 So, good morning everyone once again and I guess by now you must have had some good insight in various you know aspect or how incubation activities got evolved at IIT Bombay over a period of time. I joined this place sometime in year 2004 and it was the time when they were actually formalizing the process from you know Chris C. Taiti incubator or departmental activity into actually setting up an independent entity you know a business unit who was to do the business of business incubation at IIT Bombay. And when I see at the history of incubation at IIT Bombay I you know there is a very clear cut segment the first incubator came during the time there was no precedent in the country even we ourselves didn't know what is business incubator, what is entrepreneurship because like business incubator is not only infrastructure right. You have to mentor your companies, you have to advise them. So you don't have to only learn incubation dynamics but also entrepreneurship related dynamics. We didn't have any experience in doing this fortunately you know we really were blessed with our alumni support it was not only in terms of you know financial assistance but also we got lots of mentoring how to manage business incubator and in the process you know we incubated some good companies 12, 13 companies got incubated many of them are successful but the major impact that the incubator was having on the campus was that you know entrepreneurship was not really popular when we started but it really popularized entrepreneurship down the line 5 years students faculty members like for students you know it was a dot com boom time you know they were really opting for jobs and so on so forth like even internship basically they were going for heavy pay internship job because of you know 3 months 4 months kind of good time was available no one was thinking about entrepreneurship but down the line 5 years after sign was set up suddenly we saw a flow of student you know came to go for setting up their own venture and similar was the case for faculty members that like who were like commercialization is always not seen with positive mindset in this institution because it seems as a distraction from you know core research activity but we have now out of 16 or 17 company we have you know 10 11 companies which has faculty involvement so huge impact in in creating awareness about entrepreneurship that was first impact and second impact was that you know incubator really help us or rather gave us first IT incubator gave us you know hands-on experience in how to manage incubator yeah especially we learn lots of commercial aspect legal aspect which you really require when you start an independent entity so I think the whole day is basically meant today for sign how we evolve the process how we structured our relationship with with the host and then later part of the day my colleague Shushanth will talk about you know what kind of ecosystem you need to have and how do you create your network how how do you manage your company so and so forth I will deal mainly on structure or a structure aspect so a very quick overview structuring business incubator entity which will have you know setting up the entity as well as you know creating an appropriate business model in fact yesterday we have lots of discussion on that and how do we evolve our you know created or formalized you know relationship with parent institute and some of the policy aspects prelude you might be aware but still you know at the cost of reputation sign was set up in year 2004 hosted by IT Bombay to manage business incubator on its campus and our initial financial support as well as inter infrastructure support came from IT Bombay our business is incubation and any activity that deals with entrepreneurship or the which has you know impact on entrepreneurship so so we we don't get into any activity which is not really you know related to entrepreneurship so for example we don't get into tech tech commercialization we don't get into any kind of consulting which is technology side or whatever business consulting unless it involves you know some kind of entrepreneurship and the element and there is a reason why we are focusing I'll deal with that you know in later part of my talk. IIT Bombay has you know certain government representation on our governing board we we have 15 member governing board half of each half of them is coming from IIT Bombay again it's part of you know our deal with the relationship with the parent Institute primary focus remains on IIT Bombay which is also eligibility criteria IIT Bombay community IIT Bombay technology we take only IP base and product-based companies we don't take services company or consulting company again fallout of our deal with the whole institute since IIT Bombay being a premier institute in the country it has certain you know responsibility towards you know social and strategic aspect of the country and as a part of mandate we have also been asked to you know incubate ventures which has social as well as strategic venture though many times that don't make commercial sense yeah but we incubate this our support system is you know physical infrastructure technical support but we emphasize a lot on business network support mentoring expertise and professional expert expertise so what could be the possible business model when you really think of setting up a business incubator yeah either it could be part of the institute project or or you create an independent activity entity and we had both like when we were small scale we started or where when we were more in experimental mode we started off as an institute activity because you don't have your you know other other obligations you know administrative cost or managing cost or infrastructure cost everything is absorbed by the institute where when we are you are in experimental mode also some you know scale of activity also affects the decision whether you want to start on your own or you want to set up an entity for example if you want to start an you know incubator with the strength of 4-5 incubator doesn't make sense to