Sustainability will eat the World

I always get asked as many other investors: “what’s the next big thing to invest in…?” The standard answer to this is: AI, Voice platforms, Insurtech, Aviation to some extend, diagnostics in health, any alternative than Ads to monetize and some other fields. Standard advise is: Avoid topics like advertising, B2C business based on reach, digital verticals and tools, backward looking technologies, etc.

Sustainability eats the World

What I am interested in since beginning of last year is anything pushing sustainability. The times of “making the quick win” are over. Even though Trump’s USA is thinking different by abandoning Paris climate protocol. Norway just set a target by law to only allow electric powered cars to be sold from 2025 onwards. 50% of all new registered cars in Norway in 2017 are electric or hybrid. Norway’s wealth is coming from oil in the North Sea. So cutting on your financial lifeline is the way to go for innovation and entrepreneurship.

Interesting enough there are three other countries investing heavily in this field which don’t come to your mind: UAE, Saudi Arabia and Germany. UAE is setting up a lot of initiatives to focus on sustainability: from accelerators to government funded investment funds. Attracting companies to set up businesses in this field is one strategic move. Saudi Arabia just invested heavily in the New Vision Fund of Softbank founder Masatoshi Son, who is all about innovations in economic adjacent fields. Germany was the first G20 country abandoning nuclear energy from its future and invested heavily in wind, solar and other environmental focused energy sources. The land of Mercedes, BMW and Porsche is able during summertime to produce more energy from those sources than it consumes. Extending the number of days in a year even to spring and fall is one goal for the future. Imagine the country is able to produce enough energy to support electric and hybrid cars with those energy sources: Germany would be less depending from oil and gas, which it needs to import today. The trade deficit will sky rocket even more — a nightmare for Mr. Trump.

Start small and love your city

Not every Startup is a Tesla and will not struggle with the part of scaling as Elan Musk will do in the coming years. But a lot of young companies will push innovation and set new trends. They will be rewarded by trade sales and a good share for their founders. Because it will start small, I was looking in those trends more closely in recent months and discovered some hidden champions.

If you look on our daily consumption and the waste we produce, mostly unrecognized by its scale, first thing comes to your mind are bottles. Simple as that, even returning models and more sophisticated plastic materials are still not overcoming the basic problem of drinking from bottles. Less even talking on profits and economics of this business. It’s all about driving costs low in producing, selling and maintenance. But there is one company who rose by revenue from $10mn to $100mn in year on year by 2016 and it looks for more growth this year: Swellbottle. The ultralight metal bottles are made for reuse and will keep liquids cold for 24h and warm for 12h. The trick of this company seams to be, using brand and collections as a driver for sales along side influencer marketing. Offering only limited editions combined with environmental project support is the basis of their strategy. Having the right sense for colors, e.g. offering rosegold months before Apple introduced this color on it's iPhone shows their talent. Looks like they found a profitable business through marketing and partner offerings, as you can see with a special edition for Starbucks last year. Those fashionistas interested in a cooling companion will be happy to know it will keep your white wine cool while heading out to the picknique with friends in the park.

It isn’t a long way from water to coffee. As a friend of this brown gold I watched the baristas growing fast in my hometown over the last years even pushing Starbucks back in any part (or Veedel) in Cologne. Healthy fresh food with coffee combined is offered everywhere and with that the problem of paper cups used for coffee-to-go. While the small town of Freiburg started the “reusable and bring back to any coffee shop” model there is still a long way to go. In Germany 320.000 coffee-to-go cups are wasted per hour which results in a year for over 3bn pieces. This is a huge market to tackle considering Germany has 82mn citizens. Europe has 750mn people — so you do the math behind that. First approach was to introduce less plastic in a cup, but this will obviously not solve the problem. Next phase is to give a price reduction if you bring your own cup. Currently most baristas offering cups to purchase and to bring with you in the future. But most of those are either made from plastic (just postponing the environmental problem) or porcelain (too heavy for everyday carry and having rubber made tops again increasing plastic usage). On top those cups are priced at $15, which is way to expensive while standing in front of the counter. The ultimate solution on this is a coffee-to-go cup made from Bamboo. Next to its sustainable material the price is as low as $5 per cup and its ultralight. Making now the other baristas accepting those cups in a return model for a fee of $1 like in Freiburg, this would cut a big chunk off the 3bn problem Germany has today. Making it into a mandatory model by law would be a solution lawmakers have to think about. Currently those models are investigated by city halls in most mayor cities in Germany like Cologne, Hamburg, Munich, Berlin.

