India’s smaller cities are no longer playing catch-up. With over 51% of registered startups now emerging from Tier‑II and Tier‑III cities, venture capital firms are taking notice. In a significant move, Swishin Ventures, a domestic early-stage VC fund, has secured SEBI approval for a $20 million fund—specifically aimed at identifying and nurturing high-potential ventures beyond India’s traditional metros.
Why Tier‑II/III Cities Are Now the Focus
According to DPIIT and Startup India data:
- Over 65,000 startups are now registered in non-metro cities.
- These cities host nearly 60% of India’s annual engineering graduates.
- Talent availability, lower operating costs, and growing digital literacy make them fertile ground for innovation.
However, despite this surge in entrepreneurial activity, less than 4% of total VC funding flows into these regions. This mismatch is now drawing attention from both Indian and international investors.
Swishin Ventures Leads the Way
Founded by Gaurav Singhvi, Swishin Ventures’ $20M fund (with an optional $5M green-shoe extension) is among the first institutional vehicles focused entirely on Tier‑II/III innovation.
Investment Thesis:
- Focus on early-stage (Seed to Pre-Series A) startups in cities like Jaipur, Indore, Nagpur, Kochi, Lucknow, and Coimbatore.
- Priority sectors include agritech, healthtech, edtech, and SaaS for Bharat.
- Strong mentorship and growth support model through accelerators and city-wise micro-hubs.
“Great businesses aren’t just born in Bengaluru or Mumbai. They’re thriving in Patna, Ranchi, and Surat too—we’re here to give them the backing they deserve,” Singhvi said in a recent interview.
What’s Driving This Shift?
Several ecosystem trends are converging:
| Trend | Impact |
|---|---|
| Remote work normalisation | Founders can build from anywhere; team distribution has gone mainstream. |
| Rise of vernacular internet | Products in native languages are creating new markets across small towns. |
| Local incubation & colleges | IIITs, NITs, and local engineering colleges are churning out tech-savvy founders. |
| State-led startup policies | TN, Rajasthan, UP, and Kerala have launched startup mission schemes and funding. |
Global VCs Also Enter the Picture
Global funds are no longer ignoring this trend. Several moves in recent months underscore this momentum:
- Accel Atoms program now actively scouts in Gujarat, Odisha, and Punjab.
- Sequoia Spark and 100X.VC launched city-wise outreach and webinars.
- Google for Startups and AWS Activate held accelerator events in Indore and Trivandrum in 2024–25.
This localization of capital and mentorship is reducing founder migration to metros and enabling “build local, scale global” models.
Data Snapshot
| Metric | Value (2025) |
|---|---|
| Tier‑II/III startup % | 51%+ of all DPIIT-registered startups |
| Share of VC funding | <4% of national total (rising) |
| Engineering grads in Tier‑II/III | 60% of total graduates annually |
| Top sectors | Agritech, AI tools, healthcare, SaaS, logistics |
Future Outlook
As VCs embrace Bharat’s entrepreneurial spirit, expect to see:
- More localized funds with smaller cheque sizes (₹50L–₹2Cr)
- City-level demo days and pitchathons
- Startup–college partnerships for early validation and talent access
- Government–private co-investment models
This trend marks a powerful decentralization of India’s innovation economy. With the right capital and mentorship, Tier‑II and Tier‑III startups could be the force that drives India’s next 100 unicorns.
Final Thought: The next Zerodha, DeHaat, or Meesho might not be born in a metro—it could emerge from the heart of Bharat. And this time, capital is finally following talent.