Hyderabad: The Telangana government on Friday began construction of a technology incubator in capital Hyderabad—dubbed T-Hub—to reposition the city as a technology destination.

The state government is initially investing 35 crore to set up a 60,000 sq. ft space, labelled the largest start-up incubator in the county, at the campus of International Institute of Information Technology-Hyderabad (IIIT-H). In the second phase, the government plans to invest about 200 crore to construct a building spread across 300,000 sq. ft, which when completed is proposed to be the world’s biggest start-up incubator housing 1,000 start-ups.

Indian School of Business, IIIT-H and Nalsar University of Law, all based out of Hyderabad, will provide business, technology and intellectual property (IP) mentorship to start-ups at the incubator.

“We are still considered the back-office of the world but we are still not acknowledged for our technology skills, for our entrepreneurship skills," said K.T. Rama Rao, Telangana’s information technology minister.

Newly born “Telangana is the start-up state of this country and it’s only a logical extension of that argument that Hyderabad is the start-up capital of the country," Rama Rao added.

The government will create an initial corpus fund of 300 crore in partnership with venture capital firms to fund companies incubating at T-Hub.

“We are talking to some venture capital firms. Since government is not a for-profit entity, we are evaluating different models, and how government can contribute to this," Rama Rao said.

The fund would be ready by 2 June, when the building opens, he said. The fund will eventually be doubled to 600 crore by 2020.

A three-member board comprising Tech Mahindra Ltd chief executive officer and managing director C.P. Gurnani, Cyient Ltd executive chairman B.V.R. Mohan Reddy and early-stage investor Sashi Reddi, who runs venture fund SRI Capital, will scrutinize start-ups that want to be part of T-Hub. The board will be expanded later.

In the initial phase, T-Hub will house about 252 start-ups that are still ideas, 30 that have an early prototype and 40 that are ready to go to the market.

To be sure, start-ups will need to pay for rental space that will be charged on a cost-to-cost basis because T-Hub has to be a self-sustaining entity, according to Rama Rao.

The first phase will be completed by 30 May, and will open its doors to 170 start-ups accommodating 800 seats by 2 June.

The facility will be operational for three years before moving to a new building being constructed in the second phase.

A three-acre plot has been identified in Raidurgam locality of Hyderabad for building the second phase. The bigger facility will be a so-called incubator of incubators, with start-ups, fund managers, incubators and mentors under a single roof, said Harpreet Singh, Telangana’s principal secretary of IT.