Geographic and Sectoral Spread: Did the growth of the startup ecosystem remain concentrated in Tier-1 cities (Bengaluru, Mumbai, Delhi-NCR), or did regulatory and policy support (like Startup India) successfully foster genuine innovation hubs in Tier-2 and Tier-3 cities? 

The growth of the Indian startup ecosystem has demonstrably shifted its geographic concentration between 2015 and 2025. While Tier-1 cities (Bengaluru, Delhi-NCR, Mumbai) remain the primary hubs for capital and unicorns, regulatory and policy support, primarily through the Startup India initiative, has successfully fostered genuine entrepreneurial activity and innovation hubs in Tier-2 and Tier-3 cities.

This is evidenced by the increasing share of new, recognized startups originating from non-metro areas, marking a major success in the policy's goal of democratization.

1. Quantifiable Geographic Shift

The data from the Department for Promotion of Industry and Internal Trade (DPIIT) clearly shows a structural move away from exclusive metropolitan concentration.

The most striking figure is that by late 2025, over 40% of newly recognized startups originate from Tier-2 and Tier-3 cities. This indicates that while the absolute volume of funding remains concentrated in major metros, the rate of new company formation has been successfully decentralized.

2. Policy and Infrastructure as Growth Drivers

This geographic diversification is a direct result of coordinated policy support and technological infrastructure:

A. The "Startup India" Policy Thrust

• Financial Support Schemes: Schemes like the Startup India Seed Fund Scheme (SISFS) and the Fund of Funds for Startups (FFS) have provided early-stage capital, often reaching incubators and promising ventures in smaller cities where private Venture Capital (VC) presence is low.

• Incubation and Mentorship: Initiatives like the Atal Innovation Mission (AIM) have focused on establishing Atal Incubation Centres (AICs) and Tinkering Labs across non-metro regions. This provides crucial infrastructure, mentorship, and networking opportunities that were previously exclusive to Tier-1 hubs.

• Ease of Doing Business: Simplification of compliance, self-certification, and the availability of single-window clearances via the Startup India portal have made it easier for entrepreneurs in remote locations to register and operate formally.

B. The Digital Public Infrastructure (DPI) Effect

The technology stack (Aadhaar, UPI, high-speed mobile data) has dramatically reduced the cost of operating a digital business anywhere in India:

• Affordable Operations: Entrepreneurs in Tier-2/3 cities benefit from significantly lower operational costs (rent, talent wages) compared to Bengaluru or Mumbai.

• Market Access: Digital platforms allow entrepreneurs to sell goods and services (e.g., through ONDC or e-commerce) to a national customer base without needing a physical presence in a Tier-1 market.

• Talent Pool: The expansion of digital education and remote work models has made skilled talent accessible and affordable in these smaller cities, feeding the local startup ecosystem.

3. Emergence of New Regional Hubs

Specific Tier-2 cities are emerging as genuine, sectoral innovation hubs, driven by local strengths and government support:

• Jaipur: Emerging as a strong frontrunner, particularly due to state support like the 'iStart' program.

• Lucknow, Indore, Kochi, Coimbatore, and Bhubaneswar: These cities are consistently ranking high in the number of new startup incorporations, often specializing in sectors relevant to their regional strengths like AgriTech, HealthTech, and EdTech.

While Tier-1 cities still attract the lion's share of late-stage VC funding, the policy support has successfully catalyzed the essential, foundational step: the creation of a robust and geographically diverse pipeline of new entrepreneurs and businesses.