Mark Baum: Yeah, yeah! It’s time to call bullshit.
Vinnie Daniel: Bullshit on what?
Mark Baum: Every f*cking thing!
— The Big Short
It’s easy to lie to yourself. That’s why one of the best pieces of startup advice is to “get out of the building.” Go and talk to prospective customers. The goal is to make sure you aren’t just hoping that the thing you’d like to build is going to be useful.
Much will be written about this US election. How didexperts fail to see what was happening? They were polling and analyzing, but maybe they weren’t getting out of the building enough. Our focus in the coming weeks will be be to try to understand what the Trump administration might mean for Urbantech startups.
We’ll be meeting with many of you in person, but this is the next best way to make sure we all get out of the building — join us on Slack.
Here are some initial thoughts.
Is the head of the EPA going to be a “climate skeptic”? At the same time, a member of the transition team already indicated that there are no plans to roll back incentives for wind and solar. Let’s just say it’s too soon to tell what climate policy will be.
But more importantly, we’ve never looked at federal policy as a necessary part of Urbantech. Below are our main assumptions and questions.
In the US, most climate policy progress has come from networks of cities like C40 or the Compact of Mayors. In areas ranging from data collection to incentives, we’ve always believed that cities are the most important policymakers. Additionally, states like California have already made it clear that they’ll continue to push forward on climate policy. What’s the best way to track city-level policy changes? How does federal funding impact the ability of local government to enact policy?
If the US stops investment in climate-related tech, China, Japan and Germany will be the likely leaders. Corporations? in these countries are already expanding VC activities and other corporate-development efforts. Our startups have generally taken a US-first approach, but should we expect that to change?
As President Trump gets into trade deals, China has already signaled that it will hold the US to climate commitments. Is it reasonable to think that any trade discussions will also include climate commitments?
Climate, Business and Consumers
We believe the public is now far ahead of policymakers. US brands operate globally and their behavior in the US could affect them internationally. Is there an incentive for them to push forward or regress?
Even with reduced incentives, the price of EVs and solar are dropping, but we expect that sentiment differences for things like EVs and clean energy will further break down along party lines. So, for example, we could see a surge in EV buying at the same time as we see more interest in V8 trucks. Sound odd? Here’s an analysis of the car versus political affiliationrelationship.
How will business and consumers respond to changing climate policy? Will they step up or blame incentives for a reduced focus? How do businesses reconcile efforts in the US market with efforts in a global market that is reiterating its commitment to climate?
If you’ve made it this far, we’d love to hear from you. Please join us on Slack
A few investors have already indicated that, while they’ll be looking to learn more about emerging policy details, they’re open for business. Unless markets shift dramatically, we expect mostly business as usual.
How might corporate tax changes impact corporate venture activity? As an example, there is already talk of incentives to bring back cash being held overseas on the condition that it be invested back into the US.
Is there an opportunity to advocate for the expansion of small-business lending? If so, what is the low-hanging fruit of changes that would help startups?
We’ve spent three years understanding what VCs and angels think about sectors like government and hardware. We’ll be working to understand how policy will shift startup investment thinking. For example, some early signals suggest that some firms believe climate-related investments are a no-go but that “cyber” will see growth.
MIT has already begun to look at the viability of the all-American iPhone. The analysis of iPhone manufacturing is a great perspective on the complexity of modern manufacturing and supply chains. It’s not yet clear how you’d tip the scales to move more manufacturing to the US.
On the funding side, hardware startups have been experimenting with Hardware as a Service (HAAS). Like an automotive lease, this arrangement enables startups transform a purchase into a series of much smaller payments.
In part, HAAS has been enabled by a range of new fund structures, almost all of which have been set up outside of banks. How will banks change their lending behavior if Dodd-Frank is amended or repealed?
Local government is where most of us are focused. We’re building things to make cities better. But cities still depend on some federal funding. One issue that has already been raised is the threat of federal funding cuts for “sanctuary cities.”
Since the election, LA and NYC have reiterated their commitment to being sanctuary cities and called pledges to cut their funding “dangerous.” How realistic are funding cuts? What impact might this have on planned city projects?
At the same time, the Trump administration proposed the “New Deal for Black America,” which discusses education, policing and infrastructure. How will this translate into city funding?
Finally, transportation and infrastructure are expected to be a key part of the administration’s policies. Airports, highways, bridges, water have all been mentioned. That’s encouraging, but we’ll have to wait to understand how funds will be allocated across these areas. Further, will any funds be allocated into emerging technologies?
Immigrants are responsible for 51% of billion-dollar startups in the US. The rise in hate crimes after the election is unprecedented in recent memory. How will the Trump administration be tough on illegal immigrants but make legal immigrants feel welcome? How many founders might opt to build startups outside the US?
It’s very hard to beat major US tech hubs, but founders do have choices. The EU and Chinese venture ecosystems have been growing. But perhaps we’ve already reached the point where location is less important.
For two decades, Israeli startups have used a very effective model: leverage engineering and product talent in Israel and combine this with global sales and marketing organizations. In fact, 50% of the teams we talked with over the summer were already geographically distributed, some just in the US but others between US and international cities.
If you’ve read all the way to the end, we’d love to hear from you. Please join us on Slack.