Invest in Startups, Startup Ideas, and Startup India: Startup Investment Guide for Tier-2/Tier-3 Cities of India

Startup India and the Growth of Tier-2/Tier-3 Cities

Let's take a brief look at how India's Tier-2 and Tier-3 cities are growing in terms of the startup investment industry and startup ecosystem development.

As part of the growth and development of India's startup ecosystem and Startup India programs, the Indian government is concentrating on these cities and providing all the startup investment assistance to their startup ecosystems and infrastructure.

India's Tier-2/Tier-3 cities are the foundation of the nation's economy. It made up about 40% of India's GDP up to 2015, and by 2025, it is expected to account for 45%.

Therefore, the contribution of Tier-2/Tier-3 cities to the foundation of the economy can not be disregarded or ignored.

Scope and Reasons to Invest in Startup India

Let's talk about the scope and reasons to invest in Startup India. In fact, Tier-2 and Tier-3 Indian towns provide very profitable business expansion opportunities and foundational support for Startup India programs and entrepreneurs.

The expanding population, rising per capita income, middle-class purchasing power, and market size are all important drivers of growth! Indeed, as everyone is aware, India has a sizable population, and it is undeniable that this number will continue to rise in the years to come.

Therefore, the middle class's purchasing power and per capita income are steadily rising, while discussing the potential for tech startups and others in Tier-2 and Tier-3 Indian cities.

Compared to the affluent class in upscale cities, they spend more money on the unique or startup MVP product.

Additionally, the idea of purchasing something new and different from the market is being supported by rising per capita income. Due to the brand emphasis, the elite class may be reluctant to purchase new products.

Taking into account both tier-2 and tier-3 cities, the middle class per capita income is rising and currently ranges from 4 to 40 lakhs a year. It accounts for almost 70% of India's overall GDP.

“One report says average personal monthly income in Tier-2/3 cities is ~₹32,000, not far behind metro averages (~₹35,000) in the QSR/restaurants sector analysis.” -ETHospitality

Internet Penetration, Market Potential, and the Digital Scope for Startup India

As we all know, the Internet is inextricably linked to the success of a startup, Startup India programs, or any other business. By 2025, the middle class in Tier-2/Tier-3 cities in India will have more than what was the projected internet users in 2023 (955 million), and this number is expected to continue to rise.

As of April 2024, more than 95% of Indian villages had access to 3G/4G mobile connectivity, according to a market analysis.

Compared to the busy elite class, who do not have time to spend hours scrolling the internet, those who live in Tier-2 and Tier-3 cities are more aware of what is happening online.

Therefore, it is becoming more profitable for investors to invest in India due to the rising rates of internet usage and smartphone sales in Tier-2 and Tier-3 cities.

What Research and Studies Show

Instead of assuming anything, let's investigate and have a look at what statistics and study reports are stating.

“In Tier-2 cities like Guwahati, Coimbatore, Lucknow etc., consumers spend about 16% of their income on online shopping and spend ~2 h 25 min/week shopping online.”-Business Standard

Major Pain Points

Women's Safety and Security

Quality home service providers

Lack of market professionalism

Market affordability for students and scholars

Ease of transportation

Less or no support for skill development

Scarcity of jobs and employment

Lack of opportunities for skilled and semi-skilled people

Startup Ideas that Can Help Aspiring Founders Launch Their Own Successful Startup Company

Before we get started on a list of startup ideas for Tier 2 and Tier 3 cities in India, let's take a quick look at the pain points of the middle class and individuals who live in these cities.

Let’s have a look at the startup ideas that have a strong possibility of success in Tier-2/Tier-3 cities in India.

Grocery Home Delivery

Almost everyone desires hassle-free grocery delivery right to their door. This might be one of the profitable concepts where the project satisfies the needs of both consumers and startups.

Mineral Water Supply to Businesses

In Tier-2 and Tier-3 cities, water is readily available, but consumers prefer pure water, which is why business establishments require mineral and purified water.

Water suppliers are typically contacted by small businesses; however, this industry is relatively unstructured.

