Need of Agri-Business Incubation

for

Technology Commercialization

& Rural Development

By

Dr. K. K. SharmaHead

Agri-Business Incubator

Rural poverty in India

• Persistence of poverty is largely related to poor growth performance of national economies

• It is still mainly a rural and agricultural phenomenon where most of the poor depend on the rural sector for their livelihoods

• 800 million poor living on less than $1 a day

The Situation

• Growth in India has been disproportionately concentrated in industry and services

• Rural and semi-urban India is lagging behind that are afflicted with poor infrastructure, low levels of education, lack of literacy, besides several social & economic problems

Annual GDP Growth by Sector

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

1982-1992 1992-2002

Agriculture Industry Services

Source: Economic survey of India

Entrepreneurs can solve big problems

• The most difficult problems in the world do not have obvious solutions– They require creativity and tenacity

• Entrepreneurs have the necessary traits:– Vision– Determination– Resourcefulness– Creativity– A willingness to change direction when necessary

Entrepreneurship creates positive change

Entrepreneurial Efforts

Employees Consumers Shareholders

Government General Economy

• Great opportunities • Greater income

• New products, services

• Increased wealth

• Additional tax revenue• Reduction in social benefit need

• Secondary and tertiary creation of opportunities

We need to unleash the power of entrepreneurship on the problems facing rural and semi-urban India

Entrepreneurship Type Synergy w/ Rural and Semi Urban India

Individual / Microfinance •Flexible, meets local requirements•Demonstrated ability to scale numbers of individuals•Microfinance an established and growing industry

Micro and small enterprise / informal sources

•Can provide value added employment to multiple people•Only need one entrepreneur for multiple increases in income•Flexible – tailored to local market and infrastructure requirements

Large markets / mainstream venture capital

•Can mobilize crores of rupees quickly•Brings most sophisticated business experience•Commercial venture capital entrenched in India

•Limit to impact •Skills of great entrepreneurs not dispersed to others•Diminishing returns with market saturation

•Hamstrung by lack of capital and business building support

•Scale requirements limit flexibility•Limited understanding of rural and semi-urban India•Rural and semi-urban India unlikely to be attractive currently

Dis-synergy w/ Rural and Semi Urban India

Micro and small enterprises are the best current option for entrepreneurial development in rural and semi-urban India

Micro and small enterprises are the key, but receive the least support

BUSINESS INCUBATOR-DEFINITION

A Business Incubator may be defined as an organization which

offers a range of business development services and access to

small space on flexible terms, to meet the need of new start-up

companies. The package of services offered by a business

incubator is designed to enhance the success, growth rates and

professionalism among the incubating companies

What is Technology Business Incubation?

Technology incubators nurture hi-tech start-ups and present a technology-oriented variant of business incubators

•hands-on management assistance•access to financing•business and technical support services•shared office space, access to equipment

Incubators provide:

Business incubation is a dynamic process of business enterprise development. Incubators nurture young firms, helping them to survive and grow during the

startup period when they are most vulnerable.

EVOLUTION OF BUSINESS INCUBATORS

1970s 1980s 1990s 2000+

SME Dev. CentersScience ParksIndustrial Estates

Business Incubators•Affordable Space•First Generation

Innovation centersin wall+ AffiliatesSectoral+ ServicesSecond Generation

International Enterprise CentersConvergent services including VCThird Generation Business Accelerators

Evolution of Basic Characteristics of Incubation Models

1980’s 1990’s 2000+Public & Semi PublicNon ProfitCommunity Oriented

Fees for Services

Objective: Reduce cost of starting business

Mixed Use

•Public & Semi Public

•Non profit

•Business Oriented

•Equity for Services

•Objective: Reduce time to market

•Technology Focus

•Public & Private

•Non Profit & Profit

•Business & Technology oriented

•Equity & Fees for services

•Objective: Develop professionalism in the companies

•Technology Focus

Benefits of Technology Business Incubators

TBI

For tenant companies:For tenant companies: •access to resources•reduced risk & time to market•improved business skills

For government:For government:•economic development•new jobs & taxes•social benefits

For corporate sector:For corporate sector:•technology acquisition •investment choice•social responsibilities

For R&D community:For R&D community:•research commercialization•interaction with industry•additional income

Catalytic Factors for Technology Incubation

•Society open to innovation

Policies & legal framework

for TBIs & enterprises

•Financial support system for TBIs & enterprises

•Cooperation framework of TBIs

•Support activities of incubators to enterprises

Investmentaccess to capital

Need for Agri-Business Seed Capital

• 70% of people depend on agri-sector

• Non existence of agri venture capital in India

• Agri biotech gaining predominance

• Global Biofuel demand

• Contract farming for better economic of scale

• Rapid technology advancement in the area of GMO &

agri inputs

• Need for value added production to high demanding

consumers

a. Early-stage' venture capital as well as ‘Agri-Business' focused venture investment is highly deficient

• There is negligible early-stage VC activity in India

• The first part of the last decade – initial learning, regulatory framework evolving

• The second half of last decade-Mixed results with IT services positive, but with dotcom busts.

• Currently most of the focus is on large private equity deals, primarily as a knee jerk reaction to the dotcom bust

b. Existing fund management team less likely to launch early stage agri business funds

• Credentials are more suited to large private equity deals

• Have no operational experience

• They have no agro technology experience

• Size of investment that VCs have made in agri business have been typically more than $3-5Million

Able environment for early stage Investment in agri-business

Thank you