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About 44 per cent of investors in a survey said they have actively supported start-ups in Tier-2 and 3 cities, indicating a keen interest in the untapped potential of emerging markets, according to a report by Primus Partners titled ‘Small Towns, Big Ideas: The Rise of Innovation and Entrepreneurship in India’s Tier-2 and Tier-3 Cities’.
The report notes that within the investor segment, 64 per cent had directed their investments towards technology-based start-ups, signalling an appetite for tech-driven innovation.
This robust interest in the tech sector suggests a recognition of its transformative potential and ability to drive economic growth. Further, 23 per cent of investors supported non-tech start-ups, showcasing a diversified investment portfolio extending beyond the realm of technology. Thirteen per cent of investors have specifically backed start-ups with a social impact focus, emphasising a commitment to ventures that address pressing societal challenges.
Charu Malhotra, Co-Founder & Managing Director at Primus Partners, said, “The growth of Tier-II cities signifies a broader economic and infrastructural transformation. Despite grappling with issues such as infrastructure gaps, funding constraints, and talent shortage, the resilience of these start-ups points to availability of skilled talent, cost-effective operations, and favourable government policies that have contributed to their growth.”
An additional 24 per cent of the surveyed investors have benefited from networking support, underscoring the significance of connections in navigating the complex landscape of investments. Additionally, 41 per cent of investors are affiliated with Alternative Investment Funds (AIF) or Fund of Funds (FoF) syndicates, highlighting the collaborative nature of their involvement in financing start-ups.
Nineteen per cent of investors said they were enjoying tax benefits as a result of their investments, showcasing favourable fiscal incentives that contribute to the attractiveness of investing in start-ups. Beyond financial advantages, the remaining investors have experienced additional perks, including improved visibility, enhancing the multifaceted benefits that investors accrue in their engagement with start-ups in Tier-2 and Tier-3 cities, the report said.
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