Start-ups in fund trouble
As downturn-hit investors turn more fussy and miserly, the country’s most prominent incubators are raising early-stage funds so their fledgling firms have the money they need to grow. VC firms, for reasons ranging from poor mentoring to a lack of quality entrepreneurs emerging from the system, seem to have lost faith in incubated companies. It’s a slow process, says Sushanto Mitra, chief executive, Society for Innovation and Entrepreneurship (SINE) at IIT Bombay. “VCs are not charitable organizations ... it takes two to tango.”
It’s an act of both desperation and instinct. As downturn-hit investors turn more fussy and miserly, the country’s most prominent incubators are raising early-stage funds so their fledgling firms have the money they need to grow.
The Centre for Innovation, Incubation and Entrepreneurship (CIIE) at the Indian Institute of Management, Ahmedabad (IIM-A), is raising two early-stage funds focused on the clean technology and telecom sectors, to be launched in three months.
The incubation centre at the International Crops Research Institute for the Semi-Arid Tropics (Icrisat) is raising a $10 million fund (Rs46.2 crore), and ICICI Knowledge Park (a hub for the world’s top information technology and biotech firms) is raising up to $40 million.
That’s new ground for business incubators—designed to mentor entrepreneurs through their early stages and usually run on government grants. Firms they mentor, after a certain level of growth and maturity, typically approach larger investors such as venture capital (VC) firms to fund their next stage of growth.
And that’s where the hitch lies. VC firms, for reasons ranging from poor mentoring to a lack of quality entrepreneurs emerging from the system, seem to have lost faith in incubated companies.
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Some incubators agree with the VC firms and say it would be tough to attract more funds till investors see successful products emerging from the system.
It’s a slow process, says Sushanto Mitra, chief executive, Society for Innovation and Entrepreneurship (SINE) at IIT Bombay. “VCs are not charitable organizations. They invest looking at potential to make money. A majority of the incubated companies have not matured to that level,” he said. “It takes two to tango.”
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