How Small-Town Startups are on the Rise in India

Wed Nov 6 2024

How Small-Town Startups are on the Rise in India

Gone are the days when it only mattered to be a part of Bengaluru and Mumbai for the startup story of India. Today, Tier-2 and Tier-3 cities are emerging as new important places for new ideas and businesses that solve local problems but sell to global markets. These startups have discovered how to exploit the advantages from their locality and overlook challenges to contribute to economic growth.

Why Startups Thrive in Small Towns

1. Solving Local Issues
Local folks usually know exactly what is causing the specific problems in their community. That makes them generate solutions that are remarkably pragmatic and relevant. For instance, agri-tech companies thrive in small towns just because they are just close to their target market—farmers.

2. Connectivity through Technology
Affordable access to the internet by Jio and BharatNet has integrated rural areas into the world. This has created opportunities in the dimensions of online purchases, learning, and money.

3. Returnees to Villages
Many employees have gone back to a small town for personal reasons, especially during the pandemic. These returnees bring very important skills and experiences, which help in the growth of local businesses.

4. Lower Costs
Small towns generally afford lower cost of living and doing business, thus presenting relatively fewer financial burdens to start-ups.

Successful Small-Town Start-Ups
Let's dive into some enterprises that have been significantly impactful despite beginning operations in small towns.

1. Zoho Corporation – Tenkasi, Tamil Nadu
About: Zoho is a software company that has moved much of its operations base to Tenkasi, a small town located in Tamil Nadu.

Achievements:
• Trains and deploys local talent, reducing urban professional dependency.
• Serves software solutions to over 80 million users worldwide.

Impact: Zoho has proved that software companies can work successfully in a village environment and spur employment and reverse people's mindset to not move to the cities.

2. iD Fresh Food – Tumakuru, Karnataka
About: iD Fresh Food was established near Bengaluru to retail ready-to-use dosa and idli batter.

Achievements:
• Innovated packing that ensures freshness without any preservatives.
• Started selling in the local markets and then extended into international markets, including UAE.
Impact: iD Fresh Food has shown that quality and authenticity can make the traditional reach many.

3. Gramophone – Indore, Madhya Pradesh
About: Gramophone is an agritech firm based in Indore and which has concentrated on advisory as well as resource support to farmers.

Achievements:
• Crop management support to farmers through Gramophone's mobile application.
• Enters a marketplace for seeds, fertilizers, and other products.
Impact: Gramophone is increasing efficacy in farming and income through equipping farmers with proper tools and knowledge.

4. WOW Skin Science – Siliguri, West Bengal
About: WOW Skin Science was a small wellness firm in Siliguri. It turned into a global giant.

Achievements:
• Sells its environment-friendly, self-care products online globally on e-commerce websites.
• Later it forayed into USA, UK, and UAE markets.
Impact: WOW Skin Science proved that business from small towns can win globally too if done the proper way.

5. Ather Energy – Hosur, Tamil Nadu About: Ather Energy has decided on Hosur in Tamil Nadu as its electric scooter-manufacturing plant.

Achievements:
• Constitutes an upgraded, environmentally friendly manufacturing unit.
• Employees start working; local economies are motivated. Impact: Ather Energy has proven that small towns can sustain high-end manufacturing companies.

Small Town Start-ups Challenges

1. Shortage of Finance:
• Most investors and venture capitalists have headquarters in metropolitan cities, hence locking up finances for small-town start ups.
• Most entrepreneurs depend on personal savings, small bank loans, or even local support, hence limiting their rapid scaling.

2. Infrastructure Issues:
• Logistics is often an expensive and time-consuming affair due to poor road connectivity and unavailability of good transportation.
• Availability of warehouses and cold storages is very limited, affecting businesses in agritech and e-com space.
• Access to reliable internet connectivity, although improving is still patchy in most locations, hurting digital businesses.

3. Market Reach:
• Small-town businesses usually have restricted access to larger markets due to geographical and logistical barriers.
• They are not as visible in urban and global markets, hence growth is also limited.

4. Perception Bias:
• Small-town start-ups face scepticism at the hands of investors and partners who under-price them purely because of origin.

Empowering Small-Town Startups

1. More Incubators and Accelerators:
• Dedicated centres in small towns that provide mentoring, business counselling, and office space along with legal supports.
• Such centres shall thus provide networking for linking the start-ups with industry professionals, potential consumers, and investors.

2. Strengthen Infrastructure:
• Developing road and transport infrastructure to make logistics easier.
• Provide cheap high-speed internet connection, especially in more rural areas.
• Help in the development of regional warehousing centres that would minimize high costs to store and distribute products.

3. Give incentives for local investment:
• Regional angel investor networks established that connect small-town startups with investment capital.
• Tax incentives or grants for local investment in rural and small-town enterprises.

4. Give incentives for government support:
• Government-backed loan schemes and grants are more accessible for starting new enterprises in smaller towns.
• Regulation and financial aids for the easier registration process of entrepreneurs in smaller towns.

5. Talent Development Programmes:
• Tie-up with educational institutes to offer talent development and entrepreneurship courses relevant to local needs.
• Programmes or incentive policies making it attractive for professionals to spend some time serving a start-up in the smaller towns.

6. Use Digital Platforms:
• E-platforms to give small-town entrepreneurs a wider reach.
• Training on e-commerce and digital marketing about how the start ups can reach their clients through different forms of presentation of their product or services.

7. Awareness:
• Regional startup competitions, expos, and fairs as recognition for small-town entrepreneurs.
• Engagement with media houses to air real-life success stories and create awareness against biases.

8. Community Networks:
• Building local entrepreneurship communities where start-ups can share, collaborate, and learn from each other.
• Creating mentorship networks that connect small-town entrepreneurs with successful business leaders.

Small-town startups in India are proving that innovation and success are not limited to big cities. Despite challenges like limited funding and infrastructure gaps, these startups use local knowledge, technology, and lower costs to grow and compete on a larger scale. Their stories show that with the right support, small town entrepreneurs can overcome barriers and contribute meaningfully to the economy. The rise of these startups highlights their potential and the need for stronger support systems. By addressing their challenges and providing resources India can unlock the untapped potential of its Tier-2 and Tier-3 cities, fostering a more inclusive and diverse entrepreneurial ecosystem. The future of innovation in India truly lies in bridging the gap between metros and small towns, creating opportunities where aspiration meets reality.

-By Satvik Gupta
Corporate Relations Executive E-CELL