Beyond the metros: Startups find scale and talent in India's smaller cities

India’s smaller (Tier-2 and Tier-3) cities are driving a hiring boom, especially in the IT sector, where recruitment surged by 53% year-on-year in June 2025, nearly twice the national average, according to the latest foundit Insights Tracker. And the momentum isn’t limited to the tech sector. In June, hiring for fresher positions also saw an 11% jump, according to Naukri, driven by non-IT sectors such as hospitality, oil and gas, and real estate. Overall, white-collar hiring in Tier 2 cities is now outpacing that in metro markets.

The shift signals a continuing shift in India’s entrepreneurial geography, with 51% of DPIIT-recognised startups today emerging from Tier 2 and Tier 3 cities, including Chandigarh-Mohali, Jaipur, Ahmedabad, Visakhapatnam, and Guwahati, among others. They not only offer job seekers more opportunities close to home but also enable employers to scale up without incurring excessive cost burdens. Fortune India spoke to a few companies that have chosen to build from outside the metros, both by design and necessity. Their stories offer insight into why these smaller cities are becoming vital to India’s growth narrative.

Building for 'Bharat’: Finvasia’s Fintech Mission

Chandigarh-based Sarvjeet Singh Virk, co-founder of Finvasia and creator of Jumpp, an AI-based fintech platform, says the real opportunity lies in the mindset of Tier-2 and Tier-3 India: “Hiring in Tier-2 and Tier-3 cities is no longer just a cost-saving strategy, it’s about proximity to a highly engaged, hungry-to-learn population.”

His company is deliberately focused on these underserved markets. Speaking about the benefits and challenges of working from a Tier-2 city, Virk says: “Chandigarh is something we are proud and happy about, building things from here. But at times, there are always challenges, especially in cities like Chandigarh, which are more service-driven. That’s exactly what our focus was: to keep the baseline and focus more on Tier-2 and Tier-3 cities, where people feel they might be paying more, even in the learning curve of getting into the capital market.”

Finvasia also operates Shoonya, a zero-commission trading platform catering to retail investors across India. With over 400,000 active users, expected to reach half a million this year, it is among the top 20 brokers by monthly new client additions, according to Virk. The company is bootstrapped, with approximately 500 employees, and operates in 12 countries, including Mauritius, Greece, and various European countries. "We’ve been cautiously bootstrapped to ensure we don’t lose sight of our vision and remain fair to the business. Sometimes, when you build things on your own, you become more cautious in making the right decisions. Raising capital should not just be a news article for a day; it should genuinely add value.”

Finvasia’s latest bet is Jumpp, which Virk describes as India’s first AI-based conversational fintech super app: “You can talk to your data, it reads your past spending, helps you budget, and even predicts what you might need next month. Our goal is simple: make every Indian’s financial life smarter, no matter where they live or what language they speak.” With Jumpp, Finvaisa aims to localise the AI layer for “Bharat": “jAI, the Hindi‑language AI layer powering Jumpp, is built in Hindi right now, and over time, we’ll diversify. Once this becomes accessible in small towns, imagine what they can achieve when they can talk to their data and the data talks back.”

Global HR Tech Product from Guwahati

Another standout example is Vantage Circle, an HR tech SaaS firm bootstrapped and built out of Guwahati. Initially launched as a deals and discounts site, the company now offers a full suite of employee engagement tools, including rewards, recognition, wellness, and surveys. It serves large clients such as Wipro, Infosys, Cognizant, Tata Motors, and recently signed TCS North America. “We started with deals and discounts… but then we moved to VantageCircle.com to become a little bit more…wider in the offering…we wanted to explore other products in the employee engagement space,” says co-founder and CTO Anjan Pathak.

The company’s flagship product, Vantage Recognition, integrates with gift card providers globally, enabling employees to redeem recognition points on platforms such as Amazon, Flipkart, Best Buy, and others. “Our main USP now is that we have integrated our platform with gift card companies from all over the world…in India, you can redeem against Amazon or Flipkart…in the U.S., gift cards like Best Buy, Amazon and others.”

Together, the company calls it the “Vantage Rewards” platform. “Now we have renamed that to Vantage Recognition…that platform has two components, recognition and appreciation. One is basically with monetary value, the other is without.”

Vantage’s tech capabilities are strong enough to power Engage2Excel, a US-based HR firm that white-labels its platform. "We have even widely built our technology to another… HR information company in the US, which is Engage2Excel. They are selling it to their clients.” On how AI is embedded, Pathak explains: "We call it applied AI. For example, if you want to recognise someone...we embed that function inside our product using ChatGPT’s APIs. That’s what we have done."

The Macro Picture: Decentralisation is Real and Accelerating

Nirmit Parikh, founder and CEO of Apna.co, a jobs and professional networking platform that focuses on blue- and grey-collar workers and freshers in Tier-2 and Tier-3 cities, confirms that the trend is real and growing by the day. In Q1 2025 alone, over 40% of the company’s new users came from non-metros, clear evidence of decentralised digital adoption and job-seeking intent. “We recorded over 1.81 crore job applications across India, with remarkable momentum from cities such as Indore, Lucknow, Bhubaneswar, Jaipur, Guwahati, and Rajkot...Freshers from non-metros accounted for a major chunk of the 66 lakh+ applications recorded on Apna in Q1 alone,” Parikh tells Fortune India.

According to Parikh, the platform experienced a 92% year-over-year surge in enterprise job applications from women, particularly in smaller towns. "There was also a 46% increase in applications from freshers, revealing a young, ambitious, and digitally enabled workforce ready to build, innovate, and scale."

Mukul Goyal, Co-founder of Surat-based business management consulting firm Stratefix Consulting, says this decentralisation is not a phase, but a fundamental shift: “The transformation of India’s startup landscape is undeniable, Tier-2 cities have evolved from talent feeder pools to dynamic innovation hubs. This isn’t merely about cost arbitrage; it’s about accessing untapped potential.”

Goyal attributes the growing shift to improving educational infrastructure in these cities, which produce 60% of India’s graduates, many of whom choose to remain local rather than migrate to metros. "Operational costs are 25-40% lower than metros, whilst talent costs drop 20-30%. Crucially, attrition rates are 15-20% compared to those in metros, which are 35-40%, indicating superior talent retention. Tier-2 cities offer startups resilient talent pipelines, cost efficiency, and often deeper market insights for Bharat-focused solutions, making them indispensable for India’s next growth phase."

Neelabh Shukla, CBO at talent solutions provider Careernet, sums it up best, saying that startups and GCCs are no longer looking at these locations for cost savings alone but discovering a workforce that is digitally skilled, scalable, remote-ready, and remarkably stable. “As India’s innovation economy decentralises, these hubs are becoming essential to long-term workforce strategy, helping companies scale sustainably while contributing to regional growth.”