Tier-II cities: New hotspots for investors

According to YourStory Research, the total funding raised by startups in Tier-II cities across India between January 2015 and August 2021 stood at $1.14 billion.

Tier-II cities: New hotspots for investors

Saturday September 11, 2021,

4 min Read

Good Morning,

Over the years, India has seen an emergence of startups from Tier-II cities that are looking to solve local issues. Be it challenges across lower internet bandwidth, lack of resources, or lack of vernacular platforms, Tier-II startups today are building interesting business models and are also successfully attracting investor attention.

According to YourStory Research, the total funding raised by startups in Tier-II cities across India between January 2015 and August 2021 stood at $1.14 billion.

Expanding their reach from metros and Tier-I cities, investors today are funding companies from around 70 Tier-II cities. In fact, 10 new Tier-II cities were added to the list in 2021 alone

Over the years, small-ticket investments have poured into leading Tier-II cities such as Jaipur, Indore, Chandigarh, Kochi, Goa, Vadodara, Bhubaneswar, Coimbatore, Lucknow, Patna, and Surat — even amid the pandemic.

One of the reasons behind the trend is the growing digital adoption. According to a February 2021 report by UBS Securities Asia, the COVID-19 pandemic has largely accelerated internet adoption in Tier-II cities.

"With the pandemic and lockdown, remote working helped to access customers and talent from these cities, and create many more innovative startups — building from Tier-II cities, for the Tier-II city problems/needs," Padmaja Ruparel, Co-founder of Indian Angel Network and Founding Partner, IAN Fund said.

tier-II startups

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Before you go, stay inspired with… 

Anurag Ramadasan

Anurag Ramadasan, Partner, 3one4 Capital

“The fact that most VCs are now very comfortable making investments over Zoom, leads us to believe that the startup ecosystem in Tier-II cities in India is set to grow highly exponentially in the next few years.”

Anurag Ramdasan, Principal – Investments, 3one4 Capital

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