Smaller cities in India, known as Tier-II and Tier-III, are now playing a crucial role in the country’s startup boom. A new report from Primus Partners has shown that smaller cities, where about 171 million people live, are doing really well in startups. These cities make up 45 percent of the urban population and contribute a big 37 percent to the country’s GDP.
The report says that 90 percent of new businesses in 2023 started in smaller cities and they got about 22 percent of all the money available for funding. More and more investors are looking at these small towns and 44 percent of them are deciding to invest in startups from these areas.
Piyush Soonee, co-founder and VC partner at Amara Partners, acknowledges the changing narrative. The Tier-II and III stories are not undiscovered anymore. Investors are searching for entrepreneurs with fresh and unique ideas.
The infusion of funds into small-town startups has witnessed a substantial rise from Rs. 37,500 crore in 2021 to Rs. 1,12,500 crore in 2023, highlighting the escalating interest and confidence in these regional ventures.
Government programs like Startup India and the National Entrepreneurship Policy, along with using digital technology, have played a big role in helping investors connect with founders. The report says that now more than 66 percent of investors connect with founders through government networking platforms.
Gursimran Kalra, co-founder and COO of Minus Zero based in Jalandhar, emphasizes the democratization of knowledge and technology, providing small-town startups with an equal footing and access to resources comparable to Tier-I counterparts.
The tech-driven startups from small towns are gaining traction with 64 percent of VC investments directed towards these ventures. Ayush Atul Mishra, the CEO and co-founder of Tattvan E-Clinics, thinks technology is really important in fixing issues in small towns, especially in healthcare.
Because of all these new startups in smaller cities, there are now way more jobs. Recognizing the job creation potential, several state governments have initiated programs like iStart Rajasthan, Startup Odisha and Startup Haryana to support these local ventures.
