0:03

The problem I think in

0:05

San Francisco is you've got

0:07

some really hot competitors, right?

0:09

Yeah, I mean this was

0:11

quite possibly one of the

0:13

most stressful periods that we

0:15

had experienced to date. Not

0:17

only had we had only

0:19

raised seven million dollars, but

0:22

these companies had raised 40,

0:24

50, 60, 77 million dollars.

0:26

Wow. I remember a board

0:28

meeting where I was told

0:30

Mark. We've been telling

0:32

you're going slow,

0:35

you're not

0:37

expanding fast

0:39

enough, and now

0:41

there's this new model

0:44

and it looks like

0:46

you guys are dead.

0:49

You're being disrupted

0:51

before you have

0:54

the chance to

0:57

disrupt. I'm

0:59

Guy Ross and on the

1:01

show today, how thousands of

1:03

dollars in parking tickets drove

1:06

Mark Lawrence to launch Spot

1:08

Hero, a service that since

1:10

launch has parked 50 million

1:13

cars across North America.

1:15

More often than not, it's

1:17

the seemingly boring businesses

1:20

that succeed. These are

1:22

businesses that... Don't dazzle

1:24

us with fancy technology

1:26

or wildly disrupt an

1:28

established industry. They just do

1:31

a better job of tackling

1:33

age-old run-of-the-mill problems. Some of

1:35

these stories we've even told on

1:37

the show. For example, pods. That

1:40

company didn't invent storage. It just

1:42

did it better. Or 1-800 got

1:44

chunk. That business simply made it

1:46

more convenient to haul your stuff

1:48

away. It's more or less the

1:50

same playbook Mark Lawrence used, though

1:52

it took him quite some time

1:54

to get there. Back in 2011,

1:57

Mark got into what seems like

1:59

a pretty boy... industry. Parking. He

2:01

named his company Spot Hero. Initially,

2:03

he and his co-founder wanted to

2:05

create a sort of Airbnb for

2:07

parking, a peer-to-peer service where people

2:09

would rent out their driveways in

2:11

exchange for a fee. Mark launched

2:13

the idea in Chicago around Wrigley

2:15

Field where parking is notoriously challenging.

2:17

But as many of these stories

2:19

go, that model couldn't scale. It

2:21

turns out many people who live

2:23

around Wrigley Field were perfectly happy

2:25

to stand and further driveways on

2:27

game day with the sign that

2:29

said parking 50 bucks. So like

2:31

all good startup founders, Mark Lawrence

2:33

pivoted. He decided to try and

2:35

partner with parking lot owners to

2:37

sell their excess inventory. Mark would

2:39

build the Spot Hero app and

2:41

then get a cut from every

2:43

parking spot sold. The problem? Well,

2:45

a lot of other entrepreneurs had

2:47

a similar idea, and in quick

2:49

succession, similar businesses started to spring

2:51

up all over the US. Many

2:53

of them were far better funded

2:55

and growing at breakneck speed, and

2:57

the pressure on Mark to try

2:59

and copy them was mounting. But

3:01

instead, he took a slow and

3:03

steady approach. First, Chicago, then DC,

3:05

then Boston, and so on. Mark

3:07

resisted calls to try and get

3:09

into price wars with his rivals

3:11

in large part because he believed

3:13

that their business models were not

3:15

sustainable. And ultimately, as you will

3:17

hear, he was proved correct. Today,

3:19

Spot Hero is one of the

3:22

largest digital parking platforms in North

3:24

America with service in about 300

3:26

cities. Before he set out to

3:28

start his own business, Mark took

3:30

a job at Bank of America

3:32

in Chicago right out of college.

3:34

This was right before the financial

3:36

crisis of 2008, and just as

3:38

luck would have it, Mark was

3:40

assigned to work on mortgage-backed securities,

3:42

a massive bubble that was about

3:44

to pop. Yeah, the movie The

3:46

Big Short for me is a

3:48

documentary. Yeah. It's funny and it

3:50

has ridiculous things, but that's like

3:52

exactly how it was. Like, I

3:54

remember some of the countrywide financial

3:56

guys that came and they were

3:58

making jokes about writing mortgages to

4:00

dogs. And so, I mean, like,

4:02

it was not a very pleasant

4:04

kind of place. There were pleasant

4:06

people. You know, and I did

4:08

make some friends and I worked

4:10

with some great folks, but, you

4:12

know, a lot of the talk

4:14

was like, hey. Did you hear

4:16

we're not going to get bonuses

4:18

this year? Isn't that ridiculous? And

4:20

I was like, what would the

4:22

bonuses be for? So you're working

4:24

there. And I guess, I mean,

4:26

and I'm basing this off of

4:28

some research we did because we

4:30

unearthed a blog that you used

4:32

to write. and called Lifestyle Ignition.

4:34

I don't know if this is

4:36

something you're embarrassed about or not.

