Cities & Climate: A conversation with URBAN-X’s Head of Design
“I can say this very clearly — the future of cities is the future of our planet.”
In early May, I interviewed Johan Schwind, the Director of Design at URBAN-X. We talked about the origins of URBAN-X and how it evolved into a premier accelerator for startups intent on solving urban issues. Additionally, we spoke at length about how cities will be at the center of combating climate change in the 21st century.
You can catch our conversation through the audio or text formats below. Our conversation opened my eyes, and I hope it will do the same for you.
Listen to our conversation
Read the highlights
How did you end up at Urban-X?
JS: My background was in Industrial Design and I started my career in the car industry in Germany, where I had the opportunity to work with a team that was rethinking the future of the Mini brand, and what a car company could do outside of making cars. Mini started in the 1950s as an urban solution through an urban car. We wanted to go back to that and to understand better how cities can operate. We want to be part of building the future of cities and to shape cities in a way that is in line with the philosophy of the first Mini, which was very human centric. We realized the best way to do that is by working with startups.
JS: In 2015, we started to think about URBAN-X as a startup program. Nobody could tell us if it was a good idea or not, so we said, “Let’s just build it and see if it works out.” We put together a program in 2015 and had about 80 startups apply. The first cohort was nine companies and it showed that there was some demand for an accelerator that wanted to make an impact in cities.
Can you tell me a bit more about the core of the work that URBAN-X does with its cohort and accelerator program?
JS: We started as a classic accelerator model, where there is an equity investment component and a program component. The initial program was only three months long and it was modeled after the classic software accelerator. That had a lot of issues when it came to adapting to Urban Tech. When you want to work with cities and you want to build hardware, it just doesn’t work out in a three month timeframe. So we adapted to a five month program where we have more time to really focus on product. We realized that the product component is actually something that was missing from the traditional accelerator model.
JS: We also had a hypothesis that there was a gap in the VC market specifically looking at cities and climate change (as it relates to cities). It was a risky assumption that we couldn’t validate by just talking to VCs. And so we had to test it and validate it from a startup point of view. We were lucky enough to find a partner that had a similar interest, and had been able to bring together investors around that topic.
What are the common challenges for startups seeking to solve problems related to cities and climate change?
JS: One of the big challenges is working with cities. That’s not an easy thing, mainly because you’re in a regulated industry and you have a lot of hurdles to overcome before your product can actually even be purchased. You have to provide all of this information and come up with proposals that for any startup is a high time and resource investment. And it’s not necessarily clear that it’s going to succeed. So it’s very risky. Sometimes you can spend all of your time and money on this one RFP and, if it doesn’t go through, it will destroy your company.
JS: So we work with startups to connect them to the right people and the right cities — even to the right ecosystems — where there are a bunch of new models evolving and startups can do business with cities more easily. And that is something which we have built out and have a lot of expertise around — to make that hurdle much less daunting.
JS: Another component to doing Urban Tech is often that there is a hardware component involved. Sometimes it is just an IoT device and other times it can be full bike parking infrastructure. That is another layer of risk that needs to be mitigated. With hardware, you have long lead times and a whole manufacturing supply chain that you need to manage, and this can be very susceptible to disruption, as we’ve seen during COVID. So this adds a lot of moving bits and pieces which, if you have experience, you can come up with systems that make them less risky. But for a startup, this can be a pretty tricky task.
It’s becoming clear to a lot of city officials that cities are going to be at the center of climate change in multiple ways. If you think about how the wildfires are affecting Los Angeles, or hurricanes affecting Miami and New York City, you see that cities are at a great risk because of their density when it comes to disasters.
What innovations do you think will change how we live, work, and operate in cities over the next 10 years?
JS: That’s a great question. There are a bunch of trends that we’re starting to see pretty clearly and one of them is a focus on decarbonization. It’s becoming clear to a lot of city officials that cities are going to be at the center of climate change in multiple ways. If you think about how the wildfires are affecting Los Angeles, or hurricanes affecting Miami and New York City, you see that cities are at a great risk because of their density when it comes to disasters.
JS: At the same time, they are responsible for a large amount of greenhouse gas emissions. So there is an incentive for technology, innovation, and new ideas to help reduce that. And this work goes across industries. You can think about transportation in this context in terms of electrification of both commercial fleets and private vehicles. You can think of the Prop Tech sector, and the built environment, where we see new solutions for energy efficiency ranging from residential battery storage, new types of heat pumps, new kinds of insulation materials — all types of technical innovations that will go into buildings. So I think that a really big bucket of innovation is going to be the future of the built environment.
