What is Urbantech?
Excerpts from the Urbantech Investor Playbook.
What is urbantech?
Urbantech describes startup technology companies that directly improve city life and cities’ sustainability. Unlike smart city technologies, urbantech does not primarily sell to city governments, but rather consumers and businesses.
Sectors of urbantech
When Urban Us first created The Urbantech Radar in 2014, the main sectors included:
- Civic & Administration
- Resources & Built Environment
- Transportation, Mobility & Logistics.
At the time, notable startups included Airware (now shut down), Lyft (LYFT), Nest (acquired by Alphabet), Opengov, Opower (acquired by Oracle), Uber, and Waze (acquired by Google). This list’s M&A and public offering activity shows how viable the then-nascent category has become.
Since 2014, the urbantech sector and Urban Us’ experience investing exclusively in urbantech has evolved. We’ve expanded our definition to include the following sectors:
Built Environment & Real Estate
Technology improving how we add capacity to urban spaces and increase efficiency in building it.
Infrastructure & Industry
Roads, bridges, utilities/smart grid, Industrial Internet of Things (IIOT), equipment, manufacturing and efficiency.
Food, Waste & Water
Access to sustainable and healthy food, clean water, and the reduction of commercial and residential waste.
Public Health & Safety
Welfare and protection of the general public, environmental health and behavior, and city livability.
Energy & Grid
Renewable energy and energy efficiency that reduce environmental impacts.
GovTech & Civic Solutions
Digital upgrades to existing state, local, national and international government and civic functions including data collection and civic participation.
Transportation & Mobility
Changes of how we move people and things with autonomous vehicles, car sharing, electric vehicles and alternative transportation options.
While some of these sectors have been slow to use emerging, digital technologies, an increasing number of founders seek opportunity in these sectors.
Together these sectors represent about 25% of US GDP, and Urban Us’ analysis estimates 1 to 2 in 10 companies founded over the last few years are focused on at least one of these areas.
Urbantech serves as a systems-lens for a number of interconnected sectors and integrated technology areas. Professor and author, Richard Florida notes that urbantech is unleashing a new round of creative destruction on cities, enacting a set of economic transformations.
According to the data he collected using CB Insights, urbantech investments totaled more than $75 billion from 2016–2018, representing roughly 17 percent of all global venture-capital investment. Between 2016 and 2017, urbantech investment more than doubled — from less than $20 billion to $44 billion — as its share of global venture investment surged from 13 percent to 22 percent. Urbantech may well be the largest sector for venture capital investment, attracting considerably more funding than pharma and biotech ($16 billion in 2017) or artificial intelligence ($12 billion in 2017).
Notable urbantech companies
Below is a list of companies doing impactful work in early stages and at scale in the urbantech sectors just identified. Urban Us’ portfolio companies are indicated with asterisks.
Built Environment & Real Estate
Starcity (https://starcity.com/) — *Urban Us portfolio*
Starcity is a lifestyle brand which provides beautifully designed co-living communities in major cities. Starcity is building a new category of real estate between hotel and housing, with the mission to make great cities accessible to everyone.
Landed is on a mission to help essential professionals build financial security. They primarily focus on helping educators buy homes by investing alongside them. They call this model shared equity down payment support.
WeWork designs and builds physical and virtual shared spaces and office services for entrepreneurs and companies. The company’s 100,000+ members have access to health insurance, an internal social network, social events and workshops, and an annual summer retreat. In Q2 2019, WeWork confidentially filed its IPO at a valuation of $47 billion and managed 10,000,000 square feet of office space.
Infrastructure & Industry
Inspired by the potential of wastewater epidemiology, Biobot is the first company in the world to commercialize data from sewage. By measuring the concentration of drugs that are excreted in urine and collected in sewers, they map this data empowering communities to tackle the opioid epidemic in real time.
GoJava.ca was founded in 2015 with the mission of finding a recycling solution for the millions of coffee pods across North America that were going to landfill. The goal was to create a service that would allow users at home or at the office to recycle their coffee pods on a wide scale that was free, simple for users, and easily adapted into their existing routines.
KOKO Networks (www.kokonetworks.com)
KOKO’s IoT platform connects consumers, retailers and suppliers to improve life for everyone in African cities. They build and deploy dense Networks of cloud-connected “KOKOpoints” inside local corner stores, which serve as consumer access points for goods and services delivered in partnership with major suppliers.
