One company provides storage space in ceilings; another helps large commercial real estate holders reduce water bills; a third ships breast milk and nursing supplies around the country. It’s not obvious what connects these as investment opportunities, but for Clara Brenner, MBA ’12, who cofounded venture capital firm Urban Innovation Fund, each of these startups is shaping the future of cities. Brenner’s co-founder is Julie Lein, MBA ’12.
For most people, the phrase “shaping cities” conjures transportation or utilities sectors. Brenner sees much more: “When we say ‘urban,’ we mean startups that are tackling the problems that mayors’ offices across the country have prioritized, but haven’t necessarily been able to address efficiently on their own,” she explained in a recent appearance on the Leading Voices in Real Estate podcast. From her perspective, urban opportunities include addressing challenges of living space or the expanded population of working mothers.
Started in 2016, Urban Innovation Fund holds roughly $22.5 million, which it disburses in pre-seed and seed stage rounds of funding. (The fund also follows its investments over multiple rounds as businesses grow.) In the podcast, Brenner discussed the value of political acumen, the limits of the private sector, and the rocketing value of curbs.
Regulation as competitive advantage. Alongside financial backing, a central piece of Urban Innovation Fund’s work is providing regulatory support to the companies in which it invests. That’s a must when so many of the startups operate in both the digital and physical worlds. “They face issues of either directly being regulated, or perhaps dealing in a space where the regulation isn’t clear,” Brenner said. This reality creates enormous complexity across the patchwork of states and municipalities. “When you figure out how to operate successfully in San Francisco, then you go across the bridge to Oakland … it’s like starting again,” she said.
Brenner actually views regulatory support as a kind of competitive advantage. She pointed to Chariot, a commuter shuttle service in which Urban Innovation Fund was an early investor. When Chariot launched, it wasn’t the only bus startup out there and many others were better funded. But the competition routinely failed by misunderstanding or sidestepping regulation. Chariot went on to be acquired by Ford in 2016.
“First and foremost, you have to be a good startup. Your technology has to be good,” Brenner said. “But a real key differentiator, and an opportunity to rise above the rest, is your savviness when it comes to the way you think about dealing with the political environment, the policy environment.”
Private sector limits. Brenner is convinced that business can dramatically improve life in cities, from giving more people access to secure voting to providing crowd-investment platforms for municipal bonds that target public infrastructure projects. She is also convinced that business can’t — and shouldn’t — do it all.
“We get asked all the time, ‘When are you going to invest in a company that solves the housing crisis, or the homelessness crisis?’” she said. “I don't think it’s going to be a tech innovation that drives that change.” Private investment in building better cities must be paired with the messiness of civic engagement and the long, grinding march of political progress.
She sees political disengagement in the tech community. She recalled an event in a coworking space where California lieutenant governor Gavin Newsom was speaking. “The number of people who just literally said ‘Who is Gavin Newsom’ was shocking to me,” she said.
By all means, Brenner tells her peers, design a great product and a flawless user experience. “But there are business advantages to knowing who the governor is and understanding the regulatory implications of your business,” she said.
Invest in curbs. Asked about the trends that are likely to define cities in the years to come, Brenner gave a few oft-mentioned forecasts: autonomous driving vehicles, for instance; and alternative financing, especially in real estate. She also discussed “fem tech,” which she described as a rapidly growing space of innovation around women and new parents. But the really new trend was the value of curbs.
“I don't think you're going to be allowed to just park your cars willy-nilly, on any curb, moving forward,” she said. “Whoever controls that space has a real competitive advantage.”
As strange as it sounds, she discussed the jostling among large companies to get more access to curbsides. Lyft, for instance, recently acquired the company that runs bike shares in New York and San Francisco. What the precise implications are Brenner wasn’t sure. But looking at the example of Lyft, she was clear on one thing: “I don’t think they’re buying just because of the bicycles.”
“I think that’s the most valuable space within a city,” she said.