India’s startup map is redrawing itself with Tier 2 Startups rising, the dots are spreading far beyond Bengaluru, Mumbai, and Delhi. Ishita Agrawal Malpani, Director at Malpani Group, argues that the country’s next unicorn may not come from a metro at all and that this shift is exactly what India needs.
Her thesis is grounded in on-the-ground signals: last month, a 23-year-old founder from Coimbatore raised $50 million without ever setting foot in Bengaluru. Malpani also points to a broader distribution of entrepreneurial energy: by her count, 45% of India’s startups now originate in Tier-2 and Tier-3 cities, translating to over 67,000 ventures outside the metros.
“Say your headquarters is in Sangamner and you still see that look, like innovation needs a Tier-1 pin code to be valid,” Malpani notes. That attitude, she says, is increasingly out of step with reality.
Tier 2 Startups: The cost capability advantage is real
For founders, geography shapes runway and retention. Malpani highlights concrete operating deltas:
- Office rent: Surat at ₹30/sq ft vs Mumbai at ₹150/sq ft.
- Engineering talent: 3× higher availability in smaller cities.
- Team retention: 88% in smaller cities vs 77% in metros.
Lower fixed costs compound into longer runways and less pressure to chase vanity growth. Deeper talent pools and higher loyalty, stabilize teams in the messy middle of company-building. These aren’t soft perks; they are structural advantages.
Proof points: Jaipur to rural Tamil Nadu
This is not theory. Malpani cites a growing list of outcomes:
- Minimalist: built in Jaipur, exited at ₹3,000 crore.
- CarDekho Group: from a Jaipur garage to $1.2 billion.
- Zoho: scaled from rural Tamil Nadu to 100 million users.
Different sectors, different paths same throughline: world-class products can originate far from metro corridors.
A different founder mindset
The small-town founder playbook is distinct and often better attuned to India’s mass market.
- Problem markets, not postcard markets. “Real India” is the customer, not just the 5% who rely on quick commerce. Distribution, affordability, and durability beat influencer buzz.
- Monk mode by default. Fewer nightly events, less job-hopping, and fewer distractions keep teams in build mode longer.
- Scaling with constraints. Growing up around scarcity breeds frugality, creativity, and operational discipline, the exact muscles startups need after product–market fit.
At Malpani Group, some of the sharpest product insights arrive from customer conversations in Nashik and Ahilyanagar (Ahmednagar). When your users are outside the algorithmic spotlight, feedback is clearer, and willingness to pay is earned, not marketed.
Infra gap is closing; mindset gap isn’t
India’s digital rails, UPI, fiber broadband, cheap data, vernacular UX have largely flattened access. “A coder in Indore has the same tools as one in Hyderabad,” Malpani argues.
What hasn’t kept pace is perception. Too many pitch decks still carry a Mumbai or Bengaluru address to be taken seriously by investors, a cosmetic fix that misses the point.
The funding ecosystem, to its credit, is widening its aperture. But the habit of filtering for Tier-1 HQs lingers. If capital chases quality, it must follow where operating leverage and customer relevance are strongest, and today that increasingly means Tier-2/3 India.
What this means for founders and investors
For founders outside metros: Lean into the advantages that are already yours, longer runway, loyal teams, proximity to mass-market users. Don’t feel compelled to “metro-wash” your story; your geography is part of your moat.
For investors: Diligence where the users are. Optimize for unit economics and retention over headline logos. When constraints are features, not bugs, you often find sturdier businesses.
For policy and ecosystem players: Keep doubling down on digital infrastructure, last-mile connectivity, and regional incubation. The multiplier effect outside metros is compounding.
Bengaluru will remain a vital hub, but it no longer monopolizes innovation. The center of gravity is shifting toward the cities and towns that mirror India’s true demand curve. If the next unicorn does emerge from Sangamner, Coimbatore, Indore, Surat, or Nashik, it will be less an anomaly and more a culmination of trends hiding in plain sight.
As Malpani frames it, the question isn’t if small towns are the future of Indian startups, it’s whether investors and operators will adjust their lenses quickly enough to see it.
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