How founders beyond metro hubs are redefining early-stage opportunity

This article is authored by Deepak Gupta, general partner, WEH Ventures.

As per recent trends, more than 50% of startup additions in India are coming from the tier-2 and tier-3 cities, with a startup base of around 2 lakh. So far, they have attracted a relatively small share of the funding pie.

Start up (Pixabay)

We are increasingly seeing success in startups originating beyond the metro cities. E.g., Lahori Zeera (started by three cousins), a fizzy drink company based in Punjab, crossed 500 cr in revenue by FY 25 (within 8 years of its founding) and now has a national footprint. It has been profitable for several years and is worth over $300 million. CureBay tells a similar story in a completely different sector. Founded in Bhubaneswar in 2021 by Priyadarshi Mohapatra (Google executive), the venture set out to solve a problem metro-based healthtech companies had largely ignored: primary healthcare access in Odisha's villages and small towns. The company now runs more than 200 e-clinics across Odisha and Chhattisgarh, has served over one million patients, is built on a strong technology/AI backbone to deliver services far and wide, and has raised $35M from the likes of BII, Bertelsmann, and Elevar Equity.

Unicorn success has also been achieved. The Cardekho group from Jaipur, which runs multiple businesses, including in auto classifieds, insurance brokerage, and college admissions, and hit unicorn status many years ago, is backed by the likes of PeakXV and CapitalG. Molbio Diagnostics, based in Goa, brought much-needed diagnostic kits for remote areas for core diseases like tuberculosis, Covid and has scaled to over 50 million patients tested.

From one-off large outcomes, we are also seeing the evidence of clustering and ecosystem-wide value creation – e.g., Surat has developed a vibrant SaaS play with multiple breakout companies, with 220+ companies having raised $220M in capital, with eleven of them institutionally funded.

The reasons that more and more startup successes are likely to emerge beyond the metros are manifold. A couple of key reasons for this are:

• Consumption demand and aspiration are no longer confined to the top cities, and growth is much more widespread beyond them. Bain estimates India's e-retail market, worth roughly $60 billion in 2024, will reach $170-190 billion by 2030, with almost three in five new online shoppers since 2020 coming from Tier-3 towns and smaller towns. Deloitte puts the current Tier-2/Tier-3 share of e-commerce transactions above 60 percent already. During the 2025 festive season, Unicommerce data showed Tier-3 towns alone accounting for 50.7% of Diwali online orders, with Tier-2 adding another 24.8% — meaning nearly three-quarters of India's festive e-commerce came from outside the metro triangle. Founders who have sharp insights into what works beyond the metros are in the box seat to create meaningful consumer opportunities.
• Significant technical talent presence and projects are extending beyond the metros. A large number of quality educational institutes that are doing cutting-edge research are widely dispersed — e.g., out of the 23 IITs, only four are in metro cities. And new project setups in deep tech areas are going well beyond metros — e.g., significant semiconductor and allied investments are underway in Odisha, backed by semiconductor research facilities set up at IIT Bhubaneswar. Andhra Pradesh is investing in a quantum ecosystem in the Amravati area; focused manufacturing clusters focused on toys and aerospace are apace in Karnataka. These institutes/projects are compounding nodes of talent in many hard tech and manufacturing areas. Many of the institutes have strong startup incubation programmes, and we have encountered pretty good quality startups from them.
• Venture goes beyond digital and intersects hard-tech, manufacturing: As venture funding moves into physical areas such as hardware, semiconductors, and manufacturing, many of these industries have incumbent deep clusters across the country (e.g., Coimbatore is known for industrial machinery; speciality chemicals have deep pockets across Gujarat), and the natural intersection points for new opportunities will lie outside the metros.

What has worked to make these successful:

• Building frugally and with persistence: Founders tend to have a stronger and sustained affinity for the problem statement, and initial talent and operating costs are much lower than in Bangalore
• There is significant grant funding and lab support to build deeper tech ideas at a natural pace

Where the challenge lies:

• Talent gaps may grow with scale: Sometimes the founding team does not check the box on all competencies, and building the next layer of talent becomes harder in remote locations.
• Pitching and investor connects: Founders may not be as polished in pitching and have underdeveloped connects to angels and investors.

Some of these gaps can be overcome – e.g., founders can proactively build their social media presence and systematically reach out to investors and not just rely on connections through their incubators. They also need to seek mentorship from influential angels and founders to accelerate their fund raise dynamics. And yes, they do have to fight harder to be noticed compared to their counterparts in metros.

Market dynamics may help – Tier 2/3 cities may present deeper alpha opportunities to investors relatively to over-bid “hot” companies in metros at reasonable valuations. Many investors have already made entry into specific geographies and carry mandates to invest in them (e.g., in Kerala).

We expect to see many more scaled and well-funded startups beyond the tier 1 cities in the coming years.

(The views expressed are personal)

This article is authored by Deepak Gupta, general partner, WEH Ventures.