Urban.Us Investor Update #1
Magic. It’s what we need from cities in the next decade. The kind of magic that leads to a Nest or Waze level of impact. But historically this kind of scale and impact only happens for fewer than 1 in 1,000 early stage investments. So our focus over the next 18 months is to figure out how best to organize Urban.Us to find, select and support the most promising startups that are helping cities.
We completed the first half of our raise. And when all the wires are in, there should be 15 of us. This first group includes close friends and co-investors who’s day jobs are at some of the leading private equity and venture firms. They have been providing great feedback and guidance since Urban.Us was just an idea last year. We’ve capped each investment at $50,000 and asked that investors to deploy any additional capital directly into their favorite Urban.Us companies.
Why take on the work of finding and selecting 30 investors? First, we believe our most important asset is a diverse network. So far our investors bring a deep understanding of early stage companies but also perspective from cities across four continents and expertise and relationships in areas including real estate, energy, transport, media and local government.
Second, we’re not in a rush to deploy capital. We think it’s important to engage with prospective co-investors and understand issues like FOG (Fear of Government) or Hmmmm (Hardware Means Much More Money). Its also an opportunity to figure out how best to work with partners who we’ve not traditionally worked with in early stage deals – corporate venture funds, private equity firms, real estate developers, city governments and foundations.
Since November, we’ve brought together a community of over 130 founders, investors, advisors and urban leaders from cities like San Francisco, New York and Berlin. Being able to bring together the best people, no matter where they are in the world, has some obvious benefits, but it means we need to work a little differently than nearly every other startup accelerator because the accelerator model is usually based on 3 month programs in a physical space.
But working together online has some unique benefits. For example, 2 weeks ago the head of hardware from Silicon Valley Bank did a video chat with 15 of us from around the US, EU and Africa. Each week, as we evaluate startups, we can also quickly get feedback from a diverse community. And as we work with the community, we can monitor helpfulness to ensure that our founders are getting the attention they need and to ensure that we reward the folks who are being most helpful. Try doing that in a physical workspace.
But online interactions have their limits. For one, some folks are just more comfortable communicating in person. So we’ve been organizing meetups in cities like NYC, where we already have a few founders and advisors and using opportunities around large events like SXSW, when many of us are in the same place. And last week we organized Smart City Startups.
With support from sponsors like The Knight Foundation, Miami-Dade County, American Airlines and The Lab Miami, we were able to bring together 150 people from nearly 20 cities over 2 days to discuss key issues around funding, procurement and city partnerships. In the evening we hosted as many as 250 people to see 2 dozen demos. We’ve shared some of the action on www.SmartCityStartups.com. Next year we’ll work with 100 startups to set up demos throughout Wynwood in Miami.
While we will take the time to tell our story in the media, we believe our best strategy is recruiting people to join the Urban.Us community. The community is best at telling our story and more importantly the story of the founders and startups we work with. And in the process, they make introductions to prospective startups, partners and new advisors. So over the summer, we’re traveling quite a bit. We’ll be in Curitiba, New York, Las Vegas, Chicago, San Francisco, London, Montreal, Berlin and Hamburg to participate in Smart City and Startup events.
From conversations so far it’s clear that we can add value in two ways. First, we can help identify promising startups and then we can help to support them. To this end, we’re in conversations with the organizers of programs like NYCBigApps and SF Entrepreneur in Residence. Beyond these programs, other important organizations can help us connect startups and cities, including the Knight Foundation, Code for America and Citymart. We’re in discussions with all of them about how best to collaborate.
There are a number of other exciting opportunities to work with organizations that can help startups to gather feedback and test their ideas from real estate developers and hotel operators to newer organizations like AirBnB and Peers.org. In particular, we’ll keep seeking out organizations that have built engaged communities of early adopters around issues like sustainability and civic engagement.
As a reminder, in each case we’re joining an existing seed round. Given the amounts we are investing, we don’t get to set terms. But because we’re doing quite a bit more than most individual angels, we’re also signing advisory agreements. Like most early stage advisory agreements, Urban.Us receives options in return for services. Unlike traditional advisory services, depending on the issue, we can match the teams with the best people and organizations in the Urban.Us community.
