David Zipper is a Resident Fellow at the German Marshall Fund and a Partner in the 1776 Venture Fund, where he oversees investments in smart cities and mobility ventures. Following his tenure as director of NYC Business Solutions in Mayor Michael Bloomberg's administration in New York City he served as director of Business Development and Strategy for two mayors in Washington, D.C.
If you live in a mid-sized city like Akron, the battles over Airbnb and Uber have likely had little impact on your life.
Few issues in urban tech today are as controversial as the impact of short-term rental startups like AirBnB and VRBO on neighborhood housing. The battle lines are clear: Do these startups help residents earn much-needed extra dollars on the side, or are they so constricting housing supply and raising rents so high that locals are forced to move out? Billions of dollars—and the livelihoods of vibrant communities—are at stake in this debate, and regulatory battles royale have already been waged in cities like Washington, D.C., and Austin. Of course, urban housing isn’t the only bedrock element of city life undergoing rapid and controversial change: Public officials have wrestled for years with how to handle ride-hailing’s destabilizing effect on taxi service, and potentially on public transit as well.
If you live in a place like San Francisco or New York where urban tech startups (and, ahem, national media) are concentrated, these conflicts seem to be reshaping cities throughout the country. But if you dig a little deeper, it’s clear that’s hardly the case. With fewer than twenty new homes built in a city of 200,000 last year, Akron recently abated property taxes for new housing as a way to prop up the construction market. Many of Akron’s leaders would love to have the problem of excessive housing demand that Airbnb has allegedly created.
And although Uber and Lyft are available in almost all American cities at this point, their use is concentrated in big, dense regions. It’s extremely unlikely that the ride-hailing industry’s piece of the mobility pie in a place like Topeka or Louisville comes close to the 20% of vehicle miles seen in San Francisco.
In fact, urban tech innovations—as well as the narrative surrounding the field—disproportionately focus on a handful of cities that are already winning the competition for mobile workers and tourists. Urban tech’s relevance and impact are much more limited in the many mid-sized cities that are spread across the country. Why is that?
Well, for one thing, urban tech startups are often launched by the well-educated young people clustered in thriving “unicorn cities” like New York, Boston, San Francisco, and Austin. They also happen to be the places where venture capital firms concentrate, ready to finance growth (such firms tend to fund startups near their headquarters to keep a close eye on investments and minimize travel).
It’s natural that these entrepreneurs would draw ideas from their own experiences. Tired of lugging around your laundry through the Mission in San Francisco? Enter Rinse. Tough to find a parking spot in Manhattan? SpotHero can help with that. Inconveniences like these are most felt in growing, dense cities chock full of affluent people willing to open their wallets to make their lives a little easier. But they are just that—inconveniences.
As a counterexample, look at Tyrone Poole, the founder of NoAppFee who was profiled in CityLab earlier this year. Several years ago Poole found himself living in a homeless shelter as a result of an incapacitating leg injury. He spent days walking the streets of Portland, Oregon, his hometown, trying to find an apartment building with a vacancy that would accept someone with his financial profile. It took him months of fruitless searching before he found a place to live.
Poole turned his frustration into a business opportunity, launching NoAppFee in Portland as a software platform that instantly gives prospective tenants a list of available apartments where they will be approved based on their finances. The platform is now deployed in three states.
NoAppFee addresses the need for affordable housing—a fundamental urban need—in a way that will resonate most in mid-sized cities. This is because the software’s ability to match prospective tenants with available homes relies on a steady stock of available apartments at the lower end of the market, a rare situation in unicorn cities like San Francisco or New York that have very low vacancy rates.
NoAppFee has found one challenge of mid-sized city life that is ripe for an innovative solution. There are many others. Consider the opioid crisis, which was the focus of a recent startup gathering in Portland, Maine, where opioid deaths have spiked. But entrepreneurs in places like Portland, Maine, (or Portland Oregon, for that matter) struggle to get growth capital from venture capital firms that increasingly direct funding to Bay Area startups.
And so we end up with an urban tech sector creating innovations that are not just relevant for a certain class of city residents; they are also relevant for only a small subset of American cities. Airbnb has more than 8,000 listings in tech and tourist mecca Austin, but only a few hundred in El Paso, which has almost as many residents. Rinse’s promise for dry cleaning delivery or SpotHero’s ability to reserve a parking space have limited appeal in cities like El Paso. But an easier way for a homeless person to find an affordable apartment? That would be get people’s attention. So would a technology solution to the opioid crisis.
There is no single culprit for urban tech’s myopic focus on the unicorn cities. Regional wealth, labor force migration, venture capital preferences, and media biases all play a part. And there is unlikely to be a silver bullet to fix it. But the 21st to 100th largest metro areas in the United States are collectively home to 92 million people, no small market. An enterprising venture capital firm or community fund could finance solutions specifically developed for cities of that scale. Or a collective of mid-sized city leaders could commit to ensuring a technology solution that proves to be effective in one such city can scale easily to the others.
But until something changes, those of us working in urban tech should harbor no false illusions that our innovations are helping urban America writ large. They’re not. In fact, they’re focused on a subset of places that are already magnets for talent. Urban tech has much less to offer mid-sized cities that have their own urgent challenges to cope with.