Social commerce startup DealShare which had launched its operations from Jaipur in 2018 had bagged a considerable $144 million in funding led by Tiger Global last year which took its total fund count to about $183 million. The firm which is currently valued at about $455 million is in the midst of closing its Series E investment round. Like DealShare, many startups are getting launched from cities like Indore, Ahmedabad, Jaipur, Lucknow, Kolkata and Bhubaneswar, regions analysts often collectively describe as the “emerging startup hubs.” While Delhi-NCR, Mumbai and Bengaluru due to their sheer size and scale certainly continue to lead the startup ecosystem, they are no longer the only cities credited with nurturing scores of fledgling newage firms. “Most of the valuable startups will come out from places or business ideas which are applicable for mass India. To incubate in a city which is closer to mass India makes sense. Our investors came to Jaipur to review our pitch rather than seeking a meeting in Mumbai or Bengaluru,” Sourjyendu Medda, founder at DealShare, tells Fortune India. DealShare sells grocery and essentials to mid-income households that typically earn less than ₹50,000 per month.
A recent report by Nasscom and Zinnov said as much as 29% of all tech startups today are based in the emerging startup hubs. In fact, Jaipur has also joined the list of unicorn cities last year. Investors have infused about $850 million in capital into such companies over the last three years. Atit Danak, principal & head, CoNXT Practice at Zinnov, expects the overall share to rise from 29% to about 35%-45% in the coming years. “It will be a consistent and gradual increase,” says Danak. In fact, while only 25% of startups incepted in 2017 were based in emerging hubs, the number rose to 40% in 2021. There is a willingness among investors to scout and invest outside large start-up hubs to find opportunities, especially at pre-seed and seed stages, says Danak. Besides, “it is also cost-friendly for pre-seed and seed-funded startups to begin their journey from tier two or three cities. These cities are perfect launchpads for the new-age entrepreneurs, with good infrastructure and active support from local governments to attract businesses,” says Taranjeet Singh Bhamra, CEO and founder, AgNext Technologies, an agritech startup which started its operations in Mohali. Cities like Chandigarh have emerged as innovation hubs with suitable market conditions and enough demand generation to support the rapid pace of progress, adds Bhamra. Talent is not that much of a problem either. “Indore has an IIM. Kolkata is way ahead in terms of quality education. People living in areas beyond the established startup hubs are well educated. They just lacked better choices,” adds Medda.
Kolkata-based home decor startup Nestasia says that good port connectivity and easy access to local artisanal talent make West Bengal’s capital city a lucrative startup seat. “West Bengal is the hub of East India,” say co-founders Aditi Agrawal and Anurag Agrawal. The firm is planning to broaden the selection of its products and having a choice of local craft within the product mix can attract more customers who are always looking for varied options. Nestasia sources products from across the country infused with Indian attributes like cotton rugs from Agra, Channapatna handicrafts from South India and certain items from Jhargram.
Jaipur-based Frontier Markets is helping consumers in rural India get access to a spate of consumer durables, smart energy products and essentials. The rural commerce platform is tapping into the vast network of rural women and empowering them with technology to facilitate the process. These women entrepreneurs are local influencers and act as mediators between the customers and brands selling on the platform. They are equipped with apps to enable orders and delivery of products to last-mile villages. “E-commerce companies face fundamental challenges in addressing the rural market despite rising rural consumer spends and demand. We have cracked this problem by investing in women and technology. The markets are in new cities, in rural villages,” says founder & CEO Ajaita Shah.
“Emerging startup hubs are building for Bharat,” say analysts. Almost 70%-80% of the demand is coming from tier two and three cities, notes Tauseef Khan, co-founder & CEO at Indore-based agritech firm Gramophone.
DealShare is planning to expand into 20 states and 300 cities by December 2022 from the current 10 states and over 100 cities. “We are very close to a $1 billion gross revenue run rate already and aim to further grow by five times this year,” says Medda. Gramophone has widened its base of farmers to 12 lakh from about 2-3 lakh. The strategy now is to build on its expansion into other states like Rajasthan, Punjab, Haryana and UP before foraying into South India. AgNext is eyeing international launch and has zeroed in on Abu Dhabi and Vietnam.
The only constraint of the emerging startup hubs is the inadequate availability of high quality engineers or people equipped with knowledge of deep tech, says Medda. DealShare has shifted part of its operations to Bengaluru although 40% of its team is still housed in Jaipur. “Even when 90% of our operations were in Jaipur, we still had a tech team in Bengaluru,” says Medda.