JS: Micro mobility is something we have seen a huge push around and I would say US cities are very far behind other cities in the world when it comes to that. And I don’t mean micromobility just in terms of scooters. There is a lot of last mile infrastructure that needs to be created to make bikes, scooters, and other forms of micro mobility feasible. And I think this trend will continue because people are realizing that you can be healthier, have more flexibility, save on money, and save emissions. And this is something that a lot of cities are now actively supporting.
JS: We’ve looked at robotic delivery systems and seen that delivery is a huge, huge thing that is just going to keep growing because people want things on demand. And Amazon has shown how this can work for all types of goods. And so grocery and food delivery, which became huge during COVID, is likely going to continue. And we have to see what role robotics is going to play in this.
Why do you think entrepreneurs and investors, especially the ones that were skeptical in the past, care about the future of cities?
JS: I can say this very clearly — the future of cities is the future of our planet. The city is a great model for sustainability. If you look at the data, especially the CO2 footprint of people living in high density urban environments, it is much lower than people living in rural or suburban settings (at least in the US). Additionally, I think there is a much bigger kind of vertical social mobility that happens in cities. I think even post-COVID there will be greater opportunities in terms of jobs inside of cities. I think COVID has leveled the playing field and that we’re now more comfortable with remote work settings, but I do think to some degree people will want to be inside of cities for the opportunities they offer. And so these two factors alone, I think, should motivate any investor to really think about putting their money into things that make cities better, especially in terms of their climate performance and in terms of opportunities that exist within them to improve livability and safety.
JS: The impact part is also more compelling to investors now than it used to be. And we see more and more investors who are interested in a triple bottom line. In the 2000s, investors were very software focused, and they wanted quick returns out of that investment. And that was the primary, and maybe the only, motivation. I think that has changed a little bit. With so much capital available, people are seeking more responsible ways to put that capital to work. So that plays into the city angle, because they are a really good place from a social and environmental perspective to put your money as an investor. And I also think that because of decarbonization, the incentives around investing are shifting towards cities. Because you see new regulations, especially here in New York, around the carbon emissions of buildings. As an example, these new regulations alone have created a $20B renovation market for the next 10 years in New York City. So you’re shifting the focus by creating these new markets where solutions are going to be needed and where startups are going to build new products and new approaches. And I think that’s very compelling for investors.
What factors does URBAN-X seek in it’s portfolio companies?
JS: The number one is that companies are either focused on cities, climate change, or both. The focus is very heavily on cities, but we have made a handful of investments that are very targeted towards fixing climate change, even if they’re not 100% related to cities. This is the first layer of selection. The second layer is looking closely at the founding teams. The makeup of the founding team is one of the biggest indicators of what could potentially become a successful company. The team dynamic is a factor. The resilience of the founders to face challenges and overcome them. Their openness to feedback and how they work with it. And a third layer of selection relates to the idea, the model, and traction. We don’t actually think the particular idea is super important, but there needs to be a good understanding of the problem space. Specifically, what are you trying to solve? What are your skills and capabilities to show that you can work in a really challenging environment? It’s not so much about having a genius idea and building it out, but more about being open to experimentation and seeing what will work in the market. And that is often more of a personal characteristic that a founder or founding team will have.
What big bets is URBAN-X making over the next five years?
JS: Climate investments are going to dominate the deal flow because it’s just such an important thing to work on. But we’re looking at other sub sectors of urban tech where we would like to see a little more deal flow because we think they are important. So there are aspects of Urban Health and Safety where we’re constantly looking for companies. We have this sector called Food, Waste, and Water that essentially looks at the different aspects of the food and waste value chain as well as drinking water. We look at waste management companies because that is a big, big challenge for cities. And it’s a growing challenge because it is very linked to climate change — not just because of CO2 emissions, but also because of methane emissions. And we’re looking at deals in food, such as reusable container systems for takeout and food delivery. So these are a couple of things that feed into decarbonization and climate change, but they may also fall outside the classic and traditional urban tech sectors, such as Prop Tech, Mobility, Energy, and those kinds of things.
JS: One point that is worth noting is that we need to maintain or improve the livability of cities. There is this approach to making cities super smart, intelligent, and data driven, but this is very dystopian to me, where the city becomes a sort of machine that is optimized at every corner. This happens at the expense of human experience that you can have in the city. And this is something we’re trying to be very conscious of; not every solution that makes the city more efficient is necessarily a solution that makes it a place worth living. So we’re trying to find things that approach problems on a human scale with the human experience in mind, and still achieve an outcome that is better for the environment and is better for the climate. And that’s not always very easy, to be completely honest.
