic system or are in association with the academic system. You must also appreciate that the wealth generation mechanism in the United States has been considerably propelled by the huge amount of technology R&D that happens in its vibrant educational system. The R&D that happens in the American universities is of a different class in nature for quite some time they have been able to manage that by getting the talent across the world attracted to come to United States and work in those and those R&D initiatives in universities American universities were far more closely with business enterprises than similar relationship elsewhere. So this has been a very important home it was noticed even in the American system that as company becomes large it becomes capable of managing its resources far more efficiently and therefore is capable of generating profits year after year after year however it does not necessarily retain the capability of doing any new innovative things in either it technology or products not that it does not do so but by enlarge the ability to do any innovative new thinking is found to exist more relatively in smaller enterprise in smaller company in smaller startups reason the smaller startups have a much greater urge to prove to the world that they are different a large company has already established its brand it need not prove anything to people people accept that company people accept that brand they have to merely sustain it but a smaller startup has to start by setting up a brand for which there is nothing and therefore the innovation occurs more frequently such innovations leading to companies companies leading to large profit making ventures you go to practically the history of every well known American university Stanford for example practically runs a virtual incubator but the history of Stanford is aligned to a history of practically development of IT well generation earlier it used to be the area around Boston those of you know that East Coast area where a whole lot of thing MIT most of you know the wealth that is generated out of the ideas which themselves got generated in MIT and research of well known I think somebody said that if you count the total well generated by those companies which came out of MIT they will form the 26th or 29th largest economy of the world today that's the potential that has been exploited through some of and incubators have had a reasonable contribution to make in this respect closer home the incubation idea in Asia started again quite some time ago but it has spread in the last decade like wildfire on the CD actually this is a printed document so the list of the incubators should have been given is a fairly large list many of them actually are links I mean the name there so if you if you see the word document you click there you can go to that side but in the printout you don't get the link so I requested him to extract those links and put against them so each one of you can see that I would like you to look at these because different incubators operate differently so you can find out what is the mechanism of different incubators of admitting people of mentoring them of providing them support charging them etc etc and getting out but one more name I would like you to list this we will not be able to take out a summary like this I would appreciate if someone else does that it is called the association of Asian business incubators abhi if you do a Google search for abhi you will get the necessary link this is the Asian association of business incubators you will find of course India is there China is there Japan is there Korea is there Australia is there Malaysia is there and guess what Kazakhstan is there Kyrgyzstan is there every small and big country of the region understands that I must encourage the younger part of my society's population to get into understanding of well-generation mechanisms through technology or otherwise and generate wealth for the society there's a huge list of partner things each of the list there is a association of that nation under that for example Department of Science and Technology is explicitly listed here under that we will find a lot of activities anybody knows exactly how many incubators operate in India today no good I thought I was the only ignorant person the exact number is not known and the growth has been phenomenal of late so even if you give some number I can genuinely say that may be true as of yesterday evening I do not know what is happening yes for a country of 1 billion people it is in the 20s that is the correct number and this is the this is the concern that I have and many others have usually the number of incubators serve a certain area and a certain population range just like doctors per thousand people for a country with 1 billion people I believe the number of 20s is very small that's why I shared with you the anguish and the desire that this nation should have 100 well run incubators after all incubators don't create wealth but they create well generating engines and that is why this number should increase so I would I would request you to look at the abhi site abhi.info is the website actually as I said many of these incubators are privately run as for profit kind of organizations many are run as not for profit organizations many of them are run by educational institutions and different incubators have different models for their own operations see there is no free lunch that's another American saying I like very much there is no free lunch in life if I am getting a free lunch that means somebody somewhere is paying for it now who that somebody is that question usually when you mention for example right at the beginning that education must pay for itself or recover its cost so let me transgress