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BUSINESS INCUBATION FINANCIALS AND SUSTAINABILITY Rajesh Agrawal Director, Finance, ICRISAT

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Business Incubation <ul><li>What is it ? </li></ul><ul><li>Process which nurtures entrepreneurial companies </li></ul><ul><li>Helping them survive and grow during the start-up period </li></ul><ul><li>Providing services and resources tailored to young firms </li></ul>

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Why Incubate? <ul><li>Create jobs </li></ul><ul><li>Improves entrepreneurial climate </li></ul><ul><li>Accelerates growth </li></ul>

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What makes them successful? <ul><li>Setting up of viable enterprises </li></ul><ul><li>Appropriate feasibility study </li></ul><ul><li>Governance and management </li></ul>

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How do incubators get initial funding? <ul><li>Loan Fund </li></ul><ul><li>Grant funds from Government </li></ul><ul><li>Angel investors </li></ul><ul><li>Venture Capital Financing </li></ul>

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Are Incubators worthy of public subsidies ? <ul><li>Logic of market failure </li></ul><ul><li>In the USA $! Invested has led to an addition tax collection of $ 30 </li></ul><ul><li>Risk managers for donors </li></ul>

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Financial and sustainability issues in incubators <ul><li>Issues for Incubators </li></ul><ul><li>Incubators to operate as viable businesses </li></ul><ul><li>Practice what you preach </li></ul><ul><li>Effectiveness and Efficiency </li></ul><ul><li>Time horizon (5 to 10 years) </li></ul><ul><li>Funding mismatch </li></ul>

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Financial and sustainability issues in incubators <ul><li>Issues for Incubators </li></ul><ul><li>Financial self sustainability </li></ul><ul><li>Incubation model mismatch </li></ul><ul><li>Critical mass of users available or incubation to create “demand” </li></ul>

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<ul><li>Revenue Models </li></ul><ul><li>Payment of tangibles/ non tangibles to be bundled with rent etc. </li></ul><ul><li>Rental model </li></ul><ul><li>Capital gain model </li></ul><ul><li>Adoption to local environment </li></ul>

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<ul><li>Revenue Options </li></ul><ul><li>Consulting </li></ul><ul><li>Training </li></ul><ul><li>Risk of mission drift </li></ul><ul><li>Diversified revenue sources </li></ul>

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<ul><li>Trade Offs </li></ul><ul><li>Trade offs between impact and sustainability </li></ul><ul><li>Both are important </li></ul><ul><li>Their order is important </li></ul><ul><li>Sustainability sets an example for hosted clients </li></ul><ul><li>Incubating the incubators </li></ul>

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Stage in Business Cycle