IMPACT OF STARTUP ECOSYSTEM

A STUDY ON IMPACT OF STARTUP ECOSYSTEM

Abstract
Indian economy is moving from developing to fastest developing economy. Start-ups in India are the
new contributing factor in the growth of development. India is a developing south Asian country. It is
a most populous and 7th largest country by area. Large population implies a large prospective market
in India and puts more pressure for employment in the country. In the present decade, India is
undertaking an essential shift towards start-up welcoming policies and a business friendly
environment. India is a populated country having increasing demand which is putting a competitive
environment forcing to create innovative systems. One of these systems is a start-up ecosystem. This
paper is aimed at about the growth and prospects of start-up systems in India.
Keywords: startups, innovation, technological business incubator, India.
Indian Economy is considered to be the sixth largest economy in the world in terms
of measurement of nominal gross domestic production(GDP) and third largest by
purchasing power parity(PPP) .There are number of variables which contribute into
the growth process of the economy. Precisely this paper throws light on one of the
most important variable for development, that is, education, and its impact on the
developmental acceleration of the economy.
The paper briefly reports the reasons behind a very conducive setup, proposal of
economic development via educational reforms in the state becoming a role model for
various other states in the economy. As it is evident that Indian population also stands
second highest in the world after China. But as compared to China, India has younger
population, which in turn means more of working population. Therefore the long
term expansion potential of the Indian economy is positive due to its younger
population. There have been various, fundamental educational developmental issues,
some of them are being not only addressed but also worked upon to improvise. Our
economy has registered an impressive literacy growth rate, which is being consistently
showing an upward trend. The government, planning and efforts to provide free basic
education from 6-14 years of age, has played a vital role. Although access to primary
education is just the first step, the fact that our system still needs to work on tertiary
education, for long term goals.
Innovation Ecosystems
The term ‘innovation ecosystems’ has become popular in industry, academia, and
government. It is used in corporate, national, or regional contexts, in idiosyncratic
ways. It implies a faulty analogy to natural ecosystems, and is therefore a poor basis
for the needed multi-disciplinary research and policies addressing emerging concepts
of innovation.
Frenkel and Maital (2016) find an early use of “innovation ecosystem” in a New York
Times op-ed by William Kennard, a former Chairman of the US Federal
Communications Commission.
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Other earlier comparisons of business environments to ecological systems include
Carroll (2010), Hannan and Freeman(2011), Moore (2013), and Schot (2011). (All
owe intellectual debt to Nelson and winter (2012), though the latter's work on
evolution of technology did not imply there is ecology of innovation.)
However, these researchers may not have been aware that other social scientists had
already left the questionable ecosystem analogy behind; see specially Haynes (2011).
Jackson (2011) defines an innovation ecosystem as “the complex relationships that are
formed between actors or entities whose functional goal is to enable technology
development and innovation.” (A supplementary file, giving more background on
innovation systems and their relation to technology based economic development,
accompanies this article.) He continues, The actors include the material resources
(funds, equipment, facilities, etc.) and the human capital (students, faculty, staff,
industry researchers, industry representatives, etc.) that make up the institutional
entities participating in the ecosystem (e.g. the universities ,colleges of engineering,
business schools, business firms, venture capitalists, industry-university research
institutes, federal or industrial supported centres of excellence,
and state and/or local economic development and business assistance organizations,
funding agencies, policy makers, etc.).
The innovation ecosystem comprises two distinct, but largely separated economies,
the research economy, which is driven by fundamental research, and the commercial
economy, which is driven by the marketplace.
Review of Literature
Reviewing the literature of innovation environments, Durst and Poutanen (2016)
found very few scholarly articles that called those environments “innovation
ecosystems.” Those papers they did find, they note, paid little attention to the dialog
with multiple constituencies, which (as Jackson's definition implies) the topic seems to
call for. Likewise Niosi (2017) addressed national and regional innovation systems
(NIS and RIS) without using the prefix “eco-.”
Frenkel and Maital’s introduction to their 2016 book Mapping National Innovation
Ecosystems considers biological ecosystems only as a loose metaphor. Despite the
book’s title, neither the ecosystem term nor the metaphor appears anywhere else in
the volume. Speakers at the 2016 World Technopolis Association Workshop and
UNESCO-Daejeon Global Innovation Forum used “innovation support systems”
(Chen, 2017) and “innovation support platforms” (Seo, 2017) as satisfactory
equivalents to “innovation ecosystems.” Thus, ‘innovation ecosystem’ is identical to
‘innovation system,’ at present.
Research Methodology
Research Design - The present research is descriptive in its nature.
The population of the study - The survey population is confined to only 34 business
incubation centres and their incubatees in Gujarat State.
Sample Size-The survey sample consists of 10 business incubation centres and 42 incubatees.
Universe of the Study - The universe of the study is confined to 37 business
incubation centres and their incubatees existing in Gujarat State during the year 2018.
Data Collection and Data Sources - Among the various methods, which can be used
to collect the primary data, the researcher has adopted two methods which are
Personal Interview method and Questionnaire method. The researcher has prepared
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questionnaires, which contained multiple choice questions. The respondent’s opinions
are collected with regard to the problem with the help of the questionnaires.
Objectives
To examine the role of Business Incubation Centres in promoting entrepreneurship
and to identify the gaps, if any, between perceived and actual services rendered; To
analyze the gap between the practices followed by business incubation centres to
promote entrepreneurship; To examine the growth and prospects of start-up systems
in India.
What is a Startup
Currently a clear definition of a ‘Startup’ does not exist in the Indian context due to
the subjectivity and complexity involved. Considering various parameters pertaining
to any business such as the stage of their lifecycle, the amount and level of funding
achieved, the amount of revenue generated, the area of operations, etc., some
conceptual definitions are available in the public domain. The Department of
Industrial Policy and Promotion (DIPP) is also working around a clear definition for
startups and is expected to make it public in due course.
A startup is a young company that is beginning to develop and grow, is in the first
stages of operation, and is usually financed by an individual or small group of
individuals; A startup is a young company that searches for an unknown business
model in order to disrupt existing markets or create new ones; A startup is a young,
dynamic company built on technology and innovation wherein the founders attempt
to capitalize on developing a product or service for which they believe there is a
demand.
Origin of Startups ecosystem

