For roughly a year, Niko Bonatsos, a managing director at the venture firm General Catalyst Partners, didn’t make a single investment. He was meeting with startups daily, as it’s his job to do. But Bonatsos, who steered General Catalyst to Snapchat in 2012, was finding it hard to be inspired by what he was saw.
That changed in September, says Bonatsos, who has spent half his time in recent months focused on what urban centers are going to look like in the coming decades. On a recent afternoon in San Francisco, we sat down with him to talk about it. Our chat has been edited for length.
TC: You see a lot of space being freed up, or repurposed, thanks to companies like Uber, which may make parking structures redundant, and Airbnb, which is beginning to put two- and three-star hotels out of business. As an investor, where do you see the opportunities as this shift takes place?
NB: There are two buckets. The first is in helping cities to run more efficiently, and this is anything that’s happening in the background that you don’t notice until it breaks down – water management, parking, safety, energy stuff.
The second bucket is more consumer-facing, meaning products and services that make life better, easier, and more convenient for inhabitants of dense cites. Think of marketplaces to find roommates, or startups that can help you find physical storage, or hyper-local news that helps you understand what’s happening in the world around you.
TC: How long do you think the transition will take? And do you think the buildings will be the same as today or new?
NB: I think it will take ten to twenty years. And it feels to me that in the Western world, if you and I were to find ourselves in downtown San Francisco 30 years from now, most the buildings would be the same. I don’t see a lot of new inventory coming in. But buildings will need to be repurposed. [In addition to Uber and Airbnb], if Amazon continues to eat up [more of our discretionary spending], what’s going to happen to all the department stores? If self-driving happens, what does that mean for streets and parking lots?
TC: What do you think the implications of self-driving will be for city centers?
NB: I don’t know if whether self-driving cars, when they happen 10 or 25 years down the road, will mean that cities will be more dense or not. You could argue it either way. The cost of transportation will go to zero, and it will be become either entertaining or productive for you to commute.
There may also be a consumer preference component, where the introverts are going to find themselves living in the suburbs, and the extroverts will be hanging out in downtown areas.
TC: Who’ve you been talking to in order to understand this shift?
Policy makers, local municipalities, startups that are selling to them. I’ve been reading a bunch of books, including the Triumph of the City. Sidewalk Labs [the Alphabet subsidiary focused on tech that improves urban life] has also published a lot of really good stuff.
There’s a lot to think about. Consider that the government makes a lot of money auctioning spectrum to carriers; if self-driving cars happen, you’ll need 3D maps of everything. Could local municipalities make money from selling data from the cameras that will be installed? Will cities have high-quality data for urban planning purposes for the first time?
Right now, if you look at how urban planning happens today, a lot of the tools are stuck in the past, yet even now, with simple webcams, you can count how many cars, dogs, people, and bicycles are moving back and forth through certain areas, then make decisions around new roads, bus stops, and stuff like that. Some cities are already better than others when it comes to capturing information, including New York and London.
TC: What the single most important thing cities should be focused on right now?
NB: Well, for places like San Francisco to become denser, the single most important thing we can do is to change zoning laws. In lower Manhattan in the 1920s, density was four times was it is today, then zoning changed owing to public health concerns that aren’t [concerns] today.
Assuming zoning rules don’t change, what can we do is make housing more affordable. One way is to think about co-living situations. There are probably 20 companies that have been started like Common and WeLive from WeWork. Hotels like the Westin, W Hotels, and Marriott could have co-living brands, too. Co-living isn’t just for young people; it’s also for older people who are going through a status change like a divorce or a death in the family and who are looking for a way to start a new chapter with the right community and the right price point.
A related question is how could you make construction itself more affordable? How can you build homes for 30 percent less? How can you make prefab homes fully customized? How can you make construction more modular so you can build things quickly and cheaply. So I’m looking at this part of the world right now, too.
TC: It’s one thing to know these changes are coming. It’s another as a VC to bet on them, given that you don’t have endless amounts of time to produce returns for your investors.
NB: It’s true. One of challenges I’m seeing or facing so far, especially for companies that want to sell to municipalities or local governments, is they’re too much mission-driven. It almost feels like they’re nonprofits versus for-profit entities. For the venture capital model to work, you need a high sense of urgency and continued, exponential growth; the impact can’t just be at the hyperlocal but global level, and it needs to come faster.
I also don’t know yet the equivalent of Moore’s Law — what will serve as the pacemaker. If I had certainty that drones or self-driving cars will happen in the next 10 years, then I’d know that yes, use for land will be changing in the next 10 years.
TC: Are you finding a lot of founders thinking about this shift? Sounds like you are.
NB: A lot of people are thinking about it. So are some micro VCs and corporate VCs. Urban.us is doing some interesting stuff. BMW and Mini have an accelerator in New York for founders who are focused on urban tech. Sidewalk Labs is building companies in-house. It feels like there’s an underground movement happening.
TC: Have you made any related investments?
NB: I did make my first investment in a year in September, though I can’t talk about it yet. But I’m very excited about this space. I’m in learning mode. I can’t pretend I’ve figured out everything. I’m two months in. But it feels like there’s something there.