The Benefits and Challenges of City/Tech Partnerships

Cities can offer significant benefits to their startup partners, but they also have idiosyncrasies that startups must navigate. In this section, we will explore the benefits and challenges that cities and startups must consider when looking to partner.

Startups should consider what city partners can offer.

Even though partnering with cities can be difficult, a partnership with a city can have powerful downstream benefits for startups. Partnering with a city can be great publicity, and can help demonstrate product maturity. Smaller cities also typically look to bigger cities in their regions when making their decisions about technology. Startups can benefit from these kinds of dynamics, but they need to be patient and understand the specific needs of big cities.

When Uber and Lyft first launched their unprecedented ridesharing platforms, their legal and regulatory status were in doubt. Some major cities, including New York, attempted to ban the platforms or slow their growth with new regulations. New York eventually accepted ridesharing platforms and adopted regulations that allowed continued growth (though some of these regulations are now being re-examined). This acceptance signaled to smaller cities throughout the U.S. that the platforms were here to stay.

It’s not just getting the economic benefit for our City that I needed, what I needed was a business case that I could then take to every other city [in my country] and say, it can work.

– 2017 City participant

Partnering with cities can also send a powerful signal to the private sector. City leaders looking to make a quick impact often commit their cities to ambitious, complex goals and become early adopters of new technologies. This is particularly true in cleantech, where cities may choose to pilot a technology on the cusp of it making business sense, thus creating a model that the private sector can copy. The rapid acceptance of a new technology by a city government can have an impact on private investment decisions.

2017 and 2018 CityXChange Summit participant Atlanta aims to make its airport a testbed for leading clean energy, building management, and water management technologies by creating structures that enable experimentation on a broad scale. Cities are uniquely positioned to execute such an ambitious goal: national governments focus on more abstract problems, while few private-sector companies operate on Hartsfield-Jackson’s scale. Success in Atlanta will create an example that cities and the private sector can copy elsewhere.

Startups should be ready to help after a disaster.

Resilience shocks, while often tragic, can provide an opportunity for startups to demonstrate their value and make permanent changes to city structures. Cities can move quickly when circumstances require it, shepherding vendors through procurement processes and ensuring success.

When I-85 collapsed in Atlanta in March 2017, the City was forced to rethink its transportation systems while partnering with the tech community. It worked with ride-sharing platforms like Lyft and Uber to offer discounted shared rides to MARTA mass transit stations, and used a number of technologies to improve communications with citizens to help them better manage traffic. These decisions helped the City to maintain transit service during the outage, and may have long-term impacts on how Atlantans navigate their city. And because of the crisis, the interest groups that may have otherwise impeded these partnerships were supportive of the partnership.

Startups should consider the particularities of government.

Like any organization, cities have specific requirements that startups must address. City procurement processes are necessarily slower than private companies’ because of the multiple stakeholders (including taxpayers) to whom cities are accountable. City workforces also generally have low levels of technology literacy, but startups rarely consider training and change management when implementing a city solution. City/startup partnerships must therefore invest resources in ensuring that city employees understand how a new technology can help them accomplish their goals; startups can’t sell to a city and then count on the city figuring out how to use the technology.

Tech platforms who do not build their culture to accommodate city stakeholders tend to fail in city government. Internal change management is just as important as technology adoption.

– 2017 City participant

Startups should take city politics seriously.

Many in the tech community don’t understand politics, viewing it as (at best) an impediment to getting things done. But for city leaders, being aware of political implications is paramount to their ability to effect change. Instead of ignoring politics, startups must instead understand the potential political benefits that they offer to cities and city leaders, as well as the risks city leaders take when they look to partner. Startups can help generate concrete quality-of-life improvements for citizens, which will necessarily have political value for city leaders. City leaders may also be able to gain politically from the “cool factor” of allying with startups, which can balance out the political power of entrenched interest groups.

While startups do not need to get directly involved in the political process, they should work collaboratively to help city leaders manage a partnership’s public perception head-on. City leaders can’t communicate the value of a technology to citizens and stakeholders if the startup that developed that technology stays on the sidelines.