4:38

It's kind of interesting. And you

4:40

had a blog, which a lot

4:42

of people did and do, and

4:44

you kind of like, on this

4:46

blog, chronicled your frustration with working

4:48

for a big company. It's so

4:50

funny. I haven't thought about that

4:52

in a really long time. So,

4:54

yes, a bit embarrassing. But yeah,

4:56

I did chronicle, you know, frustrations

4:58

with working at a big company.

5:00

One that I remember was called

5:02

fake work, because it felt like

5:04

a lot of the work there

5:06

was just completely fake. And I

5:08

remember, like, I had a doctor's

5:10

appointment, and I was told, well,

5:12

hey, if you're taking a long

5:14

lunch, which is like an hour

5:16

and a half for a doctor's

5:18

appointment, like, you gotta be the

5:20

last one to leave the office.

5:22

And I was like, okay, well,

5:24

and there was really nothing to

5:26

work on then. And I remember

5:28

sitting there, and there was another

5:30

guy. And he was supposed to

5:32

be the last to leave because

5:34

he took a long launch for

5:36

some appointment And so we're both

5:38

just like waiting for each other

5:40

to leave and it's 11 o'clock

5:42

at night And we've like been

5:44

working on nothing and we're the

5:46

only ones there. We're finally like

5:48

let's just leave right now So

5:50

you know when your market is

5:53

down 99.99% there was periods of

5:55

time when you know, they didn't

5:57

And they ultimately laid off what

5:59

like 50,000 people between all the

6:01

various, you know, amalgamations of banks

6:03

for Bank of America, but there

6:05

wasn't any work and the work,

6:07

it was just fake work. You

6:09

eventually were one of those laid

6:11

off in 2010. Yeah. And was

6:13

it kind of a relief in

6:15

a sense? You know, it was

6:17

a relief because I started and

6:19

it was very stressful because I

6:21

was a week away from getting

6:23

laid off the entire time I

6:25

was there. There was never a

6:27

moment. of like, this is going

6:29

to be the career. It was

6:31

more like, okay, we started and

6:33

it was like crisis, right? I

6:35

never spend any money, I save

6:37

money because I'm like, okay, I'm

6:39

going to get laid off and

6:41

I'm probably going to have a

6:43

very hard time finding a job.

6:45

And so it was a relief

6:47

because I'm like, afraid. And so

6:49

I was able to save money

6:51

and what's nice is I was

6:53

able to use $6,000 of that

6:55

to start Spot Hero. Right, which

6:57

we'll get to in a moment,

6:59

but basically you were, you're laid

7:01

off, you saved a bunch of

7:03

money. How much money by the

7:05

way did you save? I want

7:07

to say about that time it

7:09

was like $50,000. That's great. So

7:11

you had a lot of money

7:13

saved up and you were just

7:15

living really lean. I mean we

7:17

were living so lean. I remember

7:19

there was a friend of mine

7:21

Brandon James who you know went

7:23

to high school with and we

7:25

ended up you know reconnecting at

7:27

Bank of America. We read the

7:29

book by Ralph Potts called Vagabonding

7:31

and it was like a contest

7:33

of like how little we could

7:35

spend because we're like we're getting

7:37

laid off and him and him

7:39

and I we were roommates and

7:41

we would eat like just rice

7:43

and beans and beans. to eat

7:45

with the rice and beans that

7:47

I cooked myself. And I bought

7:49

a beer trimmer, okay, like off

7:51

Amazon for like $30. And he

7:53

was so disappointed. He's like, I

7:55

can't believe. you don't need the

7:57

beer trimmer and you don't need

7:59

the chicken. I was like, I

8:01

know, but I've been eating rice

8:03

and beans for months. And so

8:05

we kind of had that like

8:07

accountability between us. This book, Vagabonding,

8:09

it's called an uncommon guide to

8:11

the art of long-term world travel.

8:13

And I guess the idea was,

8:15

you're inspired by this book to

8:17

save as much as you could

8:19

with the idea that once you're,

8:21

whatever happened, if you were fired

8:24

or you lost your job, you

8:26

would just travel. blog post lifestyle

8:28

ignition back in 2008. You're right.

8:30

I'm going to go on a

8:32

bike trip across Africa. So that was

8:34

the plan. I mean, I researched down

8:36

to the weight of every single item

8:38

that I would bring on that bicycle

8:41

because like every, you know, 10 grams,

8:43

like it all adds up, right? Yeah.

8:45

Especially if you're going uphill. Where are

8:48

you going to start, by the way,

8:50

in the South or in the North?

8:52

I was going to start in Alexandria,

8:54

Egypt and then go to Cape Town.

