- Apoorv Ranjan Sharma
Ritesh Agarwal, the founder and CEO of OYO, India’s largest hospitality chain, is an inspiration to many. The 26-year old also happens to be the youngest self-made billionaire in the country worth an estimated $1.1 billion. With deep-pocketed investors like SoftBank, Sequoia Capital and Lightspeed Venture Partners on board, Agarwal has turned his startup into a network of comprising over 13,000 properties across seven countries – within just 6 years. Agarwal’s journey as an entrepreneur is undoubtedly impressive; more so because he comes from a rather unknown town in the eastern state of Odisha. But, the business tycoon never let his humble background become an obstacle. Instead, he used this to his advantage.
Agarwal’s success story yet again proves the startup culture has expanded well beyond the metros into India’s hinterland. Once considered a big city phenomenon, tier-II and tier-III cities have now taken to entrepreneurship. Across small towns in the country, in places as diverse as Kanpur, Indore, Kozhikode, Siliguri, Ranchi, Lucknow and Trivandrum, more aspiring entrepreneurs are coming up with disruptive ideas.
While cities like Mumbai, Delhi, and Bengaluru experienced the first wave of startup revolution, increased digital penetration coupled with government initiatives has helped create a level-playing field for the small towners. Yet, there are some differences between entrepreneurs from metros and non-metros, in terms of ideas, marketing, operations and even offerings.
Urban Challenges vs Real Problems
Startups in metros are mostly focussed on urban woes like last-mile connectivity, housing shortage, sewerage problems and vehicular pollution, whereas startups in small towns address real problems. Be it healthcare or education, they are looking to solve universal problems that concern larger segments of the population. Interestingly, startup founders in tier-II and tier-III cities often draw inspiration for their ventures from personal experiences. Take, Raveendran, the founder of BYJU’s, for example. Born and brought up in the tiny village of Azhikode in Kerala, he realized that students in rural areas had little to no access to quality coaching and learning facilities.
Entrepreneurship is a no easy feat and startup founders across geographies handle similar responsibilities, that is, marketing the product/service, acquiring customers, building connections and reaching out to investors. However, entrepreneurs in small towns seem to be more dedicated and driven, as compared to their urban counterparts. Since they have a first-hand understanding of the problem they aim to solve, entrepreneurs from non-metros tend to take a hands-on approach to come up with nifty, viable ideas that resonate specifically to the local market. This is something a startup founder from Bengaluru, Delhi, or Mumbai wouldn’t necessarily comprehend.
Even though this trend is slowly reversing, investors have historically chased startups based out of metro cities. Hence, an entrepreneur based out of a large city finds it less challenging to have access to funding or networking opportunities. Raising funding is not the only barrier startup founders outside urban settings face. Lack of startup incubators and mentorship programmes is another factor that hinders their growth. Yet, at the same time, these challenges make small town entrepreneurs more resilient and tenacious. With an insatiable appetite for success, they draw strength from their struggles. However, in recent years, a few venture capital funds and high net worth individuals have been making efforts to create a supportive ecosystem of angel investors and startup mentors to provide comprehensive assistance to aspiring entrepreneurs in tier-II and tier-III cities. According to industry estimates, Indian startups outside major startup hubs managed to raise funding worth $165 million across 18 deals in 2019.
With limited access to resources, small-town entrepreneurs look for the most cost-effective way to build and market their products. The same goes for operations and scaling up efforts. Investors also feel that startup founders in non-metros take a more frugal approach when it comes to spending money, eyeing a sustainable, long-term growth. Moreover, the setting up and operational costs of a business in tier-II and tier-III cities, and rural India are much lower than in metropolitans. Other perks of starting up a venture in outside metros include low-cost and quality manpower and affordable amenities.
As the 3rd startup largest startup ecosystem in the world, India has emerged into a breeding ground for innovation. Alongside metros, entrepreneurs from tier-II and tier-III cities as well as rural areas have played a pivotal role in bolstering the country’s startup space. With support from both government and private players like VCs, local entrepreneurship in India will continue to flourish.
Apoorv Ranjan Sharma is the Co-Founder & President at Venture Catalysts. Views expressed are the author’s own.