Entrepreneurship Development through Technology Business Incubation in a Technical University
― A Case Study of IIT Delhi ―

Arya Kumar Sengupta*

Abstract

Universities and academic institutions are key resource centres for creation and development of knowledge, where innovations that emerge from the research programmes and technology projects pursued by students, professors and research staff can quite often be the starting points for entrepreneurship development. In USA and other developed countries, technology incubators attached to universities are known to be the cradle for many start-up businesses that have turned into hugely successful enterprises. In the last two decades, quite a few premier technology institutes in India have also established on campus technology business incubators with a view to promoting technology entrepreneurship among the students and faculty members. The Indian Institute of Technology at Delhi (IIT Delhi) is one such institution which has over the last few years quietly turned into a Knowledge Enterprise. It launched in 1999 a Technology Business Incubation Unit (TBIU) programme, which has become a veritable entrepreneurship development entity. This article attempts to put on record the gradual evolution of the IIT Delhi’s TBIU programme and the successes achieved.
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* Dr Arya Kumar Sengupta was the first full time Managing Director and CEO of the Foundation for Innovation and Technology Transfer (FITT) of IIT Delhi, and spent 12 years in that job. He is presently a Professor at the International Management Institute in Delhi, teaching Knowledge Management, Technology Management and Entrepreneurship to post graduate students of Management.








Introduction

In today’s world, knowledge has been recognized and accepted as the most meaningful resource and the most important factor of production, besides the traditional ones like labour, capital and land [1]. Creation, assimilation and utilization of knowledge is the key to continuous innovation that is at the heart of entrepreneurship, leading to competitive advantage in business and industry [2]. In this respect, universities and research institutions have been playing a pivotal role. All top technical universities and R & D organisations have research programs pursued by students, scientists and faculty members, in basic or applied sciences. Outputs of many of these researches have seeds of technology development and innovations.

There are around 350 universities in India, and more than 17,000 Higher Educational Institutions (HEIs) [3]. There are also some 1,500 Scientific and Industrial Research Organisations (or SIROs, as registered by the Department of Scientific and Industrial Research, DSIR), which operate in Industry firms, Industry Associations, Chambers of Commerce or Governmental and Non-governmental Organisations (NGOs). The resources spent on research in all these knowledge Institutions are substantial. On a rough estimate, total national investment on R & D in different Science and Technology fields in India was around Rs.22,000Crores ($5 billion) in 2004-2005, approximating to 0.8% of GDP that year. The technical manpower capable for pursuing research in this country is quite substantial – around 1,50,000 people were known to be engaged in R & D activities in the country in 2001 in public and private sectors taken together [3].

The contribution of the academic sector in national R & D is considerable. About 4.5% of national R & D expenditures are estimated to take place in the universities and HEIs in the country [3]. The seven Indian Institutes of Technologies and thirteen Institutions of National Importances (INI) like the IISc in Bangalore are particularly very active in technological R & D. For example, in IIT Delhi alone, on a given day around a thousand projects (undergraduate, postgraduate, Ph.D, sponsored R & D and industrial consultancy) are pursued by students, scientists and faculty members; many of these projects have strong research components.

Quite a few Indian students after graduations from Indian universities migrate to the West, mostly to the United States and some to Europe and other developed countries to pursue higher studies, to do research in academia and /or to enhance professional career. The Indian Diaspora have traditionally done very well in these countries – in academic excellence, professional acumen and, especially, in entrepreneurial ventures. Whether in the Silicon Valley in California or Route 128 in Boston, Massachusetts, or elsewhere in the United States, the Indian entrepreneurs have been known for their success. In Silicon Valley itself there were in 1998 at least 800 Companies that were promoted by Indians or had Indian CEOs, COOs or CTOs; more than 300 Indian entrepreneurs had net worth of $5m or more; 30-35% all new 1st generation entrepreneurs in the Silicon Valley area were originally from the Indian sub-continent; and collective net worth of all Indians would be around $25b [4]. Most of these Companies are in the high tech business – in IT, bio-technology, pharmaceuticals, new materials etc. Of the 100 fastest growing technology companies in USA in 2006, at least 10 have Indians among their top executives or founders [5].