spin out or doesn't make a sense to set up an independent entity because cost of entity managing entity would be much higher than your own scale of the activities so what kind of scale of activities that you are going to have it also becomes one of the influencing factor whether you want to create as a part of you know institute activity or take out separately availability of resources because incubators take long to become you know sustainable or at least for revenue generation could be in second year or third year of the operation and you require resources to run the show managing infrastructure people cost other admin costs you know what kind of resources are available if you if you if if any institute doesn't or is not able to mobilize resources and it is better to be part of the host institute where other costs can be absorbed by by the parent institute domain focus so if I can give the example of IIT Bombay like first was IIT incubator it made more sense to be part of the departmental activity but now we are a full-fledged incubator we can't restrict ourselves to any particular department so makes more sense to make a independent activity dealing with different you know domains and then of course host host institutes commitment and commitment is not only intention also doable it I'll deal with this in second second later slide but for for your information all government programs be DST MCIT biotech industry their programs which fund incubator dances for independent entity so if you are planning to go to the government financial health come out with appropriate by a viable business plan with a separate entity government doesn't fund if it is the part of the parent institute so commitment of the host institute as I said it is not necessarily the intention but do ability first legal check unit to do is that your parent institute host constitution whether it allows you to get into this kind of activity in fact you know in our case we learn one one one lesson when we started IIT incubator we adopted equity model and when we adopted equity model we didn't know that time that IIT Bombay cannot hold equity no I think by and large in India no academic institute which is funded by state government or federal government can hold equity that's that's the rule that I have I have observed private probably private institute would have different different but if they are again trust and all those things because of trusty related loss you know you can't hold the equity so so so I'm telling you about only equity part but I think it is good to do a legal check suddenly you know especially you know if you are from CSIL lab or those kind of domain you know where the focus is really on research side sometimes commercialization especially if it is a defense kind of lab commercialization is not really permitted so those those aspect one one may need to get into what kind of financial commitment is coming from the host institute I I told you it takes a while basically for an incubator to start generating revenue or becomes a self-sustenable whereas you always require your operational cost of rent yeah so you need funds and you have to ensure that you know yeah so infrastructure is not the only thing that you should look from your parent institute you should also look for some of the cash coming to the incubator so that you can sustain your operations and then there is always a conflict research work and academic versus you know entrepreneurship and incubation India doesn't have a long history of technology commercialization commercialization is not always seen with positive mindset especially in academic institutes like IITs or CSIL lab yeah priority within the host institute is you know again research and academics and no host will want its faculty members to pursue entrepreneurship at the cost of basic you know job which is again research so they wouldn't like their faculty members to to spend time on the their startup for you know four days out of five working days yes all those issues you need to sort out with the host institute many times there is a lack of awareness like in for example in IIT Bombay you know we have one some platform to commercialize technology IIT Bombay process is permit technology licensing it permits consulting you know assignments to be undertaken by the faculty members if you look at it entrepreneurship is bit on risky it's a risky affair right so faculty members many time take a very safe safe route that why to get into this you know Jamela when you have a safe route on your own money but the upscale is really limited if you go by those routes and don't start up you know your own and you own your own venture you know so there is a lack of awareness also so I think ideally if case studies need to be discussed fortunately we had a good case study in Chris itself and they spoke by the you know by themselves and like created awareness about faculty members in fact one of the reason why sign came up was also there was a huge demand from faculty side because during Chris it we had two faculty based companies and suddenly like you know everyone notice that that okay it's it's possible people are doing it and we have ready product why can't we also start something so one of the reason to also having separate entity or broad spectrum incubator as against IT incubator was faculty demand yeah then another is that target audience like I already address about faculty but for student also there is a dilemma high paying job is available why to get into entrepreneurship which require front investment plus you know success is not ensure and especially when you don't have a long history to relate with yeah so like that dilemma also so you have to create the awareness about you know overall entrepreneurship I'll deal in second session how did we deal to propagate that or how we actually attract entrepreneurs coming to add to the incubator and then you have to deal with conflicting issue like faculty time infrastructure usage institute will not like it's you know infrastructure left facility equipment to be used for the company purpose so you have