Opportunities for Partnership

City/tech company partnerships are not a novel concept but, unfortunately, there have been far more failures than successes. Through panel discussions and working group sessions, CityXChange Summit participants have identified numerous common barriers that prevent cities and the tech community from building successful partnerships, as discussed below. These barriers are far from insurmountable, but before cities and startups can overcome them, they must first recognize them.

Governments tend to favor the status quo even if it costs untold time and money.
– 2017 Startup participant

Cities and startups are still learning how to work with each other.

While there are exceptions, tech leaders tend to view cities as bureaucratic and slow, while city leaders think that startups expect them to drop everything and focus on their solution. Tech leaders view the political process with suspicion, while city leaders see startups as impetuous, reckless and politically naive. These stereotypes often lead the tech community to avoid working with cities, instead opting to find pathways around government. This only deepens city leaders’ reflexive sense that tech companies are troublemakers.

Cities and startups have very different perspectives, informed by their different social roles and constituencies.

These differences arise from the different sets of stakeholders they serve and different ways they address their missions. Startup founders are, by their very nature, risk takers. Starting a business from the ground up is necessarily a risky proposition, and many in the tech industry believe that there is no better teacher than failure. City leaders, on the other hand, are often resistant to taking even small risks. There are good reasons for this: voters can be very unforgiving of missteps. Witness, for example, the technical issues that plagued the United States’ federal www.healthcare.gov web portal in the early weeks following its launch. These issues threatened to derail the entire American health care reform program and subsequently played an important role in the 2016 election. Beyond public opinion considerations, failures can result in serious impacts on the life and livelihood of citizens. Furthermore, providing incentives or adjusting rules to accommodate startups may expose city leaders to accusations of cronyism or corruption. To partner successfully with cities, startups need to understand and appreciate this dynamic.

The difference between governments and startups and VCs are that we’re risk-averse. They’ll jump into risk, and we’ll avoid risk. It comes with the territory of protecting the public, which is the first and primary role of government. So risk becomes less of a chance for success and more a chance for failure for government.

– 2018 City participant

When you take the risk and you fail, you be charged with causing financial loss to the state. When you take the risk and you succeed, you say “hooray.”

— 2018 City participant

Use cases are a common language both cities and startups can speak.

Startups tend to think governments are overly focused on details, whereas cities worry startups haven’t fully develop products and services or considered the potential implications of deployment. These communications differences can contribute to negative stereotypes. Governments rely on memos, reports, and long-term analysis, designed to encapsulate all the complexities and subtleties of government programs with multiple stakeholders and significant consequences on the broader civic fabric. Tech companies, however, rely on the pitch: a succinct, high-level presentation designed to demonstrate a conceptually simple, technically-sophisticated approach to solving a specific problem. Pitches don’t dwell on complexity: the goal is to show how technology can turn the complex into simple. However different these communication styles are, cities and startups fundamentally share goals — the tech community wants and needs vibrant urban life.

I would say the first thing [when I launched my startup] was to learn a multitude of languages, because it’s a very complex eco-system. Everyone speaks a different language. So the University spoke one language, the mayor and the city spoke another language, the transportation, transit company/authority spoke, then when you bring in investors and private sector, then you have to talk the language of business as well.

– 2018 Tech participant

We are currently deploying [our product] at private sector buildings in New York City under a grant from the New York City Economic Development Corporation. It has taken a year longer than anticipated to get to the point where NYCEDC could release the funds.

– 2017 Startup participant

Partnerships often take too long to develop.

Cities and startups, like all organizations, must balance managing short-term crises with articulating long-term visions. Cities, at their best, seek to make long-term investments, rather than just respond to the latest crisis, while startups need to make concrete progress towards long-term goals before their financing runs out. But cities’ long-term thinking, combined with bureaucratic inertia and the complexities of city stakeholder and contracting processes, can spell doom for city/tech partnerships. Startups find that partnerships, even once launched, often take months or years longer to come to fruition than expected. Those kinds of delays can be the difference between success and failure for a young startup, and further discourage partnership.

When I ran, I set certain priorities, they’re all about infrastructure trying to lay the foundation for a better future in our city, and I’ve stayed the course through two elections now and continue to have these five priorities that were laid out.

— 2018 City participant

[For startup founders, your time horizon is] only as long as your runway…runway means how much cash you have to pay salaries for how many months. So if you have twelve, then it’s twelve, if it’s six, then you have six, if you have three than you’re not sleeping much. It’s very important to have a long-term vision for sure, so venture capitalists get excited about what you’re doing, and you’re able to mobilize your team and get the best talent for your company and to set a vision for how the world could be if you succeed.

– 2018 Startup participant

City solutions don’t easily scale.