We’re looking at startups that make cities better by improving the built environment, mobility and service delivery which often means using less time, money and natural resources while improving opportunities and quality of life. As we reflect on our first 10 investments, we’re seeing 3 broad trends:
+ marketplaces never get old – so much of the benefit of the internet comes in some form of dating, matching people and organizations more efficiently. So we expect to see variations on these theme whether this means connecting people to a free seat on a bus or finding an interior designer more focused on energy savings.
+ interacting with to the physical world requires hardware – some of the most impactful companies we see are automating interactions with the physical world by observing the world using sensors and then analyzing this data to more intelligently control everything from irrigation valves to drone flight paths.
+ government usually insn’t the customer – in many cases, citizens are the customer. So while we’ll need to live with B2G procurement processes sometimes, there is likely plenty of impact to be had via B2C and B2B models.
The second trend is forcing us to get smarter about ways to reduce the impact of HMMMM (Hardware Means Much More Money). The third trend reduces our concerns about FOG (Fear of Government).
In addition to our comments about each of the startups, you will also notice a score. This score is computed by Mattermark and provides a rough measure of growth rates. Specifically the scores are a composite, weighted average measure of rate of change of metrics like website visitors or app downloads.
As you might imagine, startup media companies have an easier time showing strong week over week website traffic growth, while B2B companies at a similar growth stage might be less focused on Twitter followers. So we’ll highlight business model as well as stage. Given that Mattermark is also a startup, we still find issues in their data, so we’ll highlight these too.
B2B | Marketplace for Architects, Developers and Vendors | New York
As the score indicates, Architizer is rapidly growing their online community and marketplace for architects and suppliers. They are further along than all other Urban.Us companies as the online community and media model was already established before embarking on events and e-commerce revenues and raising their first round. The commercial marketplace is going to be an important factor in speeding discovery of the best products and services. So it is helpful that the A+ Awards is quickly emerging as “The Oscars” of architecture and will cement Architizer as the leading community and marketplace.
Aside: we met with Watershed materials a few months ago. They weren’t ready to raise funds but we made an introduction to Architizer so that they might enter the A+ awards. They are a finalist in their category, bringing much deserved attention to their breakthrough sustainable alternative to concrete masonry blocks. This is an important indicator of ways in which Architizer will be able to support portfolio companies that will work in the built environment.
B2B2C | Direct Giving to Homeless Neighbors | San Francisco
HandUP is already showing how they can positively impact the lives of homeless people in San Francisco pilot. They enable anyone to give directly to homeless neighbors and partner with local institutions to recruit and onboard new members. As more of our social interactions move online, HandUP offers a way to bring stories to where we are but also to gather data and understand what people need and how they are using the resources they receive. You can experience this directly just by visiting the site and meeting some of their members. Beyond a number of success stores, the team has attracted some of the best known angel investors to their cause. It’s clear that the opportunity extends beyond homelessness into broader delivery of social services and so the potential for impact is enormous.
B2C + B2B | Smarter Driving for Individuals and Fleet Operators | New York
450 (score estimated)
Dash helps people drive better, reducing risk and fuel consumption. They launched a few months ago on Android (most developers opt to lead with Apple) and it appears to be paying off very well in big and small ways. They were also the first team to be featured in the app store with a hardware device (which plugs into your car). The team has quickly responded to the challenges of working with multiple phone and hardware combinations and won over loyal fans as a result. Like any number of fitness tracking and scoring devices, the feedback loop can help us to positively change behavior (I’ve found this to be true for Dash, even when driving a John Cooper Works Mini Cooper which provides unlimited temptations for trouble). Beyond their successful public adoption, pilots are underway to explore applications for fleets. Here is a recent piece about Dash in Fast Company.
B2B + B2C | Better connectivity in emergency situations and emerging countries | Nairobi
BRCK creates a backup generator for the internet. In other words, if power goes out or one connection fails, the brick shaped device keeps you connected. BRCK has already won a number of awards and the team continues to sign up pilot partners ranging from emergency response firms to global energy companies. It’s funny to think of this small black box as a piece of critical infrastructure, but the combination of unstable power and unstable connectivity gets in the away of a number of applications from keeping people connected to enabling remote monitoring. The team might look familiar – they founded Ushahidi, used around the world to quickly crowdsource information, particularly in emergency situations. BRCK will beginning shipping in a few weeks. Co-founder Juliana Rotich explains where BRCK came from last year at TED.
