India’s startup ecosystem is gradually expanding beyond its traditional strongholds, with emerging cities beginning to play a more visible role in entrepreneurial activity. While established hubs such as Bengaluru, Delhi-NCR, and Mumbai continue to dominate funding and scale, newer regions are contributing to a broader, more distributed innovation landscape.

According to a report by Tracxn Technologies Ltd., more than 68,000 startups are now headquartered outside India’s primary startup hubs as of December 2025. 

However, this expansion is not just about numbers. It reflects a structural shift where entrepreneurial activity is no longer confined to large metros, even though outcomes such as funding, scale, and exits remain concentrated.

Growth driven by regional clusters

The spread of startups beyond major hubs is not uniform. Instead, it is concentrated in a set of emerging cities including Jaipur, Indore, Kochi, Surat, Coimbatore, and Lucknow. 

Data from the report shows that the top 10 such cities account for nearly a quarter of all startups outside major hubs, reinforcing that growth is cluster-led rather than evenly distributed. 

Jaipur alone hosts over 2,300 startups, significantly ahead of other cities like Surat and Indore.   This points to the emergence of a second layer of startup ecosystems that are building depth over time, rather than a widespread expansion across smaller towns.

Sectoral trends further explain this growth. Startup activity in these regions is largely driven by consumer demand. Edtech dominates, with K-12 and continued learning together accounting for nearly 4,400 companies, followed by internet-first media, fashion tech, and online grocery. 

These sectors are typically less capital-intensive and more aligned with local demand, making them easier to build outside major startup hubs.

Funding momentum with structural gaps

Between 2016 and 2025, startups outside India’s key hubs raised approximately $3.2 billion across around 2,200 funding rounds. 

But the more telling number is this: they account for 8.6% of total funding rounds, yet only 2.1% of total capital deployed in India. 

This gap highlights a structural imbalance. These ecosystems are active at the entry level but struggle to attract large cheques.

The funding cycle over the decade reflects this clearly. Capital deployment peaked in 2022 at $880 million before declining sharply and then recovering to $519 million by 2025.   This volatility mirrors global venture cycles but also shows that emerging ecosystems are more sensitive to funding slowdowns.

At a deeper level, funding is becoming more concentrated. While total funding has grown over fivefold since 2016, deal volumes have not kept pace, indicating that investors are backing fewer companies with larger cheque sizes. 

Median round sizes have also increased significantly, rising from about $167,000 in 2016 to $454,000 in 2025.   This shift suggests a move toward conviction-led investing, where capital is concentrated in startups with clearer growth visibility.

Scaling remains the biggest challenge

The most critical gap in these ecosystems is not startup creation, but scale. While seed funding has grown more than sixfold over the decade, fewer than 15% of startups manage to progress from seed stage to Series A. 

Early-stage funding has remained relatively stable but volatile, while late-stage funding is highly episodic. For instance, late-stage capital surged to $564 million in 2022 but dropped sharply to $34 million in 2023 before partially recovering. 

Capital is concentrated in a few winners

A closer look at funding distribution reveals how skewed the ecosystem is. The top 10 funding rounds alone account for nearly $1 billion, with companies like Meril and DeHaat attracting a disproportionate share of capital. In fact, just two companies account for over 60% of funding within the top deals. 

City-level data reinforces this pattern. In places like Vapi and Patna, a single company accounts for almost all major funding raised in the region. 

Jaipur stands out as an exception, where funding is more evenly distributed across multiple companies, indicating relatively stronger ecosystem depth. This reflects what the report describes as a “barbell structure” where a small set of high-performing startups attract large capital, while the majority operate with limited funding access.

Limited but notable scale outcomes

The emergence of large-scale startups from these regions remains selective. Companies such as CarDekho and Molbio Diagnostics have achieved unicorn status, demonstrating that high-growth outcomes are possible outside traditional hubs. 

However, these are exceptions rather than indicators of ecosystem maturity. As of early 2026, within this analysis, 82 unicorns are headquartered within India’s Key Startup Hubs, while only two have emerged from cities beyond them, bringing the total to 84 unicorns. Startups outside major hubs account for only about 2% of India’s total unicorn base. 

These companies also tend to take longer to scale. CarDekho took around 13 years to reach unicorn status, while Molbio Diagnostics took over two decades. 

How early-stage investors play a key role

The expansion of startups in emerging regions has been supported largely by early-stage investors. Angel networks and seed-focused platforms such as Venture Catalysts, Inflection Point Ventures, and IIMA Ventures have been instrumental in funding early-stage ventures. 

More than 580 investors are active in these ecosystems, but most operate at the seed stage with cheque sizes ranging between $230,000 and $3 million. 

Unlike major hubs, where large growth funds drive scale, investor participation here remains focused on validation, mentorship, and early-stage support.

Gradual improvement in exit activity

Exit activity in emerging startup ecosystems has shown steady, though measured, progress. Between 2016 and 2025, there were 102 acquisitions and 33 IPOs involving startups from these regions. 

Acquisitions remain the dominant exit route, though IPO activity is gradually increasing, with a small number of companies accessing public markets in recent years. 

The road ahead

The report stated that these regions now host a large and active base of startups supported by strong founder participation and demand-led sectors, but scale outcomes remain concentrated.

“This reflects structural gaps in mid-stage funding, execution depth, and follow-on capital, rather than a lack of entrepreneurial activity. Looking ahead, the next phase of ecosystem development will depend less on expanding the number of startups and more on strengthening the pathway from early validation to scale,” the report stated.