What is the difference between incubators and venture capitalists?
Answer by – Sushanto Mitra
Founder Lead Angels (www.leadangels.in) a early stage investing network
Incubators help founders to create their business offering or idea and fine tune it to the market requirements. It is the most nascent stage in the life of a business. They do so by mentoring and providing resources including capital to them. Some of them are sector or regionally focused and often are associated with an academic institution in the Indian context.
Venture Capitalists usually invest in businesses that have a validated business model and traction with customers with a potential for high growth in future. Typically, they invest in companies at a much later stage than those in incubators. In India, initially most of the venture funds were of foreign origin or had foreign investors. Increasingly there are funds founded by Indians and also funded within the country.
There are of course exceptions where an incubator may also be investing in venture capital stage companies and venture capitalists investing into companies at a very early stage. However these are very rare.
Courtesy: Sushanto Mitra