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Call for Startup ecosystems in India
In the present decade, India is undertaking an essential shift towards startup
welcoming policies and a business friendly environment. India is a populated country
having increasing demand which is putting a competitive environment forcing to
create innovative systems. These startup ecosystems works on a continuum from
basic research to the transfer into developed companies or entrepreneurs.
To corroborate this process, the most of the works are using the record number of
patents as a proxy, given the difficulty of measuring new products, services and
process for the market.
Initiatives Undertaken by IIM’s, IIT’s & other Premier Educational Institutes
to Enable Start-Ups Ecosystem
Five of the country’s leading B-schools — IIM Bangalore, Indian School of Business
(ISB), IIM Kozhikode, IIM Ahmedabad and IIM Calcutta — have spawned more
than 400 entrepreneurs in the last five years. This is testimony to the growing clout of
India’s B-schools as breeding grounds of start-ups. Fittingly enough, it’s IIM
Bangalore, located in India’s very own Silicon Valley that leads the pack with over 150
entrepreneurs among those who have graduated in the last five years. ISB comes in at
second place with around 124 entrepreneurs from its flagship programme, while IIM
Kozhikode, IIM Ahmedabad and IIM Calcutta have around 58, 50 and 20
entrepreneurs respectively in the last five years. “It’s remarkable that so many
graduates from marquee institutes, who had the option of highflying corporate
careers, have moved into
IIM Calcutta Innovation Park: The incubator at the Indian Institute of Management
Calcutta – IIM Calcutta Innovation Park – focuses on healthcare, education,
cleantech, lifestyle, analytics, Internet of Things. There is a special focus on social
enterprises. There is a big need, to promote social enterprises in India, as it impacts
those at the bottom of the pyramid, and there are not many business incubators that
focus on this area.
The IIMCIP conducts seminars, roundtables and a business plan contest to promote
social entrepreneurship. This is done in partnership with the Tata group under the
Tata Social Enterprise Challenge. IIMCIP is spread over 10,000 sq ft and it is a not-
for-profit company established in 2014, run by an independent board and has on its
governing body a good mix of faculty and alumni, who are also either serial
entrepreneurs or involved with the venture capital ecosystem.
IIMCIP takes a small percentage of equity, typically up to 5 per cent, as a
consideration for the incubation support. IIMCIP sells its stake when the venture
raises the next level of funding. Formal incubation through IIMCIP as a separate
Entity started in September 2014. Prior to this, IIMC offer incubation support
through its Centre for Entrepreneurship and Innovation. One of the success stories of
four students from IIMC who started Zostel in 2014. Zostel is a backpacker hostel
and affordable hotel chain that is present in 35 cities. It has just announced opening a
hostel in Vietnam. Zostel recently raised another round of funding and had previously
raised $1 million.
On the start-up scene, the success stories of internet businesses have created a buzz.
Now more and more students and young professionals are opting out of jobs and
starting their own ventures.
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National Institute of Design, Ahmedabad: The National Design Business Incubator
(NDBI) at the National Institute of Design, Ahmedabad, is meant to encourage
entrepreneurs focused on design. It aims to foster a culture of entrepreneurship in
young designers so that they come up with products and services that will find a good
response in the market.
The objective is to create a new class of entrepreneurs – Designpreneurs – something
that India needs in plenty. Spread over 4,000 sq ft at the NID, the premier institute
for design in the country, the NDBI was established in 2004 and is run as an
independent legal entity.
At NDBI, about 10 ventures are at the incubator at any given time and it admits about
six new ventures every year. Though it admits any venture that is focused on design,
the NDBI concentrates on those in the health, sanitation and renewable energy
sectors. The incubator is open to any venture and need not have any NID connection,
as long as it into designing products. Innovation, market potential and business plan
are the criteria that the ventures need to satisfy for gaining admission to the incubator.
The ventures are allowed to be in the incubator for three years. The NDBI picks up
about a 5 per cent stake in the ventures, from the grants available to it, the incubator
provides air-conditioned work space with computers, IPR registration, help in
forming the company, legal and accounting services, seed capital, facilitating angel/
VC funding, networking with other incubators, product development and marketing.
According to information available on NDBI’s website, various funding options are
available, including a Technopreneur Promotion Programme, run by the Department
of Scientific and Industrial Research, through grants. Besides, the Department of
Industrial Policy and Promotion has set up a ₹10-crore Venture Ready Fund (VRF) at
NDBI to support young designers aspiring to become entrepreneurs. This money will
be disbursed over four years through loan, equity or a mix of both.
Some of the start-ups incubated at NDBI and that have made it big are Sangaru
Design Objects Pvt Ltd, Robots Alive Pvt Ltd, Yuga Design Pvt Ltd and Dhama
Innovations Pvt Ltd.
Indian institute of Information Technology (IIT-Hyderabad campus): T-Hub
Incubator of Incubators: T-Hub is a Public Private partnership (PPP) model between
the Government of Telangana, IIIT-H, Indian school of Business, and NALSAR
(National academy of research and legal studies), they are expected to be catalysts for
promoting innovation similar to the roles played by the Stanford University and
University of California in the success of Silicon Valley. T-Hub is not just about 800
people to work on innovative technology driven products and solutions, but an
integral part of a larger ecosystem the state government is keen on is keen on creating.
Initially 50 start-ups will occupy the space and thereafter 50 more will get in,
compared to private incubators, T-hub is an Industry-government partnership that
seeks to provide entrepreneurship an edge in tune with the state’s industrial Policy-
Innovate, Incubate and Incorporate.
The government may have spent Rs 40 crore on the T-Hub building, but the best part
of T-Hub will be minimal interference from the government. The government has
said that government will not be involved in the day to day affairs in areas like which
start-up to select, how long an enterprise should continue there and who will get

