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San Francisco: There’s an App for That
The Bay Area’s venture capital and tech start-up communities have the ability to effect change. Yet this power is often misapplied.
Almost 19 years ago, after a summer in Berkeley, where I had studied for a year, my college friend Laura and I moved from the Bay Area to New York. It was not an auspicious start. Laura accidently lost the tickets when she threw them out with the garbage. This was before the days of iPhones and electronic ticketing, so we had to stay a few extra days at her ex-boyfriends apartment and arrange for a new flight.
Fast-forward some two decades. I just returned to New York this month from a three-month fellowship with the University of California, living in San Francisco. It is curious seeing a city close up after 20 years especially one undergoing such a massive change as San Francisco. The long-standing San Francisco the one of hippies, artists and liberal politics but also homelessness, drug addiction and other social problems still exists. But much has been replaced by a shiny new city: one of tech bros and the start-ups, sky-high housing prices and ridiculously elaborate coffee culture.
In a time when social networking site Facebooks market capitalization has surpassed that of energy company ExxonMobil and institutional investors are putting record amounts of money into venture capital, tech is in the ascension. Yet many wonder how long this boom can last. In a December 2015 survey, seed-stage venture firm First Round Capital found that of the 500 venture-backed entrepreneur respondents, 73 percent said they thought the venture economy was in a bubble.
There are ominous rumblings out of nearby Silicon Valley about so-called unicorns, companies with a valuation in excess of $1 billion, seeing valuation write-downs and a slowdown in deal activity. New Yorkbased Tiger Global Management, one of the hedge fund firms to have successfully bet on tech in recent years, lost 22 percent in the first quarter of this year.
The palpable feel of a bubble about to burst does not lessen the day-to-day intensity inside the tech economy. In San Francisco there is an app for almost everything a middle-class, middle-age worker might want. Need a dog walker? There are apps for that. Want to order takeout? Sure. There are online food delivery services like GrubHub and Eat24. But in a foodie town like San Francisco, why roll the dice on takeout? I give you Munchery.
Recommended to me by our apartment building doorman as a popular delivery service, San Franciscobased start-up Munchery allows customers to order precooked, high-quality meals made by the companys own network of chefs through the web or via a downloadable app. As the founders explain in the web sites About Us section, We got our start back in 2010 as a couple of busy new parents desperate for an easier answer to whats for dinner? So far, according to published reports, the firm has raised $117.2 million from 21 investors and has a valuation of around $300 million. Munchery is one of hundreds of start-up companies vying to use apps and web-based technology to provide consumers with an elegant life hack.
To anyone who remembers the last tech collapse, it feels as if weve hit the candy bardelivery point of the cycle. Back in the late 1990s, start-up Kozmo.com made a name for itself by promising to deliver candy bars, coffee, DVDs and other sundries within an hour. The economics of a business delivering 80-cent Hersheys chocolate bars to hungry office workers are dubious. The eagerly hyped and venture-backed firm was among the victims when the tech bubble burst in 2001, and it became the subject of the documentary about dot-com folly, e-Dreams. (Perhaps not surprisingly, in 2013 Wired reported that Kozmo.com might be staging a comeback. Its web site today is tantalizingly cryptic.) Today the firm is a cautionary tale in VC circles.
While in San Francisco, my boyfriend and I relied on public transport and on Lyft, the friendlier, pink competitor to ridesharing app and taxi service disrupter Uber. Talking to these drivers was interesting. Lyft and Uber rely on contract drivers who use their own cars. The 20-something who drove my boyfriend to SF International Airport one February morning for a short trip back to New York worked for Lyft part of the year and then spent the rest of his time as a rock climber. One driver I spoke to had emigrated from Hong Kong with his parents when he was 14. Now in his 50s and a professional photographer by day, he became a Lyft driver to top up his income. Another driver was deaf.
The shared economy which offers the opportunity to make money through the resources that one has, be that a car to drive; an apartment to let on Airbnb; or the desire to work as a part-time cleaner, dog walker or other contractor is working for some. But not all. One driver of a traditional taxi cab we spoke to pointed out that neither Uber nor Lyft requires commercial auto insurance, meaning that the costs of an accident fall on the driver, who often has to take out special insurance coverage. A Lyft driver told us that after 35 years in the U.S., he was leaving the Bay Area and returning to his native Czech Republic because he could no longer afford the cost of living in California.
The income inequality in Northern California has been well documented: The city currently has close to 7,000 homeless residents, many of whom suffer from mental health problems or are grappling with substance abuse issues. Seeing it firsthand is shocking, nonetheless. For all its wealth generation, San Francisco feels like a broken city: one where the very rich rub shoulders with but do not see the poor and the homeless. During the second month of my stay, there was Internet outrage after a tech bro wrote an insensitive rant as an open letter to San Francisco Mayor Ed Lee and the chief of police, about the citys homeless and drug problems. This was just the latest flare-up in an ongoing war between the people on the Google employee buses and those throwing rocks at them.
Of course, not every rich person in the Bay Area is immune or insensitive to the poverty existing in their backyard. Groups such as the Silicon Valley Community Foundation in Palo Alto do a lot of great work on these issues. eBay founder Pierre Omidyar and first employee Jeff Skoll both have set up foundations that are central to the social venture movement, which seeks to use business and innovation to solve social problems.
Muncherys own effort to tackle San Franciscos obvious homeless problem is that it makes a donation to a local food bank for every order. Its something. But such buy-one-give-one models have long been criticized in social impact circles. In addition, although encouraging healthy eating practices is a general social good, the changes required to our food system extend far beyond better takeout.
My real beef with Munchery is not that it exists. Its a smart idea. Youd just like it if two people with BS degrees in electrical engineering and computer science from MIT and Berkeley, which is what the two co-founders have between them, could come up with a better problem to put their collective energies behind a bigger question than whats for dinner? Yet its exactly this type of low-cost-capital, easy-to-scale start-up business that the VC community rewards. So these are the types of businesses being dreamed up in coffee shops all around San Francisco.
There are real problems that need to be solved: climate change, income inequality, global poverty the list goes on. Institutions such as the University of California have some of the resources and ideas to solve them. But the start-up culture fostered by the present tech boom is too focused on the short term on app-based fixes to everyday inconveniences while the get-rich-quick culture exacerbates many of the problems society most urgently needs to tackle.
Yet there is money to be made in these bigger problems, which after all account for far more of the economy than takeout. Take Climate Corp., where one of my San Francisco friends works. Founded by two former Google employees, the firm helps farmers adapt to the changing weather patterns caused by climate change. In 2013 the agriculture conglomerate Monsanto acquired Climate Corp. for approximately $1.1 billion. Now thats a unicorn come to life.
I actually came away from my three months in the Bay Area a believer in the power of venture capital and innovation. I just think it is being misapplied. If and when the current tech bubble bursts, my hope is that well see more capital flow into areas like climate technology and sustainable agriculture.
As for my college friend Laura, she now lives in Los Angeles, where she is in the process of selling her first film script. We no longer put her in charge of any travel plans. Fortunately, there are apps for that.
Follow Imogen Rose-Smith on Twitter at @imogennyc.