Credit: Special arrangement
Bengaluru: As probably the country’s oldest incubator for start-up, with quarter of a century behind it, the Nadathur S Raghavan Centre for Entrepreneurial Learning (NSRCEL) had a headstart even before the word start-up came into existence.
It boasts of incubating 2,910 ventures with a cumulative value of $7.37 billion. The flagship incubator of the Indian Institute of Management, Bangalore (IIMB) is now at the centre of this fast evolving ecosystem.
Speaking to DH’s Anushree Pratap, the centre’s CEO, Anand Sri Ganesh, discusses how the behaviour of private capital is getting steered by the changing macro economic environment, the markets beyond the US and what the government needs to do to propel the entrepreneurial zeal.
Edited excerpts:
How are Indian incubators different from those in the US or China? How many ventures has NSRCEL incubated in the last financial year (FY)?
The context is dramatically different. It's unfair to compare. The US incubation ecosystem, for example, has matured over about four decades now. We should learn from them. China has integrated startup innovation and university innovation. US models are able to bring in corporates to be a part of the startup ecosystem. Of course, it is deeply capitalist driven, but that is the incentive for it. How can we translate that context to our context?
In FY25, we engaged with 1,106 ventures across 82 towns.
What kind of shifts are you observing in the venture capital (VC) space?
The VC industry in India, in the last 6-9 months, is going through a phase of reinvention. A lot of Indian limited partners (LPs) and general partners (GPs) have also emerged in the last 3-4 years. There is an upswing in money from India for India.
Because some of the innovation is in strategic and sensitive areas for the country, such as semiconductor, telecom, defence, aerospace, for many of those founders, the government is an important customer. Sometimes the nature of engagement with government buyers is that they would like all the capital infusion to be purely from within the boundaries of the country. So it is almost like there is a sub-segment of a market which has emerged.
The interest in some of the areas in very early stage ventures has seen an uptick. The number of micro-VCs, pre-series A venture capitalists that have emerged in the last 1-2 years are interested in looking at early stage investments that can create quick returns for them. Inbound interest from many family offices is also seeing an upswing. The growth stage continues to be cautious, but lucrative. Post series B, series C, private equity infusion continues to be active but there is a void in the middle. From the pre-series A, series A till you get to a position of growth, that mid gap is now becoming like a polarised gap within the country because of larger dynamics and changes in the market.
Are there gaps in the government initiatives in your opinion?
They should not do anything with the entrepreneurial ecosystem. They should let it be. There are three buckets to what the government is working with in the startup ecosystem. The first bucket is capital infusion, the second is policy, and the third is how they're supporting the ecosystem.
I am not sure the first bucket, where it is believed it is the role of policy to inject capital to a founder, is as productive as it could be. The premise of an entrepreneur is wealth creation. The nature of markets, whether it is institutional investment or banking or corporate innovation, will find ways in which they can support innovation injection from the startup. I wonder if there is a meaningful role for the government to offer grants like Rs 5-7 lakh. That’s just too little. If I genuinely want to build a startup that will be a Rs 100-200 crore company in 5-7 years, this kind of capital infusion is not of material value. If at all we have to look at capital infusion, maybe larger ticket sizes for extremely difficult areas.
In the second bucket, where we are trying to create a policy environment that encourages innovation, in some of these areas (healthcare, climate, education, inclusive finance, insurance), it would have a massive impact to create policy sandboxes.
All the government should do is put the maximum money in areas where it can have maximum impact. For most other areas, the larger economic forces and market forces will figure it out.
Are founders looking at markets beyond the US?
Southeast Asia is strong for some of these ventures. Outside of the UK and continental Europe, we are seeing a big upswing in the Middle East. This is especially for areas like fintech, mobility, sustainability, climate tech, AI, machine learning (ML). Separately, especially for areas which have a broader impact driven thesis, we are seeing the Global South as a great market opportunity. Work in edtech, affordable healthcare, telemetry, inclusive finance, disaster relief, and so on, is leverageable across many emerging countries.
Market access is the biggest driver. We also see a lot of cross-border partnerships where, especially in areas like robotics, drone tech, founders find partners and system integrators who can take their solutions to markets out there. They also incorporate a company as either a wholly-owned subsidiary or flip it over to say India becomes a subsidiary of a US or a UK or a Dubai entity.
Do you see credence in the practice of Indian startups opening offices in the US for market access in the capital intensive sectors?
Sectors like healthcare, avionics, drones, climate tech, battery technology, biosciences, sustainable agriculture, and so on, are research and development (R&D) intensive businesses. Their regulatory requirements are often geography specific, especially in food and agri spaces. So each market entry for founders of such businesses is a very thought-through exercise. Having said that, many of these solutions are border agnostic, for sectors such as climate and sustainability, sustainable agriculture, upcycling. Many founders naturally look to larger mature markets as opportunities to quickly scale.