Success stories of most Indian entrepreneurs almost invariably have a common denominator – many of them had their undergraduate college education in India, and a majority was from the IITs. While working in the US, or after completing advanced degrees there, they gained confidence in their innovative ideas and business skills and gave up their jobs in the US to start their own companies. The moot question is, if the IIT graduates can be successful in technology entrepreneurship ventures abroad (in USA mainly), can they not be persuaded to show the same spirit in India itself? The key to their success lies in the nurturing environment, the facilitating and handholding mechanism and the plethora of incentives that are available in those countries towards promotion of entrepreneurship. In the late eighties and early nineties, as globalization and free market economy began to take root in India, a number of new technology entrepreneurial companies got established in the country, such as the Infosys, the Wipro, the Satyam or the Ranbaxy; Government took a number of initiatives like setting up of Science and Technology Parks, and in many universities and academic institutions concerted moves were taken towards development of Industry Academia interaction and entrepreneurship training. The Indian Institute of Technology at Delhi (IIT Delhi) was a pioneer institution in this regard. It set up the first foundation of its kind in India to formally institutionalise the concept of industry academia interface, the Foundation for Innovation and Technology Transfer (FITT), which was financially and administratively independent of the host institution. FITT in turn was the first to organize a Technology Business Incubation programme within a University, for actively promoting the spirit of entrepreneurship among its graduating students and research faculty.

About IIT Delhi -- a Knowledge Enterprise [6]

IIT Delhi was established in 1963 as the fifth Indian Institute Of Technology, after the ones at Kharagpur, Kanpur, Bombay ( now Mumbai) and Madras (now Chennai). A sixth IIT was set up in Guwahati in the late 1990s. These institutions were created, after India gained independence in 1947, as new centres for higher education and learning, having a mission to contribute to India and the world through Excellence in Science and Technology Education and Research, and to serve as a valuable resource for Industry and Society. Among the primary objectives behind the IITs were i) creating impetus towards enhancement of Knowledge through basic and applied research in engineering sciences and ii) providing platforms for close Industry Academia Interactive Partnership.

Over the years, all the IITs have been striving to fulfill the above objectives, and have been successful to various extents. IIT Delhi in particular have 13 departments and 11 research centres pertaining to various disciplines of science, technology and social sciences, with more than 450 faculty members and 4000 students pursuing undergraduate, post graduate and research studies in some 400 laboratories and workshops. The Institute has one of the largest libraries of science and technology in this part of the world. It is an excellent knowledge center with an up-to-date infrastructure for undertaking Research and Development in Science, engineering, technology, social sciences etc.

During the last fifteen years, IIT Delhi has taken a number of bold policy decisions and initiatives that can be considered stepping stones for transforming the Institute from a Knowledge Institution to a Knowledge Enterprise. For example, quite a few Technology Companies, like IBM, NIIT and Tata Infotech, were given in-campus space for setting up their R&D extension units that allowed a degree of synergy with faculty, students and researchers. At least two new industry sponsored Schools were established for post graduate research and education, in the area of Telecommunications and IT respectively by Bharti Group and Vinod Khosla of Sun Microsystems fame. Four additional Masters level (M-Tech) courses were launched, namely in the areas of VLSI Design Technologies and Tools (VDTT), Construction Technology Management (CTM), Power Systems Engineering (PSE) and Power Generation (PG), fully supported by Industry Firms. A number of High Technology Labs were set up in the Institute with full funding support and technical association from well known multinational organizations like CISCO, Microsoft, Intel and Phillips. More than 25 industry/ alumni sponsored professorial chairs were established in emerging technology fields. And as mentioned earlier, FITT represent an independent Technology Transfer/ Marketing organization for the Institute, developed in the model of Technology Transfer Offices (TTO) that are common in most Technological Universities in USA and Europe, in order to promote close collaboration with industry and commercialization of Intellectual Properties that get developed in the research activities conducted in the Institute. It was the first organisation of its kind in an Indian institute of learning.

