News Post

77% Indian start-ups invest in AI and advanced technologies, 40% tech start-ups originate in Tier II, III

Business Today · 1m

SAP India, in collaboration with Dun & Bradstreet, has released a study revealing that over 77% of Indian start-ups invest in advanced technologies such as Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), and blockchain. Another significant aspect of the study is the rise of Tier II and III cities as innovation hubs, with 40% of tech start-ups emerging from these regions, leveraging local talent and cost advantages. 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. This tech-driven evolution reinforces India’s global stature as a leading start-up powerhouse, supported by robust corporate governance, and a favourable regulatory environment. In the age of digital disruption, Indian start-ups are proactively integrating advanced technologies to achieve operational efficiency, drive growth, and elevate customer experiences. This trend highlights the rapid technological adoption and innovation within the Indian start-up ecosystem, now ranked third globally, following the United States and China. Announcing the findings of the survey, Sanket Deodhar, Vice President and Head of Digital Natives, SAP Indian Subcontinent said, “The Indian start-up 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.” According to the report, start-ups in India have raised $2.77 billion across 326 deals in Q1FY24 with significant contributions from the e-commerce, fintech, and healthtech sectors. Bengaluru leads in funding and deal numbers, showcasing the regional dynamics within the ecosystem, while tier 2 and 3 cities emerge as innovation hubs. Key findings from the report - 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 already 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. - 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. - 64% respondents believe that adoption of enterprise applications is key to measuring rapidly changing customer behaviour 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. As per the report, new-age tech adoption is transforming various sectors. In agritech, AI-powered drones and IoT devices optimize farming, enhance yields, and reduce labor costs. In fintech, AI improves credit scoring, risk assessment, and fraud detection. In edtech, AI, AR/VR, and gamification enhance personalized learning and upskilling. In healthcare, telemedicine and AI/ML provide real-time insights for better healthcare delivery and operational efficiency. Speaking about the report, Avinash Gupta, Managing Director & CEO – India, Dun & Bradstreet, said, "India's startup ecosystem is thriving, fueled by a favourable regulatory environment, a growing middle class, and a tech-savvy youth population. With almost 3 lakh start-ups and 113 unicorns across diverse sectors, India ranks third globally in its startup ecosystem. 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 the challenges of 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. "