This past year was pretty rough in Startup Land. Investors held their pocketbooks close to their chests as it was nearly unanimously decided that India’s entrepreneurs needed to take a good, hard look at the fundamental building blocks of their startups. Fortunately, that hasn’t slowed down the excitement and enthusiasm around entrepreneurship in the least bit. We know that our startups have a lot to learn — excitement and passion, does not a strong startup make, after all — and it’s up to our ecosystem builders to step up their game.
Since 2014, there has been a 40% year-on-year rise in the number of incubators in India, which doesn’t seem to be diminishing anytime soon. Even with this boom in incubators, some believe that this is not enough to fully support the thousands of budding entrepreneurs in India. This past year demonstrated the depth of work our incubators have to put in to truly help startups build strong foundations early on. But can India’s incubators keep up?
For the past two years, Unitus Seed Fund has been working closely with a number of incubators in India to understand the pressing problems that our ecosystem builders are facing and to figure out ways we can help. Our mission is to develop initiatives and programs to support incubators as they cultivate more investment-ready entrepreneurs. We’ve learned a lot about the ecosystem in the past two years, and India’s incubators are in dire need of support.
Ultimately, there are three main problems we see with India’s incubators today.
The first is a massive knowledge gap in startup know-how. The second is the lack of strong mentorship in the majority of incubators who operate mentor-driven programs as the largest means of startup support. And the third is the overall sustainability of a program, both in terms of human capital as well as financial resources.
This series of blog posts will explore these three pain points and shine light on how Unitus has been developing interventions to support India’s next generation of startups.
The Knowledge Gap
While there has been an encouraging surge in aspiring entrepreneurs that want to build highly scalable companies, there is little guidance on how to do so. Even among incubator managers, there is a lack of knowledge about startups––especially investable startups. This is not a revelation; most incubators know that this is a problem. At the very beginning of our work, our Incubator Partners expressed not only a need for capacity building for their incubator managers but a pressing need for an easy-to-use, comprehensive curriculum to work through with their startups. Ultimately, they ranked Improving Program Structure and Curriculum as one of their Top 3 priorities.
We find that incubator managers tend to come from an academic background, especially at TBIs (Technology Business Incubators), and don’t bring real-world startup expertise to their programs. Even non-TBI incubators struggle to find incubator managers with the right entrepreneurial background to run their program. While this isn’t ideal, it’s also not shocking given the nascency of the entrepreneurial ecosystem. That said, it’s not impossible to run a solid incubation program without an entrepreneurial background. But in order to do so, there is a huge need to fill in this knowledge gap.
The Foundations of Strong Startups
Entrepreneurs have become far too focused on raising funding versus building legitimately investable startups that attract the funding they need. Even before an entrepreneur moves forward on their entrepreneurial journey, they need to be able to look objectively at their startup’s trajectory and have an idea of what types of obstacles will arise, and how best to tackle them.
In order to do so, India’s entrepreneurs need a deep understanding of the fundamentals of strong startups. We define these fundamentals, or critical success factors, as the following:
- Entrepreneurial Aptitude and Soft Skills
- Pain Point
- Value Proposition
Business Model and Unit Economics
- GTM Strategy
- Sustainable Systems
- Funding Strategies
This problem is two-fold: both entrepreneurs and incubator managers need to understand these fundamentals in order to foster success. There needs to be a comprehensive, accessible knowledge-base that conveys these fundamentals to entrepreneurs and incubator managers. From our Global Best Practices Study in 2015, we found that incubators are 3x as likely to have a structured curriculum versus relying strictly on mentorship. Currently, there are a number of different entrepreneurial capacity building programs, from virtual incubators and online/offline entrepreneurial training, but none are comprehensive enough to fill the major knowledge gap present among most early entrepreneurs.
The entrepreneur-focused initiatives cannot promote peer-to-peer learning which is extremely important to early-stage entrepreneurs. Aside from that, we find that the content available to entrepreneurs is often extremely academic in nature and are difficult to turn into actionable steps forward. They are transplanted from other ecosystems, like the Bay Area, which has far more resources available for startups and is a totally different market from other startup ecosystems. Additionally, these resources limit the growth of the entrepreneurial ecosystem at large by ignoring incubator managers’ needs. Making sure entrepreneurs as well as incubator managers can access the necessary knowledge for startups is critical to the ecosystem.
Enabling Incubators to Thrive is a Must
But that is not enough. There also has to be a complementary knowledge-base that helps incubator managers actually work with their entrepreneurs in a productive manner. This includes best practices for incubation, as well as how to turn this startup curriculum into actionable steps forward.
Incubator manager capacity-building workshops and training sessions do exist, but a few days in-person, and/or a few weeks virtually aren’t enough to provide legitimately helpful knowledge. Yes, there are transfers of knowledge here and there––a tip, trick or suggestion––but they are often considered better as networking events versus actual capacity-building. India’s incubator managers need more than that. They are strapped on human capital, time, as well as financial resources. What India’s incubator managers need is an easy, comprehensive method of working with startups that eases their workload and provides more guidance to their budding entrepreneurs efficiently. The way we see it, an incubator can only build stronger networks, relationships and increase organizational sustainability when it can prove successes coming out of its program.
Bridging the Knowledge Gap
For the past few months, we piloted our first phase of VentureBasecamp: a comprehensive, easy-to-use curriculum for an incubator’s startups. Alongside this, we’re currently building our incubator manager training program––what we call our Head Sherpa Program––which helps incubator managers work more efficiently with their startups in a complementary way. By combining the two and streamlining the knowledge that has to be conveyed, incubators will have an easier time working with startups and help them succeed in the long-run.
Next up in this series: Mentorship. Where are India’s top quality mentors hiding? What can we do to foster stronger mentorship in incubators? When everybody in an incubator’s ecosystem is on the same page about what makes investable startups succeed and thrive, that’s when entrepreneurs are truly equipped with powerful skills and tools they’ll need to keep moving forward.