About FITT -- the autonomous industry interface of IIT Delhi

Foundation for Innovation and Technology Transfer (FITT) was set up in IIT Delhi in 1992 as an autonomous, non-profit making Society with a view to achieving a quantum jump in the level of collaboration between IIT Delhi, industry and other user organisations on programmes and projects of mutual interest. The basic objective of FITT is to facilitate transfer of technologies developed at the Institute to the industry, to promote joint development of technologies between the Institute and the Industry and to market the intellectual capability of the Institute, by providing on one hand an interface, whereby it becomes possible to transfer the benefits of the R&D done at the Institute to industry, and on the other, by providing industry with a channel to utilise the expertise and facilities at the institute for technological solutions/development and continuing education. In short, FITT’s primary objective is to function like a “marketing arm” of the Institute and bring in industry and other external agencies to interact, collaborate and cooperate with the Institute in a partnership mode. Through these, the Foundation is also expected to facilitate additional resource generation for the Institute, and maintain technological relevance in its academic programmes. FITT is administratively and financially independent of the Institute and recognised as a Scientific & Industrial Research Organisation (SIRO) by the Department of Science and Technology (DST), Govt. of India.

Incidentally, many technological universities in developed countries, such as USA, UK, Norway, Germany, Italy, Australia and Japan, have similar organisations affiliated to the parent body, either as a Foundation or even as a University-owned Company. Such organizations have in most instances been quite successful and effective. The performance of FITT at IIT Delhi over the fifteen years since its inception has also been quite positive. For example, the number of faculty members involved in external projects (mainly funded by industry) rose from merely 10 % in the early 1990s to more than 30% of the total faculty members by 2005. The value of such externally funded projects in the Institute soared from a paltry Rs 6.5 crores in 1992-93 to around Rs 40 crores in 2004-05. Some 100 patents have been filed by FITT (on behalf of IIT Delhi) out of the research outputs in the Institute between 1997 and 2005. Around 45 technologies got transferred to industry firms. Corpus fund of the Foundation, which was only Rs 1.62 crores in 1993, grew to Rs 5.0 crores by 2006 by way of generation of surplus from its activities; the organisation became self sustaining from around the year 2000 itself. [7]

Technology Business Incubator at IIT Delhi

Behind the success of FITT lies the principles that are observed in all its functions. Firstly, it is an organisation that provides a platform of facilitative, flexible, friendly and focused environment for fruitful mutual interaction between the academic members of the Institute on one hand, and the industry and other clients on the other, the two sets of customers of FITT. Besides inculcating an attitude of commercial ethos, the Foundation has also taken upon itself the task of encouraging the spirit of entrepreneurship in the faculty, graduating students and scientists at large. The most significant act of FITT has been in the establishment, and later, the administration of the Technology Business Incubation Unit (TBIU) Project in IIT Delhi.

The idea of promoting entrepreneurship through the incubation process evolved in the United States in the early eighties, and in the next two decades became widespread in many other developed and developing countries. In 2000, there were some 4000 Incubators around the world, of which approximately 900 were in the USA creating around 20000 incubated Companies. In China there were in 1999 at least 100 incubators, incubating 5000 start-up companies that had more than 50000 employees and over $5 billion combined turnover. Over 70% of all incubators world wide are linked to a Technical University nearby, and supported with funds, expert advice and infrastructure by local government bodies, industry firms or industry associations. [8]

When the TBIU concept was first mooted at IIT Delhi in early 1998, no other academic institution in India had yet considered such a scheme seriously. The Department of Science and Technology had however long been supporting a Science and Technology Entrepreneurship Park (S&T EP) Programme, under which budding entrepreneurs were encouraged to work in association with specific knowledge institutions in order to set up start-up technology enterprises. IIT Kharagpur was one of some seventeen academic institutions in the country to have S&T EP very near its campus, where faculty members and researchers of the Institute could provide technical support to enterprises operating from the Park. The idea of incubating a start-up is one step before the S&T EP process get under way. In an incubator, a technology concept is nurtured from its nascent stage, verified, upgraded and developed into a viable commercial proposition. Only minimal commercial activity gets done during the incubation period.

The IIT Delhi incubator finally got its approval from the Board of Governors of the Institute in 1999, after a long process of a series of discussion and evaluation by expert committees and faculty members. It was formally operationalised in July 2000 when a small office space was provided in the campus, adjacent to the academic area, where seven to eight modular cubicles were built to accommodate seven to eight incubatee start-up teams. FITT utilized a part of its surplus funds to develop the space adequately with basic amenities for the offices as well as the common facilities like communication and internet systems, reception and conferencing arrangements with a view to creating a modern hi-tech working environment for the entrepreneurs. Later, FITT funds were also made available for arranging facilitative supports such as seed financing, marketing, IPR and other legal service. The most important role of FITT was to provide the interface between the entrepreneurs and the academic community and the technology infrastructure of the Institute.

