Building from Scratch: Leveraging Tier 2/3 Cities for incubating new products

Last week, I had the opportunity? to speak at the inaugural Kerala Technology Expo, a meticulously crafted platform brought to fruition through the collaborative efforts of The Malabar Chamber of Commerce ?and CITI 2.0 This event was designed with the overarching goal of highlighting the significance of the city and the myriad opportunities it presents. What made this occasion particularly meaningful for me was the realization that it marked my return to Kozhikode after an interval of 18 years, the city that played a pivotal role in shaping my worldview, particularly during my formative years pursuing engineering education at National Institute of Technology Calicut

During one of the sessions, I was privileged to contribute my insights on the pivotal role that Tier 2 and Tier 3 towns in India play in the journey of product incubation. It was a fascinating discussion underscored by various statistics that served to captivate the audience and shed light on the untapped potential of these locales. Some of the facts that is important to know are below,?

1. As per the Economic Survey, 48% of the startups in India are coming from the Tier 2/Tier 3 towns in India. This clearly shows a significant shift from the past as we have many shining examples of mulit million SaaS companies which are built from scratch from Tier 2/Tier 3 towns in India.

1. 50%? of the online shopping population resides in small cities, with projections indicating a surge to 60% by the year 2030. In the consumer electronics market, this number has already surpassed 65%. The burgeoning affluence of India's lower-tier city inhabitants is driving this shift, fueled by a combination of governmental initiatives, enhanced infrastructure, evolving consumer mindsets, and increased private spending within these regions.

1. The active technology and academic ecosystem around Tier 2/Tier 3 towns have significantly increased over the last four years creating a strong talent pool. The multiple communities of practice and entrepreneurship forums that emerge out of the smaller towns in India shows a strong and healthy trend.

Just like Guidewire Software , there is a huge opportunity for startups to identify and transform industries which everyone thinks mature and enable digital adoption at scale, helping them to optimize the entire value chain and create a large impact for the people around us.? We built the platform Property and Casualty insurers trust to engage, innovate, and grow efficiently. We combine digital, core, analytics, and AI to deliver our platform as a cloud service. More than 450 insurers, from new ventures to the largest and most complex in the world, run on Guidewire. The story of Guidewire is a perfect example of how to build a vertical SaaS offering for a problem that matter and software engineering can create a definitive value.

While there has been a significant increase in digital adoption within B2C sectors, there remains ample opportunity to further empower Small and Medium Enterprises (SMEs) in India with digital tools to accelerate their growth and market reach.I believe that Tier 2 and Tier 3 communities hold the potential to address the genuine challenges faced by our industries today, even if these challenges may not always be immediately apparent or glamorous. With a substantial number of SMEs situated in smaller Indian cities, we gain valuable insight into the specific problems and opportunities existing at the intersection of these businesses, enabling the creation of transformative solutions.

While the scope for addressing broad horizontal issues may be limited, there is a niche for Vertical SaaS (Software as a Service) products tailored to address industry-specific and mission-critical problems. These are often challenges that larger software companies struggle to tackle due to a lack of specialized expertise and smaller market sizes, presenting a tangible opportunity for meaningful problem-solving.

This is real India opportunity and and the Tier 2 and Tier 3 ecosystems are poised to play a significant role in seizing it !