8:57

The person I was supposed to go

8:59

with, Brandon, he biked, he started in

9:01

Europe and then he biked all across

9:04

Asia and we were supposed to meet

9:06

up in Africa. So you're laid off,

9:08

the plan is, let me do a

9:10

bike trip across Africa and you start

9:13

to research this, but meantime, you had

9:15

a friend, a guy named Jeremy Smith,

9:17

who I guess had been a roommate.

9:20

He went on a bike trip and

9:22

Brandon was like, hey I need someone

9:24

to take over the lease. So I

9:26

didn't even know Jeremy. And so Brandon

9:29

was like, hey you guys have to

9:31

live together so I can bike longer.

9:33

So Jeremy moves in. And who is

9:36

Jeremy? What does he do for, what

9:38

was he doing for living at the

9:40

time? So he was at Motorola. And

9:42

in the beginning, him and I kind

9:45

of... I don't know the right, like

9:47

we would butt heads because I was

9:49

so done with the corporate world. Yeah.

9:52

In Bank of America. And he was.

9:54

like in love like with Motorola. He's

9:56

like corporate America is amazing and Motorola

9:58

is the best and you know going

10:01

on and I remember you know saying

10:03

to him I was like I'm sorry

10:05

I have to say this but I

10:08

forgot. Motorola existed until you reminded me.

10:10

But yeah, we definitely bought it heads

10:12

in the beginning. Yeah. So another thing

10:14

I think that was happening around this

10:17

time, which would actually lead you to

10:19

Starting Spot Hero, is that both you

10:21

and Jeremy, I guess, were having a

10:24

lot of issues with parking. Like you're

10:26

getting hit with a ton of tickets.

10:28

Do you remember how much you accumulated

10:30

in parking fines, like over the years

10:33

while you were working in Chicago? Yeah,

10:35

I mean it was it was about

10:37

$5,000 worth of parking tickets. It was

10:40

pretty embarrassing. And you paid them, presumably

10:42

you paid them all. Yes, if you

10:44

don't pay your parking tickets in Chicago,

10:46

they're going to boot or, you know,

10:49

tow your vehicle. And I remember actually,

10:51

I call it, I don't know if

10:53

it's like peak demoralization, but. I got

10:56

three tickets for the same thing, like

10:58

about a minute apart, which was parking

11:00

more than six inches away from the

11:02

curb or something like that. And so

11:05

I remember, I'm like, oh, well, I'll

11:07

just, you know, I'll go down and

11:09

I'll beat this, I'll pay one, but

11:12

I'll save on two. And so, you

11:14

know, they're just like, well, is it

11:16

not true that you were at 301,

11:18

302, 302, and 3 or 3 p.m.

11:21

Okay, well, technically, but, and they're like,

11:23

okay, so guilty. And I was like,

11:25

wait, what? Like, I was like, that's

11:27

bullshit. And they're like, you can't say

11:30

that in court. Like, do you want

11:32

to go to jail? And I'm like,

11:34

well, am I going to go to

11:37

jail for parking tickets? Yeah. It's amazing

11:39

how efficient a city like Chicago is

11:41

in finding people and following up on

11:43

those fines for parking violations and how

11:46

inefficient it is in everything else. on

11:48

a specific date, it's like the second

11:50

Tuesday, the last month of, yeah, in

11:53

the leap year. Yeah, and then what

11:55

they do is they put up these

11:57

like temporary signs or these almost pieces

11:59

of paper, plastic around trees. And then,

12:02

you know, you've already parked your car

12:04

for the night. You missed the sign.

12:06

Yes. Yeah. And then there's the overnight

12:09

towing ban, like if it snows, you

12:11

know, more than a certain number of

12:13

inches, then they just tow every car.

12:15

I mean. in the city of Chicago,

12:18

so. They're so good. All right, so

12:20

you're dealing with that. Jeremy moves in,

12:22

and he's Mr. Corporate America. You're looking

12:25

to kind of transition. You're still thinking

12:27

about a bike trip across Africa. How

12:29

do you start to talk about maybe

12:31

doing a business together? We weren't like,

12:34

hey, let's build a company. We were

12:36

like, hey, we both have this problem

12:38

with parking and parking tickets. Let's see

12:41

what we could do. Right? Like, wait,

12:43

what we looked at is we're like,

12:45

there's all this parking that you can't

12:47

have access to. And if we bring

12:50

all of this parking supply, we're gonna

12:52

start the Airbnb of parking. Wait, so

12:54

when you say there's all this parking

12:57

that's available, you're talking about like people's

12:59

driveways, basically. Yeah, people's driveways, but also,

13:01

how about a church parking there? at

13:03

9 o'clock at night. Or the bank

13:06

that on the weekends says, you do

13:08

not park here, there's our parking lot,

13:10

and you're like, the banks are open.

13:13

Exactly, right? So banks close Sunday, right?

13:15

So, you know, the bank's going to

13:17

be completely open on Sunday, the church

13:19

is going to be completely packed, right?