The next thing in this line on the daily usage are bags. From Rucksack (backpack) to Weekender and smaller bags. Another big market for sustainability products to take over. From kids in Kindergarde to school and adults in university and office jobs. Avoiding back pain and looking cool through personalization. There is a company in Cologne named ‘Fond of Bags’, which is focusing on the whole field of bags: from kids to hipsters, Instagram fashionistas and office workers. They combined seven bag companies so far and are still growing. Their brand pinqpong is leading the sustainability part of the business, hopefully it will outgrow the others and have a positive influence on the other brands as well. So pinqpong is offering those kind of bags, people should be using in the future from an environmental perspective.

When Services will catch up on environment

Discovering those trends and products while taking a walk in my neighborhood the Belgium Quarter in Cologne I realized that this town has much more focus on this topics than other German cities. Found of Bags is located in Cologne as some others as well. However this is not just about products but it is also about services and shopping. While you need the products to be available, there is another big step to be achieved: Putting it into a plastic bag would actually damage all the good will, you had in the first place. So lets introduce you to the concept of “Tante Olga” and others: a plastic free supermarket. Overcoming the little plastic bags for your fruits and vegetables, having pasta and cereal bagged in foil and all other items sealed in plastic is a huge challenge. Some shops like "Tante Olga" started to sell products without that package in either more friendly natural bags or offering to bring your own glasses and containers to take in those groceries right in the shop.

Reaching the shops is part of the game

Cologne stands out in terms of mobility for a couple of reasons: There is an airport outside the city which is a hub for Eurowings, Easyjet and Ryanair bringing in and out a lot of people on business and for leisure. Jobs will make people commuting in and out of city center as well between Dusseldorf and Bonn. Hence public transport is on the edge of its capacity most of the time and people tend to use individual options for transportation. To make things worse the city was marked as one of the worse areas for bike riding — too dangerous and narrow while cars seams to be getting the advantage if city planing in the last decades. But this has changed in recent months with more infrastructure projects being started to favor bike riding and preventing cars from entering the city center. Streets are getting more narrow from two lanes to one. Parking lots are converted into outside seating for cafes, restaurants and even cocktail bars. This trend of parklets was born in San Francisco in 2012 and spread around the world since then.

Limiting parking lots is driving business in summer times, hence people want to enjoy sun as long as there is some and it serves the purpose of keeping cars away. This among other obvious reasons will lead to an increase usage of car-sharing offerings like car2go, drivenow, cambio and scooter-sharing like scoo.me. Interesting enough cambio was the first car sharing offering in Germany and it started in year 2000 in Cologne, Aachen and Bremen. The next obvious movement will be to prefer bike riding in the future within urban planing even more.

Why Cologne will be part of the Sustainability movement

Looking on the history of all those trends and products I recognized Cologne being an early adopter and early mover of various parts of this development. From small startups to larger corporations adopting the trends and finally urban planing and city hall pushing towards this direction. Building a startup around this ecosystem and supporting the overall trend looks obvious from an investors perspective. Products and service in this area will need time to prove itself and gain their trusted communities. This will be much easier to build and test in an experienced and supportive city. It doesn’t need to overcome the general hurdles of a new beginning and it will benefit from an experienced ecosystem giving feedback during the long hard times of the early days of a startup. However Cologne seams to be the perfect testbed for such ventures - much more than Hamburg, Berlin or Munich.

The most common hashtag used for Cologne is #LiebeDeineStadt (meaning: love Your city). The obvious double meaning of a campaign with focus on sustainability would serve any startup company setting its base in this city.