B2G + B2B | Paperless government | New York
Seamlessdocs enables the rapid conversion of PDF documents to fillable online forms, reducing data entry costs and errors. It seems odd that this would be an issue, but paperless government has remained elusive. We use the forms for fundraising and while it doesnt make people wire money faster, it greatly simplifies process of gathering information and signatures and managing the associated data. Over the last few months, the team began focusing on government agencies ranging from states to cities. They are one of our first teams selling directly to government and they have been relentless in testing strategies from direct sales to partnerships. And they’re beginning to see success. We expect that soon they will be teaching the software procurement master class.
B2B | Autonomous drones for commercial applications | San Francisco
Skycatch produces autonomous aerial drones that are used for imaging in applications such as construction, logistics, energy and mining. First clients include First Solar and DPR Construction. The Skycatch solution involves the use of a lot of off-the-shelf components, but their focus has been the automation of flying, battery swapping and data processing, which enables clients to focus on acquiring the images they need to save time to reduce risk. The NYTimes has a good piece featuring Skycatch and its role in systainable energy.
B2B | Reduces energy use in building heating systems | New York
Since we first met the Radiator Labs team, they have used their first 2 pilot installations to show that they can consistently reduce heating energy usage by almost 40%. This means an anticipated 1 year payback period for oil fueled boilers in the North East US or about 2 years for those that use natural gas. What is even more interesting, is that they also have early indications that their solution can work for other heating technologies. They recently won an award from Popular Science.
B2B | Wireless key system for residents and service providers | Berlin
137 (score should be higher but since all media is in Germany, their growth is undercounted)
Kiwi.ki is on plan with their residential deployments in Berlin with partners that include Deutche Telekom and first customers Deutche Post and ALBA (recycling + waste management). The team is following a strategy that enables them to install their wireless access device at the entrance of multi-family residences in the service of their B2B customers, who are looking to move away from managing physical keys and to gain greater insight into logistics and service levels (using data from the wireless locks). Once the devices are installed, Kiwi offers their wireless Ki’s to residents along with the possibility of installing Kiwi locks on their apartment doors. Kiwi has received lots of good press already, though non-German speakers will need some help from Google Translate.
B2C + B2B | Reduces water use through smarter residential irrigation control | Denver
Rach.io changes how we water gardens. They closely monitor local weather, vegeration and optionally local sensors and then constantly adjust watering programs. They have just begun shipping pre-orders and will be available in Home Depot in a few weeks. I have a prototype unit installed at home and beyond using the app to prank the kids, there are some important utilities. Last year the team demonstrated that they could save 30% or more water and over the last 60 days, Rach.io co-founder Chris Klein experienced something similar with the first production units. While the device can be purchased and installed by consumers, the Iro can be used by gardening and landscaping service providers, adding a new dimension to how they operate and interact with their customers.
B2G + B2C | Road infrastructure monitoring to identify interuptions | Miami
Has been operating their first pilot in downtown Miami and is awaiting approval for full production. During the pilot, I’ve been able to avoid a few waits in bridge traffic. While first responders are the first customer, the team is also figuring out the consumer offering (currently sms notifications and digital signage), but there are a number of applications involving monitoring of infrastructure like railway crossing or road construction to inform first responders and consumers to better enable them to respond to changing traffic conditions related to temporary road closures.
We’re always looking to meet founders and investors. For potential partners, we’re particularly interested in real estate developers, foundations and corporate venture groups. While we’d like to meet more cities, for the moment, we’re going to focus on relationships with a few cities that already have the capacity to work with startups.
We’ll send out updates like this each quarter. But if you want to see what we’re up to each week, please consider joining the Urban.Us Community online. You’ll see where founders can benefit from your specific knowledge and support and you can weigh in on new prospective investments too. If you are interested, please let me know and we’ll send you an invitation.
CEO and Co-Founder Urban Us Public Benefit Corporation