Cities themselves have a difficult time sharing best practices, and often implement wildly different solutions to the same problems. this diversity can be a strength, as cities can adopt best practices from peers around the globe. But it can also make it difficult for startups to scale, as they need to adapt their technologies and engagement approaches to different circumstances. The impact of this is striking: Citymart, a global consultancy that helps cities transform their procurement processes and a 100RC partner, estimates that it takes 40 years for a civic technology to go from its first success to reaching just 1% of global cities.

[After our first success] it was much easier than to go to Singapore or New York because we could point out “this city is using it this way, and this is what you can do,” still, and being very open about this…it was really really slow because there are long sale cycles and fragmented transportation markets and transit markets.

– 2018 Startup participant

Cities have not fully evaluated the potential use cases for new technologies.

City governments often house deep repositories of subject matter expertise about their operations and the challenges they face. Those same experts, however, may be unsophisticated about and resistant towards technology change. Established city workforces are often over reliant and defensive of proven practices and resistant to change. They may also view new technologies as shiny distractions, rather than key tools for achieving their goals. Many would prefer to focus on delivering services, not rethinking how they do their daily work. The main tool cities leverage to identify and socialize new ideas, the request for Information (RFI), can help companies to describe their solutions and potentially influence a procurement process, but they are insufficient for creating change, both because they require cities to have fairly concrete ideas about what they, and because companies are reluctant to divulge competitive information.

Startups can better understand how to engage with cities.

Startups are generally made up of people with specific skills needed to drive product development and expand their user base — the critical factors that can make or break their business. They do not have in-house public affairs expertise to navigate public contracting and RFP processes or to advise about political implications for their actions, and usually cannot afford lobbyists or outside advisors to fill the void.

City procurements can be better structured to include start-ups.

It is accepted fact among both cities and startups that procurement and partnership policies stand in the way of successful partnerships. And for good reason: city procurement policies are designed to prevent contracting scandals, not to encourage innovation. Procurements tend to happen through requests for proposal (RFP), which are confusing for first-time bidders and rarely written to solicit innovative solutions. Many RFPs even include requirements that bidders have a minimum number of years in the market, excluding startups before they even have a chance to bid. These procurements also can also take years to materialize, further discouraging startups that need to quickly demonstrate results to ensure next-round funding.

[The] never-ending procurement process…hinders city execs from using innovative solutions even when they want to.

– 2017 Startup participant

Procurements can be modernized to be more open to new solutions.

Even when they don’t actively discriminate against startups, procurement processes generally don’t reflect the realities of modern software development. Arduous procurement processes are geared towards broad service level agreements with large consulting firms, not modern, Software-as-a-Service solutions. Consulting firms, for their part, are incentivized to bill development hours, not partner with startups or create lightweight, replicable solutions. This makes it hard to drive continuous improvement and take advantage of changing technologies. Cities’ one-year procurement cycle also disrupts many purchases, which have multi-year time horizons. Instead, cities must reorient their processes towards simpler, lighter procurements that allow them to cooperate directly with their startup partners.

The thing holding us back was always those people that would show up and say, “Well, that’s the way we’ve…always done procurement…” If you look underneath procurement rules…there’s room for almost everything you want to do, you just have to convince people to find their way doing that.

– 2018 Tech participant

Cities are generally cautious of partnerships with untested startups.

Cities are typically happy to be the second customers for a new technology, but fear being the first. Citizens have low risk-tolerances for public-sector projects, which means that cities often spend far more than is necessary to invest in sometimes outdated, but proven, solutions. Cities further worry that projects with startups will become white elephants that will cost a ton of money and generate bad press. Cities also worry about startups’ permanence and sustainability. Cities make generation-long investment decisions, and fear working with a startup that may disappear overnight. Lastly, citizens may also have concerns about outsourcing critical civic infrastructure to private companies. startups can overcome these issues by taking city leaders’ concerns seriously, and committing to working with the City to address citizens’ concerns. startups that navigate those hurdles achieve significantly greater success.

Figuring out who to get to [in a city] is hard. Oftentimes, the person responsible for the area has insufficient knowledge and it frustrates entrepreneurs. Feeling is that you need to be an insider to get a contract.

— 2017 VC participant

Cities and startups can benefit from partnership playbook.

Startups think in terms of playbooks, or specific tactics they can use to solve problems, acquire customers, and grow their businesses. Uber, for example, faced a challenge in quickly building up deep networks of passengers and drivers in dozens of cities globally; it famously used referral codes to give individual users an incentive to share the app with their friends. startups across industries now routinely use referral codes, copying Uber’s playbook for customer growth. Cities and startups today lack a playbook they can follow when they contemplate working together. this makes it hard for either side to take the first step.