Beyond Bengaluru, startups are rising but big capital remains unconvinced

A recent report shows that more than 68,000 startups are now headquartered outside key startup hubs like Bengaluru and Delhi, yet they attracted only 2.1 per cent of capital deployed in India between

India’s startup map is widening beyond its traditional strongholds of Bengaluru, Delhi-NCR and Mumbai, with thousands of companies now emerging from smaller cities. A report by market research firm Tracxn shows that more than 68,000 startups are now headquartered outside key centres like Bengaluru, Delhi-Gurugram-Noida, Mumbai-Navi Mumbai-Thane, Hyderabad–Secunderabad, Chennai, Pune, Ahmedabad, and Kolkata, signalling a steady geographic spread of entrepreneurial activity in India.

 

However, despite this expansion, access to capital remains mostly constrained.

 

Between 2016 and 2025, startups outside these hubs accounted for 8.6 per cent of total funding rounds but attracted only 2.1 per cent of capital deployed in India. This highlights a significant gap between participation and funding outcomes.

 

 

Where are startups emerging beyond the traditional big hubs

 

Importantly, the report notes that startup activity beyond the major metros is not evenly distributed but concentrated in a set of emerging regional clusters.

 

Cities such as Jaipur (2,331 startups), Surat (1,297), Indore (1,169), Lucknow (1,006), Coimbatore (956) and Kochi (919) account for a disproportionate share of new ventures.

 

Together, the top 10 cities contribute nearly 24 per cent of all startups outside the key hubs, suggesting that growth is being driven by a second layer of urban ecosystems rather than widespread diffusion across smaller towns.

 

Even so, the scale of activity still lags behind the established centres. The report shows that key hubs account for more than 111,000 startups, compared with just over 68,000 outside those hubs.

 

Sectors driving the startups expansion

 

The sectoral mix outside major hubs differs sharply from that of Bengaluru or NCR. Startup formation is largely demand-driven and consumer-focused.

 

> EdTech segments leading: over 4,395 companies across K-12 and continued learning

 

> Internet-first media: 2,370 startups

 

> Fashion tech: 2,238 startups

 

> Online grocery: 2,011 startups

 

These sectors indicate the patterns of local consumption, low capital needs, and regional familiarity with the markets, as opposed to a focus on deep tech or enterprise software, which is more common in other startup ecosystems, the report notes.

 

Why is funding still limited despite the growth?

 

While the number of startups created has increased, funding has not kept pace. Startups outside the key startup ecosystems received a total of $3.2 billion across about 2,200 funding rounds between 2016 and 2025, but the capital is highly concentrated.

 

The report also notes that only 920 startups have raised seed and later-stage funding, while only 139 have secured Series A funding and beyond. This shows a sharp gap in converting early interest into sustained investor confidence.

 

Large funding deals are less common but more concentrated. The top 10 funding deals alone accounted for $954 million, with companies like Meril and DeHaat leading the way.

 

Investor participation is active but largely limited to early stages. Around 587 investors have backed startups beyond key hubs, led by angel networks and early-stage venture platforms with typical cheque sizes ranging from $230,000 to $3 million, indicating a focus on seed and early validation rounds.

 

However, late-stage capital remains more episodic. Funding peaked at $880 million in 2022 but dropped sharply to $353 million in 2023, reflecting sensitivity to broader market cycles.

 

What does this mean for India’s startup ecosystem?

 

The data suggests a structural imbalance. While the creation of new startups outside India’s main hubs has grown significantly, access to capital remains limited and selective, especially beyond seed funding. Most ecosystems are able to create new startups but struggle to help them scale further.

 

Thus, while smaller cities are contributing to the breadth of India’s startup ecosystem, large funding, unicorn creation, and exits continue to be concentrated around established hubs, with newer ecosystems yet to achieve similar depth.