THE BLOG
01/26/2015 12:22 pm ET Updated Mar 27, 2015

The Most Important Startup Trend

It's fascinating to understand what trends interest the best startup investors. This year there are some overlapping themes as articulated by firms like Andreessen Horowitz or Union Square Ventures or First Round Capital. There is good reason to be excited about potential disruptions coming to markets like finance and healthcare and we'll no doubt get a better understanding of the impact of increased focus on security as well as blockchain applications beyond Bitcoin.

But missing from the discussions is the trend I think will matter most in the coming years - the redesign of cities in response to climate change. It's not just the scale of the problem, but unlike most investments, if we fail, we stand to lose a lot more than money.

"No challenge -- no challenge -- poses a greater threat to future generations than climate change." - President Barack Obama, State of the Union, Jan 20, 2015.

Cities use about ¾ of global energy and contribute about a similar percent of CO2 emissions. At the same time in 1950 about 33% of the world's population lived in cities. By 2050, it will be 66% according to UN estimates.

"It would be super-helpful if cities were to develop in an energy efficient way." - Dr Felix Creutzig,

In the US, for example, our residential heating and cooling generates a large footprint directly and indirectly via the inputs to the electricity used (lots of coal and natural gas). Ditto for the offices we work in. And of course, there are the cars we rely on and the heavy use of trucking to move around our food, our goods and our waste. A lot of the time, we're moving nothing - empty passenger seats and cargo areas.

Dr Creutzig explains how cities offer unique opportunities to change our energy use and therefore our impact on our climate. Increased density makes it possible to rely less on cars from bike sharing to ride sharing. The same applies to heating and cooling, where living in smaller spaces means we expend less energy to heat and cool them. Smart thermostats can help us further avoid expending energy when we're not home.

"Gridlock and slow commutes, which take a toll on productivity and the quality of life, are unfortunate side effects of record downtown growth." - Cushman Wakefield Urban Development Report 2014.

Real estate firms are discovering what city planners have long known - traditional response to urban challenges to significant investment and time. Addressing traffic congestion is just the start. Some of the highest concentrations of wealth can be just a few miles from a miserable lack of opportunity. It's hard to see how people will enjoy the benefits of city living, when too many are excluded. While US cities tend to be safer, for wealthier inhabitants, faster growing cities in developing countries, experience higher rates of crime for everyone. If we are to benefit from urban density, we'll have to tackle these very hard socio-economic problems too.

When we say "we" or "cities", to whom are we referring? Governments? Business? Citizens? I think the answer is "all of the above" because while we might look to city government to solve many city problems, they are not doing all the driving and heating and cooling. I also believe this because the founders I get to meet are building useful, delightful, money-saving, city-impacting, climate-change denting products and services. Yet cities are not featured as interesting areas for venture investment and yet they are showing up on the radar of many other organizations.

Utilities want to see innovative approaches to using less energy. Insurers want to know how we can mitigate weather related risks in cities. Real estate developers are concerned about mobility. Foundations want to see cities thrive for all manner of reasons. A host of larger technology firms from mobile carriers to enterprise software are already actively looking at opportunities related to cities. And don't forget consumer electronics companies, who see connected homes and cars as new big markets, no longer just focused on comfort and entertainment, but energy, safety, security, water - the very same areas of concern to many city governments.

When have so many large organizations ever wanted to fund, partner with or buy from startups?

It's easy to dismiss this as part of a current bubbly startup cycle, but something else is going on. The scale of innovation required is beyond internal R&D teams. Without looking to outside teams, like startups, firms risk missing out on whole markets. Auto companies looked smart to focus on car sharing, but they missed ride sharing. And these organizations have some of the best R&D organizations in the world.

I hope more venture firms will begin to see city problems as a larger opportunity. It will help more startups succeed and encourage more founders to focus on city problems. In the meanwhile, we'll be working with the founders and anyone who wants to help them redesign the way we live in cities so we can effectively respond to climate change.