At Urban Us, one of the first question we ask when we evaluate new startups is “How will your idea make cities better?” Interpretations of what it means to make cities better may vary, but in order to align resources to your cause, it is critical that your startup has a clear benefit to multiple city stakeholders. Whether the distribution channel for your solutions is government, businesses, or consumers, a successful urbantech startup will ideally serve cities, citizens, and the environment.
Our next question is, “Can you grow to 100 cities in five years?” It’s unlikely you’ll know exactly how this will happen, but the goal is to determine whether the problem your startup is solving exists for people or organizations across multiple cities. This will also help you answer a question you will get from prospective investors and teammates: How big is the market?
“Cellular phones will absolutely not replace local wire systems.”
– Marty Cooper, credited with inventing the cell phone at Motorola in 1981
Predicting scale is never easy
So why bother figuring this out early? Because, for many investors and employees, the potential size of an opportunity is an important measure of whether it will be worth spending time to learn more about the idea and, eventually, to invest. They know startups are hard in both large and small markets, so why not focus on the biggest opportunities?
Next, we ask, “How easily might this idea be replicated?” Some ideas become more difficult to copy as they grow, but in general, as your startup grows, more competition is likely to appear. Brand awareness, economies of scale, and high switching costs might slow down competitors, but it also helps to get a head start. If you’re working on an obvious problem, there are likely others working on solutions, too. And even if you’re working on a problem that is not asobvious, or in a “boring” market (as many urbantech startups tend to do), others will become interested in replicating any success you build over time.
Competition won’t just come from incumbents and other startups. Your potential customers might be tempted to keep doing what they’ve been doing, including nothing. Some may decide to build their own solutions.
You can’t depend on old adages like “hardware is hard” to protect your idea. Hardware is becoming less hard thanks to easier access to regions rich with manufacturing resources and better distribution of best practices. Most advantages in software and UX/UI are replicable, and though machine learning may give you an edge, algorithms are quickly becoming commoditized. Networks and industry insights are easier than ever to access and build.
What’s really hard to replicate are unique insights, proprietary datasets, distribution and brand. Whether your customers are consumers, businesses, or cities, we’re seeing winners break out by delivering on promises and exceeding expectations. Understanding your customer, being responsive, and shipping a great product remains rare but justly rewarded.
We also ask, “Why do you want to work on this idea?” Or, to put it another way, why do you want to make cities better? All startups are hard, but urbantech startups often include additional challenges. Your answer to this question will impact many things, including what support you can expect from advisors, what types of people will want to join your team, and even how you interact with regulators. Too often we see founders enamored with a piece of technology instead of focusing on the problem they hope to solve. We prefer the latter group.
A note on demos:
Some customers need to experience a product to be convinced of the product’s value. They need to test-drive it or see ratings or reviews from people they know. This is why great demos and prototypes can be so critical. They may not answer questions about how a product or experience will be delivered at scale, but before you worry about how to serve an entire market, it’s important to verify that someone wants what you’re making.
For business and government customers, the problem you’re working on is often one they’ve been living with and understand very well. If you are able to demonstrate how you can deliver a faster, better, or cheaper solution, they’ll be able to give you a sense of their interest. Ideally, they’ll demand to be first in line to buy it when it’s available!