Karnataka’s Big Push Beyond Bengaluru: Can Mysuru, Mangaluru or Hubballi Become the Next Startup Magnet?

For decades, Bengaluru has been the gravitational centre of India’s tech universe — a city that pulled startups, engineers, investors and dream-chasers into its fold with an intensity few ecosystems worldwide could match. But that explosive growth has come at a price. Congested roads, soaring rentals, infrastructure strain and a growing sense that the city has reached its saturation point have prompted Karnataka to ask an uncomfortable but necessary question: Should the state’s future still depend on a single city?

Now, the government is taking its boldest step yet to shift the balance.

In a sweeping move aimed at decentralising its tech economy, Karnataka has unveiled the IT-BT Policy (2025–2030) — a policy that quite literally pays startups to move out of Bengaluru and build their next chapters in the state’s rising Tier-2 and Tier-3 centres.

With this, the long-unthinkable suddenly feels possible: the next major innovation hub in Karnataka may not be Bengaluru at all.

An Ambitious Plan to Spread Innovation Across the State

The new policy reflects a clear intention: spread opportunity beyond the capital and build multiple engines of growth.

It outlines a strategy to develop and expand innovation clusters, startup zones and sector-focused technology hubs across cities such as:

• Mysuru

• Mangaluru

• Hubballi-Dharwad

• Shivamogga

• Kalaburagi

Karnataka has set a target of 30,000 startups by 2030, with at least 5,000 of them emerging from outside Bengaluru. If successful, this would mark one of India’s most significant shifts in startup geography.

A Policy Built on Strong Incentives — And Big Money

The government seems determined to remove the financial barriers that often deter founders from expanding beyond Bengaluru.

The policy promises:

• 50% reimbursement on office rent (capped at ₹2 crore)

This slashes a major cost for growing startups, especially in smaller cities where rentals are already far lower.

• 30% property tax relief for three years

A long-term incentive for companies willing to establish permanent bases.

• Up to ₹50,000 per employee for talent relocation

A rare payout directly tied to moving staff — signalling how serious the state is about decentralisation.

• Full waiver on electricity duty for five years

A meaningful cost saving for tech firms and R&D setups.

• 25% rebate on telephone and internet bills (up to ₹12 lakh)

• 40% reimbursement on R&D expenses (up to ₹50 crore)

One of the highest R&D reimbursements offered by any Indian state.

• Additional incentives for deep tech sectors

Companies in AI, ML, quantum computing and blockchain will receive further capital support.

To back this ambitious vision, the government has earmarked ₹960 crore over the next five years.

Applications for incentives open in mid-December 2025, and each category is capped at 100 beneficiaries, making this a true first-come-first-served race — one that has already stirred urgency across the founder community.

A LinkedIn Post Sparks a Debate

The policy drew major online attention after investment banker Sarthak Ahuja broke down its biggest highlights in a viral LinkedIn post. The reactions ranged from enthusiastic endorsement to sharp criticism.

The Supporters

Many users felt the move was not only welcome but overdue. They argued that this would:

• ease pressure on Bengaluru,

• reduce salary inflation,

• improve unit economics for startups,

• and accelerate development in secondary cities.

One commenter wrote that the policy could “rebalance hiring” across Karnataka, offering a healthier cost structure for early-stage companies.

The Critics

Others, however, urged caution. Several voices argued that cities like Mysuru and Mangaluru should be protected from over-urbanisation. They feared the government might replicate Bengaluru’s challenges instead of solving them.

A strongly worded comment read:
“Don’t ever think about touching Mysore or Mangalore.”

This sentiment revealed a deep-rooted fear that rapid tech expansion could disrupt the cultural and environmental charm of these cities.

The Realists

Some founders called the incentives too compelling to ignore. As one user wrote:
“This is huge for startups looking to scale outside Bangalore. First-come-first-served could make all the difference.”

The Opportunities Are Clear — But So Are the Questions

Even as the excitement builds, significant questions linger.

One major concern is whether Tier-2 and Tier-3 cities have the infrastructure needed to support rapid scaling. While they offer cleaner, calmer environments, not all have Bengaluru’s depth of office spaces, transport systems, talent networks or round-the-clock services — all crucial for tech-led growth.

Talent mobility presents another challenge. Convincing employees to uproot from a city that offers countless opportunities, deep networks and lifestyle advantages will not be easy — even with relocation reimbursements.

Then comes the question of sustainable development. Cities like Mysuru and Mangaluru have rich cultural identities and slower, more mindful ways of life. Residents worry that a sudden surge in commercial expansion and population influx could alter their character in irreversible ways. Policymakers will need to design growth that respects heritage and local sentiment.

A Turning Point for Karnataka’s Startup Landscape

Still, one thing is undeniably clear: Karnataka has taken one of its biggest strategic swings in recent years. The next five years will determine whether this becomes a landmark model for decentralised innovation in India, or whether it joins the long list of ambitious policies that struggled to find real-world momentum.

For now, founders across Karnataka — and beyond — are studying the fine print, weighing the benefits and gearing up to submit their applications the moment the window opens.

And in a rare shift, the future map of Karnataka’s startup ecosystem suddenly feels open to imagination.

For the first time in a long time, the state’s next big innovation hub may not be Bengaluru.