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funding. All he professional decision would be taken by people involved in the
management and guided by 10-member empowered board in which the lone
government representative will be the IT secretary.
The IIT-Madras start-up incubator: In early 2013, two IIT-Madras batch mates, Tarun
Mehta and Swap nil Jain, quit their jobs and went back to their alma mater. Their
intention was not further studies. They wanted to make a battery -one that could be
used in electric two wheelers, and which would be far superior in performance than
the available ones.
The IIT-Madras start-up incubator welcomed them and even provided Rs 5 lakh in
funds. That was the start of Ather Energy, which expects to commercialize a high
performance electric scooter in the coming months at a little less than Rs 1 lakh, a
price which they say is no more than for an equivalent petrol scooter. For the two
friends, the objective was simple. They wanted to make an electric scooter that feels
like a petrol one -much like what Tesla Motors in the US did with cars.
The idea has attracted many, and Ather's funders now include the Central
government, Tiger Global, Flipkart founders Sachin Bansal and Binny Bansal, and
Silicon Valley-based big data firm Aerospike's co-founder V Srinivasan. The scooters
will have a top-speed of 72 km per hour and a remarkable 90% battery charge in an
hour. The vehicle produces 7 bhp powers, only marginally less than the current petrol-
based scooters. It will come with a smart dashboard that will enable users to create
personalized profiles and choose riding modes, and it will have onboard diagnostics
capabilities.
Results & Discussion
For testing the first objective of this investigation pertaining to the role of Business
Incubation Centres in promoting entrepreneurship, mean scores of sampled
organizations were taken on the basis of 25 items included in the second part of the
questionnaires. Furthermore, a t-test was also performed to analyze the gaps between
perceived and actual services rendered by the business incubation centres. The level of
significance was set at a conventional level of 5 per cent. Table 1 presents the 109
results of the statistical analysis expressed in terms of the mean values of perceived
effectiveness.