A Technology Business Incubator by definition denotes a location in which potential entrepreneurs with business ideas can receive assistance (that may otherwise be unaffordable, inaccessible or even unknown) in the form of proactive supports like access to critical technology tools, laboratory facilities, information and contact with experts in relevant areas, use of shared services, interaction with other fellow entrepreneurs, and access to professional help in business planning, HR, finance, operations, marketing and other management skills. The TBIU at IIT Delhi was designed as an incubator to provide infrastructure on campus for a limited duration (2-3 years) to facilitate research and Development to convert nascent Technological Ideas into Commercial entities. It is open to first generation entrepreneurial hopefuls from among the faculty, graduating students, alumni and research staff of IITs, technology based start-up enterprises and SMEs. Applications for residency in the incubator are screened by a high powered standing committee of experts from academic and industry professionals, based on a number of criteria like the quality of the proposal and the innovation idea, assessment of the entrepreneurial capability, potential and commitment of the applicants, potentiality of commercial viability and growth, the planned R&D intensity, and above all the homology between the Institute expertise/ facilities and the technological requirement/ R&D interest of the applicant. Once the application is admitted, the entrepreneurs concerned are obliged to register themselves into a Start-up Company before they are given office space (between 100 and 500 square feet area) as Resident. A license agreement on space utilisation and an agreement on synergy are entered into by the Resident Company and the Institute. Significant concessions on rent of space are provided to Resident Companies, who are expected to offer around 5% equity ownership to the Institute in recognition to the tangible and intangible contributions of the Institute to the Company during the residency in TBIU. An Institute level empowered committee, known as the TBIU Board, guides and monitors the progress of the programme, while FITT plays the role of the administrator, as mentioned earlier. FITT is also assigned equity stakes of the Start-up Companies when offered to the Institute and are authorised to operate the stock options on its behalf as and when required, at market price at the time of IPO in Stock Market.

The first two resident companies admitted to the Institute campus under the TBIU programme in 1999 were promoted by two aspiring and experienced promoters, both of whom had successful and chequered professional careers in multinational companies in India and abroad and could be described, in a manner of speaking, as serial entrepreneurs. Both planned to capitalize on their own experience and backgrounds (both had originally been alumni of the IIT system), and hoped to harness the resources of the institute, and motivate the faculty members and students of IIT Delhi to join in R&D partnership to develop innovative products and services. Both these companies wanted to operate in emerging new technology fields; one in high end software, financial and system Integration in Mobile/WLL Services , and the other in internet based products and services, like e-commerce, distance education, digital Library. Both aimed at markets in the US and Europe (and later in India). There was assured funding for both the companies; one had a substantial equity support from a leading foreign institutional investor (FII) and other had private equity funding from USA.

Neither of these companies could however complete the incubation experiment fruitfully and exited the TBIU prematurely. Though there were quite a few faculty members working in the technology areas of interest to these start-ups, none of them could, however, be persuaded to participate in the collaborative projects proposed by the companies, in spite of several motivational interactions the promoters had in various departments and centers across the Institute. In both the cases, however, no pre-arranged homology agreements had been arranged before they came into the TBIU, and the promoters failed to rope in the faculty members as partners. There were of course a number of other factors that contributed to the failed incubation attempts, such as the severe slow down in the IT sector worldwide in the early 2000s, delay in successful product development and reduced enthusiasm of the funding agencies; but it was felt that the absence of pre arranged homology agreements and pre planned collaborative projects were mainly responsible.

The lessons learnt from the experience of the first two resident companies led to streamlining of the operational parameters of the TBIU, including significant modifications to the guidelines and rules pertaining to participation by the IIT Delhi faculty as well as the admission criteria for new units. The need for identifying an agreed homological arrangement became an integral part of the guidelines. It was made mandatory to name one or more IIT Delhi faculty members as mentors or partners in the proposed start-up company. To encourage entrepreneurial faculty members, institute rules was liberalised for availing sabbatical leave for upto one year, and a provision was incorporated for permitting long term lien (upto five years). Other salient features of the admission requirements for residency and operations have already been discussed earlier in this article.

