Q: Why hate to love smart city startups?

A: We have a complicated relationship.

Let’s start at the top. I love smart city applications…

  • Why I fell in love #1: The technology is inspiring. Let’s think about inventions ranging from EV-charging streetlights to multi-purpose urban sensors. It’s insane what electrical, mechanical, civil engineers can do. Layer on the network layer, beautifully designed for each use case. And security? Software? UX? Wow.
  • Reason for loving smart city #2: Infrastructure is powerful but in need of a refresh. Walk around and see how the engineers and architects of the era have layered on the best technology of the day. Yes, there was a day when the now backed-up drainage system solved major flooding issues. But now, we complain that it isn’t better. Personal problems in Chicago? Potholes, crime alerts, delayed trains, trash cleanup, flooding, traffic, snow removal… smart city here we come.
  • Yes, I’ve fallen in love again for this reason #3: The installation is meaningful. Smart “home” lights are usually installed for convenience. Smart streetlights save energy, increase safety, and reduce maintenance cost. That impact is orders of magnitude greater. It’s smart.

…But I hate smart city startups

Traditionally, startups have led a wave of “disruption” in sleepy industries. Cities are in dire need of a refresh. I saw many startups attempting to tackle city problems in my previous role at an IoT company. I loved them all. In my current role as an investor, I hate(?) them all.

I have many assumptions about why startups can’t solve the smart city problem. Most come from observation and not empirical evidence. After thinking a lot about why I can’t find a smart city startup that I can get behind, I want to understand why that is.
 
Following this post, I’ll do a deep dive into each of the following assumptions. I’ll try to dig up available data and draw analogs from parallel industries. I’ll look at cities abroad to see what works there that’s a gate here. I hope to disprove each hypothesis or understand possible remediation strategies. We’ll see where it goes…
  • Problem #1: We don’t know what cities buy so we don’t know what to sell. Industrial buys platforms. Consumers buy products. Cities buy… pilots?
  • Problem #2: Infrastructure is expensive and sucks. To make cities smart, software is not enough. Cities need to replace or retrofit physical assets to become smart. Project financing too much for early stage companies to undertake. Hardware development and manufacturing at scale is unpredictable. (There’s a reason so many VCs invest in SaaS.)
  • Problem #3: Given the problems upgrading infrastructure, software takes longer. Let’s say I built a predictive maintenance app dependent on city sensors. I will have to wait for the city to deploy 1,000s of sensors before I have a full-scale data set. That could mean months or years before I ramp up past pilot stage.
  • Problem #4: Startups can’t get close enough to the customer and that counts. Relationships are difficult to build, cities are risk averse, and margin for error is low. So, startups need to align with trustworthy big co’s. But partnerships don’t work. At least, they don’t work fast enough.
  • Problem #5: There are too many stakeholders. This is a sales, deployment, maintenance, buy-in, PR, financing, and policy problem. Cities are not organizations with a user and a buyer. There are hundreds of thousands of users, dozens of stakeholders and more than a few buyers. Everywhere, there is a lack of knowledge problem.
  • And we haven’t even mentioned everything else. Public entities are difficult to sell into and generally slow adopters. Funding is tricky, regulation is challenging, technology policy is not defined.
I’ll start working down this list and hope that I’m proven wrong. If not proven wrong, I hope find some exceptions. As I create new posts, I’ll update links so this one serves as a table of contents.
 
If you have an opinion, access to data, or an example of a smart city startup that’s killing it, please let me know. You can reach me on twitter @jaydimonte or via email at jackie@hydeparkvp.com.

What do you think?