Edtech company upGrad wants to use its new artificial intelligence incubator to create an insulated talent pool that can “wear the hats of both an investor and an entrepreneur,” co-founder and chairperson Ronnie Screwvala told Mint in an interview.
The company has set aside ₹100 crore for its upGrad AI Incubator to help local startups building artificial intelligence applications. It hasn’t raised any external funding for the incubator.
“It is part of our growth investment. I wouldn’t call it capital expenditure because that would mean it goes straight to my balance sheet. It may go into my profit and loss statement as well,” Screwvala said. “The incubator is to bring in the brightest people in the [AI] sector and disrupt it in many forms.”
The edtech company is the latest to join the growing ranks of late-stage tech companies that have opened their own incubator programmes. Across the board, such companies as well as larger corporations have been setting up their own incubator programmes in a bid to stay close to the startup ecosystem, Mint previously reported.
PhysicsWallah and Games24X7 launched their own incubator programmes last year to help fledgling startups. Emami, the Kolkata-based FMCG company, has developed an incubator under its M&A team.
The rationale for setting up the AI incubator is clear: foster innovation and disrupt the market. For early-stage startups, finding funding is one of the biggest issues and building their product often comes as an afterthought.
“We want to give startups that comfort right now and say, let’s innovate,” Screwvala said.
Accelerating failure
At the same time, however, Screwvala said that “99 out of 100 people who are rushing into AI will fail.” He said the current funding ecosystem will only accelerate that process.
“Venture capitalists will fund everybody knowing fully well that they need just two or three companies to work out. It is why they put an incredible amount of pressure on their companies. This is not the environment which needs to be exposed to that kind of capital,” Screwvala said.
For now, upGrad has no plans to add more money on top of the ₹100 crore that it has set aside for the incubator. In fact, Screwvala said that within the next three years, upGrad will see the ₹100 crore returned, suggesting that incubator revenue models will become less important.
“Disruption, technology and consumer insights are going to be most relevant,” he said.
The edtech co-founder isn’t new to the space. In 1991, he set up his family office, Unilazer Ventures. The firm has made a total of 31 investments since then, mostly at the seed funding round of startups (15), followed by Series-A (9). Companies that are a part of the family office’s portfolio include Lenskart, Zivame, Silverpush, Niki and Lido.
Companies that are fostered by upGrad’s incubator will mostly operate independently. If the edtech sees value in a company, it might take a significant stake in such an entity.
“We are focused on creating disruptive solutions, not just acquiring companies,” Screwvala said.
On top of the incubator programme, upGrad plans to invest in five to six startups this year and take a minority stake in each of them.
“I’m not interested in blowing my mind on business plans and valuation. I want to just look at being part of the innovation cycle,” Screwvala said. The company has already invested in one company, ZuAI, as part of its venture capital investments this year.
There have been some significant changes in the company’s leadership in the past month. UpGrad appointed Neeraj Gera as president of upGrad Enterprise and Neha Prasad Mullick as vice president, go-to-market and customer success.
Founded by Screwvala, Mayank Kumar, Phalgun Kompalli and Ravijot Chugh in 2015, upGrad provides skilling programmes to potential learners, both online and offline. The edtech company also helps students to complete university programmes from top educational institutions from both India and abroad.