and get into what I was to share with you later namely the cost of running an incubator when I thought of running an incubator I looked at some of the models particularly the model at incubator in place called St. Louis incubator in Texas okay and of course the well known Stanford kind of philosophy and several other incubators and I decided that I will I will have this incubator running with a guaranteed revenue mechanism which will be on monthly charges to be paid by any incubating company for the services which I render because I need to provide some facilities some infrastructure I have to run the pilot which I had planned was an IT business incubator I will tell you why and so on later but this charging policy which I initiated generally required about 40 to 50 thousand rupees per month of an expenditure including of course investment recovery and so on so for a year it would mean about 5 to 6 lakh rupees of expenditure for any startup company this was in 1998 1999 the money did appear slightly large but we said anybody who want to start a business potential of building something very large in the IT area you remember as process user was he said this was the days of IT boom I mean if you I had found out from my friends who regularly visited VCs in Bay area it was very atrocious as you just give a name to the ventures saying internet something or e-enabled something so he says you can even get a million dollars for running e-enabled toilets he said that was a joke of course but those were the days so he thought that this should not be a problem one of my experiences so one group which came in when I when I circulated that was setting up this pilot a large number of people wanted to come in and that fellow said my father wants to meet you why does father want to meet me I agree I had a meeting with that father and this father said you know you are encouraging these youngsters I like the idea but this too much of a race suppose the venture fails so what will he do I said after one year he has got a IIT Bombay degree so there is no problem that fellow will get a good job just like you would have got a good job now what is your problem but this much expenditure has to be made I said if I understand there are three or four of your people and each family can definitely take some loan of one lakh or two lakh rupees so I do not see there is a big deal then he came up with his real question he says professor suppose after one year the venture fails he will of course get a job but he will start a job with a two hundred thousand rupees loan on his head tell me who will marry him that was the biggest problem the father had so I said what do you mean who will marry him he says in our community if a fellow is not credit worthy from Devan the marriage is going to be a difficult task I thought about it then what I realized is that the ability of Indian middle class people to take rest is very low to begin with and the ability to take the risk of failure is still low failure in a venture in India is considered a distinct stigma which does not get washed out easily that is not so in Europe and United States if somebody fails everybody says that is ok he tried did not work he tried again it does not work here it did not work ten years ago hopefully things are changing now but till such time that a large number of startups fail and the society sees that it has not affected the individuals who are behind the startup and that some of them are trying again and that will generally take a cycle of generations which is about ten to fifteen years till such time this mentality may prevail so actually called up Nandan Nilekani the Infosys chief and Kamal Rekhi was one of the supporters of this whole idea and I told him I told them I have a marriage problem they could not understand what is a marriage to do with starting an incubator so I explained them they asked me what is to do so I said I am changing the model of my incubator in my model I will not charge anything to a startup company for one year they again gave them particularly Kamal who has been insisting again and again on a very important principle he says do help them but do not handle them too much otherwise they will start acting like cocoons they will never learn to fly you must expose them to harsh realities of the world as early as possible and here you are saying they will color them for a year so he said otherwise I cannot start finally it was agreed Nandan Nilekani agreed to give me a donation of one crore rupees which I said I will use it for initial setup infrastructure and initial expenses and we announced that we will not charge anything to people but we will hold a percentage of that company I wanted that to be a very notional thing I started with 3 percent we shall see later when the sign and all they explain to you how it emerged and that is how of course that particular group did not get selected on some other reasons one of which was the qualitative evaluation frankly somebody who cannot convince his own father there is one while taking the race why leave it how is the rest of the world he is not sure of convincing his would be bride anyway that's the one of the ways that he had I am not sure convince the market and therefore I said nice meeting you let's have a cup of tea but try something else better take a job so that you get married very quickly your father will be happy you will be happy it's not your cup of tea basically saying that incubators which are ways of operations and it is important for you to study all of these my own learning from seeing all these better models is that there is nothing like a single model fit all there's no single answer or single model which will what worked in IIT Bombay may not work in Surat Kal what works in Surat