Primus Partners' survey report, titled "Small Towns, Big Ideas: The Rise of Innovation and Entrepreneurship in India’s Tier II and Tier III Cities," reveals that 64% of investors surveyed have opted to fund technology-based businesses, indicating a strong inclination toward technology-driven innovation. Additionally, 23% of investors have chosen to support non-tech firms, showcasing a diversified investment portfolio. Notably, 13% of investors have prioritized startups with a social impact focus, highlighting their commitment to addressing pressing societal issues. The report indicates that 41% of surveyed investors are affiliated with either a Fund of Funds (FoF) or an Alternative Investment Fund (AIF).
The shift of investors towards tier 2 and tier 3 cities can be attributed to various factors. Networking support has been crucial for 24% of surveyed investors, underscoring the significance of relationships in navigating the complexities of investments. Furthermore, 19% of investors find satisfaction in tax savings, illustrating the favorable fiscal incentives that make investing in startups attractive.
Apart from financial gains, other investors have enjoyed increased visibility, adding to the array of benefits associated with working with startups in tier 2 and tier 3 locations.
Charu Malhotra, the co-founder and managing director of Primus Partners, highlighted that the growth of tier 2 cities signifies a broader economic and infrastructural transformation. Despite challenges like infrastructure gaps, funding constraints, and talent shortages, the resilience of startups in these locations can be attributed to factors such as skilled talent, cost-effective operations, and supportive government policies.
Malhotra emphasized the symbiotic relationship between education, geographical roots, and entrepreneurial choices, pointing out that 65% of startup founders completed their education in tier 2 and tier 3 cities. She underscored the need for targeted policies fostering innovation and entrepreneurship in emerging urban hubs for regional economic development.
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