In 2025, India’s startup story goes beyond Bengaluru, Mumbai, or Delhi. An unexpected transformation is underway — Tier-2 cities are becoming vibrant startup hubs, redefining the country’s business landscape.
From Indore’s thriving IT services and Surat’s D2C textile brands, entrepreneurs are escaping the high cost and competition of the metros while finding economically viable, talent-rich, digitally connected ecosystems in tier-2 cities.
Why Tier-2 Cities Are seeing Business Upheaval
- Cost
Office rents in Indore or Kochi are 60–80% less than in Mumbai or Bengaluru. Our operating costs, including salaries and logistics, are less. - Talent Pool from Tier-2 Colleges
Institutes like IIT BHU, NIT Trichy, IIM Udaipur produces high calibre graduates. Many of which are now choosing to stay in, or returning to, their hometowns to enjoy a better quality of life. - Government Initiatives
Startup India 2.0 has launched over 20 incubation and acceleration centers across Tier-2 and Tier-3 cities across India.
Government ran schemes like PM Gati Shakti and Digital India and have also paved the way for improved logistics and digital infrastructure
Case Studies: Successful Startups From Tier-2 Cities
🌱 Toothsi (Indore) A direct-to-consumer (D2C) dental tech startup. Grew from regional player to depth of brand pan-India.
📦 CityMall (Originating in Gurugram, with Tier-2 focus)
A community commerce app focused on Bharat users, operating primarily in smaller towns and rural belts.
🧵 Suta (From Surat)
Built an online handcrafted fashion brand using a local textile network.
Why Start Up in Tier-2 Cities
✅ Cheap Scale
Ideal for bootstrapped or seed-stage companies looking to de-risk on burn.
✅ Untapped Markets
There are large population segments with new income that remain under-served in tier-2 and 3 cities.
✅ Government Schemes & Grants
SIDBI’s Fund of Funds
Startup India Seed Fund Scheme (SISFS)
Atal Innovation Mission (AIM)
Challenges Faced
Even with models in place and recent advancements, the road ahead still has some hurdles. Things that still need to be overcome:
Investor hesitance in cities outside of metros
Limited startup culture and interactions
Some states with slower execution.
Nevertheless, networks of angel investors and VC firms are increasingly creating micro funds to support regional startups (e.g. 100X.VC, Blume Ventures).
Implications for Entrepreneurs
Whether you’re an early-stage founder, freelancer, or seasoned business leader, tier-2 India holds enormous potential for:
Rolling out MVPs at low-cost.
Building scalable models to target “Bharat” users.
Bringing new customers into the fold with unique market propositions and local talent.
💡 Pro Tip: Utilize local interface accelerators such as T-Hub (Hyderabad), iCreate (Ahmedabad), and AIC-BIMTECH (Greater Noida), to help validate your model, fast-track your startup’s growth and seek potential funding partners.
Conclusion: The Bharat Opportunity
India is undergoing a flourishing startup ecosystem.