Opti enables communities and businesses to continuously improve stormwater management by delivering real-time visibility, adaptively controlling assets, and supporting smart city initiatives.
Food, Waste & Water
Bowery Farming (https://boweryfarming.com/)
Bowery Farming is a modern farming company growing the purest produce imaginable by revolutionizing agriculture. By combining the benefits of the best local farms with advances made possible by technology, indoor farms create the ideal conditions to grow post-organic produce with a proprietary software system using vision systems, automation technology, and machine learning. Because Bowery controls the entire process from seed to store, Bowery farms use zero pesticides, 95% less water, and are 100+ times more productive on the same footprint of land than traditional agriculture.
Drinkwell is a market-leading water technology company operating in India and Bangladesh that provides turnkey water solutions. Their proprietary technology removes contaminants from water using a gravity-fed process that reduces energy costs and wasted water by more than 95% versus competing technologies.
Sanergy builds affordable sanitation products designed specifically for urban slums, and franchises them to community members to serve all residents. They convert the waste at a centralized facility into valuable end-products such as organic fertilizer and insect -based animal feed. Sanergy builds healthy, prosperous communities by making sanitation safe and affordable for residents of informal settlements.
Spoiler Alert is helping food manufacturers, wholesale distributors, and grocery retailers manage unsold inventory more effectively. We offer 1) a business intelligence solution that allows companies to get a better handle on food recovery and waste diversion efforts, as well as 2) a controlled, relationship management portal that facilitates real-time food donations, discounted sales, and/or organic byproduct redistributions.
Public Health & Safety
Mark43 creates the next generation of law enforcement software that allows police to effortlessly collect, manage, analyze, and share information. Mark43 has reinvented the law enforcement paperwork process which includes everything from arrest and incident reports to investigations.
Medwood provides administrative and management support services to a network of primary care and family medicine physician practices located in New York City, which collectively support more than 40,000 visits annually. The primary care and family medicine practices that Medwood services are providing low-cost, high-quality care within medically underserved communities.
OneConcern is building a global disaster-intelligence platform with one concern in mind: saving lives. They are using AI and machine learning to (1) create a robust, disaster-resilient cloud infrastructure, (2) create a real-time big data pipeline to inform disaster response and modeling, and (3) combine traditional hazard models with machine learning to provide clear pre-disaster insights, while capturing post-disaster data to continuously improve response and recovery.
Energy & Grid
BlocPower uses data, thermodynamic models, structured finance, IoT and edge computing to make city buildings, greener, smarter and healthier. BlocPower connects online investors to solar and energy efficiency project micro-finance opportunities, and trains and hires local unemployed workers to install all BlocPower retrofits.
DEPsys provides a versatile control platform allows power grid operators to run distribution grids safely, reliably and optimally — making it possible to feed large quantities of renewable energies into their grids from decentralized sources. Their leading product, GridEye, also allows for the easy management and control of micro-grids and neighborhood solutions.
Spark Meter (www.sparkmeter.io)
SparkMeter provides smart metering solutions tailor-made for rural and central utilities in developing markets, where 2.1 billion people live without reliable electricity access. The simple plug-and-play solution enables utilities operating in remote locations to access a range of features — prepaid billing, customer communications, and remote monitoring and control — that improve their operations and help them achieve financial sustainability.
GovTech & Civic Tech Solutions
Neighborly is democratizing the $3.8T municipal securities market, fostering a healthier relationship between global banks and our nation’s places. By engaging individuals to invest in civic projects through municipal bonds, drives investment in world-positive infrastructure projects like broadband, solar microgrids, and libraries.
OpenGov is a technology company that offers cloud-based software for public sector budgeting, reporting, and open data, powering more effective and accountable governments. Through its Smart Government Platform, OpenGov offers a complete suite of software products, all designed to enable public agencies to make data-driven decisions, improve budgeting and planning, and inform elected officials and citizens.
Remix is a platform for planning public transit, designing streets, and managing new mobility. Remix makes a web-hosted application for planning public transit systems. It automates the process of route and schedule scenario testing, letting planners draw routes onto a map and immediately see a potential schedule and fleet requirements.
