Startups Are Helping to Drive the Smart City Revolution

Modern city connectivity.

Today’s cities are getting smarter. The application of digital technologies is allowing them to carry out their basic functions more efficiently and effectively. Citizens now have novel ways to socialize and to feed, clothe, and house themselves.

Behind these smart city innovations are a number of enterprising startups. Some are developing new materials with which to build cities; others are intent on improvising the quality of the air that citizens breathe. Still others want to improve mobility, getting place from place to place faster and more conveniently. 

Let’s examine some of these smart city startups.

What Are Smart Cities?

The term “smart city” may have been coined by IBM. In 2009, Big Blue launched its $50 million Smarter Cities campaign to help municipalities operate more efficiently. But the smart city concept predates that. As far back as 1974, Los Angeles was toying with the idea when it commissioned a report entitled “The State of the City: A Cluster Analysis of Los Angeles. “ Three decades later, around 2005, Cisco launched the Connected Urban Development program. The collaboration with the cities of Amsterdam, San Francisco, and Seoul intended to discover ways to improve the efficiency of urban infrastructure through digital technologies. 

Are smart cities a futuristic utopia where citizens’ everyday lives are eased by advanced technologies, or will these new technologies mutate into Trojan horses that, in the end, destroy democracy? Only time will tell. For the moment, we must be content to describe smart cities simply as cities that rely on the Internet of Things (IoT) to improve efficiency, convenience, and quality of life. (IoT refers to the billions of physical devices around the world that are now connected to the internet collecting and sharing data.) The OECD further defines smart cities as “cities that leverage digitalization and engage stakeholders to improve people’s well-being and build more inclusive, sustainable and resilient societies.” 

A McKinsey report proposes that three layers work together to make a city smart. At the base is the technology, made up of devices that record and measure physical properties (sensors) and those that receive and process that data, which importantly can include smartphones and the IoT. 

The second layer consists of communication technologies, such as cellular networks and Low Power Wide Area (LPWAN) wireless technologies, that connect the physical devices. A range of applications interprets the data in specialized ways, producing alerts, insights and calls to action. 

The third (and most important) layer is the behavioral change prompted by the new information. To a large extent, this depends on how fast, to what degree, and in what ways people react to the data. Transit information could lead to more distributed use of public transport systems. Data on energy and water usage could reduce consumption. Health information could increase preventive self-care, make citizens healthier, and reduce strains on the healthcare system.

McKinsey graphic showing the three layers of smart cities.

The ultimate aim, of course, is to improve the quality of life for citizens. But quality of life is a complex concept, difficult to pin down and difficult to measure. Regardless, the McKinsey mandarins have broken it down into seven areas: cost of living, environmental quality, health, jobs, safety, social connectedness and civic participation, and time and convenience. 

Two of the startups we review below are tackling environmental issues. Another two have devised solutions in the time and convenience space, while one is hoping to improve mobility. 

One major environmental issue is global warming caused by carbon emissions, a great deal of which come from buildings. Buildings generate nearly 40% of annual global CO2 emissions, according to the independent nonprofit Architecture 2030. Carbon emissions from buildings originate from two sources. The first, operational carbon emissions, derive from the everyday lighting, cooling, and heating that buildings require. Globally, operational carbon emissions contribute about 28% of emissions annually. The second source is embodied carbon, the carbon generated from the manufacture and transport of materials and the actual construction process. Globally, such embodied carbon accounts for about 11% of emissions. It’s a big problem, but one startup — Woodoo — has already started work on it.


Woodoo is making transparent wood. The startup, founded by French architect and biologist Timothée Boitouzet, is using cellulose nanotechnology to replace lignin, which gives wood its solidity and opacity, with a transparent polymer that has new optical properties. This process results in a new see-through material with unprecedented mechanical strength, durability, and fire resistance. The manufacturing process uses low-grade wood species, such as beech, birch, pine, and aspen, all sourced from sustainably managed EU forests within 300 km of Woodoo’s manufacturing plant. Woodoo’s augmented wood is expected to reduce embodied carbon. Italian benefit corporation LifeGate says Woodoo’s biomaterial is 17 times less energy-intensive than glass, 130 times less so than steel, and 475 times less energy-intensive than aluminum.