to have a mechanism how they access this on the payment and how do you route the system IP IP once it is you know develop at IIT Bombay ownership belongs to IIT Bombay how do you transfer those IP because without transferring you can just start your own venture so those are the issues need one needs to deal with then once once a call is taken to set up a legal entity it has actually an Indian context what kind of entity you set up so it's for profit entity or not for profit entity and I already said that you know state government or federal government funded academic institute they they have their limitation they can't get into any activity which is for profit activity in fact in India we have for profit incubators which are three or four they all are in primary private domain none of them is added to academia yeah so and if you are coming from that background you have to decide whether you are going for this and again do the legal check with the parents institute yeah if it is for non-profit there are three entities you could go for section 25 company trust or society each has is plus and minus is section 25 company it's a it is a really very structure and professional entity and it's easy to invite you know good good board good members on your board if you are basically because it looks more compliances are on higher side looks more transparent you know lots of things are basically regulatory issues take care of compliances and transparency so it's a good good entity but again compliances are difficult and all academic institutions they don't have bandwidth to comply with all regulatory requirement so when I also I think it's in copper you people are section 25 incorporation process really takes very long any change in constitution also becomes difficult it takes about three to six months to come out with trust is a very very narrow this thing again trust is you know from state to state regulators actually they differ and sometimes a trustee regulator especially we had and we didn't have a two pleasant experience with the with the regulator of trust in Maharashtra and more than that I think it's a very like you know you have to define your the financial statement of friend you have to submit with trustee a friend and you don't have any you know flexibility to deviate from them so it becomes a very very binding and small narrow inflexible you know entity society assign is a society we chose society as against company because we felt that society once you set up your own constitution or charter and if you are within that charter you know you have enough amount of flexibility and also like you know we wanted to stay away with section 25 company more from compliance viewpoint and when we formalize this section 20 sorry society sign by then already two incubators in the country had come in fact you know when we started we set up sign that time we were also not too clear about how what would be the governments take yeah DST were just starting to fund fund this thing but whether it will be appreciated or not or like you know you are taking this commercial activity none of us had clarity on that side and IISC and Delhi had directly set up without getting into pilot mode sometime in early 90s they set up their society so we thought that since there is a precedent let us there you know go by society itself so one was flexibility and another was there was already precedent so we went into it now government is very clear that all academic institute can actually host the incubators but that time there was no clarity five years that is a long big change you know in mindset of the government also then it's good to have a you know business plan upfront which will give you some idea about the viability and it's very important because you want to get into commercialization but you don't want to get into an entity which is not viable by itself so how do you generate your revenue model what would be the scale of the activity how the incubator will look like down the line three four five years and that will give by writing a business plan will give you a very good you know idea where to focus your own efforts yeah so it's good to write you may not take to that business plan you know you may overperform underperform but it will give the idea how the entity will look like then figure out where the initial funding will come and fund for operation will come and what would be the other sources of revenue down the line you know two to three years very important you have to have right set of people I hate to say this good professor is not there but you academicians should not be put you know in charge of this incubator entity it is always good to get some external people who have work in the industry at least for some time understand the industry dynamic yeah but right set of people you know and actually IIT Bombay did a very good job on this right from Chris it incubator professor lagu also our every professor in charge who is part of I sign you know they have exposure to commercial world so what we talk they can understand and if they can't understand they generally don't don't meddle in our affairs so that's a very good job you know IIT Bombay has done so first professor part of tremendous exposure to industry then professor lagu who was put in charge of running then professor Suryan Narayan he was Dean RND tremendous exposure to industry so ideally you need to have people who are not pure academicians and of course our operational team so then while you form the entity you need to understand which place you want to register for all three that I explained earlier section 25 trust and society there are federal acts but they have state specific you know offices and also for society and trust they have state specific separate acts basically so you are not only get regulated by the federal act but you are also get regulated by you know state specific act and it's amazing to see that you know society registrar in Karnataka are much more flexible than society regulator in Maharashtra in fact it was a revelation to us when we were going through the process then if