Trust, not technology, is helping startups make inroads into the Indian hinterland

Their secret: double down on trust and local nuance and, then, blend it with technology to amp up business.

Wealth management platforms Centricity and Wealthy, edtech entities Supernova, Arivihan and SpeakX, consumer brand Traya, and social networking firm Frnd are some companies that have grown in hinterland India by doubling down on building trust with customers.

Startups targeting so-called tier 2+ markets is not new. Companies have been trying to prise open such markets from 2015. Some like the recently-listed e-commerce platform Meesho have shown the way to build scale among buyers in smaller cities and towns.

But, it is only recently that more businesses are reporting traction in these geographies.

The big learning: business models in Big City India don't work in smaller cities and non-urban markets.

Businesses can onboard users in large cities, where audiences are more aware of choices, by using data to convince them, according to an entrepreneur reporting early success in tier 2+ India. “It's a rational argument. Small towns, however, still rely on relationships,” said Aditya Agarwal, co-founder of Wealthy.

The company operates a B2B2C model, bringing on board chartered accountants, insurance advisors, and former bank employees, who then sell wealth management services to individuals. These distributors understand the language, nuance and are able to build trust with customers.

Wealthy, which raised $15 million November last year, every month records some 6,000 distributors active on its platform. Agarwal said it has been adding 400-500 new distributors a month and plans to double that rate. The additions will be split across 25 cities and towns.

Go local in the mantra

Today, 55% of Wealthy's customers are from non-urban markets and account for 30% revenue.

Much of the company's existing clients work in industrial towns, where demand for wealth management services is higher. Wealthy has a presence across cities Vasai, Raipur, Jalandhar, Ludhiana, Bhagalpur, and Faridabad besides like Prayagraj and Varanasi.

Supernova started in Tamil Nadu targeting locals who wanted to learn English. When users log in to the startup's app, it switches to the language of their choice (Marathi, Bengali, and Kannada are also on the app). It does all the teaching, language correction, and interaction in that language.

Language learning peer SpeakX has done the same. With three of five of its users in Tier 2+ markets, it revamped its user flow to be straightforward and non-exploratory. “They're coming to the app looking for a specific thing,” said founder Arpit Mittal. “Building something that is direct and exactly what they're looking for helps build trust.”

Hair care brand Traya targeted its ad campaign with actor Sunil Grover, who is popular in states such as Haryana and Uttar Pradesh. Most of its marketing taps into local content creators, film stars or celebrities, backing this with billboards and advertising in local newspapers.

The moderator nudge

For voice-first social networking startup Frnd, inspiration came from Facebook Groups.

They found that fan clubs of celebrities consisted mostly of users from smaller towns with limited social circles. These users would join groups for access to larger groups. But discussions would almost never be about the person or people the fan club was about. Instead, around 8pm, moderators would post on the groups, asking girls to say hi, and for boys to impress them.

“These boys would write shayaris (couplets) to impress the girls online. That's how conversations would start, friendly banter. It wasn't about coming online to find a girlfriend or a boyfriend, it was to interact,” said Harshvardhan Chhangani, co-founder and chief product officer at Frnd. Through this insight, the company built is voice-first social network, bringing with it a strong focus on moderation to help users build trust.

Today, it has 3 million monthly active users and 250,000 daily active users.

Digital penetration, UPI spread

Experts cite digital penetration and familiarity with the ubiquitous UPI, short for unified payments interface, platform as major drivers. UPI transaction volumes have compounded nearly 114% each year between fiscal 2018 and FY25.

Internet penetration in India deepened after the launch of Reliance Industries's Jio service late in 2016 and accelerated after Covid. In 2024, some 488 million internet users were from rural India, per estimates of Internet and Mobile Association of India. "It's why over the last 3-4 years, you're actually seeing an acceleration in the companies targeting Tier 2+ India,” said Rahul Taneja, partner at venture capital firm Lightspeed.

Latest data is not immediately available but a Redseer Strategy Consultants report from 2023 found that around 70% of the existing users of UPI were from outside tier-1 cities and four of five user additions came from Tier 2+ locations.

The traction in India's non-urban markets also shows that people will pay, even if the amount is small, if there is perceived value.

Take Frnd, for instance, that has shown that people are willing to pay for social interactions on a freemium model. Users can buy coins to spend on gifts or starting chats with other people. Coin packs start at as low as ₹25 and go all the way up to ₹49,999.

“Now I don't have to spend too much on customer acquisition, but I can focus on ensuring that a consumer's lifetime value is high,” said Bhanu Pratap Singh Tanwar, CEO and co-founder Frnd. The company claims that its annual revenue run rate is $60 million and that it is profitable with 22% of its users paying.

For the long haul

Still, there are challenges: the biggest of which is becoming a customer habit, like, says, Urban Company with home repair. The alternative is suffering when discretionary spends get crimped.

“The sooner these companies can be categorised in tier2+ consumers' mind maps as ‘must haves,’ they probably won't get removed from their spends,” said Sunitha Viswanathan, partner at early-stage venture firm Kae Capital that has funded Traya and Supernova.