This document discusses the opportunities and challenges of starting businesses and startups in small cities in India rather than large metro areas. While lower costs and a closely-knit ecosystem can benefit startups, small city markets may have less opportunity or purchasing power. Two startup founders discuss mixed experiences - one grocery delivery startup in Lucknow failed due to an unready market, while a consulting firm in Ranchi has expanded internationally due to local talent and infrastructure. Experts note challenges like lack of mentors, scalability risk, and the need for government support and investor interest to help small city startups succeed.

1. Startups- Preferable ForSmall Cities,Or Not?
Afterthe launchof Startup Indiabythe central governmentinJanuary2015 inan efforttoboost the
startupecosystem,variousstateshave launchedschemesannouncingfunds.The startupcampaigns
motivate entrepreneurstoexploreopportunitiesindifferentstates beyondthe mainmetrocitiesof the
country.Mediareportsalsohighlighted“whystartupsshouldstartbusinessesfromsmall cities”.
Thoughthere are some benefitsforstartupsinsmall citiesyettheyhave tomeetwithsome unexpected
challenges whichcanbe astrivial as gettingsuitableinfrastructure.
In June 2015, AishwaryaJaiswal foundedanon-demandhyperlocal deliveryservice forgroceryand
householditemsinLucknow whichis calledGharbaithay.com. The startupworkedonthe JustinTime
(JIT) model where customerscouldordergoodsoverthe phone,website andWhatsApp. Withinthree
monthsof the launch the startupwas offeringservicesinvariousareasof the cityand taking12-15
ordersa day withan average ordervalue of Rs 1,000.
Duringmarketresearch,Aishwaryaestimatedthe size of the grocerymarketinLucknow tobe around
$1.5 billionandobservedthatthe share of online wasalmostnegligible.So he decidedtolauncha
businessinthe marketwhichwasstill untouched.Howeverthe marketdidn’trespondasexpectedand
he saw hissales gettingstagnantaftera pointof time.In the nextthree months he hadto shut the
business. The marketisnotreadyintierII and IIIcities forhyperlocal servicessuchasgrocerydelivery
and home-servicessaidJaiswal.
In metros there’salarge workingpopulationwithhighpurchasingpower hence theyare more likelyto
opt forsuch hyperlocal servicesthanpeoplefromnon-metrocities.

2. SumitYadav whoisthe vice-presidentof JharkhandInnovationLab,whichis a government-backed
platformforstartups revealedthathe observedstartupsgrapplingwiththe challenge of societal
acceptance.
Yadav saidthat manypotential ideasoftengetdilutedasthe targetmarketin small citiesrejectsitoris
not evenreadytotry it.The culture of the startup ecosystemisnotdevelopedyet, because thereare
still issuesof infrastructure,capital andmarketgrowthinsmall cities. Butitisnota bad ideaeither,
Here’swhy. AmiteshAnand whorunsabusinessandmanagementconsultingfirmcalled36Pi from
Ranchi whichis the capital of Jharkhand,saidthat a tierII citysuch as Ranchi is one of the bestplacesto
run a startup like his.
His firmhelpsstartupsaswell asvariouskindsof businesseswithcustomerengagement,
conceptualizingsales,marketingstrategy,digital strategy,marketexpansion,digitaltransformationand
manyother processes. 36Pi whichisheadquarteredinRanchi hasexpandeditsbusinesstill Dubai and
plansto openan office inthe UK.
Anandsaidthat for businesseslike theirsthiscityisthe perfectplace.There’snodearthof facilities
here. They have reputedcollegesfromwheretheycanhire a pool of talent,airconnectivityfromRanchi
isgood and infrastructure hasdevelopedinthe pastfew years.He explainedthatthe otheradvantages
inrunninga businessfromsmall citiesare costeffectiveness,highprofitabilityandease of mind.
These factors cannot be true for everytierIIcityin the country,some of whichare grapplingwith
somethingasbasicas internetconnectivity. AnandpointedoutthatPatna whichis the capital of Bihar is
one such tierIIcity whichlacksa conducive environmentforstartups.
On the otherhand, ParveenSinghal whoisthe co-founderof Wittyfeed isbasedoutof Indore.He said
that itis all aboutcreatinga perception andhe wouldliketobelieve thatastartupcan rise fromany
city,be it metrosor non-metros. Whenwe startedoutin2014 fromIndore he justwantedto create
awarenessthatthere isa huge opportunityavailable inthe citythatcan contribute tothe startup
ecosystem.Inthe lastthree years they have beenable tocreate a ripple andmove froma small teamto
a 120-memberteam.

3. Yet it’sstill noteasy because the obviousbenefitsforstartupsbasedintier-IIandIIIcitiesare lower
operational andhumanresource costs. Alsothe startupecosystemof smallercitiesiscloselyknitandis
at easydisposal toeverynewentrant.Challengesinclude lackof marketopportunitywithinthe city
whichimposesahighriskon scalability.Also,lackof exposuretoa goodmentornetworkinsmaller
citiesmaybecome a bottlenecktotheirgrowthstory.
Khuranasaidthat at ChandigarhAngelsNetwork,theiremphasisisnotjustonaddingmore companies
to our portfolio. They have ratherbeenstrivingtoprovide networkaccess,mentoringandhandholding
our portfoliostartupstothe bestof theirabilities.
RS Bhatiawho isthe founderof Chandigarh-basedPumpkartsaidthe governmentshouldcome forward
by providingfundsandskilledmanpowertosmall citystartups.Besides,investorsshouldnotshirkaway
fromsuch startupsand shouldcome forwardto supportthem.