The State of City Digitalization in Europe: Trends and Investments

European cities are eager to digitize their infrastructures, operations and services. And as more and more of them try to make that vision a reality, certain trends in verticals, investments and cybersecurity stand out and show where the industry is at. When it comes to vertical and solution trends, it's safe to say the industry has remained the same in the last years. No major changes. There's still a focus on adapting to climate change and artificial intelligence. I would say the biggest thing for me is the focus on green transition. And in fact, if you look at the (European) Commission during the last one and this Commission, they always talked about the twin transition. There is a belief that the digital transition can support green ambitions in a sense of, for example, making transport more efficient, making water usage more efficient, lighting more efficient, heating more efficient. AI of course, digital twins. I mean digital twins in urbanism, in mobility in environment. It's it's been huge. Although there hasn't been a change in what cities are looking for and looking to solve, there has been a shift in the perception of digitalization. The industry has seen that data and technology by themselves are useless. It's about the insights they give, the actions municipalities will take thanks to them and the return on investment, whether money or benefits for residents. This may sound obvious, but it's sometimes lost in projects. What good is having data on heat islands if it's not used to plant more trees in an area to cool it down and improve the experience for residents, for example? But this concept is now understood. What is also starting to sink in is that for innovation in cities to be more agile, go further and therefore get better results, cities will have to have an open mind and have a stronger public private collaboration. And that said, municipalities’ interest in startups is going up. They don't want to only partner with major companies. They've seen and loved how agile startups can be. These new collaborations are the base of projects like GovTech4All. And this new openness and interest from governments has led investors to look at industry startups. Before pandemic, again, I mean, trying to invest into a startup with a B2G model, it was a red line. It's not anymore. Having said that, it’s not that you see a lot of investment here, but it’s true that at least the investor have a talk with them, with the startups. And that's something new. Investors are starting to see beyond the cons of B2G startups, like the boring and never ending tender process, and understand the pros of investing in these startups. Yes, it's complicated to work with cities, but once a company is selected for a project, government contracts go on for long, like three years, and ensure scheduled payments. This is very rare and plays in their favour. This said, it's still tricky, which is why some believe the best model for smart city startups will be doing B2B with big companies that do B2G, and we know big companies are interested in these startups. There are many examples of the big acquiring the small, like Google and Breezometer. There is another trend we can't skip when talking about city digitalization. Cybersecurity. As more cities turn to digital solutions, they become more susceptible to attacks. Cities struggle to keep up with the fast changing industry. You have to manage a lot of different providers with different solutions, different platforms. And you have to trust them. And you cannot directly trust them in a regular way. So you have to subscribe to certain agreements, certifications and be very focused and oriented on what you're doing with your providers. Cybersecurity concerns have even reached a point in which some countries have adjusted their procurement rules and banned solutions made in China. Almost two years ago, we got the recommendations from the National Security Ministry to change and not to use in our activities the products produced by the non-trust companies. So it means all the IT systems should be updated with EU sensors with EU elements which will be produced by the European Union or not necessarily European Union but non Chinese let's say companies. Climate change adaptation, cybersecurity and a stronger startup presence to be more agile and innovative. It's what European cities are focusing on. Yet none of these goals will be achieved without a clear goal of taking data driven actions, an ROI and a robust public private collaboration. As residents demand more from services, cities will turn to public private partnerships to find the innovation that the cities, let's be honest, tend to lack on many occasions, whether it's due to lack of time or resources or talent. This can be a ray of hope for B2G startups who will have to learn to speak city language to be successful now that more opportunities arise for them. These collaborations are also bound to bring more investor attention. So all in all, it looks like a good time to be in the digitalization of cities and the industry is at a good point.