Challenges faced by Entrepreneurs while Operating in Tier 2 & Tier 3 cities

Jeenal Jain Jeenal Jain
Mar 25, 2021 7 min read
Challenges faced by Entrepreneurs while Operating in Tier 2 & Tier 3 cities

Wondering what are Tier 2 and Tier 3 cities? Based on population density, Indian cities are classified as X (tier 1), Y (tier 2) and Z (tier 3) categories. Where Tier 1 contains metropolitan cities like Delhi, Bangalore, Mumbai & so on, Tier 2 has cities like Gurgaon, Vellore, Kochi etc., The remaining cities fall under Tier 3 i.e., Kanpur, Chandigarh & more.

Normally, businesses use different strategies and techniques to cater to different customer segments residing in any of the tiers. This makes operating in different cities difficult. To understand the challenges faced by businesses while operating in Tier 2 & Tier 3 cities, StartupTalky reached out to entrepreneurs from diverse fields to get their insight on the same. And here's what we got to know -

Sanjay Tiwari - Co-founder, 21CC Education

Sanjay Tiwari - Co-founder, 21CC Education

We are operating in these locations on behalf of logistics and supply chain brands that are gaining attention and interest in these locations. While we are aware of the challenges businesses face when it comes to skilling and employability in these areas, since we ourselves aren’t approaching these markets directly yet, it is too soon to comment from an informed lens.

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Sudha Anand, Founder, Swaas

Problems in operating in tier 2 and tier 3 cities
Sudha Anand - Founder, Swaas

We find it at times difficult to give the best of quality and price, which is
a basic requirement for tier 2 & 3 customers.

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Amit Nigam - COO & Executive Director, BANKIT

Amit Nigam - COO & Executive Director, BANKIT

BANKIT tries to reach this segment of the audience through retailers who are already familiar with the customer and can reach them more effectively. This also helps in overcoming the most common challenge that companies face while reaching consumers in Tier 2/3 areas: Gaining their trust. The other most commonly-faced challenge is the language. India with its varied cultures has different languages in the same state and district and due to lack of exposure people in smaller cities and towns understand only one language that a company may not be versed with.

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Amit Nigam - COO & Executive Director, BANKIT

The biggest challenge (and an opportunity at the same time) for homegrown startups is to build in-house, India-centric expertise and capabilities and not solely be governed by tech and social media giants for reaching their audiences. With the Government’s clarion call for Atmanirbhar Bharat, I believe that our time has arrived to rise to the occasion in terms of shaping the larger global narrative and discourse through 'Bharat First' solutions.

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Amit Agarwal - Founder & CEO, OckyPocky

Amit Agarwal - Founder & CEO, OckyPocky

Considering the lack of resources in rural areas, there were several challenges that we had to face. It was difficult to invest in local content and customer support and there are still a lot of areas with no high-speed broadband which makes it tough for us to reach them effectively and students completely relying on a device for all their educational needs could be restricting at times"

Shivram Choudhary - Founder, Codevidhya

Shivram Choudhary - Founder, Codevidhya

Self-awareness among the parents was not there. The need to teach kids to code was not a priority in these cities. Also, due to inevitable circumstances, kids do not have proper laptops or computers to learn to code.

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Krishna Murthy - Founder of Teach My Lesson

Krishna Murthy - Founder of Teach My Lesson

Challenges vary depending on the degree of reliance the solutions have on technology and what proportion of the delivery can be managed remotely without compromising consumer experience.

  • In our case, the most significant challenges are Tier agnostic. While there is no shortage of great talent in India, the biggest challenge we face is the need for instant gratification. Loyalty from talent is coming at a considerable premium. It is less about remuneration and more about the talkability, the halo effect, and the prestige the job provides to the recruited talent.
  • Tactically speaking, finding T2 and T3 talent that is both an expert in vernaculars and proficient in English is not easy to find.

Raj N - Founder, Zaggle

Raj N - Founder, Zaggle
Raj N - Founder, Zaggle

They say that real wealth of India lies in its villages. β€œIf the village perishes, India will perish too”

Brands need to understand that the rules of game are different when it comes to rural markets, especially in India, where diversity rules. The rural environment is vastly different from the urban and therefore communication to potential customers requires a specialized and integrated approach.

Tanul Mishra - CEO, Afthonia Lab

Tanul Mishra - CEO, Afthonia Lab

I believe that today’s world is knowledge forward and as such is a catalyst for driving a rapid pace of advancement and innovation in everything we interact with. And while there are many great startups with path breaking ideas that can truly come from anywhere, getting the right support from the right quarters to help sustain and grow that idea is critical to the survival of that venture.

What I have seen is startups at least in the initial stages require intense support for the right kind of network access to the experts and industry stalwarts who can share knowledge and insights with them from their wealth of experience helping them avoid the pitfalls of starting a business from the ground up. This support may not necessarily be easily available in tier II and III cities - especially the tier III cities and can be the difference between the startup thriving or perishing.

To my mind, therefore the first challenge to solve is the lack of access and thankfully we have the resources today to digital create a borderless support ecosystem, wherein an incubator like ours based in Bengaluru can easily spot and support a great idea emerging from a tier 2 town in Gujarat or Uttar Pradesh. This is crucial as instead of waiting in the wings these startups from smaller towns in India get an equal opportunity to be heard, to be nurtured and eventually find their own space in a complex market like India and even venture towards international markets with the right support ecosystem in place.


Problems are inevitable. It is the knack of cracking the solutions that takes people ahead in life. As per the above views from well-known entrepreneurs, though they face various challenges along their way while catering to Tier 2 and Tier 3 cities, 'Never Give Up' becomes their motto! Β 

Hope you got an understanding on the problems faced in entrepreneurs in various industries while operating in Tier 2 and Tier 3 cities.

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