Far from the metros, startups in Tier II and III India are bringing innovation to agritech, edtech, healthtech, fintech, and other sectors. Founders list down how the new prime minister and his government can back a boom in Bharat’s entrepreneurial ecosystem.Sindhu Kashyap
In his first term in office, Prime Minister Narendra Modi won over entrepreneurs with his Startup India initiative and steps that made starting up in the country easier. As he readies for his second term, India’s startup ecosystem has boomed. Most of that growth has been in metros and big cities.
But far from the metros, a new breed of startups is solving ‘real India’ problems. These businesses are bringing innovation to every sector – agritech, edtech, healthtech, fintech, logistics tech, and others – and creating solutions to the problems ‘Bharat’ faces. And as the 17th Lok Sabha is formed and Narendra Modi readies for his second consecutive swearing-in, we decode the puzzle of what startups from Tier II and III India want from their new prime minister.
Startups from metro cities and those in Tier II and III India have one common demand: clarity in terms of regulation, policy, and lesser paperwork.
Dr Kiran Kanthi is the Founder and CEO of Lifetron Innov Equipments, a Hubli-based startup that has built a low-cost, portable, bedside neonatal phototherapy unit to be used in any kind of rural or remote healthcare setup. He says,
“While it is good that different levels of certifications are needed for medtech startups, it would be great if there was some clarity in terms of paperwork and requirements." He explains it would be easier for startups if there were simpler processes and lesser paperwork. “The norms can be a little more refined to include startups,” he adds.
Shashank Kumar, Co-founder of Patna-based agritech startup DeHaat, explains that the policy call the government takes will need to have a synergy between the State governments and the Centre for implementation and execution.
“There is a need for right coordination, irrespective of who comes to power,” he adds.
Funding is crucial for any startup to thrive and grow.
The number of investments in startups in Tier II and III cities has grown. In 2018, startups in smaller cities -- other than the six major startup hubs of India -- raised $447.64 million across 63 deals. This is more than a three-fold increase in the value of investments injected into startups in smaller cities in 2017. The number of deals also nearly doubled from around 32 in 2017.
But startups feel more can be done, especially by the government. “Most funds granted by the government cannot be easily accessed by startups from Tier II and III areas,” says Rishav Bajoria, a startup founder based out of Bhubaneswar.
Kiran says while the government has announced several initiatives and programmes to encourage startups, communication with startups, especially those in Tier II and III regions, needs to increase.
CM Patil, CEO, Sandbox Startups Hubli, says the government can look at opening grants and easy access to capital for Tier II and III startups working on specific sectors.
As Sanjay Anandaram, early stage investor and mentor, says: “We also need means for a domestic pool of capital pumped into Indian funds. Today, 90 percent of the money that VC funds get is from foreign sources of capital. The government needs to find ways and means to encourage family offices to invest in funds.”
Patil explains that currently startups, through different inclusion funds, have access to capital of Rs 5 to 10 crore. “This makes it difficult for early stage startups to get access to capital of Rs 10 lakh. We are currently talking to different government bodies to have a ‘Bharat Inclusion Fund’ that focuses on funding startups that solve different problems.”
Incubation centres and government-approved grants are growing, but startups believe that they need to be included more often in collaborative work.
“Ours is a healthcare product,” Kiran, says. “We fit in easily with different government offices and hospitals, but working with the government and getting access isn’t easy. They look at three-year income tax returns and other paperwork, which startups often don’t have,” Kiran says.
Rishav says it may be beneficial if the government can work with small startups from Tier II and III cities.
YourStory’s Startup Bharat series has chronicled a variety of startups that have emerged from small-town India. Bypassing regular startup hubs like Delhi and Bengaluru, small towns like Hubli, Kochi, Thrissur, and a few in the state of Odisha have thrown up some stellar startups.
“There are many startups in Tier II and III cities that are building and solving for real India problems in healthcare, agritech and even sanitation. The government can easily tie up and work with these startups. However, many of these do not have easy access and communication with government authorities,” Patil says.
Startups in Tier II and III cities are asking for a committee that can work closely with them and possibly look at addressing challenges like access, funding, and more government projects and resources.
As of last year, India moved up 23 ranks when it comes to ease of doing business. And after the Centre announced the Startup India initiative, different State governments have been working on their own startup policies and initiatives. This has led to tremendous growth; just last year, India added eight unicorns. The first five months of this year have led to the entry of three new members in the unicorn club.
The sky may be the limit if startups in Bharat get the backing they deserve.