Decoding contributions to technology incubators under Corporate Social Responsibility (CSR)

By Nirbhay Lumde

Entrepreneurial ecosystem has a crucial role to play in addressing the needs of the society more so in the globalized world. The startup ventures emerging from cutting-edge innovations play an important role in the transfer of technology to the industry. These out of the box solutions fill the gap, otherwise ignored by conventional and traditional companies, to expedite technology transfer to address the market needs. Therefore, the hunger for innovation and willingness to risk along with the power of technology makes startups play a vital role, not only fuel economic growth but infuse world class business practices. It is important to note that one of the good signs of growing economy is job creation. These innovations also have huge role in addressing larger social issues.

The Entrepreneurial Wave

It’s dynamic world and entrepreneurs have fueled the growth of enterprises. There are abundant numbers of successful startups making into big companies. They have challenged the way of doing business. The buzz word among youth, especially with the availability of smartphones and high-end technology, is being an entrepreneur. The governments are also aggressively promoting campaigns around job creators versus job seekers. Entrepreneurship is also mooted as one of the solutions to address the age old issue of unemployment and regional economic imbalances.

Defining Entrepreneurship

BusinessDictionary.Com defines entrepreneurship as, ‘the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses.’ The entrepreneurial culture in India is still in its early stages with lack of structured access to resources, mentoring and funding opportunities. However, there are some initiatives that are helping growth of entrepreneur culture in the country. ‘Startup India’ ‘Standup India’ campaigns are launched to strengthen entrepreneurship ecosystem. These campaigns are aimed at encouraging startups among larger masses and promote bank financing for start-up ventures to boost entrepreneurship for jobs creation. Deen Dayal Upadhyay Swaniyojan Yojana is rural India’s version of Startup India. There are various premier academic institutions pioneering and fueling the growth of entrepreneurship ecosystem in India.

CSR’s Role in Entrepreneurship

In India, companies with Corporate Social Responsibility (CSR) obligation have an interesting role to play in building and strengthening the incubation ecosystem. Section 135 of the Companies Act, 2013 allows contributions or funding to Technology Incubators located within academic institutions which are approved by the Central Government and the expenditure qualifies as a CSR spend. Therefore funding Technology Incubators attached to academic institutions would be an interesting stint given that the space is very new to many companies and their CSR Boards. It is also a departure from typical charity or project initiative under the Companies Act, 2013 to manage the CSR obligation. However, not many are aware of the space and the processes to venture into the unheralded arena. The aim of the article is to understand broader definitions of terms associated with Technology Incubation.

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Startup and Incubator Ecosystem

A startup is a company that is in the first stage of its operations. An Incubator is a collaborative platform designed to help new startups succeed. Incubators help startups survive in their very early stages when most of them rely on bootstrap funding either from their family and friends. The platform also extends support required in running a startup by providing workspace, technology, seed funding, mentoring and training and most important opportunities to networking. The purpose of an incubator is also to help entrepreneurs grow their business and provide all the support to make the venture market ready. Incubators are often associated with universities and business schools, in some cases, allow their students to take active part in these entrepreneurial ventures. However, there are several other forms of incubators formed by business houses, civic groups, startup organizations, successful entrepreneurs and venture capitalists.

The Importance of Technology Incubators

In context of CSR in India, startup incubators are typically non-profit organizations run by academic institutions or universities or business schools approved by the Central Government. Startup incubators provide early stage companies and entrepreneurs with physical facilities and a variety of business services to help them increase their chances of surviving and whereas Technology Incubators are startup incubators which focus on early stage companies with more advanced technologies. They are also known with various names, such as, Tech Villages, Tech Parks, Tech Centres, Info Cities, Innovation Centres, Science or Entrepreneurial Parks. Organization for Economic Co-operation and Development (OECD) defines Technology Incubator as ‘a specific type of business incubator – a property-based venture which provides tangible and intangible services to new technology-based firms, entrepreneurs, and spin-offs of universities and large firms, all with the aim of helping them increase their chances of survival and generate wealth and jobs and diffuse technology.’ The report also lists following four main objectives of a Technology Incubator, 1) economic development; 2) technology commercialization; 3) property venture/real estate development; and 4) entrepreneurship.

Supporting Technology Incubators: A Call to Action

Though in nascent stage, companies should come forward in supporting and funding Technology Incubators located within academic institutions for various reasons. The current generation of startups are technology and knowledge based hence it would ideal to nurture them at the universities and academic institutions with plenty of scope for their stronger theoretical and practical rigor. Academic institutions, located within Tech or Info Parks with well networked industry partners, are resource rich, uniquely positioned, and equipped to provide a boost to technology-based entrepreneurs. It is important to note that a vibrant entrepreneurial ecosystem needs strong capital inflows to fuel startups to become enterprises. These institutions can attain required organic growth with required financial support from CSR funding and continue to nurture the entrepreneurial ecosystem. The incubators could also play an outreach role in fostering entrepreneurship and training in the local communities.

The financial support to academic institutions would further bolster their capacity to experiment and fuel growth of startups. The Technology Incubators located within academic institutions would utilize funds for creating physical workspaces to accommodate more number of ventures, seed early stage investments, hire required talent and human resources for mentoring, bring thought leaders under one platform, fuel existing entrepreneurial forums and set up Research & Development Centres.

These facilities would certainly help in rapid growth and sustenance of startup ventures and demonstrate and showcase industry-academia collaborations for meaningful large scale impact. However, it is important that the corporate and Technology Incubators have to evolve processes and governance structures to manage the flow of CSR funds to build mutual trust and ensure meaningful collaboration.

The author is confident that the successful technology based startups would help in job creation, infuse economic growth and address regional imbalances.

About the Author: 

Nirbhay Lumde is a Corporate Social Responsibility professional and writes on current social, economic and environmental trends. He is an alumnus of IIT Bombay. The views expressed in the article are personal.

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