13:22

So why can't we bring all this

13:24

new parking to market and solve all

13:26

these tickets? Right. Okay, so you guys

13:29

start talking about this. And clearly you're

13:31

excited about it, but initially, I mean,

13:33

he's working on Motorola. By this point,

13:35

you're already laid off from Bank of

13:38

America? So I'm already laid off. and

13:40

then he got laid off from Motorola

13:42

as well. Wow. And then he started

13:45

working at a pizza place. Okay, so

13:47

you guys, you decide, let's see if

13:49

we can build something. What does that

13:51

mean? Did you, what were the first

13:54

steps you took when you decided to

13:56

pursue this idea of trying to see

13:58

if you could use unused people's unused

14:01

driveways and Dunkin' Donuts parking lots to

14:03

turn them into paid parking spots? Okay,

14:05

so the first step was I called

14:07

my friend Brett. Because he had a

14:10

parking spot in Wrigley Field that he

14:12

didn't use. Not literally on Wrigley Field,

14:14

but in a neighborhood Wrigleyville, right? In

14:17

the neighborhood Wrigleyville, in the alley behind

14:19

his apartment. So our first spot was

14:21

called Brett Spot. It was named Brett

14:23

Spot versus the addresses like today. So

14:26

the first thing I did was ask

14:28

him, hey, can we sell this online?

14:30

He said, yeah, I'm not using it.

14:33

So, no problem. And then the next

14:35

thing we did, we did, we did,

14:37

we're like, well, well, well, how we

14:39

would go on Craigslist, tell people they

14:42

could park there. Right. You see didn't

14:44

build a website yet, first just starting

14:46

with one ad, one space, one ad

14:49

on Craigslist. Correct. And what we do

14:51

is we'd have two, we had two

14:53

different ads. One was for self-park, and

14:55

then the other was valet, which I

14:58

was the valet, and I was the

15:00

valet, and I had my car. So

15:02

they would park, and then I could

15:05

drive them to the, as close as

15:07

you could get to where pedestrians can

15:09

walk, where pedestrians can walk in. So

15:11

we had self-park and a valet-park and

15:14

a valet-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a-a Yeah. And there's a phone

15:16

number or there's like an email address

15:18

that they can respond to. Okay. Yep.

15:21

Yeah. So what happens? I mean, we

15:23

would sell out his spot every day

15:25

on Craig's list. During the season. During

15:27

the season. During the season, correct. And

15:30

how much were you charging for the

15:32

spot? 20 dollars for South Park and

15:34

40 dollars for Valley. All right. You

15:37

can't really build a business off 20

15:39

dollars a day or 40 dollars a

15:41

day, right? But this is a start.

15:43

It's just a start to start to

15:46

kind of see. on through Craigslist. Correct,

15:48

through Craigslist we are selling it out

15:50

every day. And did you need any

15:53

money to start? I mean, you didn't

15:55

need money to advertise on Craigslist, but

15:57

did you, I mean, you had saved

15:59

$50,000 a lot of money for a

16:02

guy who is $24.25. How much money

16:04

did you guys put in? So we

16:06

each put in $6,000. And so then

16:09

the next step was I called my

16:11

uncle, my mom's brother, and he was

16:13

an engineer, software engineer, by background. And

16:15

I said, you know, what do you

16:18

think I should do? And he said.

16:20

And it's funny because obviously Python is

16:22

a critical component of what we do,

16:24

but I said to him, I said,

16:27

what's a Python? What is that? I

16:29

mean, the programming language, but did you

16:31

know how to code? No, I did

16:34

not. And so he made an introduction

16:36

to someone who he knew that was

16:38

willing to contract for us. And just

16:40

to be clear, I mean, this was

16:43

to build a website and platform, this

16:45

is what the code, this is what

16:47

you hired this coder to do? Correct.

16:50

So initially the idea starts a wriggly

16:52

field and which is smart because you're

16:54

thinking hey, wriggly field it's it's in

16:56

a dense area built-up area. It's not

16:59

easy to park there, but there's a

17:01

lot of people who live around there

17:03

who could probably make an extra cash.

17:06

It's like Airbnb. You can rent out

17:08

your air mattress and make some extra

17:10

cash. Yeah. How did you find people

17:12

who were who you could, you know,

17:15

whose spots you could put on the

17:17

platform? I mean, we would just go

17:19

door to door. You and Jeremy? Yes.

17:22

And some people were extremely upset, like,

17:24

no way I do it myself, I

17:26

don't need you, I stand on a

17:28

corner with a sign, and there's a

17:31

big culture around that. And other people

17:33

are like, yeah, like of course, like,

17:35

wait, I don't have to do anything,

17:38

right? Like, I'm in. And what was

17:40

the fee that, what was the fee

17:42

that you, you sort of gave them?

17:44

So the fee was 15 plus 99.

17:47

But I mean, you're talking about, like,

17:49

$3.50 that you guys earn from a

17:51

spot. That wasn't a lot. of money.

