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cities

Building smarter cities

Arturo Muente-Kunigami's picture

For the first time in history, more than half of the world’s population lives in cities. Over 90 percent of urban growth is occurring in the developing world, adding an estimated 70 million new residents to urban areas each year. Demand for services in urban areas is therefore increasing exponentially, and the capacity of local governments to manage this demand is challenged.

Moreover, even though private sector has been successful in leveraging technology to improve service delivery and efficiency, governments have failed to fully embrace the benefits that these innovations bring. There is a growing need for governments to be able to deliver more services in a more efficient and effective way with limited resources. Cities need to innovate and create new tools and approaches.

Fostering cities as technology innovation ecosystems: a big opportunity for developing countries

Victor Mulas's picture
Source: Florida, Richard (2013) “The Global Startup Cities”

​Cities are becoming the new ecosystems for innovation. Recent studies on venture capital (VC) investment in the United States reveal that innovation is moving from suburbs to downtown areas. Today, San Francisco hosts more VC investment than Silicon Valley and New York – a city where the innovation startup scene was merely anecdotic 10 years ago – has become the third-largest technology startup ecosystem in the United States, with more than US$2.4 billion VC investment in 2011.  

This trend is not unique to the United States. Start-ups are surging in other major cities around the world, including London, Berlin, Madrid, Moscow, Istanbul, Tel Aviv, Cape Town, Mumbai, Buenos Aires and Rio de Janeiro, to name a few.

New technology trends have reduced the cost of technology innovation. Cloud computing, open software and hardware, social networks and global payment platforms have made it easier to create a startup with fewer physical resources and personnel. If in the 1990s, an entrepreneur needed US$2 million and months of work to develop a minimum viable prototype, today she would need less than US$50,000 and six weeks of work (in some cases, these costs can be as low as US$3,000). This trend is allowing entrepreneurs to take advantage of cities’ agglomeration effects: entrepreneurs “want to live where the action is,” where other young people, social activities and peers and entrepreneurs are. They look for conventional startup support, such as mentor networks or role models, but also for nightlife, meet-ups, social activities and other potential for “collisions” – a combination best provided by cities.