Student-faculty led Incubation Programme

A new Student-Faculty Led Incubation programme was taken up in IIT Delhi in 2002 for nurturing Technology Start-up enterprises. The objective of the programme was to motivate students of the Institute itself and their faculty supervisors to dedicate between six months and two years after the students graduate, in creating technology start-up companies through conceptualizing, fine-tuning, upgrading or packaging technology products or services based on ideas from their work in the previous few years. The programme was akin to running an “entrepreneurship nursery”. The ultimate goal of the exercise was to nurture the fledgling student-faculty enterprises through to “transition” into a business, marketing the developed product/service, patenting the technology and selling or licensing the IP, or even to persuade an existing large company to acquire the start-up.

The process got initiated in March 2002 through a series of inspirational lectures by the Managing Director (MD) of FITT, on entrepreneurship as an alternative career option and principles of technology incubation, to the senior students (of final year under graduate class, Masters and PhD programmes) and faculty members of various departments and centres in the Institute. It was mentioned that the graduating students could spend time at IITD, incubating their ideas into an enterprise and emerge as successful entrepreneurs. FITT promised to provide an initial seed funding in the form of monthly “entrepreneurial fellowships” to each deserving student for up to 6 months and for developing office facilities. The incubatee start-ups were assured of access to IIT Delhi computing network and infrastructure, contacts of faculty, alumni and other associates, and the overall campus environment that was conductive for advances in technology. The other motivating factors for the students (in favour of starting a business against opting for other careers or taking up higher studies immediately) were stated as follows.[9]

· Doing your own thing, that is high tech, interesting and creative
· Creating a difference through innovation. Working in the Country, for the
Country
· Growing applications in new and emerging technologies in India and globally
· IIT network and the business opportunities that could be created in and
around Delhi
· Social and cultural ethos – Despite PhD/Research and Job offers, Entrepreneur
was the hero.
· Being against the herd mentality of migrating out of India with an IIT degree


The FITT lectures led to quite a bit of stir among the students and faculty members of the Departments of Computer Science and Electrical Engineering. There were corridor gossips, exchange of emails and good many internal discussions and debates. While for students the primary issue was about taking up an alternate uncertain though challenging career rather than the well trodden path of getting into a job or going for a higher degree, for the faculty members it was their reputation in research and consultancy that was in stake; some of them were, however, excited by the prospect seeing their research ideas translate into products with the help of their own students, for the benefit of the nation and society.

Finally, one group of seven graduating students and five professors of the Department of Computer Engineering decided to take the plunge and the first student-faculty led incubatee start-up company was admitted into the TBIU in IIT Delhi in July, 2002. The company was registered in the name of Kritikal Solutions Private Limited. It planned to work mainly in the areas of computer vision and embedded systems. Kritikal was the first student-faculty led incubatee start-up at IIT Delhi. Next year in 2003, one more student-faculty group teamed up to form a start-up called VirtualWire Technologies Private Limited, this time from the Electrical Engineering department, to try their hands in the incubation exercise in the technology area of wireless application, digital signal processing and cryptography. Both Kritikal and VirtualWire spent around three years in the IIT Delhi Incubator, successfully developing technologies, business processes and clientele, before exiting from the TBIU to set up their own commercial offices outside. A short case report on Kritikal Solutions Pvt Ltd is given in the Appendix.

Enthused by the entrepreneur students of Kritikal and VirtualWire, a number of new student faculty start-ups enrolled themselves for incubation in TBIU in 2004 and the following years. Seed funding (provided earlier by FITT) was supplemented by grants from the Ministry of Information and Communication Technologies of the Government of India under a scheme to support start-ups in the area of Information Technology (IT) or IT Enabled Services (ITES). From 1999 till the beginning of 2007, fifteen start-up companies became resident in the IIT Delhi incubator, of which seven belonged to the “student faculty led incubatee” category. At the present time seven companies are resident in the TBIU. Of these, two are in Chemical Processes, two are in Bio-technology/Bio-informatics, and three deal with software and hardware. During all these years at least fifty enquiries had been received by FITT regarding possible residency in TBIU; some thirty completed applications were screened by the empowered expert committee and fifteen were admitted. Five start-ups so far are known to have “graduated” to set up commercial establishments outside.





