Urbantech in 2019
Replicants are like any other machine — they’re either a benefit or a hazard. If they’re a benefit, it’s not my problem. — Deckard, Blade Runner
Nearly 40 years ago, Blade Runner’s creators predicted everything from climate change to homelessness — they saw flying cars alongside the humble bicycle (no boards or scooters though) and they predicted the rise of powerful tech firms alongside with complex tech policy and enforcement. What follows is what we’ll be tracking in 2019.
More support for climate action
At the national level, there isn’t a lot of climate action to be excited about. “I’m not a scientist” has given way to “the climate is changing, but we’re unsure of the cause.” Brazil’s new leadership looks set to ramp up the harvesting of the Amazon rainforest — at a minimum, reducing its capacity as a carbon sink. Where there is environmental-policy leadership, in places like France, efforts to tax gas resulted in riots, which turned into a larger set of demands about the plight of the working class.
Those who profit from dinosaur juice may think that they have reasons to celebrate. But, do they? Changing our energy infrastructure was never going to be easy. The incumbents have money and power and, what feels like, endless tools at their disposal to push back against actions that will reduce revenues. But, national policy failings are being overcome by local governments and businesses. Local governments, in particular, have been a dependable force in climate action for some time now. The fires, floods, and storms of the recent years have only increased local governments’ resolve to avoid the future we don’t want.
While energy incumbents have power (pun intended), they are increasingly at odds with the world’s biggest investors who now see climate as a threat to their balance sheet. These investors are pushing to end subsidies for fossil fuels, as they seek investment opportunities that are aligned with what they believe will be a low-carbon economy. Avoiding climate challenges means avoiding great new business opportunities. It also often means a growing risk of assets that will simply not be able to generate returns to investors. More from The Guardian.
More ways to commute and more deliveries
Uber and Lyft are rushing to go public in 2019, and, no doubt, money will be made. But, are we in the Yahoo stage of search or are Uber and Lyft the Google of transportation? This remains a key question.
The EU has continued to be a difficult place to operate for Uber, and this is just the beginning of their complications. Even with considerable resources and “home field” advantages, their issues in the US persist as well. Research now suggests that Uber and Lyft contribute to increased traffic congestion, adding 976 million miles of driving to New York City streets from 2013 to 2017. It’s also to be determined how these two firms shape the future of an important stakeholder — the country’s public transit agencies.
Buses are most likely the first beneficiary of AV tech. It’s easier to set parameters for how they operate, including where they go, whether they have dedicated space, etc. This would also help shift some power back to transit agencies. But, AVs will certainly impact Uber and Lyft more directly. It’s one thing to compete with taxis, limos, and even public transit, but what about 46 more well resourced groups?
Personal electric transportation seems to be here to stay. Scooters won’t be the only form factor though: outside the US, that’s already true with more seated versus standing options. The bigger questions might be about how much we want to share: if we want to ride a (likely) heavier, slower fleet vehicle or if we would prefer to own something. Sharing seems to have it’s moments, but it’s not clear if it’s overcome the many benefits of ownership, like availability and customization.
The focus on moving people around misses something potential much bigger — moving our stuff around cities. “There are some geographies where Eats is just a better connection with that community than [Uber’s ride-hailing business],” Janelle Sallenave, head of Uber Eats in the US and Canada. This highlights combinations of electrification, new vehicle form factors, routing, supply-chain analytics, and AVs point to many new opportunities to drive down cost and increase on-demand performance.
Maybe competing with vehicle ownership is harder than competing with a core assumption in cities — the value of real estate attached to location, location, location. Is it possible that the value of location can keep going up if it has to compete with the improvements in mobility economics that are enabled by tech? This might just be the most competition that real estate has encountered since the introduction of the automobile.
Lyft and Uber IPOs feel like they signal the beginning, not the end, of the story of how we’ll move people and stuff around cities.
Founders will sell less equity
Softbank had a profound impact on the venture world last year. They appear to anoint winners in any sector through the exorbitant amounts of capital that they invest. For many founders and investors, large amounts of capital from investors, like Softbank, feel like an offer they can’t pass up. If they don’t take it, there is the pressure that the same offer will then be made to their competitors.
