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From big to small – Startups choosing Tier 2 and Tier 3 cities over metros as their breeding ground!

Metro cities are always assumed to be better markets. Being considered as a one-stop shop for consumers, human resources, opportunities, investors and so on, even an employee prefers choosing a metro for working. The question is that is it a necessity for startups to move away from its roots and operate in a bigger city. Are bigger mature markets looked as a greener pasture? Will it be profitable to start your startup away from the conventional hotspots? Senzit  startup from Thiruvananthapuram, Appoint from Bhopal, LabInApp from Hubbali, Dextrasys from Tiruchirappalli, Robosoft from Udupi, Ampere from Coimbatore, CultureAlley from Jaipur, Sayabot Systems from Kochi are a few examples from the list of hundreds of startups which started from small towns and have now made a sensation in the big cities. 

If you ask any veteran in any business field, they share that typically your first  team, advisory board and even your first customers are pulled from your own network. Talking about the business side, revenue is the number one qualifying parameter. So if we consider revenue, Ahmedabad is the top city. Bangalore, Pune, Chennai, Jaipur, etc come in the list of cities giving top revenue. A lot of startups, which have now changed the face of corporate culture in India have dwelled from cities like Bangalore. Imagine, of these companies didn’t have their initial base in there; Bangalore probably would not have been what it is today. Smaller cities come with their own set of advantages and for a startup, every such small factor turns into the winning factor in the times to come.

Start up gurus and mentors share that there are only two kinds of people to create a technology hub- the rich and the nerds! You just need to search for the places where you find these people. Look for cities and places where you find the nerds and the rich, i.e. the investors need not to live in your city. The rich, i.e. the investors need not to be living in your city. Talent cannot be electronically transferred, but yes money can be! So lets have a quick look at what benefits the small cities offer to the startups-

Cost-effectiveness- While the cost of living is higher in big cities, so it the infrastructure cost. An employee working in a metro automatically expects a high paycheck as his cost of living and other expenses is automatically high. The situation is way better in smaller cities. To get the right talent, you only need to give the right working environment and people will love to work with you.

More Access To Talent - There is a huge resource of qualified persons in small-towns. Many big corporations have started identifying and training these human resources. In fact, the placement drives by the corporate’ do consider the educational institutes in the Tier 2 and Tier 3 cities. The talent retention rate is very high due to low competition. For a startup, where the owners spend a lot of time in training the core team, a high retention figure helps them in building a strong core team. When your core team is strong, half of your work as a business owner is done.

Taking small steps towards your final destination: For startups, testing and verifying in a small city and then expanding to bigger cities makes a lot of sense. If your product or business idea is successful in your area, you can look at expanding its footprints in the bigger cities. In fact, a lot many times, startups sees so much success in the home market itself, that they can open multiple outlets in the same city.

Most Valuable Product at a minimum resource cost: When you start at a low resource cost, i.e. with just enough features to gather learning about the product, you can always spend more on its continued development. Learning and gathering insights at an initial stage when your financial involvement is low will decrease costs and risk if the product fails.

Employment opportunities in the rural India: There always has been an urgent need to create employment opportunities in the rural areas. So startups flourishing in the rural areas are actually helping the country and it should be cheered.

Well, there a lot of advantages in operating from the homeland, but startups have also shared the challenges they face in finding senior talent. While they usually look for young talent to drive them, it also opens up the opportunities for these young guns to groom themselves for senior management profiles. While the initial years of every startup go into building technology, profitable business model, strategy and a lot of experimentation, survival in the long run becomes viable when your initial costs are low. This does not mean that one should restrict themselves to smaller markets only. Once the idea and business is tried and tested in the home market, catering to the metros and larger markets should be the vision of an entrepreneur. 

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