Concluding Remarks

The Technology Business Incubation experience demonstrates that given the right kind of environment and appropriate incentives it is possible to motivate talented young people towards entrepreneurial career, even in Indian academic institutions. It has often been asked that if the Indian students with first academic qualifications obtained in India can be successful as entrepreneurs in the west, what needs to be done to catch them in India itself. The experience of IIT Delhi, and later similar initiatives taken in some of the other IITs and a few higher education institutions (HEIs), clearly indicate an affirmative answer to this question. Many graduating students, who would in normal circumstances go for higher studies abroad or take up well paid jobs in the market, can try out their passion to follow up on their own nascent and innovative research ideas. By nurturing the entrepreneurial ambitions of some graduating students in association with some of the more adventurous faculty members in a facilitative work environment, potential of creating successful enterprises opens up. Angel investors and venture capitalist companies are coming to a resurgent India with enormous funds to search for and invest in business ventures that work on novel technology ideas addressing new and expanding needs of an ever increasing customer base. The Technology Business Incubators should be the ideal place for such investors to find them and help in transforming fledgling resident companies into successful and large businesses.














Bibliography

1. Peter Drucker, Managing for Future, Tata McGraw Hill, 1993
2. David Holt, Entrepreneurship: New Venture Creation, Prentice Hall, 2007
3. Report of the Working Group on DST, 11th 5 year Plan, DST, GoI, 2007
4(a) Ignatius Chithelm & Val Souza, Public Capital Markets and New Generation of
Entrepreneurs: Success of Indians in USA, EPW special Article, October, 2005
4(b) Anon, Do Highly Educated Immigrant Entrepreneurs Help the USA to Maintain its edge,
India Knowledge @Wharton, June, 2007 .
5. Anon, 100 Fastest Growing Tech Companies, 2007, Business 2.0, CNN Money.com, 2007
6. Anon, Managing University Industry Interaction: Case Study on IIT Delhi India,
UNESCO Report, 2005,
7. Website of FITT, IIT Delhi :: www.fitt-iitd.org
8. Website of National Business Incubation Association, USA: www.nbia.org
9. A Case Study on Kritikal Solutions Private Limited, CIIE, IIM Ahmedabad, 2005



APPENDIX

Short Case Report on Kritikal Solutions Private Limited, a “graduated” incubetee company of IIT Delhi TBIU

• Idea seed was planted during a departmental interaction at the Computer Science Department of IIT Delhi with MD FITT in April 2002

• A group of 12 people (7 graduating students and 5 faculty members of Computer Science Department) joined to form the Company in August 2002 and started operating in the TBIU offices

• FITT provided all initial help including in Company Registration, Business Plan preparation and policy making
Continued next page

• Initial efforts of Kritikal were in participating in technology projects with IIT D in the areas of embedded systems (from Xerox for designing a multi functional office unit) and computer vision & image processing (from DIT, MICT for developing vehicle authentication and vehicle underside scanning devices)

• Later thrust was also given in full measure on Product Development, in focus areas like security & surveillance, traffic and transportation, telecom etc

• The business strategy has been maintained at a combination of Project (services) and product development

• Initial Office infrastructure cost of Rs 1.5 million was provided by FITT, as well as Entrepreneurial Fellowships to the 7 students for the first 6 months (around Rs 1 lakh per month)

• Exited from IITD TBIU in May 2005 and set up a commercial office in NOIDA

• At least 3 IITD alumni joined the Company at different times

• Set up a subsidiary company in August 2005 to give thrust on products

• Present Manpower is 55 people - 35 in design services and 20 in product services

• Annual revenue grew from Rs 6.5 lakhs in 2002-2003 to around Rs 3 Crore in 2006-2007

• It has received an angel funding of Rs 2 crores in 2006.

• It has an MoU with IITD and working relationships with IIT Kanpur, IIT Mumbai, IIT Roorki and IIT Chennai. IIM A has done a case study on Kritikal

• It has clients in both India and abroad