India's Startup Boom Beyond Metros: How Tier 2 & Tier 3 Cities Are Emerging as Business Powerhouses

India’s startup ecosystem is no longer confined to Bengaluru, Delhi NCR, or Mumbai. A quiet but powerful revolution is unfolding in cities like Indore, Jaipur, Coimbatore, Bhubaneswar, Surat, and Kochi, where a new generation of entrepreneurs is reshaping the business map.

According to data from the Department for Promotion of Industry and Internal Trade (DPIIT), over 50% of recognized startups in India in 2024 originated from Tier 2 and Tier 3 cities. This isn’t just a decentralization of geography—it’s a reinvention of innovation.

The Shift: What’s Fueling the Rise of Non-Metro Startups?

The surge in startup activity in smaller cities can be attributed to several macro and microeconomic factors:

• Affordable infrastructure and lower cost of living

• Government incentives under the Startup India initiative

• Improved internet and digital payment penetration

• Reverse migration of talent during and after the pandemic

• Growing local demand for tech-driven and regional solutions

As per Startup India, nearly 40% of all DPIIT-registered startups in FY24 came from cities beyond the top 10 metros.

Spotlight: Emerging Startup Cities in India

1. Indore (Madhya Pradesh)

Home to the country’s cleanest city title, Indore is fast becoming a startup magnet. With institutions like IIM Indore and incubation centres such as iDEX and AIC Prestige, the city has seen success stories in agritech, healthtech, and SaaS.

Startups like Gramophone (agriculture platform) and ParkMate (smart parking solutions) are redefining urban and rural interfaces.

2. Jaipur (Rajasthan)

Jaipur's strategic location, vibrant heritage tourism, and growing IT infrastructure make it a hotbed for e-commerce and D2C brands. Platforms like RazorThink and CarDekho have roots here, and support from RIICO and Startup Oasis is enabling early-stage innovation.

3. Coimbatore (Tamil Nadu)

Known for its textile and manufacturing base, Coimbatore is now nurturing startups in clean energy, industrial automation, and fintech. Organizations like Forge Accelerator and TiE Coimbatore are mentoring regional founders.

4. Bhubaneswar (Odisha)

With the push from Odisha Startup Policy 2022, Bhubaneswar has emerged as a hub for edtech, mining-tech, and AI-based analytics. The city ranked high in the Startup India State Rankings for ‘aspirational performance’.

5. Kochi (Kerala)

Kochi’s Startup Mission (KSUM) and a well-developed port economy are fueling a wave of marine tech and health tech innovations. Genrobotics, known for robotic manhole cleaners, is one of Kerala’s most celebrated deep tech startups.

Role of Government and Incubators

The Startup India Seed Fund Scheme (SISFS) and Atal Innovation Mission (AIM) have played pivotal roles in expanding incubation support beyond metros. According to NITI Aayog, over 10,000 startups have received assistance from Atal Incubation Centres (AICs) across smaller towns.

State governments are also stepping up:

• Maharashtra’s FinTech Policy has helped Nashik and Nagpur attract startups in financial services.

• Uttar Pradesh's Startup Policy 2020 targets cities like Kanpur, Varanasi, and Lucknow with dedicated startup zones and funding access.

• Assam Startup - The Nest, based in Guwahati, is driving entrepreneurship in the Northeast.

The centralized platform Startup India now lists thousands of government-supported startups from towns that were rarely on the business map just five years ago.

Investment Trends: VCs Look Beyond the Big Three

Even venture capital firms and angel networks are expanding their horizons. Leading funds such as Sequoia Surge, Blume Ventures, and 100X.VC have started actively scouting in Tier 2 and 3 cities. Local angel networks like Hyderabad Angels, Chennai Angels, and Kolkata Ventures are supporting region-specific innovation.

Recent high-potential startups from Tier 2 and 3 cities that have raised funding include:

• Fasal (Raipur): Smart farming solutions

• Bikayi (Hyderabad): WhatsApp-based commerce for MSMEs

• Staqu (Meerut): AI-based analytics for law enforcement

A report by IVCA and Bain & Co. indicates that 17% of total VC deals in 2024 involved startups from non-metro cities, a steep rise from just 6% in 2018.

Digital India & UPI: Infrastructure for Innovation

The Digital India movement has been instrumental in this transformation. With the UPI ecosystem handling over 14 billion transactions per month (as per NPCI), even the smallest towns are fully integrated into digital commerce.

This digital-first foundation has given rise to startups solving hyperlocal problems—telemedicine in tribal belts, online education for vernacular learners, and rural B2B marketplaces.

Additionally, the BharatNet initiative has enabled high-speed internet in over 250,000 village panchayats, expanding the startup runway to rural innovators.

Challenges to Overcome

While the growth is promising, challenges remain:

• Access to quality mentorship and high-skill talent

• Limited exposure to global markets

• Inconsistent access to early-stage funding

• Regulatory compliance awareness

However, these gaps are gradually closing with virtual accelerator programs, online learning platforms, and government-led investor connect sessions.

Conclusion: The Future Is Hyperlocal, Yet Global

India’s Tier 2 and Tier 3 cities are no longer startup shadows of the metros—they are bold, innovative, and deeply connected to local challenges. As digital tools, funding mechanisms, and policy frameworks evolve, these cities are set to become the next wave of entrepreneurial energy in India.

The true test now lies in scaling these startups sustainably and ensuring that the innovation is inclusive, resilient, and globally competitive.