Kal may not work in Allahabad we have to examine what will work from a better understanding of the environment let me give you some examples of environments that I have seen there are engineering colleges of course nowadays there are two thousand engineering colleges and that's why I think hundred incubators a small number amongst these two thousand colleges typically about 50 to 100 colleges are really good colleges many of them are state colleges some of them are private college but they're good colleges go back and find out the history of what the graduates of those colleges have done in the last 20 years and you will find that there are graduates from a few colleges who become entrepreneurs in larger number and larger percent Manthya Pradesh the state where I come from for example has five or six good engineering colleges but if you look at people passing out of Indore is one of the places largest number of past students are entrepreneurs some small-scale middle-scale something like you take Maharashtra College of Engineering Pune is one such place where you'll find a uncannily larger percentage of entrepreneurs coming out of that is it only because the college perhaps not it is also because of the ethos of the city in which those colleges exist if that city has an entrepreneurial culture you will find more and more people are encouraged what do we do then in cities which do not have such entrepreneurial culture at all we have colleges where the students and their parents the only ambition they have is that the student should get a government job not even a man job why because that place has been worried about security of a job for large number of decades in the in that place I think the other things that we need to factor and we need to counter we need to build an ethos where ability to take risk is encouraged where we suggest to the society that failure is no problem and that if somebody fails either one can start again or one can do something else but this encouragement has to be given by components of the environment other than the incubator if those components do not exist I submit that running an incubator well would have a problem because then you will be running an incubator in isolation or in vacuum this is the reason why I have invited Sunita Singh of National Entrepreneurship Network and DST Dr. Anita is coming here unfortunately Mithal and Lara parking who are behind who are the basic dreamers on these both are busy but please listen to them in terms of the entrepreneurship promotional activities that they do and at your places and also at those places which you will no doubt advice your colleagues based on this course when you conduct a similar course at your place please ask them to imbibe those initiatives to whatever extent they can because it is only as a supplement to those initiatives that an incubator could become very great and without that it will not be very easy because it is it is the spirit see when you incubate as I said you're not creating life you're bringing life to life the life must exist basically when you hatch a egg you did not inject the life there life existed it was in a dormant form which you're bringing up if there is no life an incubator cannot give life and the life is in terms of the the fire in the belly as you say of the people and that is why I will remind you the individuals is the key so although you are admitting startups to an incubator it is always the group of the individuals one of the activities of mentoring that I have done personally and our sign continues to do is that when a startup company is otherwise found okay for admission to the incubator but we find some inadequacy in the composition of the team we see too many techies who advise them get somebody who understands marketing get somebody who understands finance when we monitor the progress of a company within five to six months when they have actually built a technology prototype which is now ready to go we advise them now get an experienced CEO do not confuse between owning a company and running a company if you are good continue to run there are umpteen instances I have seen in the US where the original promoter who actually holds a large stake in that company is actually working as a vice president marketing if he is good at marketing but his CTO his CEO could be completely different because it is the right people doing the right job which matter for taking the company forward so that is why concentrate on the individuals help them to build a good team I believe if you look at the incubators and if you look at the success rates and then you go back to those incubators and find out who are the individuals who are running incubators and try to get stories related to those individuals this is the unfortunate problem our documentation will give you a whole lot of quantity it will very rarely tell you about the qualitative piece of information who are the people I had the fortunate privilege of learning from Kamal Rekhi Suhas Patil Nandan Nilek and these are the people from whom I learned hopefully when I was working there were others who perhaps saw me doing something and imbibe and added their own luster such series of people Dr. Lagu about whom we shall have a session tomorrow he is not able to come he will be talking to you in absentia we had taken a one-hour interview tomorrow Dr. Mukta Atre and Pohini Bhatt will be actually presenting to you his case if he was not there there would not have been any incubator today afternoon a colleague of mine Arvind Patil who is now with our center for distance engineering education program he was the project manager in crescent without him there would have been even a simplest possible infrastructure that we made it is not only people that you have