17:54

Oh it was not a lot of

17:56

money but it was more exciting to

17:58

sell one spot like at the at

18:00

that time it wasn't like oh we're

18:03

making three dollars and fifty cents or

18:05

here's a financial model it was like

18:07

I like I remember I'm like wow

18:10

like how good it felt when someone

18:12

went on our own website and purchased

18:14

one single spot it was so cool

18:16

and then I remember the first month

18:19

where we had double-digit sales 11 spots

18:21

sold it was like we hit a

18:23

milestone. We have double-digit sales 11 spots

18:26

sold in a month. So going door

18:28

to door in Wrigleyville I mean, that's

18:30

a lot of work I mean, that's

18:32

like like let's say one out of

18:35

five or ten people are gonna do

18:37

it You gotta go to ten houses

18:39

before one person is gonna be like

18:42

I'm in and then you've signed them

18:44

up for you know, you're basically gonna

18:46

make three dollars and fifty cents off

18:48

of them every time they rent the

18:51

spot so That's a lot of work.

18:53

I mean that is really painstaking work.

18:55

Yeah, and it's not also easy in

18:58

Chicago in the snow, you know, because

19:00

we would try to get ahead of

19:02

it. So in the winter, we went

19:04

and wanted to get ahead for the

19:07

season. So we would, you know, tell

19:09

people like, hey, you know, six months

19:11

from now, you know, we can make

19:14

you money on your spot to get

19:16

contacts. So, you know, we went to...

19:18

I don't know how many homes, but

19:20

ultimately even people that said yes, they

19:23

might have moved or they're like, I

19:25

need my spot now. And we were

19:27

able to get about 50 spots after

19:30

about a year. Took a year to

19:32

get 50 spots. Yeah. That is, I

19:34

love this because this is what a

19:36

business is about. It's painful. Yeah, it's,

19:39

you know, like thinking back, it seems

19:41

ridiculous. Like, gosh, like 50 spots a

19:43

year. But at... at the time it

19:46

was like one foot in front of

19:48

the other, we've got five spots, we've

19:50

got 10 spots, wow, we've got 25,

19:52

and when you're kind of like crawling

19:55

around in the dark, you don't know

19:57

what's next. like it could be 100

19:59

spots, right? Like it could be 200.

20:02

But I mean, even just back at

20:04

the envelope math, I mean, 50 spots

20:06

after a year, if all of them

20:08

were rented out every day for the

20:11

game, you'd make 200 bucks a day.

20:13

I mean, it's small, I mean, it's

20:15

slow going. Right, but I wasn't thinking

20:18

about it like that. I was more

20:20

like, yeah. Okay, we got double digit

20:22

sales in a month, right. You know,

20:24

a funny milestone was when two people

20:27

tried to buy the spot at the

20:29

same time and the site crashed. All

20:31

right, so you've got 50 people signed

20:34

up to sell their spots, right? Through

20:36

your website, through Spot Hero. Let's talk

20:38

about the name for a moment, because

20:40

it's a great name. How did you

20:43

come up with it? And was it

20:45

just a domain that was available? Yeah,

20:47

the domain was available. It's interesting, because

20:50

we had a brainstorming session. And you

20:52

and Jeremy? Me and Jeremy and some

20:54

other friends. And you know, we came

20:56

up with a whole bunch of different

20:59

names. And it's actually kind of funny

21:01

because Spot Hero was the second name

21:03

we wanted, the first name. I'm so

21:05

glad it was, the domain was not

21:08

available, but the first name was Park

21:10

Shark. But the domain was taken, so

21:12

we went to the second one, which

21:15

was Spot Hero. And so the first,

21:17

you know, we bought the domain Spot

21:19

Hero. Spot hero.com. And then we went

21:21

on 99 designs and paid $99 to

21:24

get a logo made. Yep, so you

21:26

really started 99 designs, just whatever you

21:28

bid, whoever bid the lowest amount. So

21:31

you have a logo, you got a

21:33

website. And how did it work in

21:35

terms of like, I mean, we're talking,

21:37

this is 2010, 2011. Let's say you

21:40

click on a spot and you pay

21:42

for it through the site, right? And

21:44

then what happens? And you get like

21:47

a code? The only way that it

21:49

would work is you had to print

21:51

out your confirmation. So you had to

21:53

print out an email. So you had

21:56

to have a printer. And so, you

21:58

know, and if you didn't. it out

22:00

and put that on your dashboard, you

22:03

would get towed. So there was

22:05

definitely an enormous friction.

22:07

No app, just a website

22:09

and required a printer. Got

22:11

it. All right, so you launch a website,

22:14

you've got, it's kind of janky,

22:16

it sounds like, but it's good

22:18

enough. How do you even get

22:20

people to be aware of it?

