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1,000 True Residents
Towards A Maxim and Measure for Startup City Success
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1000 True Fans
Years ago, Kevin Kelly published the essay: 1000 True Fans. Kelly argued that 1000 True Fans is an online creator’s baseline for success.
Kelly defines “True Fan” as someone who will give you $100 a year for your creative work. The math is simple: 1000 True Fans that pay $100 each yields $100,000. This isn’t a fortune. But it’s a respectable living. And it’s much more than many creatives earn.
But 1000 True Fans isn’t really about income. To secure 1000 True Fans, you must solve the core problems of your enterprise. To rake $100 from 1000 fans you need a way to reach many more, since most of your audience won’t convert to a paying customer.
You’ll also have to master your creative process: you must ship at least $100 worth of value per customer per year. And you must have a solution for the entire product lifecycle: design, build, sell, ship.
1000 True Fans is a basic test of competence. Your work is far from over at 1000 True Fans. But you must be pretty good to get there.
1000 True Residents
I’ve asked myself what the “1000 True Fans” would be for Startup Cities. I’m convinced it’s basically the same: 1000 True Residents.
1000 True Residents has two parts: the 1000 and the True.
Let’s first look at the 1000.
Certainly, a tiny development could reach a gentle profitability with fewer than 1000 residents. Millions of apartment buildings do it each year. And ambitious founders will reach for much higher numbers. But 1000 residents, like 1000 fans, forces a baseline level of competence across the full customer journey.
To attract 1000 residents, you need decent sales and marketing. That means you’ll need focused, understandable value props for your customers. You need the legal stuff like leases sorted out. You’ll have to make an attractive website with information like floor plans — or at least a persuasive brochure!
After closing 1000 residents, your work has only just begun. And this is where 1000 True Residents becomes a test of competence.
1000 residents are a serious logistical issue. 1000 residents are a crowd. Only about 500 people showed up for the infamous Fyre Festival... and we all know how that turned out. 1000 residents demand that you solve the core problems of urban life: sewage, electricity, water, security, transit.
At the typical U.S. rate of 1.98 cars per person, 1000 residents might mean anywhere from 500 to almost 2000 cars (a strong argument for projects to pursue less car-centric forms of development). Or it might mean 500 to 1000 bikes (although at the rate that bike fiends collect them, 1000 residents probably means 2500 bikes!). Storing all this metal is no small feat.
1000 residents make a project the size of a little town. As in a little town, there will be occasional drama. 1000 residents are a tiny but legitimate dating market, similar to a small college like Harvey Mudd. Statistically, 1000 residents starts to reach the long tail: some kids, some oldsters, and probably at least one person with special needs.
1000 residents also mean at least a few annoying people. These pathological customers will eat your time. They’ll do the city equivalent of breaking your software with their ridiculous user behavior.
In the apartment building where I live, I know our pathological customer. He refuses to pay rent. He complies with zero rules and once berated me in the elevator because I was wearing a mask. He shows up drunk in common spaces, munching pizza and shouting vaguely about women. Management hasn’t been able to evict him, because COVID. Such customers will force you to confront your
product’s neighborhood’s failure modes.
Aside from being a test of competence, 1000 residents is an ambitious but achievable goal. We know it’s ambitious because if you walk around and tell people “I’m going to found a startup that builds a neighborhood for 1000 people,” they’ll think you’re crazy.
Yet we know that 1000 residents is realistic because it’s quite small. Disney World manages fifty times that number of visitors on peak days. Caesar’s Palace had 700 rooms when it opened in 1966, meaning that this single hotel holds more than a 1000 people on full nights! We also know it’s achievable because there’s a startup already doing it.
A “True” Resident: Community Technology and Frontiers for Monetization
So that’s the 1000. What about the True? What makes a True Resident? For Kelly, it was $100 a year. I doubt we can be so simple with neighborhoods and cities.
I’d argue a True Resident means a person with more than one dimension of their lives connected to the community. It may mean they work and live in the area. Or they work and educate their kids there. Or they live and do most of their shopping there. You get the idea.
Why not just pick a number? Well, because the business of a neighborhood or city is so contextual.