to concentrate on when you talk about startup companies it is also the people that you have to concentrate on when you build a team to run the incubator you cannot generally advertise saying I want an officer or see you or this and that and get good people there you have to hunt for those people and you get and get I will I will like to mention that getting individuals rightly disposed and then some mentoring and then building them as a team is the crux of success of any incubator once you set it up of course it runs the large number of incubators that you see not all of them are equally successful so before closing this session let's define how do you measure the success rate of an incubator how do you associate success after yeah please successful exit yes so either selling or IPO or something yes successful exit of any company fairly good definition although it is slightly broad what we would also like to perhaps look at is the amount of wealth that this company is able to generate both at the time of exit and subsequent I'll give you a familiar example most of us are teachers so this will apply we have students who pass out one of the measures is the percentage of students who do well in the university examination if in my state my college has produced the toppers from that university I'm pretty happy and sure that I'm doing a good job however the real branding of your institution happens when these students go out in the field and on some name for themselves so they're professional activities IIT brand name is not created merely by us teachers or by the facilities here it is largely created by these success stories of our past students who go out if you want to measure in terms of the similar parameter for the success of incubators I would submit that while this is an important and perhaps number one parameter for measuring success but I would say well generation over a period you can define this period 10 years 5 years 20 years whatever in fact for a startup incubator incubator itself is a startup there will be no period because there'll be no no examples okay you will get these examples only over the years it is exactly same as building an institution and its reputation when the institution is new when IIT Bombay was set up 50 years ago nobody knew about IIT Bombay they were bright students who did not come to IIT saying what the hell is this entity I don't understand let me go to Vijay Tia let me go to college of engineering Pune let me go to Jabalpur Jabalpur was one of the best-known colleges in Madhya Pradesh those days whatever so but today it is exactly the other way around it takes time to build the brand and the brand is built by a valuation of people over a period of time so we take the successful exit of a company as the fundamental parameter because if that parameter is not like if if 50% of my students are failing then I am obviously a useless institution doesn't matter what those of course some failure may like Bill Gates you know set up a billion dollar company but that will be an exception not a rule okay but how do they proceed further secondly when we say successful exit we might want to define this successful in more quantitative terms which can be done but this aspect will be covered in the sessions which deal with the sign progress and so on so I'm not emphasizing what is important is that we measure the people when they get out and we sort of continue to measure how they are doing for example if a company leaves this successfully meeting all the obligations of the incubator but in exactly two years it gets folded I may not want to call it as a feather in my cap if a company continues to do well expands further over next 10 years I will say yes that is important it is not to be little the people whose company folded earlier the person may have exactly the same capability as person here person may have learned exactly the same thing market opportunities might have might have been different the situation might have been different but as far as I am concerned I have to measure these different if I can produce one in four system 10 years that was my ambition when I said that if I hold 3% stock of Infosys today I don't need research funding from any government yeah process Sharma you agree 3% of Infosys stock today is is is in fact I can I can pay back government every year if I want but that will happen once in a while and Infosys today is most certainly not interested in giving IIT Bombay 3% of its year even if it were to be incubated so you have to decide what you do we'll discuss that when I describe the the history of incubation and the path to the formalism which has led to the sign issues here but the global experiences that you have to consolidate to sort of summarize early 50s store the early incubation signs in the decade of 90s that is the last year's 90s decade was a phenomenal growth in United States 40% of the incubators actually IT incubators you should not be surprised because of that even in India which is primarily IT seen as services largest companies are IT services companies if you take engineering admission more than 50% of the students admitted to undergraduate programs in engineering in India are in computer science IT or electronics so the proportion and ratio roughly matches it is very unlikely that a IT or a computer science graduate will start a machine shop very unlikely although it is quite likely that a mechanical engineering student who actually was interested in computers but did not get the computer science brand studied throughout those four years more about programming and less about mechanical engineering may start a computer engineering come in fact one of my first startups had a had a partner who was a civil engineer okay we'll talk about it later