you set up a society in Bombay Maharashtra state of Maharashtra you actually ruled by three regulators yeah so one is basically society registrar then all all all society in Maharashtra have to be registered under Bombay public trust check so you get ruled by regulator for the trust and they all are both the entity be it trust or be it you know society under one one umbrella of cherry commissioner so three set of regulators come in our case fortunately they are internally very well seen so we we have to comply with one guy and automatically other guys get complied with but if they have different regulation then you again you know things are very difficult to so it's important all these complications are not there for example in Andhra Pradesh or Karnataka that's what I learned later on important to know the place of registration and same the place of the regular know your regulator compliance is very important thing then constitution of business incubator constitution mainly what is the objectives and then what are the you know rules and regulations very important because specially for all entities you can't do anything which is not part of you know your constitution and specially if you are a section 25 company to change the constitution is very difficult I won't say it is impossible it is time consuming yeah so work on a proper constitution which is not limiting your activity which give you so right now like for example we are right now limiting to business incubator but going forward we may expand into some other activities so we have actually you know budgeted for certain activity that we are talking right now debating that we want to get into it we have budgeted almost five years back and they are they have some provisions into it so have a long long term view when you get into when you work on your constitution don't copy paste job that's what I'm trying to tell you most of the legal entities they are doing copy paste job so we're doing it but try to figure out your own focus and best one that you can work on the constitution governing structure actually that is the this is very important governing structure what do I mean by basically your board of supervisory board board of directors and they bring lots of you know value addition to the incubator in fact in our case our major strength science major strength we say that it comes from our governing board we have seven eight members from IIT Bombay but we have equal number of people from the industry who are entrepreneurs who are industry people who are consultant who are investors and they they are the biggest you know strength for for sign they are very good and it's not the case that you need to have a high profile you know governing board but you need to have people who can spend time for for your strategy for for advising the incubator so governing structure it's good you know to work on also being when you are hosted by parent Institute they want that their representation has to be there on your body and that becomes basically part of the constitution so that any person who is coming you know later point of their time cannot fiddle around with those numbers and representation and put who will be the operating team and how big the team and structure operation structure I think we had enough discussion we can carry on yesterday there were quite a few governing structure is more main like you know your board of governors board of directors which gives you know more direction and strategic guidance to the company advisory board is something different it advisory board could also in you know include people with certain specific expertise here the whole what direction you know incubator will get into what kind of strategy you should adopt yeah at a at a you know broader level you know and there are certain strategic decision you only take at the board level you don't take at a specially you know which impacts the whole direction of the venture that is operational day-to-day operation yeah they are mainly policy because right right no it's only board it's only board and your team yeah so in our case we meet once a quarter that is religious oh yeah it's a we follow almost corporate norms and sign is managed also like a corporate entity in that sense shall I go for I think we briefly discuss in forget largely discussed but still like if you have certain unanswered question you can also mention today we essentially adopted you know equity model because we were to deal with startups and in startup entrepreneurs and first generation entrepreneurs were cash was always a problem this taking was you know when we started off in increase it time I'm telling this taking was not a you know norm of the youth one in those days so we thought let us share a friend cash investment you know reduce their cash investment requirement by adopting a equity structure so we give you either free or subsidize you know support and you give us equity against it whenever you get funded we liquidate our equity and and cash you know take some cash inflow out of it so that was the philosophy I don't know professor part of mention he always likes to mention about that my marriage problem do you know did he mention so actually there was single marriage problem incident why we adopted this equity structure and that was the first for entrepreneur yeah but in the process it worked out for us like you know and we thought we will stick to this even when we set up sign but there are there were some lessons then that we learn in the process first thing equity takes a long to liquidate yeah investment generally in Indian startup nowadays trend has changed but like when we started even when we started sign people wouldn't be able to get investment in first two years or so so that was one thing second thing is that IT incubator was pretty unstructured and free support and very small small rent support you know people would tend to stay long in this case because it's a very protected environment and all those things so we learn that you know doesn't make sense to give a free lunch so start rent from day one it could be subsidized