Homing in: The startuppers who want to transform their own backyards

Things were going well for Hitesh Dharmdasani. After finishing a masters in cybersecurity in the US, he’d been working at a startup in San Francisco. That company did an IPO, leaving Dharmdasani with a handsome sum in his bank account. This is back in 2015 — a period he describes as a “post-recession boom” in the US startup ecosystem. So, his plan to move back to India, and that too, his hometown of Belagavi, Karnataka, struck others as, politely speaking, sort of stupid. But he’s been running his cybersecurity startup out of the small town for many years now, and has even created an organisation called Belagavi Technology Companies Association (BeTCA) to bring together the small but budding startup ecosystem of Belagavi.Like him, many entrepreneurs are looking beyond the charms (and problems) of big cities like Bengaluru, Mumbai or Gurgaon and homing in on their own backyards. This is also why Tier 2 and 3 cities are seeing so much startup action. A 2024 report by Primus Partners found that 90% of startups in 2023 were started in Tier 2 and 3 cities. These startups creating 150 lakh jobs last year.Anugraha Ganesan and Dinesh Baluraj moved back from the Netherlands to Thanjavur, Tamil Nadu’s rice bowl, to launch their drone startup Yali Aerospace in 2022. “People didn’t take our work seriously based on location. We met hundreds of venture capitalists. Some ignored us, some treated us poorly. A few asked us to move to Bengaluru or hand over the technology. I was getting good pay abroad, so I was not here to make quick money,” Baluraj told TOI. Their patience paid off — this year, Zoho founder Sridhar Vembu invested an undisclosed amount in their startup.The pandemic played a big role as many entrepreneurs returned to their hometowns during lockdown, and found that remote working let them function just as efficiently. It changed mindsets too. As Dharmdasani puts it, “Before that, people believed that if you don’t move to a bigger city for greener pastures, you’re not living the good life.”Others, of course, were far ahead of this change. Rohith Bhat moved back to Udupi a year after starting his company Robosoft out of Mumbai. “In the first two years, I was building software and delivering it to American clients like Apple. This was all happening over the internet, so I saw no reason to stay in Mumbai. Everyone told me I was cray, but luckily things worked out,” he says. He sold Robosoft to a Japanese firm for $100m. He now runs a gaming company called 99Games. “If I could do it in the ’90s, why would someone think they can’t do it now?” medium111365223Bhat acknowledges that it’s not all roses. “It takes convincing to persuade middle management, in particular, to move to smaller places. My pitch to them has been that it’s a great lifestyle decision. If they’re still able to do cutting-edge work and have a better quality of life, they are happy.”Amey Kadle, founder of Ajinkya Technologies and member of Belagavi-based BeTCA, says that while finding talent is not that hard, retaining it can be challenging. “We’re able to offer salaries at par with Bengaluru organisations. But there are issues with retention. With young men, when it comes to having an arranged marriage, they want to move away because it’s hard to find a match. Parents don’t want their daughter to marry a boy in Belagavi. We actually just started a small Bengaluru office for this reason,” he says. Plus, for people in relationships, it can be hard for both parties to find employment they’re happy with in a small town.Another potential hurdle is funding, founders say. While things have changed in recent years — Bhat had been laughed out of the room when he was raising funds in 2013, and was told that no one funds companies in small towns — there are still challenges when it comes to courting venture capitalists. For one, some investors like to keep a close eye on the startups they invest in, so the distance may prove to be a hurdle. Sajith Pai of Blume Ventures says while he wouldn’t turn a startup away for funding because they’re from a small town, he does see it as a constraint. “I’ve only seen a few high-quality startups in Tier 2 and 3 cities because investing and talent are challenges. If it’s very early on and you want to bring a small group of people together, it makes sense. But long-term, it makes sense to be in Bengaluru or in Delhi if you’re a consumer brand.” There’s a reason, he says, that small-town startups often move to a big town to scale up. ShowQuotesJivraj Singh Sachar, host of the Indian Silicon Valley podcast and investor, sees not being in a startup hub like Bengaluru to be a double-edged sword: “While peer talent and conversations are available in startup hubs, you could argue that they become deafening or counterproductive.” But, at the same time, he cannot deny that there is something about the energy — the ambition in the air of a city like Bengaluru — that does have intangible benefits. “It makes you believe in something bigger than yourself,” he says. However, he has seen more startups coming out of small towns like Jaipur and Surat, for instance. Small-town success stories, he feels, will inspire more entrepreneurs.This lack of ecosystem and community is exactly what BeTCA is trying to change. Dharmdasani says they are now connected with at least 50 companies running out of Belagavi; many of them are funded and doing well. For those who ask ‘why Belagavi?’, Ajit Patel, founder of electric vehicle startup Rivot Motors, has an answer: “When TVS started, someone must have asked them ‘why Hosur?’. Today, Hosur has a supply chain which has led other companies to go there. I want to be TVS — to create opportunities for future generations to be here.”Even in Bihar, where the ecosystem is still in a fledgling stage, entrepreneurs with an emotional connection to the state are trying to give it a fillip. Himalay Verma’s return to Bihar to start SKILL Foods, a food and agriculture startup aimed at generating employment, has been quite a journey — from a chance meeting with Ratan Tata at Verma’s alma mater Cornell University that led to a job, to his wife’s role as breadwinner while he worked out his startup logistics. Now, he’s on the Bihar Industries Association where they’re currently selecting the best business plan submitted by about 150 budding entrepreneurs. “I’ve taken sessions with young people at BIA and many of them have amazing ideas — one is making an app for barber appointments, while others are making soap out of flaxseeds. Over the last 15 years, I’ve seen many people move back and launch homegrown startups,” he says.