22:22

Like, how did you even know

22:24

how to find customers? I

22:26

mean, I Googled, how do

22:28

you get customers? When we

22:30

come back in just a

22:32

moment, Spot Hero expands into

22:34

parking garages and then hunkers

22:37

down as competition spreads across

22:39

the city and the country.

22:41

Stay with us. I'm Guy

22:43

Raz and you're listening

22:45

to How I Built This. Hey,

23:01

welcome back to how I built

23:03

this. I'm Guy Ross. So it's

23:05

2011 and in order to get

23:07

customers for his new parking service,

23:09

Mark Lawrence literally Googles, how do

23:11

I get customers from a new

23:14

parking service? And one idea he

23:16

has is to start a blog

23:18

about parking. So I went on

23:20

the street and I would map

23:22

every inch that you could park

23:24

for free with pictures of the

23:26

signs and where you couldn't park.

23:28

And we had these maps that

23:30

I made in Microsoft Paint. So if

23:32

you thought our website Spot Hero is

23:34

janky, you should see my artwork of

23:37

maps for free parking. And then when

23:39

it was there, I was like, hey,

23:41

if you don't want to risk free

23:43

parking, you click on this link to go

23:45

to Spot Hero. That is absolutely brilliant.

23:47

That's such a smart idea. So

23:49

you would spend all this time

23:52

writing blog posts on how to

23:54

find free parking near a sports

23:56

arena. people would find it because

23:58

they might type that in. And it

24:00

was really designed to get them to

24:02

become aware of Spot Hero. Yeah, and

24:05

so that was where our first

24:07

customers came from. In addition, we

24:09

also posted on Craigslist too. Those

24:11

would always get flagged and we'd

24:13

have to go through different hoops,

24:16

but between the content marketing and

24:18

SEO and Craigslist, and you know,

24:20

we just went down the list.

24:22

When you Google, how do you

24:24

get customers? There were, you know,

24:26

things came up like paper click

24:28

or SEM and our budgets were

24:31

super low like you know a

24:33

few hundred dollars a month but

24:35

you know it added up we

24:37

didn't have too many parking spots

24:39

but we were able to kind

24:41

of you know grow neighborhood by

24:44

neighborhood. Got it but still I

24:46

mean the business basically started by

24:48

by going to people and saying

24:50

hey register spot right like just

24:52

like Airbnb. But I guess after

24:54

a year of doing this you

24:57

realize that that this is not

24:59

scalable right this is not a

25:01

great model. And I think it

25:03

was around this time that you

25:05

started to meet people who actually

25:07

owned parking garages, right? Right. We

25:09

were using Twitter at the time

25:12

to tweet about parking and seeing

25:14

can we attract people or see

25:16

people who are frustrated with parking

25:18

in Chicago or for Riggly and

25:20

say, hey, have you heard a

25:22

spot hero? It caught the eye

25:25

of someone named Eric Elo, who

25:27

was at Central Parking, which at

25:29

the time was the second largest

25:31

parking company in the country. He

25:33

saw your Twitter feed. Yeah. And

25:35

so he had reached out. And

25:37

so we met, and it was

25:40

interesting because, again, never sold parking

25:42

in a garage. And to date,

25:44

we had 50 spots. Like 50

25:46

spots. It was a peer-to-peer system.

25:48

Yeah. And so, you know, some

25:50

of conversations with Eric. like looking

25:53

back or just you know kind

25:55

of kind of you know funny

25:57

because you know he said you

25:59

know what I'll try this out

26:01

why don't we start something small

26:03

like a couple of thousand spots

26:06

and and I remember like you

26:08

know try to keep it cool

26:10

I'm like wow a couple thousand

26:12

months I remember I said said,

26:14

Eric, so are the, are the

26:16

spots open every day? And he's

26:18

like, what do you mean? It's

26:21

a parking garage. But I'm like,

26:23

yeah, well, like a lot of

26:25

the people we work with sometimes

26:27

they're at work or like they

26:29

need to move their car, they

26:31

use it on a certain day.

26:34

And he's like, yeah, it's a

26:36

parking garage, it's open 24 7,

26:38

like, like, so instantly, you go

26:40

from 50 spots to a thousand

26:42

or more, even more. Yeah. Initially

26:44

when Eric said, hey, let's try

26:47

this, I'm curious to see how

26:49

this will work. Was it cheaper?

26:51

Would it be cheaper to go

26:53

through Spot Hero rather than just

26:55

to go directly to the garage

26:57

and pull a ticket and go

26:59

park? So yes, it was cheaper

27:02

and they would sell excess inventory.