“We have developed a technical process to remove the weak lignin parts of a wood board’s structure, replacing the lignin with a recycled custom polymer,” said Olivier Grange, SVP Marketing & Communication at Woodoo. “The result is a sustainable material with tremendous qualities: it is three to four times sturdier than conventional wood, resistant to rotting, fire retardant… It has applications not only in construction but also in the smart surface industries … because our wood is also translucent and touch-sensitive.”

In answer to how Woodoo will help build the future Smart City, Grange responded: “We firmly believe we are the best alternative to concrete and building materials. We are already studying full-wood 35-stories structures, and it’s just the beginning. It will allow a drastic cut in the 2.5 billion tons of CO2 that the building industry is spilling in the air each year.” 

However, at present, Woodoo’s augmented wood isn’t being used in buildings. That probably won’t become a reality for at least a decade, when the material will allow the erection of wooden constructions about three times higher than regular buildings

To date, Woodoo has raised a total of $5.2 million in four funding rounds, according to Crunchbase. The latest round raised €3.25 million ($ 3.8 million) as a grant from EASME – EU Executive Agency for SMEs.


Israeli startup company Valerann was founded by Israeli entrepreneurs Shahar Bahiri, Gabriel Jacobson, Michael Vardi, and Daniel Yakovichin in 2016 to create an AI-powered road management system to improve mobility and reduce accidents. Valerann’s system provides real-time data. It does so from three sources: proprietary sensors embedded in the road, public devices such as traffic lights and cameras, and data from user-enabled applications like Waze and Twitter. It can also utilize “floating car” data from connected vehicles, where that’s available. Such a tool in the hands of road operators would not only improve the flow of traffic but reduce accidents

Valerann acquired initial pre-seed capital of $800,000, which allowed it to develop its first prototype by December 2016, just four months after launch. After a relatively quiet 2017, the company won three major contracts in 2018, and in April of the same year, the first deployment of its system went ahead in Israel. A US installation followed the month after. This attracted the attention of giant fund SoftBank, which struck up an IoT partnership with the startup. And in October 2018, Valerann completed its first UK deployment. 

According to Crunchbase, the company has raised over $14 million in capital over three rounds, according to Crunchbase, the latest being a Series A round that took place on May 1, 2021. In February 2021, CTech reported that Valerann was set to receive a capital infusion of $2.7 million through a partnership led by Israel’s public transportation bus company Dan. At that time, Valerann had a valuation of $16 million.


Dutch startup Spaceti is a pioneer in the digitized property management sector (known as proptech). The company has created a SaaS system for the management of spaces devoted to work and study, which combines a Workplace Analytics suite and a Workplace App. The Analytics platform collects data from proprietary and third-party sensors that measure occupancy of desks, offices, and parking lots, as well as indoor air quality factors, such as temperature, humidity, and CO2 levels. The Workplace App allows the utilization of this data to select spaces: venues with specific attributes. The system can be used in conjunction with many popular peripherals, including Cisco cameras and Gantner lockers.

Company co-founder and CEO Max Verteletskyi expects hybrid working (i.e., the combination of remote working and working in the office) to be the new norm. As he describes: “It’s the ability to work from an ecosystem of places – let’s say you can perform some of the focus work from your home, more collaborative work from your company office location or nearby coworking centre, and some creative work from a café or even a hotel somewhere in the Alps that could give the right inspiration and vibe. In my opinion, the lines are being blurred between the types of physical space, and more importance will be given to the quality of space, which will become more of a benefit for your employees.”

Spaceti, which is based in the Czech Republic capital of Prague, was founded by a quintet of entrepreneurial individuals. Max Verteletskyi, formerly of the IBM CEE Cloud Innovation Lab is CEO. Ondrej Plevka, also a former member of the Cloud Innovation Lab, is the chief technology officer. Vladimíra Josefiová is the chief finance officer. She holds an MBA from Harvard and is an alumna of Goldman Sachs and McKinsey. Tomas Bartak is the security manager. The multilingual Aakash Ravi, formerly of Stanford University’s Institute of Experimental and Applied Physics, is the fifth member of the co-founding team, with the title of Chief Growth Officer. 

Spaceti has raised $5 million in two funding rounds. The first was In 2017, when the company received €1 million ($US 1.2 million). The second was in May 2014, amounting to €3.5 million ($US 4.14 million). The company relied on founders’ funds to get off the ground.