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Analysis of gaps between perceived and actual services rendered by business
incubation centres
A thorough understanding of the perception of incubates in respect of various
business incubation services is critical for the success of the business incubation
centres. This information serves as a feedback to enhance their utility and
effectiveness by making suitable changes in the level and type of services rendered.
Incubator resources are scarce and should be utilized for providing only those services
that benefit the incubates most. For an analysis of the gaps between perceived and
actual services rendered by the business incubation centres, a t-test and ANOVA was
performed. The level of significance was set at a conventional level of 5 per cent.

The statistical results of the t-test reveal vital gaps between perceived and actual
services rendered by the business incubation centres as denoted by the critical
negative mean difference and significance value of less than 0.05 across all categories
namely: Physical Infrastructure services (-.7988), Management Guidance and
Consulting services (-1.2310), Enabling Environment services (-1.0291), and Business
Assistance services (-1.0291). It is important to note that although the first three
categories of services have statistically significant gaps, they are acknowledged to be
provided by the incubates since their mean scores are above 3.00. The analysis,
therefore, reveals that the incubates’ expectation of the degree of effectiveness in
provision of these services is higher than its current level. However, in case of
Business Assistance services, the mean value is below 3.0 suggesting that the incubates
did not discern them to be provided.

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In terms of physical infrastructure services, the ANOVA table indicates that the
significance value of library facilities (.001) and laboratory facilities (.015) is less than
0.05 indicating vital gaps in the perception of business incubation centres and their
incubates regarding provision of these two services.
The results of the ANOVA for business assistance services reveal a significance value
of less than 0.05 for secretarial services (.000), technical assistance (.000), marketing
assistance (.002), networking support (.000) and assistance in securing capital (.029)
implying critical differences in the conception of business incubation centres and their
incubates regarding provision of these five services. It is, however, worth noting that
in case of networking support and assistance in securing capital, the results indicate
that although the incubates figure out these services to be provided in general, the
degree of efficacy is perceived to be less in comparison to that of business incubation
centres.
In case of management guidance and consulting services, the significance value of
assistance in conducting feasibility studies (.006), assistance in writing business plans
(.003) and business counselling (.000) is less than 0.05, suggesting significant gaps in
perception of business incubation centres and incubates regarding provision of these
services. The business plan writing assistance service though provided requires
considerable improvement.
With regards to the enabling environment services, the ANOVA table reveals that the
significance value of synergistic environment (.030), reduced time to develop
marketable products/services (.003), minimized chances of failure (.000), establishing
credibility (.032), and periodic feedback (.002) is less than 0.05, implying significant
differences in perception of business incubation centres and incubates regarding
provision of these services.
Conclusion
There is no doubt that start-ups play an important role in boosting innovation,
entrepreneurship and creating new jobs. The country's premier engineering and
Management like IIT’S and IIM’S have taken significant steps in enabling start-up
ecosystem by establishing Incubators, Accelerators and research park and even the
placement are seeing a fresh surge in hiring from start-ups.
The culture and practices of IIM’ and IIT’S related to start-ups should also be
percolated to other B-schools and engineering institutes located in TIER-II and Tier-
III cities, where majority of the student’s study. To begin with the ministry of HRD
should provide the funds to set up incubators, Accelerators and research parks in
Universities having the status of potential of excellence and thereafter to other
universities and affiliated colleges looking into the success of the Programme. Even
the corporate can be invited for funding start-ups through their corporate social
responsibility activities.
For building an entrepreneurial environment, the government, big corporate,
educational institutions should come forward to provide a culture for start-ups in
India. Mentor programmes, innovative essay competitions, workshops, seminars
should be organized by the government and universities. From an overall viewing,
India had a very high scope for growth of start-up ecosystems. India offers the largest
pie of venture prospect that the world is eyeing.

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There are lots of issues relating to provide venture capital to these start-ups. “We need
innovations that solve Indian consumers’ problems, with a grassroots level
movement. Foreign venture capital firms tend to have a bias towards replicating
business models proven in developed countries.
Let’s hope that new policy would address the problems of start-ups in General and
educational institutes particular to foster innovation and entrepreneurship.
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