Dotted across the United States are unwalkable, sprawling, automobile-dominated cities that are neither environmentally nor financially sustainable. Even the most walkable cities in the US have urban designs that lag behind cities like Amsterdam and Copenhagen in terms of urban design. At the same time, demand for housing in walkable US cities — like New York, San Francisco, and Boston — has been insatiable for the past decade, contributing to the highest costs of living in the US.
Rather than rely on bureaucrats and municipal governments to improve our cities, the company Culdesac endeavors to build better cities from scratch with venture-backed capitalism.
In 2018, technologists Ryan Johnson and Jeff Berens left Opendoor and founded Culdesac. The company soon moved from San Francisco to Tempe, Arizona, where the company broke ground on its first neighborhood, Culdesac Tempe (which is still under development today). To build Culdesac Tempe, Culdesac raised $17 million in seed venture capital funding from Khosla Ventures, Zigg Capital, and Initialized Capital, as well as nearly $200 million in real estate capital. More recently in 2022, the company raised another $30 million Series A, led by Khosla Ventures, with Founders Fund, LENx, Byers Capital, Zigg Capital, and Initialized Capital joining the round. The company has earned local buy-in, attracted big name investors, and garnered plenty of press attention (including from The New York Times); all of these signals indicate we have a successful tech startup on our hands, right?
Culdesac is a real estate company masquerading as an urban development tech startup, claiming to wield technology, construction planning, and venture capital fundraising to build the American city of the future.
The pattern of sprawling, car-dependent urban development that has ensnared many American cities for the past few decades is unsustainable. Multi-lane roads, elaborate sewer systems, advanced water treatment plants and other municipal services are too expensive to maintain if they serve very few people (taxpayers) per square mile — low density, high cost infrastructure is not scalable.
But you know what is scalable? Technology of course. What is unclear, however, is how Culdesac will incorporate technology in a novel way to solve the monumental challenge of building a sustainable city.
Culdesac attempts to position itself like the classic Silicon Valley startup™. The company’s website emulates the boilerplate tech startup landing page: a visually simple design, a section of news logos including The New York Times and The Wall Street Journal, a “join our waitlist” button, and renderings showing the visionary product-to-be. Culdesac’s website proclaims, “We’re building cities for people, not cars. Our team blends technology, real estate, and culture to reimagine our daily lives.” Choosing to list the word “technology” before “real estate” illustrates Culdesac’s intention to position itself as a tech startup rather than a real estate developer. It is unclear exactly what proprietary technology Culdesac is building, beyond partnerships with Lyft, Bird, Envoy, and other mobility tech companies.
The rendering shown above further clouds Culdesac’s messaging. Car-free? Nope, cars front and center. City for the people? Not a person in sight. Electric scooters and rideshare platforms are technically technology, but how that technology solves urban development problems is left unexplained.
Furthermore, the website’s “Our Values” section includes a variety of typical overused tech mantras, such as “Be output oriented. Ship.” and “Embrace the full-stack.” Ironically enough, the tech industry widely regards being output oriented as an anti-pattern, or a counterproductive approach to a problem. Outcomes are much more important than output, after all. The point of shipping is not to deliver something for the sake of delivering something, the point is to get results sooner to learn, iterate, and improve. For example, in software user impact determines success, not the number of lines of code. Everything about the website resembles pre-IPO WeWork, with a capital-intensive real estate company disguising itself as a tech company to justify its “groundbreaking” growth proposition.
Despite Culdesac’s best efforts to represent the façade of a tech startup, how the company actually operates exposes how the urban development problem they are trying to solve is fundamentally incompatible with a tech startup approach, and cannot be solved with current technology. Another well-known tech industry anti-pattern is the idea that “if you build it, they will come.” Building a “perfect” tech product means nothing if nobody actually wants to use it. Hence, the focus on shipping quickly and frequently to validate (or invalidate) ideas with real user traction and engagement. In contrast, The New York Times (in an article linked on Culdesac’s website) describes Culdesac’s mission as follows:
The goal might be termed instant gentrification: to open up with all the amenities that make a place desirable, and hope that they make the neighborhood a destination overnight. The development’s park, shops and co-working spaces will all be open to the public, and every penny spent on site…will filter up to the same company.
On the surface, this sounds like it could work, especially when paired with the futuristic, idealistic renderings of what these neighborhoods will supposedly look like when built. Culdesac can also learn from both the successes and the mistakes of existing cities, and construct infrastructure with those lessons in mind to mitigate problems before they arise. I believe, however, that this is a terrible, flawed way to build cities. Unlike software, in real estate building a “minimum viable product” is measured in years and rather than weeks or months. Thus, with its first site in Tempe alone, Culdesac is betting hundreds of millions of dollars and years of construction on the idea that if they just build a place with the right amenities, people will come and populate that place. However, if not enough people come to make the development profitable, then all of these resources are wasted. Making risky bets on complicated, large-scale projects is not a sustainable pattern of urban development — in fact, it is the very reason why many US cities have the financial insolvency issues they have today.
Cities are complex systems that cannot be built to a “finished state,” even if Culdesac believes otherwise. Strong Towns, a nonprofit organization supporting thousands of people in the US and Canada to advocate for an organic, sustainable approach to urban development, has discussed this issue at length. Strong Towns founder Charles Marohn says:
Unless your city was founded after 1945, it’s almost certain that you could look at what was there in 1945 and think of that snapshot as the most mature version of your city. It’s around this point in time that the development of cities shifted from a complex undertaking to one that was merely complicated…the building of cities shifted from being a co-creation of the people who lived there to a technical undertaking by professionals. The method of change shifted from a painstaking craft to more of an assembly line. The mature city was assembled incrementally on a continuum of improvement; in contrast, the places we’ve built since about 1945 tend to be built all at once to a finished state.
People’s needs evolve over time, and cities need to be capable of reflecting that evolution. When many smaller risks are taken over long periods of time (decades to centuries), you get successful outcomes by natural selection as people vote with their feet and wallets: successful real estate developments stay in business and expand, while unsuccessful real estate developments go out of business and get replaced. Venture capital’s business model, however, relies on highly risky investments that have the possibility of generating massive returns over a (relatively) much shorter period of time of around 10 years. Culdesac cannot possibly follow a sustainable pattern of development under those constraints. In addition to venture funding, Culdesac has raised over $200M in real estate capital just for its first project, Culdesac Tempe. Raising that much money to build a single neighborhood serving 1,000 people is not sustainable city development “built for people,” it is building a theme park catering to young, high-income tech workers and wealthy empty nesters. The New York Times article by Conor Dougherty even alludes to this fact, stating, “At the Culdesac site, the developers are blending two ideas that usually have nothing to do with each other. The project is both an “infill” development that aims to sleeve itself into the urban landscape, and a master-planned community that recalls a Disney exhibition or a golf-and-condos parcel in Florida.” A “master-planned,” “Disney”-like community certainly does not elicit the feeling that this community will be an inclusive place for all to live, work, and play.
Technology (and the venture capital investment model that supports it) cannot solve the essential problem of real estate development: it takes a lot of time and money to build physical infrastructure, and the patterns for developing this infrastructure cannot be copied and pasted across locations without regard to climate, existing transportation networks, local incomes, education systems, and hundreds of other factors. Successful urban development is not a product but a continuous process, and unlike software development, there are no instant over-the-air updates to fix issues.