The value of a place includes the many spillovers that surround it. I think of the value of a community as driven by what I like to call ”community technology.” People come for beauty or job opportunities or walkable streets. But they get that value because a community adopts relevant technologies: cobblestone roads, responsive and cheap business licensing processes, or wide tree-swept sidewalks.
More links to a community — making a resident more of a True Resident — creates more opportunities to use this technology to deliver value.
Let’s look at a simplistic example.
The national average rent for a 1-bedroom apartment is $1,500 a month. With a 12 month lease, that’s $18,000 gross revenue per year, per unit. Many residents will be couples that share a bedroom. Let’s be conservative and assume that a 1000-resident development has only 600-700 units (60-70% of residents share a room). That’s $12.6 million in lease revenue a year. These leases are analogous to baseline subscriptions: our Costco membership or our SaaS one-above-the-free-tier plan.
Let’s add more links and make our residents more like True Residents.
Maybe we commit to a lot of green space so people spend time outside. This trades some density to make existing units more attractive. Or perhaps we build a grocery store or daycare. These services may make a little margin themselves via a revenue share with the owner or because we operate them. Or maybe they won’t — they’ll be loss leaders that draw people to the convenience of the community.
Either way, if people like these services, we can charge premium rents. The positive externalities of shared services, beautiful urbanism, and pleasant neighbors capitalizes into the value of the community.
This is what Henry George railed against a century ago. But instead of taxing the “unearned increment” á la George, a startup captures it by owning the whole neighborhood-enterprise and pricing rents accordingly. Or, a startup might capture the value directly by charging fees for access to shared services.
This only works if you’re not a one-dimensional bedroom town. The more links to the community, the more chance to monetize beyond the residence, and the more you can monetize individual customers rather than the household.
Can you rent people bicycles? Can you charge for package handling? What about offering a discounted tutor, shared among residents with school-age kids? Who knows. If every person buys $5.00 of ice cream a month from my conveniently-placed ice cream stand in the neighborhood square, well, that’s $60,000 more revenue per year. Big apartment buildings already do such things, grabbing little margins here and there. I suspect there’s much more to be discovered by entrepreneurs.
In startup lingo, more links to the community creates more chances to raise the lifetime value of a resident. The True Resident has higher LTV. I suspect that True Residents also would retain better. They’re like users invested in a platform technology who find it hard to leave.
You might even model a True Resident in e-commerce terms: how could I increase the average order value of a day in the community? Again, the more links the bigger the “cart.” Ice-cream-stand-on-the-way-home is the equivalent of impulsively adding a $5 sticker to your Shopify cart at checkout.
No doubt some will be put off by such ideas. But this obsessive focus on the customer experience — yes, driven by profits — is sorely missing in today’s cities.
Towards a Minimum Viable Community
The point is, 1000 True Residents is a maxim for focus. It grounds. It leads to workaday questions rather than grand visions.
You might even argue that the maxim helps us navigate the variety of projects in the Startup Cities space. For example, 1000 True Residents divides the “financial center” or “industrial SEZ” from a full-blown community like Ciudad Morazán. A thousand transient workers who pass through a gate to a textile factory each morning aren’t the same as 1000 workers who also live and play next door.
Similarly, a sleepy suburban subdivision — even if it holds 1000 residents — isn’t the same as a neighborhood with street life, employers, and housing. In both cases: too few community links. While such developments certainly make money, it’s hard to argue they solve the fundamental problems of urban life in the same way that a neighborhood with 1000 True Residents would.
I also like 1000 True Residents because it fights vanity. It keeps the focus where it belongs: customers. Startup Cities is overrun with lofty statements about world-changing ambition and “institution building.” But the whole budding industry is really about solving the most human of human problems: how we live together.
1000 True Residents straddles the ambitious and the real. I hope many more startups that build neighborhoods and cities will reach this baseline for success.
Is this a good maxim or am I deluding myself? Tell me in the comments.
In the weeks ahead I have some exciting new interviews with innovators, February’s goodreads roundup, and some essays by yours truly on the rising cost structure of cities, why beautiful neighborhoods need unified ownership, and why we should build cities like we build successful AI systems (sure to infuriate both urbanists and technologists alike).
Thanks for reading and don’t forget: Startups should build cities!
Update 02/25/2022: Fixes silly math error. Shoutout to Greg from CityDAO for spotting it!