Blog post
January 15, 2024

An Investors Natural Habitat

December 15, 2020
An Investors Natural Habitat
Why startups thrive in innovative districts and VC should be part of the community.

One major pull factor driving more and more people to move to cities in our age is their apparent promise of a limitless network, countless social contacts and viral new business opportunities. Once arrived and settled in the new home, the actual experience not just falls way short of what we had imagined but rather quite the opposite starts to materialize.

The sheer countless opportunities to pick from, the long distances within cities (“In Berlin my neighbor lives half an hour away), the fast paced lifestyle, all accumulate to a rather anonymous life. This represents a major drag on productive interaction, slowing down and sometimes bringing to halt the potential within urban communities. Policy makers in their effort to drive an entrepreneurial spirit face the same roadblocks as they continue to seek solutions on a citywide scale.

We at Styx believe, that, only when we put a city under the microscope, zoom in and hold steady we can uncover their true capacity as an innovation driver. The quarter, district or how Berliners would say the ‘Kiez’ is where the magic happens. Here decentralized management and a symbiosis of city infrastructure paired with the propinquity associated with a small village facilitate something remarkable, an innovation district shaped by attractive spaces, third places and technology.

Attractive spaces, including both those for commercial use like office buildings, ground floor real estate for shops but also the public areas with parks and access to water. Spaciousness for pedestrians instead of cars dominating the picture as well as streets predestined for calm traffic are just a few examples of prerequisites that can influence and lay the foundation to a district’s success. The right mix makes all the difference. An innovative district needs to have room for for startups, established businesses but also subsidized or cheap space for socially engaging and creative projects.

The Challenge comes with getting the prevalent spaces and infrastructure to work for and with the community. Third places who bring the available spaces to life e.g boutiques, street markets, culinary or cultural and social offerings have to be integrated and adapted to what is given. I often witness decsion makers complaining that their district does not offer anything to work with, that they do not have the beaches of Santa Barbara or their very own Central Park. However those comparisons should not hold back but rather inspire every quarters own way forward. Ultimately, no one of us will reinvent the wheel. Instead, it is on you to look for inspiration and to adapt what is working elsewhere to your local habitat. I am sure ideas will start springing to your mind: How about an open air swimming pool across the old industrial harbour, a street food market where usually cars are parking side by side. Make your office space accessible for Co-working and see how people start crowding your streets.

Ultimately, it is software and technology that gets businesses and the community on a district level to take off. Visibility through social accounts and networks as well as accessibility in mobility terms to a quarters offerings from both outside and within can propel a district to a new level. Accessibility is by no means limited to traffic and the question of how to get from A to B. What technology can achieve is access to goods and services, for anyone, at any time.

Not without good cause technology is one of the main drivers pushing global megatrends such as decentralization or sharing economy. An easy example helping to grasp these ideas can be a library. One that is built by brick and mortar is physically limited to its site, restricted by opening hours and even if you get there in time the book you are looking for may just be home with someone else. None of those roadblocks stand in your way when the city library goes online and you can access whatever read you are craving from anywhere, day and night. This by all means does not mean we have to abandon the smell of a fresh book and the scintillating silence of a library forever.

Just when we go there next time we might just use our phone to get access to the building to avoid the cough of the librarian at the door and find what we are looking for with IoT powered, indoor navigation without loosing precious time. Moreover, online marketing and market places going local (think Amazon supermarkets) have the ability to kindle regional commerce and kick-start businesses on the spot. By connecting various stakeholders, like restaurant owners and pedestrians or local law enforcement and a quarters party people, software can help to both simplify administrative tasks as well as boost leisure activities like local restaurant visits at the online promoted happy hour.

In addtion to enhancing existing connections technology possesses the ability to repair long broken relationships like those between a renter and her landlord or between the disgruntled youth and the city council. To wrap your head around this, just imagine the lifetime-saving effects of an all digital rent procedure or young people being able to contribute digitally without having to attend endless boring assemblies. Finally, IoT devices connecting a district can foster sustainability for example through smart heating systems saving energy or a drain helping to preserve water. IoT devices and systems are the backbone of a modern quartiers infrastructure. Smart home become smart city devices when data is shared anonymously along 5G networks.

The right combination of those three elements has the ability to create an economy-shaping, place-making and networking ecosystem (The Global Institute of innovation districts). This is where “leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators”. An innovative quarter at its best is “physically compact, transit-accessible,[…]technically wired and offers mixed-use housing, office and retail.” (Katz and Wagner, The Rise of Innovation Districts, 2014). We are passionate about the possibilites transparency and efficacy possess when it comes to the relationship between all stakeholders within the community. A thriving district is both charming to its inhabitants while also enhancing business. Thinking within this model takes us one step closer to tackle the challenges of modern urban living.

Why should investors care?

Now let us step into the shoes of an investor who is looking to develop bright new ideas and for that he needs startups. From the startups perspective, what makes or breaks an innovative district is proximity. There is no better facilitator for collaborative innovation than a vibrant social network where people can bounce ideas off one another without entering an artificially created idea Lab or accelerator campus. The inherent trait of a quarter is its proximity and this is why it is the ideal breeding ground for entrepreneurs and their ideas. Hwang & Horowitt often us the methophor of a “Rainforest” when describing ideal startup ecosystem. In our opinion there is now better way then being part of the urban djungle as an investor by tearing down the border between the local community and the upscale VC office. Being present where innovation takes place enables us to observe first hand and take wise investments at an extremely early stage. The Styx Living Lab resembles exactly what Katz and Wagner describe as the ideal innovative district. It is physically compact across two burrows (Jungbusch und Neckarstadt), accessible by foot, car as well as underground public transportation and offers mixed housing from office space, student housing and your local kebap store to upscale restaurants and penthouses.

To sum up, it is the ideal place for an investor to find himself in. And while there surely are countless innovative districts in cities around the globe for investors to glance at, we find ourselves in a unique spot having been stakeholders in its co-creation for years.

River and modern building