Tier 2 towns that will soon catch up with Delhi & Mumbai as Startup Hubs

What does the planned city of Chandigarh in the north have in common with the scenic Kochi in India’s southern Kerala. Or for that matter, what is that Surat, Bhubneswar, Coimbatore and Lucknow share. 

The year 2022, as it rolls by has been a great one for new ventures in India. Nearly 15,000 new ventures took off during 2022 and quite a few more are set to be added.

‘However, that is only half the story. 

A remarkable and definite trend that is shaping up in India’s start-up story is that the tier 2 cities are moving ahead to catch up with the big metros like Delhi, Mumbai, Chennai, Bengaluru and Kolkata. 

That is what Surat shares with Bhubneswar, Coimbatore and Lucknow as well as Chandigarh and Kochi. 

The Top Ten

According to a latest report by Software Technology Parks of India (STPI), the top ten emerging hubs in cities beyond Tier 1 in India are Bhubaneswar, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Lucknow, Surat, Thiruvananthapuram and Vadodara. 

According to the report, in the emerging hubs beyond Tier 1 cities, a total of ~14,000 startups have been added in the past decade. The year 2020 saw the highest number of registered startups at 2000. The final figure for 2022 may, well, be higher.

Advantages

If you are considering starting up, the tier 2 cities may be your destination as they offer a number of advantages. The first and the obvious advantage is that they are less expensive real estate option compared to the big ones where office rental itself is capable of creating a big hole in your pocket. 

Secondly, many of these cities offer rather good infrastructure while that of the metros is often overstretched. 

The emerging hubs beyond Tier 1 cities are performing well on most of the parameters like literacy, GDP, ease of doing business index, business environment, etc. which are important for startups to scale, says the STPI report. 

Sector-wise

Enterprise tech, retail tech, and health tech are the top three sectors by number of startups beyond Tier 1 cities, says the STPI report. Rnterprise tech and retail and retail tech are the top sectors in cities beyond Tier 1 by deal count. 

Retail and Retail Tech and FinTech are among the top sectors by funding amount, the report adds. 

Efforts of the States

A key reason for the growth of start-ups is also the handholding that the state governments now provide. While the Centre has rolled out a series of initiatives many of the state governments are also providing their own incentives. 

Emerging hubs beyond Tier 1 cities have local, state-level policies and initiatives which are helping startups flourish in those cities like GVFL (Gujarat Venture Finance Limited) being the driving forces behind the startups in Vadodara, says the STPI report. 

Multi-product SEZs (Special Economic Zones), incubators, and integrated platforms are the key reasons for growth in emerging hubs beyond Tier 1 cities, it adds. 

However, before you take the call, check whether the vernacular language and culture in a particular culture suits your product and team. In some areas, aspects like skilled manpower and raw material also have to be factored in.