The 2021 Urban Tech report
2150 and Dealroom publish the first annual report looking at Urban Tech, investment trends and opportunity for innovation.
The battle for climate change will be won or lost depending on how well we innovate within our cities and urban environments. Today, cities consume 2/3 of the world’s energy and produce more than 70% of GHG emissions. Urbanization continues to grow and by 2050 it is expected that 70% of us will live in cities.
“Ground-breaking innovation is needed in cities, where the battle for sustainable development will be won or lost”
Building effective urban environments requires inclusive, healthy, resilient and sustainable solutions, which urban tech can provide. Timing is key, as there are massively disruptive solutions under development that can have a meaningful impact in ten years time.
However we also need solutions that can be deployed in cities now. To map these technologies, we created this report in conjunction with Dealroom to define what urban tech is, the big problems it solves, and what sectors we at 2150 are excited about.
Urban tech is technology that improves the broad urban environments to make them more sustainable, resilient and efficient. Although governments and regulation may be involved, urban tech primarily targets the private sector, selling to businesses and consumers directly.
We view cities and urban technologies through the lens of the Urban Stack, representing four interconnected and interdependent layers of an urban environment; Enable (underlying infrastructure), Build (materials & systems), Operate (urban & physical assets), and Experience (by urban dwellers). By investing across these four layers we can support the scaling of technologies up and down the urban value chain to achieve our sustainability goals.
Investment in urban tech has grown from €5B to €23B over the last five years. Investment in climate and sustainability has also taken off, as it is up nearly 40% since 2013. Here are three key takeaways that emerged when we started analyzing the Dealroom data:
(1) Cities are booming, and so is sustainable urban tech
Urban tech startups raised a record €23B in 2021 YTD, 4.4x higher than they did five years ago in 2016. Heavy industry giants are getting into the game, such as Cemex and Vale who became active urban tech investors. More investment across all urban tech sectors is required to hit net-zero targets and improve life in cities. My colleagueChristian Hernandez Gallardo has previously highlighted that we don’t have until 2050, but really only until 2030 to bend the emissions curve, which is only nine years away. We need sustainable tech solutions now.
(2) Materials and infrastructure is the fastest-growing segment for unicorns
When you think of urban tech success stories, it tends to be in one or two well known categories. Currently there are 75 sustainable urban tech unicorns, mainly within clean energy or mobility. However, growth is expanding quickly to other sectors. Six sustainable infrastructure & materials companies became unicorns in 2021, and at a faster growth rate compared to those previously in energy and mobility. This is important as more than 15% of emissions come from the materials and infrastructure sectors. These unicorns are needed now to drive the scale required across additional urban tech sectors, driving further innovation and lowering emissions.
(3) High emission sectors are also highly underfunded
Heating, cooling, concrete, steel and alternative material startups are all underfunded. Concrete alone is responsible for 8% of global emissions, and buildings take up a large portion at 36%. By channeling dollars into these high emitting sectors we can bend the emissions curve more steeply. Record investment into concrete and cement in 2021 YTD shows how this can move quickly. Action is underway , but efforts still have a long way to go.
At 2150 we are hunting for Gigacorns, or companies that have the potential to mitigate or capture CO2 emissions by 1 Gigatonne/year while being commercially viable. This latter concept is key, as technologies have existed with a green premium, and only early adopters have been willing to absorb this cost.
However we’re now entering a tipping point where the sustainable solutions aren’t necessarily more expensive, and are often cost competitive or even less expensive than the existing products. And although a Gigacorn is yet to appear, there are signs that they will emerge, and are likely to first do so from within urban tech. With more venture capital being raised, more traditional industry anchors jumping in as customers, and clearer regulatory processes, urban tech Gigacorns will appear sooner than you think. And we need them to.
Download the full report here.
2150 is a venture capital firm investing in technology companies that seek to sustainably reimagine and reshape the urban environment. 2150’s investment thesis focuses on major unsolved problems across what it calls the ‘Urban Stack’, which comprises every element of the built environment, from the way our cities are designed, constructed and powered, to the way people live, work and are cared for. Find out more at www.2150.vc and follow us on twitter.