27:04

So they knew, for example, I'm

27:06

gonna have 800 empty spaces after

27:08

3 p.m. And I might only

27:10

have, you know, 50 spaces during

27:12

the day. Right, okay, so you're

27:15

starting to work with parking garages

27:17

and then I guess you meet

27:19

this guy named Harlan, Harlan Karp,

27:21

I think, and not only does

27:23

he have garages, but he's also

27:25

kind of building or developing scanning

27:28

equipment, like the machines that you

27:30

that we used to, where you

27:32

scan your ticket to go in,

27:34

and I guess he wants you

27:36

to start using those as well,

27:38

right? Yeah, and again, in hindsight,

27:40

it seems obvious, but at the

27:43

time, I'm like, goal, get spots

27:45

for Bears games. We have zero.

27:47

Harlan has these spots. And he's

27:49

like, hey, let me show you

27:51

this future vision of parking. And

27:53

he was telling us about a

27:56

problem that he was solving that

27:58

we didn't have because we didn't

28:00

experience it. We never sold parking

28:02

in a garage. And so ultimately

28:04

at that location, the Park Connect

28:06

from Harlan from Harlan stuff. was

28:09

put there and you could scan

28:11

to get out. You would scan

28:13

your printed out, the print out.

28:15

So you could scan a print

28:17

out or you could scan it

28:19

from a phone. Right. And so

28:21

it depended on the equipment, but

28:24

that was the first, actually, you

28:26

know, that was one of the

28:28

first garages that we got the

28:30

equipment in. So it was perfect,

28:32

because I mean, with Harlan's technology,

28:34

it could become more seamless. Right.

28:37

And we ultimately were able to

28:39

get, you know, these different garages

28:41

on board from three of the

28:43

largest parking companies in the country.

28:45

Oh, wow. And I guess in

28:47

the meantime, like, neither you... Nor

28:50

Jeremy or all that like technically

28:52

minded. And so I guess around

28:54

this time you brought on somebody

28:56

who had more like technical skills

28:58

because this guy named Larry kiss

29:00

to be your your CTO. Correct.

29:02

Yeah. And this I think is

29:05

around 2012. That was the year

29:07

you also applied to Y-combinator which

29:09

of course famously you know incubated

29:11

Airbnb and coin base and Instagram

29:13

and a couple of other major

29:15

companies and brand. So what like

29:18

what happened with that? I mean

29:20

the interview was interesting but it

29:22

didn't go well. off the bat

29:24

and the key reason they said

29:26

no was because we had we

29:28

they didn't believe that we knew

29:31

Larry long enough and they were

29:33

like it's a huge risk to

29:35

have two business founders and a

29:37

technical co-founder of which was such

29:39

a new relationship yeah interesting no

29:41

I mean it makes sense and

29:43

their records very good but obviously

29:46

they have to make a decision

29:48

was that disappointing when you didn't

29:50

get in? You know it was

29:52

but I was So, like, excited

29:54

at the time to be in

29:56

San Francisco to have just been

29:59

in the room at a Y-cominator,

30:01

you know, interview, I felt it

30:03

also clarified a lot of things

30:05

for the business just by actually

30:07

filling out the application. You know,

30:09

because of the experience, I was

30:12

so excited to apply to other

30:14

ones and, you know, did all

30:16

these interviews and, you know, kept

30:18

getting turned down. And then I

30:20

remember we got in... They accepted

30:22

us into Tech Star Chicago. And

30:24

it was interesting because we all

30:27

weren't sure if we want to

30:29

do it. And, you know, myself,

30:31

Larry, and Jeremy talked and we

30:33

actually decided no. And, you know,

30:35

ultimately sat for, you know, a

30:37

few hours talking to them about,

30:40

you know, pros and cons and

30:42

like what we're going through and,

30:44

you know, conversations like, you said

30:46

I have to be in all

30:48

these meetings, meaning all these different

30:50

people. I'm like, I... I'm like,

30:52

I don't have time for anything.

30:55

I'm going door to door. I'm

30:57

having meetings to get parking spots.

30:59

I'm doing our SEO and our

31:01

paper click. I'm like, right now,

31:03

I'm like, look, I'm missing customer

31:05

service calls. People are, they need

31:08

me. And I can't answer the

31:10

phone because I'm hearing this meeting

31:12

with you. And I was told,

31:14

well, you could, you know, just,

31:16

you could hire someone. Have you

31:18

thought about hiring anyone? And I'm

31:21

like hiring anyone. you know it's

31:23

like it's been a year and

31:25

a half of like I didn't

31:27

realize you could do that just

31:29

wasn't a thought. Okay so you

31:31

change your mind you and you

31:33

wind up joining Techstars the incubator

31:36

and and to get into it

31:38

just to clarify I mean to

31:40

get into one of these incubators

31:42

would work to your advantage right

31:44

because of course you get it

31:46

usually in office and the office

31:49

space and a network of people

31:51

and mentors and investors who can

31:53

come by for the pitch day

31:55

right. And oftentimes they get, sometimes

31:57

not always, these incubators, depending on

31:59

what they are, get a little

32:02

bit of equity in the company.

32:04

Yeah, so they got 6% of

32:06

the business and we got $50,000.

