NASSCOM Report: Business Incubators leading growth of startups in India’s tier II/III cities

India’s tier II and III cities are now emerging as new hubs for startups driven largely by the growth of active incubators and accelerators.  According to the latest NASSCOM and Zinnov report, Startups from these cities account for about 20% of total startup base in India.

This encouraging trend is further supported by the fact that around 40% of the active business incubators and accelerators are now located in non-tier I cities such as Ahmedabad, Pune, Jaipur, Lucknow, Chandigarh etc., making startups a pan India phenomenon.

Incubators are responsible for providing support across a startup’s life cycle, while accelerators are focused more towards growth and acceleration of the startup.

The report notes that there has been an impressive 35% growth in a number of incubators and accelerators being instituted in 2017 when compared to 2016. There are more than 190 active business incubators and accelerators in the country, out of which 90 are academic, while the rest are corporate, Govt. supported and private in nature.

Traditionally, many tier II/III cities of India have been educational hubs which makes them ideal and plausible destinations for startup incubators and accelerators.

Speaking about the vibrant ecosystem of business incubators and accelerators, Dr Sunil Shukla, Director, Entrepreneurship Development Institute of India (EDII), Ahmedabad said, “The Indian incubator and accelerator ecosystem are partnership-driven and sector-specific. Academic incubators provide a unique experience to new startups in terms of access to faculty, the network of mentors, funders, entrepreneurs, industry experts, the private sector and supportive work environment. They also tend to be multi-sector making them approachable for startups operating in various sectors. Moreover, many academic institutions, such as EDII, are nodal agencies for key government policies related to startups and hence are attuned to incentives and initiatives of the start-up ecosystem in India. “

The EDII has also promoted an incubator named Centre for Advancing & Launching Enterprises (CrAdLE) under the aegis of National Science and Technology Entrepreneurship Development Board (NSTEDB) & The Department of Science & Technology (DST), Government of India. This incubator primarily supports start-ups in the fields of manufacturing, food and agribusiness, renewable energy and healthcare.

Further, the Government of India has instituted measures to create a conducive ecosystem by facilitating collaboration between government, industry and institutions, and addressing start-up concerns through innovative and sustainable solutions. These measures have triggered the growth of incubators and accelerators in tier II and III cities, which offer low manpower cost, cheaper real estate, and more affordable amenities to young companies with limited budgets.

The NASSCOM and Zinnov report note that breaking away from the established convention, most of the startups from tier II/III cities are advanced technology based using Artificial Intelligence, Advanced Analytics, and IoT in newer sectors such as Healthcare, Agri-tech, Education, Financial Inclusion, Energy-tech and Alternate Energy. It was observed that a lion’s share of tier II/III startups cater to solving the social challenges facing the country.