In 2023, over 45% of new recognized startups in India came from tier-2 and tier-3 cities which is a dramatic shift from the metro-dominated narrative of the past decade. From Jaipur’s fintech experiments to Indore’s healthtech leap and Kochi’s ocean-tech innovations, India’s startup story is no longer confined to Bengaluru, Mumbai, or Delhi. The real disruption is brewing in smaller towns where digital infrastructure has unlocked markets previously overlooked by both investors and innovators.
This rise in entrepreneurship outside major cities is not just a temporary trend but a lasting change. As startups grow in cities beyond Bengaluru, Delhi, and Mumbai, India’s innovation scene is being reshaped by founders in smaller cities who are tackling local problems with scalable solutions. These entrepreneurs aren’t copying Silicon Valley models; instead, they’re focusing on real-world issues, like digitalizing kirana stores in Kanpur or improving irrigation in Madurai. The startup scene in India is evolving, and it’s starting from the smaller cities.
Why This Shift Is Happening: The Building Blocks Behind the Boom
Several forces have come together to make it not only possible but practical for startups in India to emerge from the smaller cities.
One of the biggest drivers has been the Digital India push and rapid internet penetration. Thanks to Jio’s affordable data plans and wide 4G coverage, over 750 million Indians are now online (TRAI, 2023). The rise of cheap smartphones has brought even small-town users into the digital economy. This massive online population has created both a demand for local solutions and an opportunity for local entrepreneurs to build them.
The shift to remote work during the COVID-19 pandemic also played a major role. As offices shut down, many tech professionals moved back to their hometowns. They found lower living costs, a slower pace of life, and surprisingly few compromises in work quality. For some, this return sparked the idea to start something of their own, this time from home. That change brought skilled, ambitious talent into regions that previously lacked startup exposure.
Startups in these cities also benefit from lower operating costs. In places like Indore or Coimbatore, founders don’t have to worry about expensive office rents or high salaries. This leaner setup gives them a longer runway, especially important in times when funding is tight. It lets them experiment, make mistakes, and improve without the constant pressure of burning through capital.
Finally, state governments have stepped in with focused support. Programs like the Kerala Startup Mission and the MP Startup Portal offer early funding, incubation support, and mentorship. These efforts may not make headlines, but they’re quietly creating an environment where startups outside the metros can grow and thrive.
Several smaller cities in India are now home to some of the country’s most promising startups. Take Jaipur, for example. Known earlier for tourism and traditional industries, it’s now where CarDekho– one of India’s leading used car platforms was founded. The city has become a quiet hub for fintech and SaaS startups, supported by better internet access and proximity to investor circles in Delhi NCR.
In Indore, agritech startups like Gramophone are helping farmers make informed decisions. The city’s reputation for cleanliness, a growing tech workforce, and support from the Madhya Pradesh government have made it a natural base for ventures focused on rural India.
Down south in Kochi, the Kerala Startup Mission has helped create a fertile ground for robotics and deep-tech startups. One notable example is Genrobotics, which developed a robotic alternative to manual scavenging and has expanded its use across Indian cities.
Other cities are catching up too. Bhubaneswar is seeing early traction in edtech and IoT, while Surat known for textiles is beginning to produce startups focused on digitizing B2B supply chains. In Nagpur, clean energy and logistics-focused startups are taking shape, driven by the city’s central location and improved connectivity.
These cities may not have the size or speed of Bengaluru, but they’re starting to make a name for themselves by solving relevant, local problems with long-term potential.
The Roadblocks: What’s Holding These Startups Back
While the growth of startups in India’s smaller cities is promising, the path isn’t without its hurdles.
One of the biggest challenges is access to early-stage funding. Many founders struggle to connect with investors who are still largely concentrated in metro cities. Local angel networks are growing, but they often lack the scale or appetite to support riskier ventures.
Another issue is talent. While smaller cities now produce skilled graduates, especially in engineering and business, retaining top talent remains difficult. Many young professionals still migrate to bigger cities for better opportunities, making it hard for startups to build experienced teams locally.
Mentorship is also limited. In metros, ecosystems benefit from serial entrepreneurs, seasoned professionals, and strong alumni networks. In smaller towns, founders often lack access to this kind of guidance and strategic input, which is crucial in early stages.
There are also basic infrastructure concerns in many regions. Even with improving internet access, inconsistent power supply, limited logistics support, and bureaucratic delays can slow down growth and execution.
Despite these roadblocks, many founders continue to push forward, driven by the belief that solving meaningful problems in overlooked markets is worth the extra effort.
What Comes Next for India’s Startup Map
The rise of startups in smaller cities is not just about spreading innovation but about changing who gets to participate in the economy. For years, most opportunities in tech and entrepreneurship in India were concentrated in just a few metro cities. That meant ideas from other parts of the country often never made it past the drawing board. Today, that’s beginning to change.
As more students from tier-2 and tier-3 cities gain access to online learning, remote work, and digital tools, they’re starting to imagine new futures, ones where they don’t have to move to a big city to build something meaningful. At the same time, local problems, like poor irrigation, unorganized transport, or lack of access to small business credit are finally being treated as startup-worthy challenges. This is creating a different kind of innovation: one rooted in local understanding rather than borrowed templates.
But the real shift will happen when these founders stop being the exception and start becoming the norm. That requires stronger local ecosystems- more mentorship, more early-stage capital, and more startup success stories to follow. It also requires metro-based investors, incubators, and media to stop looking at these cities as “emerging” and start treating them as integral parts of the startup landscape.
India’s next generation of entrepreneurs is already here. They just might be building from a college dorm in a small city. The rest of the ecosystem now has a chance, and a responsibility, to show up and support them.