but late late now entrepreneur and entrepreneurs realize that you have to put a friend some cash and by now you know that like that aversion to take the risk has also gone down so from pure equity we introduced equity plus rent so increase it itself we introduced for next so three years support first two free free support and next one year basically we would take rent and that rent was very negative we came to a position that no you should start taking rent very different so equity rent but again that rent we differentiated in sign today what we do is that first three years we break into two two blocks 18 months 18 months so we pick up the equity we take the rent but first 18 months rent is heavily subsidized and next 18 months subsidy continues but subsidy elements go down it is also basically you know a process to gearing up the startup by increasing their cost that you have to have you will have much more cost than what you are paying so it is one of the way to put a pressure on them yeah so pure equity equity plus rent for one year equity plus differential rent and then we have also taking revenue I also mentioned why we take revenue revenue is very small one or two person and that too for limited period two to three years so it really doesn't burden a company yeah then if a company is growing so we typical support is company unit but many times we have seen three four companies in the incubator have a team size of 30 35 people so if they can sustain then they might as well you know take up larger additional set so if we give more than one room we charge them higher end you know so we have also basically pushed them to get into really commercial venture in the sense so higher end for additional support and it helps us to get our cash so that you know we also keep our running our operations efficiently then in IT days we were not maintaining equity but we realize that you know what are smarter than us so we maintain we came out with this equity maintenance you know clause I think yesterday I already spoke about it but if you have confusion you can ask me I can again you know now explain the whole whole equity structure partial liquidation again you know we took a decision that was not initial understanding but we learned that you know where do you get the cash from so partial liquidation at every stage of investment we define investment because they were actually facing out investment lower investment and then lower valuation we take our exit and then they get you know higher money so we also define the term what would be investment anything below that care you know we will not turn term the investment so that we don't get a raw deal and everything is put in our agreement with the company so there is a legal obligation on the company we can we generally don't do but we can actually take a legal recourse if they don't comply with yeah so it's part of our legal arrangement with the company they have to ensure that all this thing happen companies graduate formally registered company no our our criteria is incorporated company so when we take they have to be company so we don't do with individuals then it becomes very difficult to enforce this so it's company so even if company graduates yeah and we can if we continue to hold the equity they are still bound by this clauses yeah we give three months we so we take the company we give three months to them to get themselves registered and if they don't register then they have to move out yeah till such time you accommodate them inside three months is enough but I think we haven't faced a problem where company was not registered most of the clients come to us after registration so when they apply and they get a sense that they there is a potential to get into it they just registered what is the investment they have to make to get registered it's that's what yesterday I was mentioning the requirement is very low in Indian companies act you know it's hundred hundred thousand rupees one like that's a minimum capital and most companies start with minimum one like capital yeah then they keep on pumping some more but like you know what is that equity percent maintenance so so you know we take three percent minimum equity yeah now what we felt was that when company would come you know with a minimum capital base though their requirement would be on higher side they will register that one one like and they will come to the incubator and our our you know we get three percent of one like which is like you know nothing three thousand three hundred shares right and then they will pump additional equity so we don't get additional we remain at three they get into the issue of sweat equity for to themselves you know so sign is losing out in the process whereas they are taking the full advantage of infrastructure our brand you know our mentoring time everything so so and it happens so that's what we realize boys sometimes are much smarter than you know we felt they would be and they may not come with always that much loyalty yeah so so we said that until you get a commercial investment and commercial investment we define what is commercial investment that is from again external resources not from the promoters if promoters put in money then they have to you know maintain our equity but commercial means be it you know angel investor be it strategic investor be it we see anything until they get this one investment our three percent will be maintained so so so there is capital from one lakh to five lakh so our three percent of five like they have to give us so that's what we did is also friend decided no no so we even the process what I'm trying to tell you is equity equity plus rent so initially it was very likely then we added you know rent for one year that was during crescent time then science said that equity plus differential rent plus revenue yeah it is all basically we evolved over a period of time based on our own experience yeah and about the incorporation it's very interesting it's very puzzling also anybody has invest incorporated company or partnership from anybody no any one of you have incorporated