Boston's Smart-City Startups Navigate a Funding Slowdown, but Pilot Programs Press On

Boston’s smart-city startup scene is in the middle of a recalibration. Venture-capital dollars that flooded into urban-tech companies two years ago have cooled, but founders and city officials say the pipeline of pilot projects, not hype, is what’s keeping the sector from stalling.

That matters right now because cities across the U.S. are watching Boston. The city’s 2022 smart-city roadmap, updated last October, has become a template for how municipalities can test sensor networks, traffic AI and waste-management software without blowing out budgets. But with national venture funding down roughly 35 percent from the 2024 peak, according to PitchBook data cited in a recent MassChallenge report, Boston startups are leaning harder on municipal partnerships rather than splashy Series A rounds.

Where the pilots are running

In Central Square, a five-month-old pilot by Cambridge-based startup VeoLogix is using 14 lidar-equipped poles to count pedestrian and bike traffic at five intersections. The data feeds into the city’s traffic department, which is using it to time walk signals. VeoLogix chief operating officer Claire Hwang told a Greater Boston Chamber of Commerce event last week that the pilot has already logged 340,000 crossings. The company is now negotiating with Somerville and Everett for similar deployments.

Over in the Seaport District, another pilot, this one by waste-analytics startup BinSense, is running in 22 municipal trash compactors on Congress Street and Northern Avenue. The bins report fill levels hourly, letting the city’s public-works crews skip half their collection routes. BinSense founder Raj Patel said at a June 28 Boston Tech Forum panel that the Seaport trial has cut collection costs by 23 percent since April.

Neither VeoLogix nor BinSense has disclosed the specific dollar amount of their city contracts, but both say the terms pay for hardware and a data subscription, not a flat fee. City officials confirmed the pilot agreements are structured as “no-cost to the city except for staff time,” a model Boston’s transportation department expects to use for at least two more procurement rounds this fall.

What happens next

The near-term challenge is scaling. Mayor Michelle Wu’s administration announced in a June budget hearing that it would allocate $2.1 million in federal infrastructure funds for smart-city expansion, but that money will not be available until the 2027 fiscal year. In the interim, startups are relying on the same model that kept Boston’s cleantech cluster alive a decade ago: prove the tech on one street, then sell the data to a larger city or a private developer.

“No one is writing $10 million checks right now for smart-city platforms,” said Nina Bhandari, a partner at Boston-based early-stage fund Underscore VC, during a July 8 panel at District Hall. “But we are seeing a lot of $500,000 to $1 million SAFEs that buy a team twelve months of runway while they stack two or three city pilots.” Bhandari noted that four of Underscore’s eleven current portfolio companies are Boston-area urban-tech startups, and that two of them are close to closing their next rounds.

For founders watching the macro picture, a possible federal government shutdown in October, the ongoing unrest in the Strait of Hormuz pushing energy costs higher, the piecemeal approach feels like the only sensible move. “We’re not building for a world where everything works,” Hwang told the chamber event. “We’re building for a world where the city has to make very granular decisions. Our tech just makes those decisions cheaper.”