Green City Solutions

“Polluted air is the cause of one in seven deaths worldwide,” says former Green City Solutions CEO Dénes Honus. “Just 10µg of pollutants per m³ of air will shorten a life span by half a year.” Green City Solutions has devised a solution to remove those poisons. The CityTree uses a combination of sensors, irrigation systems, software, and moss, to capture and metabolize pollutants. The 14-foot high biotech filter is now deployed in several German cities, and international ones as well, including Amsterdam, Hong Kong, Lisbon, London, and Paris. The CityTree removes up to 82% of fine dust from the air and improves air quality by up to 53%.

Green City Solutions was founded in 2014 by Dénes Honus, Peter Sänger, Victor Splittgerber and Zhengliang Wu, all students in Dresden at the time. Together, their combined knowledge spanned architecture, computer science, horticulture, and mechanical engineering, which the quartet put to good use in the fledgling venture. Currently, two of the founders, Peter Sänger and Zhengliang Wu, still work in the company. Sänger is CEO; Wu holds the position of Chief Information Officer. The startup has raised $2.1 million in funding to date. The latest was a grant of €1.2 million ($1.4 million) from the European Commission.


Accessible transportation is a crucial requirement of the smart city, and German startup door2door has developed an analytic software suite that’s helping to make that possible. Its Mobility Platform allows ridesharing to be integrated into the existing public transportation infrastructure. But it’s ridesharing with a difference, what the company calls on-demand ride-pooling. 

With on-demand ride-pooling, the starting point and destination are determined by a passenger’s unique requirements. The system dispatches a vehicle in response to a number of related requests, after mapping an optimal route. The service actually combines three platforms working in tandem: a passenger app, a driver app, and a management platform. 

The founders of door2door are intellectual titans. Co-CEO Maxim Nohroudi attended WHU, a renowned German business school, as well as Harvard and MIT. He then joined Royal Dutch/Shell’s strategy team in London. The other co-CEO, Dr.Tom Kirschbaum, holds a doctorate in law from the University of Bonn. Together, the duo founded door2door in 2012. To date, door2door has raised a total of €31.8 million ($37.6 million) in funding, with the last being a Series A round in March 2019, according to Crunchbase.


A recent report projects the US Smart Cities market to be $233.9 billion in 2021. Major segments include Smart Governance & Education, Smart Buildings & Infrastructure, Smart Energy, Smart Healthcare, and Smart Security. The global smart cities market is expected to grow at a CAGR of 22.5% in the five years to 2026. Most of that growth will take place in China, North America and Japan. Global Smart Governance & Education has a projected CAGR of 24.4% over the period of analysis. The estimated CAGR for Global Smart Buildings & Infrastructure over the next seven-year period is 18.9%.

The main factor driving the development of the smart city market appears to be local and national government initiatives spurred on by the rapid ICT advances. This is, perhaps, unsurprising. Smart municipalities are only possible where three essential factors, identified by one study, are present: first, the deployment level of information and communication technologies (ICT), second, the extent of citizen participation, and third, the degree of political will. Political will is a vital ingredient in the smart city mix since the city is as much a political entity as it is a social unit.

A Smart City Should Be a Happy City

If the aim of a smart city is to improve the quality of life, then smart city residents should be happier people. One obvious way to raise spirits is to rid people of the things that irritate or, at the very least, reduce them. 

In Asia, Europe, and North America, city authorities are tackling the most common annoyances. In the Chinese city of Hangzhou, AI systems have helped reduce traffic jams by 15%, a development that should bring good cheer across the globe. Which modern city isn’t grappling with traffic congestion? In Spain, garbage cans are fitted with sensors that monitor how full they are. This leads to healthy cost savings since garbage trucks are directed only to full containers. What’s more, the City of Schenectady, New York, is replacing its 5,000 or so sodium street lights with LED technology. The city expects to cut its energy bill in half, as a result. Developments like these offer the outset of what a smart city should be. The technology is there. All that’s required for a city to become smart is to get the politicians and citizens involved. 

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Anthony de Freitas

Anthony is the owner of Kip Art Gifts, an ecommerce store that specializes in art-inspired jewelry, fashion accessories, and other objects. Previously, he worked as an accountant and financial analyst. He enjoys writing on small business, financial intermediation, and economics. Anthony was educated at Wilson’s School and the London School of Economics and Political Science.

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