raise your have you have incorporated no actually unless we incorporate we don't understand what is actually incorporated that's very interesting I have faith unless we incorporate a company of our own partnership we can't understand exactly how things happen what kind of things are right but I think you can get an insight if you talk to the you know people who have done it's always better to if you open a passport you understand what exactly the passport is a set of forms yeah simple set of forms which any person can fill it up and then they will guide you there but actually follow their rules and regulations yeah it's not difficult only thing is that unless you go go and open an account you don't understand what is it exactly opening an account bank account incubator also should have why I said is that restring a partnership firm doesn't require more than 600 rupees for example restring a company doesn't require more than 15,000 rupees this is this my information which I got company request minimum like partnership and not expenditure company oh you are talking about that basically they are chartered account and it's a package you give me 15,000 I'll have it done for you so that is a different yeah partnership firm doesn't require more than 600 rupees to restart a firm but there is a small fee there's a small fees there's a small fees of 300 yeah thank you terms for the founders like a cliff investing schedule so that the equity that the founders get actually they just get incrementally every month over the you know three or four years do you guys do things like that we don't do that we like you know only only the clause is basically equity maintenance as long as equity is concerned and equity liquidation every round of investment so like you your point is that if they over perform then the VC gave them bonus shares right that's the point is that if one of the founders leaves after three months do they still get one third of the equity oh so that is actually getting into founders agreement right and now actually we had some bad bad bad incidents happening in happening incubator itself company were actually funded and because of certain partner issue a company got folded up the reason was exactly like this that the other partner he just walked away with the equity he was not willing to negotiate and give back the balance whatever due to him keep and then give back he was not willing to do that so company actually you know full I folded up like you know it become almost defunct company after that now we have started insisting for past two years that you have to have founders agreement and now we also in our agreement with the promoters we insist that you have founders agreement between two of you and you have certain clauses yeah which actually ensures that you know even if someone moves out venture keeps on moving ahead so yeah that is a part of partnership regulation itself you know but we don't deal with partnership fine there is no equity in partnership we can provide we can do it provided you don't commercialize it's just joke we can provide actually actually our policy document is on our website we don't put our commercial agreements on website but our policy agreement is on website you can download from sorry no no I'm just joking now so actually we insist all this thing so like you know he mentioned about founders agreement for past two years we have been insisting in our legal terms but still people are not doing it yeah so we have to really vigorously follow up that you get into founders agreement so now as long as business model is concerned some general tips you know actually I wouldn't say there is any you know single model which can be customized for all it has to be you know customized for your own local situation we are very successful in equity model but it may not be suitable for all of all of you if the company profiles are not really fundable companies then doesn't make sense to have equity model revenue sharing perhaps could be a better better idea to go for that higher higher level of revenue sharing so also like I think adoption of appropriate business activities define you know rather helps in getting consistent you know revenue but at the same time when it went when incubator defines as business activity you have to figure out that you don't diffuse from your you know core focus so like I just mentioned in the beginning you know we see a huge revenue in technology commercialization and lots of technologies are lying in IIT Bombay and we could do it actually now we have got good understanding of various technology their application in the industry we know which industry could absorb them but we don't generally get into it because it it will diffuse our focus from you know incubation entrepreneurship to other areas and again I'm telling in this case I our board is very conscious you know some of the activities we wanted to get into in both flatly said no so that's what I said that our major strength comes from our you know from an active board for any incubator that is very important cost can be passed to the customer if they are established clients yesterday I was mentioning you know equity always don't make sense if you have clients with deep pocket try to in cash as much as much as possible yeah a front investment if you are beginning is good if you can source from various government programs you know install the equipments install certain infrastructure at the cost of government so that you can return some money for your own operations may be high hybrid model you know works that is like you know yeah so for example I have seen certain incubator so some portion is incubate meant for incubator and some portion is actually commercially renting the property I think yours is something similar to that I says in knowledge park is also something like that so you can subsidize the cost for your client companies and charge higher to the established players yeah so that could also work so there are several such you can figure out but you have to essentially customize your own model don't blindly adopt a single model