Tier II and III cities emerge as innovation hubs, contributing to 40% of India’s tech start-ups.
SAP India, in collaboration with Dun & Bradstreet, has released a new study revealing how Indian start-ups leverage cutting-edge technology to unlock their full potential. According to the findings, over 77% of start-ups invest in advanced technologies such as Artificial Intelligence (AI), ML, IoT, and blockchain. In the age of digital disruption, start-ups in India are proactively integrating advanced technologies to achieve operational efficiency, drive growth, and elevate customer experiences. This trend underscores the rapid technological adoption and innovation across the Indian startup ecosystem, now ranked third globally, following the United States and China.
Another significant aspect of this study is the emergence of Tier II and III cities as innovation hubs, where 40% of tech start-ups originate, leveraging local talent and cost advantages. This tech-driven evolution solidifies India’s global stature as a leading startup powerhouse, supported by robust corporate governance and a conducive regulatory environment.
Announcing the findings of the survey, Sanket Deodhar, Vice President and Head of Digital Natives, SAP Indian Subcontinent, said, “The Indian startup community stands at an inflection point. As companies shift their focus from GMV (Gross Merchandise Value) to GM (Gross Margin) and seek to forge more sustainable business models with the help of transparent, trusted financial data, technology remains a cornerstone and a key differentiator for startups to achieve these business goals, regardless of their growth stage or industry. At SAP, we understand the power of tech innovation to shape the entrepreneurial ventures of tomorrow and, are thus, committed to helping our customers transform into intelligent, growth-oriented, and sustainable enterprises.”
Key findings from the report:
Capitalizing on advanced technologies builds more value for Indian start-ups
- 79% start-ups believe that adopting Enterprise Applications integrated with new-age technologies such as AI is essential for scaling and improving unit economics, and 72% start-ups aready have or are looking to invest in new-age technologies.
- 85% of start-ups believe unit economics is a clear path to profitability and enhancing valuation.
Rising prominence of Tier II and III cities as innovation hubs
- Tier II and Tier III cities have emerged as innovation hubs, with 40% of total tech start-ups originating from there.
- Cities like Chandigarh, Jaipur, Madurai, Indore, Kochi, Warangal, Hubli, Raipur, Vishakhapatnam, and Guwahati, among others, host 15% of the country’s tech skill pool.
- Tier II and Tier III cities can contribute to substantial cost savings as real estate rentals and talent pool costs are lower here compared to metropolitan cities.
New-age tech adoption is transforming the sector’s growth.
- Agritech: AI-powered drones and IoT devices optimize farming practices, enhancing yields and reducing labour costs.
- Fintech: AI algorithms improve credit scoring and risk assessment, while real-time AI fraud detection ensures robust security.
- EdTech: Advanced technologies like AI, AR/VR, and gamification enhance personalized learning and upskilling.
- Health Tech: Telemedicine and AI/ML provide real-time insights for improved healthcare delivery and operational efficiency.
Enterprise solutions help build robust corporate governance practices necessary for attracting investors and public listings.
- 64% of respondents believe that the adoption of enterprise applications is key to measuring rapidly changing customer behavior and making strategic decisions to scale and improve unit economics.
- 71% of respondents believe that robust corporate governance measures are necessary for attracting investors and preparing for public listing.
- Enterprise solutions can help build robust corporate governance practices to drive accurate and transparent reporting, security, and data privacy and implement enterprise contract management systems.
Speaking about the report, Avinash Gupta, Managing Director & CEO – India, Dun & Bradstreet, said, “India’s startup ecosystem is thriving, fueled by a favorable regulatory environment, a growing middle class, and a tech-savvy youth population. India ranks third globally in its startup ecosystem with almost 3 lakh start-ups and 113 unicorns across diverse sectors. The government’s supportive policies, ample venture capital, and a talented workforce have contributed to the growth of key sectors. The rising prominence of Tier II and Tier III cities as innovation hubs has further decentralized economic development. As we navigate funding limitations and market volatility, start-ups must focus on unit economics and profitability to build sustainable and profitable enterprises. This report is a deep dive into the current startup ecosystem with strategic insights on evolving dynamics in valuations, aspirations, trends, and the role of technology in their growth journey. ”
The study titled ‘Value Creation and Sustainable Growth: The Blueprint for Startup Profitability in India‘ examines 113 Indian start-ups, showcasing their strategic advancements and investments to enhance competitiveness.