Transportation & Mobility
Bird gives you access to shared personal electric vehicles (scooters) that can be picked up and dropped off anywhere. Bird shares a mission with cities to reduce traffic congestion and carbon emissions by providing people with a safe, affordable, and clean alternative.
Lyft is an on-demand transportation company primarily providing ride-hailing services.
One Wheel (www.onewheel.com)
Onewheel is a self-balancing electric board-sport, recreational personal transporter, often described as an electric skateboard.
Startup challenges in urbantech
Urbantech startups generally encounter at least one of three significant challenges.
- Heavy regulation. Local, state, and federal governments regulate most urbantech sectors, and can create friction for startups attempting to scale services quickly.
- Lengthy sales cycles. When startups sell to local governments, procurement processes can result in long, costly sales cycles.
- Alternative capital models. As many urbantech startups use hardware to scale, some must either sell more equity than their software-exclusive counterparts or look beyond traditional venture finance for capital. The Urbantech Playbook consolidates learning from founders about how to address these challenges.
Most urbantech startups do not sell to local government, and instead focus on business and consumer go to market paths. There is a balanced mix between software, hardware enabled software, and software enabled services (like market places) across urbantech technology stacks.
Startup advantages in urbantech
Urbantech startups generally benefit from several differentiated advantages.
- Well-known predecessors. The rise of urbantech reflects the growing role of cities and urbanism in the global economy. Many of the companies that now have the greatest influence on our daily lives are urbantech unicorns: Uber, Lyft, Airbnb, WeWork, Nest, Tesla and Instacart.
- Overlapping categories. The themes of these urbantech unicorns consider many aspects of human life: mobility, housing, energy systems, food, and government services. Further, they elevate cities and the density afforded by urban areas to promote efficiency, inclusivity, sustainability, and shared infrastructure as an opportunity to improve our collective use of resources.
- Potential for scale. Urban Us invests under a philosophy that industries and experiences in cities are complex, intersectional, and should not be examined in a silo. For example, 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 mega-cities, but also thousands of smaller urban areas around the world. Intersections and scalability are most literally the benefit and beauty of cities and the key to creating new large, impactful companies.
- Eligible for impact capital. Admired for their fast growth and investor returns, some of these companies have also benefited from “impact” capital that seeks to improve society through investments in social and environmental change.
- A growing need for new solutions. Old technologies, many introduced over 100 years ago now, helped cities scale to deliver the opportunities for urbanization we see today, but many are no longer up to the task and will to deliver what needs. In the age of climate change and more people moving into cities globally, we need more benefits without all of the negative consequences, like electricity without global warming or rapid, comfortable mobility without risk of injury.
Active investors in urbantech
Active urbantech funds cover some or all of the above sectors.
- Traditional and corporate venture capital funds include Alliance, BMW iVentures, Builders, Congruent, Ekistic, Energy Impact Partners, Fifth Wall, Fontinalis, Govtech Fund, Metaprop, Omidyar Network, Trucks, Tusk Ventures, Urban Innovation Fund, and Urban Us.
- Generalist VC is increasingly active in urbantech, including Alphabet, Amazon, First Round, NEA and Social Capital.
- Specialist accelerator programs include DreamIt, Tumml, Urban Future Lab and URBAN-X, Urban Us’ accelerator in partnership with BMW-Mini.
- University programs for MBA and engineering students interested in urbantech are offered by Cornell and the Massachusetts Institute of Technology. While Harvard University’s program is based on the Urban Us case study, we also have the honor of creating and facilitating the curriculum at the University of Chicago.
Y-Combinator, the largest generalist accelerator, is increasingly making calls for urbantech startups in areas like government and climate change. Generalist investors increasingly have partners dedicated to one or more urbantech sectors.
Urbantech is similar to smart cities in its goal of improving city life. However, the first generation of these “smart city” projects tended to focus on cities with a lot of power. This means they missed a lot of important areas, especially in mobility and built environment.
Organizations like Sidewalk Labs are now incorporating the benefits of mobility and built environment in their vision of smart cities. By building whole cities, they seek to control usually private elements like buildings or cars. We expect this approach will become more common with time.
Urban Us’ is focused on existing cities and opportunities to improve tools and systems across the sectors that are latent to upgrade for today and tomorrow’s cities.
Sector Power Signatures — The size of the green area denotes the mayoral power/control over transport assets and functions.
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