I have a lot of folks who are close to me in the tech sector…I would tell them, when you go in to see a person that’s a mayor, the same way that you love building your technology firm, and have dreamed about it, and are making that dream a reality, I’m living my dream as mayor. So let’s start the conversation by you telling me that you’re not going to get me beat. And you would be surprised that once you get over that hurdle, the whole world opens up.

– 2017 City participant

Startups should research cities before talking to them.

A well-known saying in sales is “show me you know me.” Cities publish all kinds of strategic plans, including the 100RC city resilience strategies. These types of documents provide great insight into cities’ thinking, challenges, and long-term plans. Most city leaders expect that vendors have studied these documents before approaching them.

Startups should run a deliberate stakeholder process.

Like all organizations, cities have multiple internal and external stakeholders and political dynamics that startups need to navigate. Many of these groups, including the civil service, city attorneys and auditors, and even external advocacy groups, have the ability to help or hinder a partnership. Instead of building consensus among these stakeholders, however, many startups act as if they are entitled to city time and resources. Startups must instead be deliberate in managing stakeholders, ensuring that no groups are left out of the process. Startups should insist that city leaders designate a champion, in the Mayor’s office or elsewhere in city leadership, who can help the startup navigate internal politics and align interest groups. Even where they lack specific control, city leaders generally have tremendous informal authority and ability to get things done.

Cities are extremely complex organisms and the truth is that on the VC side, there’s little understanding for the complexity.

— 2018 Tech participant

Neighborly, a 2017 CityXChange startup participant, is an online investment platform that allows individuals to invest in civic projects in their communities through small-scale municipal bonds. Neighborly’s model therefore empowers communities to engage in city projects in a meaningful way, while simultaneously lowering the underwriting costs associated with municipal bond issuance. Implementing Neighborly’s platform in a city, however, requires cooperation from numerous agencies, from finance and IT to planning and transportation. Such a project is only possible with full-scale support and a dedicated project manager from the Mayor’s office.

Opaque organizational and decision making structures make it hard to understand what cities really need and who calls the shots

– 2017 Startup participant

Cities should use the bully pulpit to enable innovation.

Even where cities lack formal authority, mayors can use their offices to influence the conversation and break out of traditional bureaucratic inertia. Cities are the closest point of contact between citizens and government, and citizens often feel visceral relationships with their city leaders in a way that they don’t with national government officials. This means that citizens come to city leaders with their problems, and expect solutions, even when those solutions lay outside the city’s purview. By advocating for their citizens, city leaders can create tremendous change, going well beyond their statutory authority. Appointing a dedicated point-of-contact for city/tech collaborations can further demonstrate mayoral commitment to innovation.

When you’re the Mayor, people take your call

– 2017 City participant

Cities should ease the path towards turning custom solutions into products.

Many large cities have developed powerful custom tech solutions, but those solutions rarely get shared widely, even when made available as open source. this is akin to New York City asking Microsoft to develop a word processing application, then keeping it as an internal tool.

Instead of letting solutions languish, cities and government-focused developers should find new structures to enable the wider-distribution of custom-built tech tools. This could mean open-sourcing solutions, once they’ve been developed, or giving developers the right to sell solutions to other cities, perhaps in exchange for licensing fees. Building markets around previously custom-tech would also give developers an incentive to continue refining tools even after go-live.

[For our program to be successful] it was essential to have support from the top — the Mayor, Chief Innovation Officer and buy-in from other agencies.

– 2017 Startup participant

Athens came to CityXChange 2018 looking for a partner to help to replicate New York City’s urban tree canopy management platform. Such replication shouldn’t be necessary: New York’s platform should be available on the open market. While 100 Resilient Cities can serve as a bridge between cities, in the long run cities should leverage peer developed solutions and contribute to the market by sharing their successes.

Cities and startups should both prepare for leadership transitions.

Cities have planned leadership transitions that come at election times. Change at the top can roil almost any organization, but the election cycle ensures that cities face regular turnover. Newly elected city leaders may choose to cancel some of their predecessors’ projects, particularly if they are viewed as pet projects of the previous administration. To mitigate this issue, contracts should bridge administrations, with plenty of time for incoming city leaders to understand a city/tech partnership before it comes up for renewal. Cities and startups should also plan ahead for transitions, and ensure projects are both well-supported in the bureaucracy and well-understood by incoming political appointees. Having relationships throughout a city’s structure will insulate the startup at the end of a term.