Online Food Delivery

Among Gen Z and those who enjoy placing online food orders, internet meal delivery is one of the most demanding industries.

Smartphone Market

These days, smartphones are essential for all social classes. However, people always watch the best features and first launches in Tier-2 and Tier-3 cities.

As an illustration of the consumers' obsession with smartphones, consider Flipkart's Big Billion Days and Amazon's Sale.

AI Home Appliances

Nowadays, high-tech home appliances are present in every Indian home, and as a result, their market share is growing quickly. Cities in Tiers 2 and 3 are not far behind.

As per capita income rises, so does the rate of internet shopping, and middle-class consumers like purchasing these appliances, particularly around India's big holidays.

Online Personal Care Services

Due to everyone's hectic daily schedules, nobody has enough time for personal care. This is where ideas for online personal care services enter the picture.

The concerns of middle-class office workers and businesspeople can be solved by launching a personal care app that offers doorstep service in an affordable bundle.

Food and Event Services Industry

The most significant aspect of life in Tier 2 and Tier 3 cities is occasions and celebrations. Everyone enjoys celebrating, but in India's smaller cities, people look forward to the festivities. But without delectable and sanitary food, no celebration is complete.

Although caterers are doing well in small cities, there is currently no structured player in this market that is committed to providing this service without any hassles.

Kids' Schools, Student PGs, and Homestays

Parents are committed to their children's education because they think it is the only path to advancement and growth.

As a result, parents send their kids to school in Tier-2 and Tier-3 cities, but students there typically struggle to find a pleasant and healthy environment.

Offering a PG or homestay could be a problem solver for the issue and a profitable solution for startups as well.

Safety Device in Public Transport

Although there are many options for public transportation, safety is the main concern these days, especially for women and girls who are enrolled in school.

Offering a complete safety solution could be a game-changer for a new business.

Rural Public Transport

Even if rural India is developing, one of the main concerns for the rural populace is still access to efficient public transportation.

Things can change with a safe and affordable rural transportation service.

Rural Healthcare

The situation with rural healthcare is the same. There are numerous government health programs for rural India, but no private company can offer a comprehensive, well-organized platform to offer rural India high-quality, cost-effective healthcare.

Reasonable Supply Chain to Rural India

India is one of the most technologically advanced nations in the world and is expanding quickly.

However, rural India has made the largest contributions, and Indian farmers have played a vital part in this.

Yet, rural India has long struggled to establish a reliable and affordable supply chain, which remains unfeasible to this day.

Although not many players have arrived, the situation is still unclear.

Affordable but Advanced Education System for Rural and Tier-2 and Tier-3 cities of India

One of the most important factors that cannot be disregarded is education. There are numerous government education programs in rural India, but there aren't any significant private companies or startups involved in the education system there.

Obstacles faced by entrepreneurs and startups in achieving success with their startup ideas

This is the first and most prevalent thought that comes to mind: any startup or idea that fails to impress the market in India's Tier-2 and Tier-3 cities.

Wait until the market research is finished and the product and demand are completely satisfied before launching any products. Recognize supply and demand since each market is unique.

Make the startup ideas and concepts resilient enough to handle any market circumstance

Conduct research and release an updated version of the same product under a new brand.

Modify the prior USP and add a distinct one while maintaining the market study at the top.

Make the product quality and price competitive.

Don't undervalue your market and customers.

If necessary, bring on a mentor before launching.

Maintain the flexibility to transition to the second or third revenue models at any time.

Startup Resources: Get in touch for Mentorship, Startup Support, and Business Outsourcing

To comprehend market research and consumer behavior in India's Tier-2 and Tier-3 cities, speak with the WTNInsider Market Research team or startup incubators.

Entrepreneurs and startups seeking to contribute to rural India's development through startup funding can reach out to industry experts, mentors, or startup consultants at WTNInsider.

Disclaimer: The data and statistics provided in this blog are indicative estimates and should not be relied upon for final assessments. It is advisable to obtain an official or verified report before proceeding with the Invest in India initiative.