Innovation Finds a New Address: Tier 2 Cities Fuel India’s Startup Surge

India's startup landscape is experiencing a revolutionary transformation as Tier 2 cities emerge as India's new innovation hotspots. Once dominated by metropolitan giants Bengaluru, Delhi, and Mumbai, Indore, Coimbatore, Lucknow, Bhubaneswar, and Surat are now spearheading India's startup revolution, driving job growth, investment, and digital innovation at unprecedented levels.

 

Key Highlights

 

Dramatic Increase in Startup Employment and Registration

Share of startup employment in Tier 2 cities has grown from 9% in April 2024 to 31% in April 2025—a three-fold increase—while overall startup employment grew 32% year-over-year in April 2025. Newly registered startups have also grown 22% over the last year.

 

Investment and Talent Magnet

Cities like Indore, Coimbatore, and Lucknow are gaining prominence among investors and entrepreneurs with low property prices, increasing talent pool from local institutions, and rapidly developing infrastructure. Government initiatives like the Smart Cities Mission are also driving this growth.

 

Startup Ecosystem Democratization

More than 45% of DPIIT-acknowledged startups (approximately 56,000) are now based in Tier 2 and 3 cities, which indicates the de-metro movement and democratization of entrepreneurship.

 

Sectoral Diversity and Local Innovation

They are not just tech centers. Coimbatore is a manufacturing and textile center, Surat a textile and diamond center, Indore an IT and civic entrepreneurial center, and Bhubaneswar an IT and education center.

 

Challenges Remain

 

Even with the boom, Tier 2 cities must also contend with issues such as infrastructure shortages, talent retention, and regulatory issues. These will be crucial in sustaining momentum.

 

Metro Decline, Heartland Rise

 

While Bengaluru, Delhi/NCR, and Mumbai have witnessed a decline in the proportion of startup jobs, Tier 2 cities are witnessing robust growth, reflecting a much more inclusive and diversified growth pattern for India's future.

 

"Expansion is no longer confined to big metropolitan cities; we are witnessing a robust expansion into Tier-2 cities, which is a more inclusive and balanced model of expansion." — V Suresh, CEO, foundit India's boomtowns are no longer simply back-office hubs—they are the new drivers of innovation that are set to define the next decade of the nation's economic narrative. 

 

Source: New Indian Express, Trade Brains, SME Venture, LinkedIn Pulse, WeWork India Blogs