Softbank announced a large investment in a competitor of one of our portfolio companies, Bowery Farming, right after their series A raise. Interestingly, Bowery Farming went on to raise their own large series B a few weeks ago. It’s not clear if the large investments are scaring away competitors or other investors. It is curious how this plays other sectors where Softbank has invested, but that’s not what we think will be the most interesting in 2019.
We’ve been exploring the growing universe of non-equity options for startups. Perl Street has been actively exploring ways to provide on-dilutive funding to operate fleets of EVs and residential batteries or to find funding for co-living projects. We see a growing list of emerging city assets that could be financed without requiring founders to sell more of their companies. But, Perl Street is not alone.
The end of 2018 saw some notable moves in non-equity funding. Indie VC announced their V3, which offers founders the ability to access capital without selling nearly as much equity as traditional VC rounds. And, Clearbanc raised a new fund to lend money to firms for their online marketing efforts. This isn’t new in industries like entertainment, where investors often fund movie-marketing budgets, but this is new for startup founders. In all cases, startups are using revenue to pay back investors, and this lets founders keep more ownership. ICOs didn’t kill VC, but new capital alternatives may make it harder to put VC dollars to work in 2019.
Policy & enforcement algorithms
Order without Design — How Markets Shape Cities is a new book from Alain Bertaud, an urbanist and researcher who is uniquely positioned to comment on tensions between markets and planners in shaping cities. He begins from a profound understanding that cities are, first and foremost, labor markets and, then, offers a great backdrop to understand the growing opportunity to help markets do what they do best without bumping into the public interest — this is especially relevant when it comes to real estate and mobility.
We’ve started to see more algorithms at the intersection of local government and markets. Machine learning helps transform data to enable “what ifs.” Instead of long, complex, and often incomplete consulting engagements, stakeholders can understand such things as, “Will my new building design meet new efficiency requirements?”; “How much does this new infrastructure investment reduce flooding in this community?”; or “What’s the best way to provide mass transit improvements in this neighborhood?”
Algorithms can do more than answer complex “what ifs.” Algorithms can be used to evaluate compliance and performance. They’ve already been used to detect tax cheats, but, now, they’re also being used to identify poor landlords: we expect that, soon, we’ll also learn what vendors are underperforming for everything from road maintenance to school lunches.
It’s going to be tempting to keep deploying algorithms to smooth the interaction between markets and city-government agencies. But, to make this work, we’ll need to find better ways to address privacy concerns, data ownership, and bias (reflected in data and now institutionalized in algorithms).
More public benefits
Amazon’s HQ2 arrival in Long Island seemed to be welcomed by tech and real-estate owners, but it was harder to find support from any other groups. It’s easy to dismiss this as a lack of understanding or appreciation of the long term benefits of 25,000 new jobs, but try explaining this to existing residents who just want their already overcrowded and broken public transit to get them to point A to point B without major disruption.
This isn’t just about whether Amazon deserves the tax incentives. It just confirms the idea that markets can’t do all the work — they need policymakers to write the rules. Right now, the interventions to “help the market” seem to go to the folks who need the least help and it’s no wonder socialism is now viewed more positively than capitalism, at least within the party that turned out the most voters in the last US elections.
In 2019, we expect a lot more debate about the limits of markets and if interventions are appropriate to help address everything from affordable housing to the management of climate risks. The Green New Deal is likely to explore this at a national level, and we’ll be curious to see what businesses rally around this platform — many of them already supporting city-climate actions.
Avoiding tunnel vision
When we look at a startup working on transportation, we consider its impact and opportunity on housing, safety, and climate change. We consider how the solution could impact not only the mega-cities of the world, but also how it could impact the thousands of smaller urban areas around the world. Intersections and scalability are most literally the benefit and beauty of cities.
Aging and stressed infrastructure causes crises of public health, including access to sustainable and healthy food, clean water, and the disposal and reduction of commercial and residential waste. Housing crises have become transportation crises and have impacted resiliency and safety. Disaster and weather challenges create an even more drastic economic divide. How we interact, work, move, live, and invest are results of all these changing pieces.
In 2050, when almost 70% of the world’s population live in cities, our industries need to interact and our ideas need to scale. That future feels so far away, but that’s probably what the creators of Blade Runner thought as well. Despite the political exhaustion, we expect 2019 will be a positive year for solving city problems.
