Smart cities: Opportunities for startups

1Executive Summary

The global urban population will grow from 3.5 billion to 5 billion within the next two decades. This rapid increase in population coupled with financial constraints and a desire to reduce environmental impact is creating new challenges for cities in areas such as energy use, mobility, security, and governance.

The policies and technologies that will help cities meet these challenges have come to define the concept of “smart cities.” The impetus to do more with less affects all types of cities, from the largest that might be struggling with mobility to the smallest that might be looking to reduce environmental footprint. Over the last decade the term “smart” has become synonymous with NASA-style control rooms monitoring large systems, designed and built by global technology providers like IBM, Siemens, and Cisco. Historically this type of work was off-limits to small startup firms, but emerging ecosystem is enabling new approaches.

These startups are enabled by a growing ecosystem of consumer technologies, open data, supportive city policies, urban startup-focused programs, open procurement, and organizations involved in everything from funding to research. This report explores how startups like Waze, Nest, Canary, Embark, Aunt Bertha, FirstFuel, Uber, Lyft, Sidecar, Public Stuff, coUrbanize, and Citymart.com can harness this new ecosystem and help solve urban challenges.

Startups can harness this ecosystem by adopting the following strategies:

  • Sell directly to citizens. Urban leaders look to citizens to help set priorities for investment in new solutions. However, citizens have also demonstrated willingness to directly seek out, test, and pay for solutions where they can see direct benefits, particularly in areas like sustainability and mobility.
  • Build on open city data sets. APIs for services like Google Maps or Twitter have become important resources that developers can build on. The emergence of standards, tools, and supportive policies are making available a growing set of data, from 311 reports to real-time transit data.
  • Build on more standard city policies. Cities increasingly look to one another to understand what policies are working. Like data standards, similar policies across more cities mean that startups do not have to adapt product and services to unique situations in each city.
  • Sell to cities via open procurement. Cities are finding new ways to expand calls for proposals to enable more participation from small and medium businesses. There are also more cities embracing pilot programs to test new products and services, giving startups more opportunities to evaluate prototypes and turn pilot successes into sales opportunities.

Local governments are acting because they are being asked to do more with less. In the United States, for example, cities face reduced state and federal support amid slow recovery to prerecession revenue levels. At the same time, an increased focus on the environment means additional constraints beyond financial sustainability. But cities are not working alone. They increasingly receive support from institutions like foundations and nonprofits that fund research and facilitate communication to share what is working. Some of this research is spawning startups to help with critical parts of open data and procurement ecosystems, and startups are banding together to lobby for more standardized policies in areas like the sharing economy.

The figure below shows the emerging urban startup ecosystem. City leaders include mayors, innovation officers, and various people throughout city government who help to understand issues and evaluate proposed solutions. Citizens include individuals and entities that participate in a variety of ways from research to testing. Investors include angels, early-stage funds, and new fundraising platforms. And enablers include foundations, academic institutions, and nonprofits that help to with everything from research to advocacy.

Smart City FIgure 01

A map of the urban startup ecosystem shows various startup enablers from cities, citizens, investors, and other enabling institutions.

Thumbnail image courtesy of Thinkstock

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Shaun Abrahamson

CEO / Founder Mutopo

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