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Startup Model or Rental Model

Posted in Uncategorized

Last updated on November 14, 2019

Host Institutions intending to start a Incubator are faced with a question how to model their startup incubator, a TBI or STEP or a BioNest.

The question is “Which Model they should choose for their Incubator?.

In a broad sense, there are two models which are adopted. One is the Rental model and the other is the Startup model.

These rental model, workspace, TBIs, business units usually mushroom, yes the word is purposely used, in densely populated, IT intense, commercial, cosmopolitan areas. Take Bangalore, such rental workspace offices are concentrated in Indiranagar, Kormangala, and Whitefield. Many of them are purely rental model based. If the rental rates fall, these units will be out of business. Most occupants of such workspace units are financial services, employees of nearby trading units who cannot house their staff in house, and other such units.

So, is there anything wrong with this model? Absolutely, not. It has its own role to play.

But, the important point is, the model will determine the marketing and business development efforts of the unit. In a rental workspace model, the single minded focus is the maximise high revenue potential of the unit. Many, naive entrepreneur gurus think the workspace model is a masterstroke and it is a panacea for all problems. They do not realise that a rental workspace model can hinder organic growth of the incubator and is no prestige for the host institution.

Let us examine the Startup model. In this model, efforts are focused on three goals. One, motivation of students in the host institution to consider startups and guiding them through pre-incubation, managing the technology incubator, and mentoring the resulting startups.

The question one is tempted to ask is – will not a workspace model work in a startup model. What that means is, have a rental model based on workspace and pursue a startup model. The problem is in a startup model, the host institution is interested to get startups and is not interested to generate high revenue from incubates. Whereas, in the workspace model the owners are purely interested to generate high revenue from the space available.

The profile of the Technology Incubator which is based on startup model is also different as the entire focus is on getting more startups. The role of the Chief Executive of such the TBI or BioNest is also crucial. He should be technically sound, and aware of electronics, cloud computing, artificial intelligence, and preferably be a founder of a startup himself or closely associated with startups. This will enable him to motivate students of the host institution and also mentor the startups and thereby perform multiple roles.

Managing a workspace model based unit and a technology incubator based on startup is vastly different, In the former, you need a real estate manager, whereas for the later you need a technology aware professional. A startup model is widespread in its focus and objectives and the role of the Chief Executive is vital.

So, what should be the rental policy in a startup model?

Firstly, it should be understood that rents from incubates is one of the key source of income. In a rental workspace model, rentals is the main and only source of income.

The flexibility a startup model offers can be leveraged to have a flexible rental policy which will facilitate pre-incubation of the potential startups. As the startups grow and succeed a graded rental policy can be formulated factoring in the Grants and Seed funding availed.

An incubate friendly rental policy will go a long way in building a respectful relationship between the incubator and DST, DBT and other funding agencies.

Further, such a policy can also go a long way in enhancing the credibility, in the eyes of the host institution regulator – AICTE in case of Engineering Colleges and MCI in case of Medical Colleges.

This will also lead to more funding from fund granting agencies such as BIRAC and DST

The mandate of the Technology Incubator vis a vis the model to be adopted also determines how performance of a Chief Executive of the Incubator is measured.

Finally, it boils down to how we want to showcase the incubator – No of Quality Startups or The Income Generated. This is the bottom line.

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