While metropolitan cities like
Bengaluru and Delhi-NCR continue to be the hub of start-ups and the
quantum of investments. However, the industry is also expanding into tier 2/3
cities to increase opportunities at a growing pace. More than 14K start-ups
have been established in tier 2/3 over the last decade. This is due to more and
more people acquiring skills to join the labour force, a significant increase
in the labour rates, the government's push to increase Special economic zones
(SEZs), etc. Investors are keen to find entrepreneurs passionate about solving
problems in rural India and catering to the masses.
In the following sections we look to understand
what is happening in the start-up world in Tier 2 and 3 cities.
More and more start-ups are getting established in tier 2/ 3 cities as they receive more and more government support in the form of institutional support from government bodies and private incubators.
The government is pushing the start-up India initiative and many schemes to create a start-up environment outside metro cities and is providing subsidies, incentives, and grants.
Moreover, the start-ups in tier 2/3 are at an advantage since rental costs and operational costs are significantly lower as compared to metro cities. Many of these cities are educational hubs for premium institutions, there is an abundance of skilled labour available at lower hiring costs.
Developing infrastructure and growing internet
reach helps to reach a large target group and also connect with the funding
networks. In addition, the emergence of co-working spaces in tier 2/3 cities
has been growing which helps them to set up offices beyond tier 1.
More
than 850 million people live in rural India. However, the majority of rural
start-up founders lack resources when compared to entrepreneurs based in metro
cities. But to solve this challenge, governments across states are coming up
with initiatives to incubate and promote budding founders. These initiatives
are helping move the start-up momentum to tier 2 and 3 cities.