Incubator operating budget: costs and what grants cover

Most incubators know their grant amount to the rupee but cannot say what a normal year of running costs them. The grant letter splits money into scheme heads, the host institution pays some bills directly, and the true cost of a cohort, a demo day or a mentor network never appears in one place.

This guide sets out what goes into an incubator's yearly operating budget, what one official model budget looks like, and which operating costs the Atal Incubation Centre, NIDHI-TBI and Seed Fund Scheme rules allow. It explains the rules; for your own grant, read your sanction letter and ask a chartered accountant.

What goes into an incubator operating budget?

An incubator operating budget covers the recurring costs of a year: staff, space and utilities, programmes and events, mentor honoraria, demo day, travel and administration. It leaves out one-time capital spending, such as equipment and renovation, which schemes budget separately as non-recurring costs.

• Staff: the CEO, incubation managers, an accountant or administrator and support staff.
• Space: rent where it applies, utilities and maintenance.
• Programmes: workshops, bootcamps, investor office hours and outreach events.
• Mentors: honoraria and consultancy charges for experts.
• Demo day: venue, production, investor hosting and the follow-up report.
• Travel: domestic travel for scouting, partners and investor meetings.
• Admin: accounts, audit, insurance, software, printing and contingencies.

Revenue sits on the other side of the same sheet. Our guide on how incubators make money covers the income lines that have to cover these costs once grants taper.

What does an official incubator budget look like?

DST's NIDHI-TBI guidelines publish a model five-year budget with Rs 950 lakh of recurring costs, of which manpower is the largest head at Rs 370 lakh, followed by training programmes and events at Rs 185 lakh. Divided by five, that is about Rs 190 lakh a year in running costs.

Recurring head (NIDHI-TBI model)	Five years, Rs lakh	Per year, Rs lakh (our arithmetic)
Manpower: core team, mentors, tech support, business development	370	74
Training programmes, events and startup-resonators	185	37
Utility and maintenance	130	26
Marketing, networking and publicity	120	24
Other administrative expenses	80	16
Miscellaneous and contingencies	40	8
Travel, at Rs 40,000 a month	25	5
Total recurring	950	190

The figures come from the funding table in DST's NIDHI-TBI guidelines. Manpower is about 39 percent of the recurring total. The guidelines also allow provision for honoraria and consultancy charges for mentors and experts, and cap DST's share of the CEO's salary at Rs 1.75 lakh a month, a limit fixed in the 2016 to 2017 financial year and raised by 10 percent each year.

Which operating costs does a NIDHI-TBI grant cover?

A NIDHI-TBI grant covers recurring costs up to Rs 700 lakh over five years for both public and other institutions, out of the Rs 950 lakh model total. DST pays all actual recurring costs in years one and two, then 80 percent, 60 percent and 40 percent, and the host institution covers the rest.

The taper is the budget's main planning problem. By year five the incubator must find most of its running costs elsewhere, and the guidelines expect it to be self-sustaining after five years. Our explainer on the NIDHI-TBI guidelines covers eligibility, release of funds and reporting.

Budget for the year the grant stops, not the year it starts.

Which operating costs does an Atal Incubation Centre grant allow?

An Atal Incubation Centre grant of up to Rs 5 crore, or Rs 10 crore with a sector lab, covers capital and operating costs over five years, within caps: capital spending up to 35 percent, personnel up to 22.5 percent and seed support up to 10 percent of the grant. The larger part should go on core activities.

Our arithmetic: if all three caps are used in full, at least 32.5 percent of the grant is left for programmes and other operating work. The AIC guidelines add that office furnishings, administration, utilities and office expenses should be kept to a minimum.

Several costs are ruled out. Personnel money can pay only for new team members, not staff the applicant already employed at sanction. The grant cannot fund international travel. Rent cannot be charged to the project by academic or R&D applicants, and notional rent on owned space, external agencies to run operations and application consultants are excluded. Our guide to the Atal Incubation Centre guidelines covers the rest.

What can the Seed Fund Scheme management fee pay for?

The Startup India Seed Fund Scheme gives a selected incubator a management fee of 5 percent of its seed fund grant, released in proportion with each instalment. The fee is for administrative expenditure, selection and due diligence of startups and monitoring their progress, and not for creating facilities.

The scheme guidelines give the example of a Rs 1 crore grant, which becomes Rs 1.050 crore with the fee. On the maximum grant of Rs 5 crore, that is Rs 25 lakh over the life of the fund, by our arithmetic. The seed fund itself is only for startups, so the fee is the one SISFS line that touches operating costs.

How should an incubator lay out its yearly budget?

Lay the yearly budget out by cost line, with a column for each funding source: the grant, the host institution and the incubator's own income. That shows at a glance which costs depend on a grant that will taper, and how much income the incubator must raise to replace it.

Sample cost line	Rs lakh a year
Staff	45
Space and utilities	15
Programmes and events	12
Mentor honoraria	6
Admin, audit and contingency	5
Demo day	4
Travel	3
Total	90

Give demo day its own line rather than burying it in events. It is the cost funders and investors notice most, and a separate line makes it easier to see what each cohort's showcase costs and to plan for it before the cohort starts.

The table is a sample for a small incubator, illustrative only. Add the funding columns, then check each line against your sanction letter. Our guide to grants for incubators in India lists the schemes that can fill each column.

Questions

What is an incubator operating budget?

It is the yearly plan of an incubator's running costs: staff, space and utilities, programmes and events, mentor honoraria, demo day, travel and administration. It excludes one-time capital costs such as equipment and renovation, which grants and host institutions usually budget separately as non-recurring spending.

Does the NIDHI-TBI grant pay for operating costs?

Yes, within limits. DST's NIDHI-TBI guidelines allow recurring support for manpower, travel, utilities, marketing, training programmes and events, and administration, up to Rs 700 lakh over five years. DST pays all actual recurring costs in years one and two, then 80%, 60% and 40%.

Can an Atal Incubation Centre grant pay staff salaries?

Yes, for new team members only. AIC guidelines cap personnel expenses at 22.5% of the grant, and the grant cannot pay salaries of staff the applicant already employed when the grant was sanctioned. It also cannot fund international travel. Check your sanction letter and the current guidelines.

What can the SISFS management fee be used for?

The Seed Fund Scheme gives incubators a management fee of 5% of the seed fund grant. The guidelines say it is for administrative expenditure, selection and due diligence of startups and monitoring their progress, and not for creating facilities. It is released in proportion with each instalment.

Sources: DST, NIDHI-TBI guidelines and funding guidelines, 2023 · Atal Innovation Mission, NITI Aayog, Guidelines for Atal Incubation Centres, 24 Nov 2023 · DPIIT, Guidelines for Startup India Seed Fund Scheme, 2021

For more on running an incubator in India, read the MyStartupValley blog or see MyStartupValley for incubators.