The Village team says it chose Kerala because costs are lower than New Delhi or Mumbai and it has 150 engineering colleges that can provide start-up enthusiasts.
Startup Village aims to pluck innovators from college campuses, and bring them into the fold after evaluating their business ideas. Many of its in-house entrepreneurs are in their mid-twenties.
Startup Village, a state-of-the-art glass and steel edifice tucked in a green corner of the port city of Kochi, wants to develop 1,000 Internet and mobile companies in the next 10 years.
It provides its members with office space, guidance and a chance to hobnob with the stars of the tech industry.
The seven-month-old Startup Village provides would-be entrepreneurs with workspace at rents about a tenth of anywhere else in Kochi, computers, a high-speed Internet connection, legal and intellectual property services and access to high-profile investors.
The village is still to be completed, but 68 people, would-be entrepreneurs and their teams, have already taken up two buildings at the site.
Spread over 100,000 sq ft (9,250 sq m) - equivalent to 20 basketball courts - Startup Village will be completed in 2014.
India has 120 other incubators, but they are mostly housed in academic institutions and have not drawn a strong network of advisers from the private sector.
Startup Village, the first such institution to be jointly funded by the government and private sector, has Infosys cofounder Kris Gopalakrishnan as its chief promoter and has collaborations with companies such as BlackBerry maker Research in Motion and IBM.