32:08

Did you need the money at

32:10

that point? I would say yes.

32:12

I mean, I know how beneficial,

32:14

you know, joining Textar Chicago is

32:17

now, I didn't at the time,

32:19

but I remember thinking when we

32:21

raised like we're like we raised

32:23

$50,000 like it just felt so

32:25

good and I'm like we did

32:27

it like it took a year

32:30

almost a year and a half

32:32

to hit $1,000 of sales in

32:34

a month okay and which meant

32:36

like we're taking home what like

32:38

on hundred fifty bucks but I

32:40

remember in 2012 sales ramped in

32:43

you know January February March April

32:45

May from you know five thousand

32:47

a month to to eighty thousand

32:49

a month in May but the

32:51

worry was is this going to

32:53

last and so we were you

32:55

know kind of scared to hire

32:58

someone and and that fifty thousand

33:00

dollars gave us the confidence to

33:02

make our first hire but when

33:04

text stars brought you in and

33:06

they you know, 50 grand, they

33:08

get 6% of the business. I

33:11

mean, essentially the business is valued

33:13

at just over a million dollars

33:15

at that point. I think less.

33:17

If we gave up 6% for

33:19

$50,000. Yeah, a little less than

33:21

a million dollars. Yeah. Did anybody

33:24

say that's a lot? That's giving

33:26

up a lot. Oh, like everybody.

33:28

Yeah. But I like and that

33:30

was kind of like why we

33:32

initially said no. And I thought

33:34

about it after the conversation. I

33:36

was sitting. you know, by myself

33:39

in the car. Everyone was like,

33:41

you should negotiate, you should do

33:43

this, and like, no, you should

33:45

say no, you guys are already

33:47

doing 80,000 a month. And I

33:49

remember just thinking, I'm like, okay,

33:52

what is the best possible outcome

33:54

if I say yes to this,

33:56

and what's the worst possible outcome?

33:58

And thinking through those, like, different

34:00

scenarios, it became clear like, okay,

34:02

I want to do this. So

34:05

you guys now have significant revenue

34:07

coming in, 70, 80 grand, 80

34:09

grand. But again. But again. your

34:11

costs were that were super low?

34:13

I mean, was that so, I

34:15

mean, were you profitable in that

34:17

year? Yeah, we were profitable. Yeah.

34:20

And so with that, so essentially,

34:22

I'm thinking now you've got some

34:24

traction, you've got real money coming

34:26

in. I mean, you're gonna hit

34:28

almost a million dollars in revenue

34:30

in 2012. And so I have

34:33

to assume that the strategy now

34:35

is to just expand, get more

34:37

and more and more and more,

34:39

work with more and more parking

34:41

garages. Yes. The idea was, can

34:43

we create a model? that we

34:46

can then bring and scale to

34:48

other cities. And so our expansion,

34:50

we were the only, like, you

34:52

know, we started all these different

34:54

competitors pop up, and many were

34:56

in, you know, 10, 20, 50,

34:58

150, 200 cities. We were only

35:01

in one city, and our focus

35:03

was, can we really get a

35:05

true playbook for this business in

35:07

a single market and then go

35:09

to our next market? in December

35:11

of 2012, it's about $2.5 million

35:14

you guys raised. And your idea

35:16

is, let's do this slowly, let's

35:18

really first own Chicago, and then

35:20

we'll expand out, then we'll go

35:22

to other cities. Essentially, you were

35:24

able to iron out all the

35:27

potential friction points by really focusing

35:29

on Chicago. Yeah, the friction points,

35:31

because if you think about it,

35:33

we've talked about, okay, there's the

35:35

parking. operators and there's the drivers,

35:37

right? There's the parking spots, spaces

35:39

and drivers. But the third leg

35:42

of the stool is the point

35:44

of sale systems or parks, which,

35:46

you know, help enable that consumer

35:48

experience. And so, like, it's not

35:50

just as simple as getting the

35:52

spots on the drivers. So, working

35:55

out the different kinks, understanding... each

35:57

detail that's needed by the different

35:59

partners, right? Like there were also,

36:01

you know, folks in the garage

36:03

that we could talk with and

36:05

understand what's happening. How does this

36:07

work? But meantime, all over the

36:10

United States, clones started to pop

36:12

up. Companies doing the exact same

36:14

thing, but expanding faster in New

36:16

York and Washington, D.C., and L.A.,

36:18

etc. Give me a sense of

36:20

how investors reacted to that. Were

36:23

you, even your seed round investors,

36:25

where they're saying, hey, what's going

36:27

on? Why are you just in

36:29

Chicago? Yeah, I would say there

36:31

was, there was a lot of

36:33

pressure. Why are you just in

36:36

Chicago? You're not in these other

36:38

markets, you're not relevant. Uber was

36:40

also launching and lift, and there

36:42

was this whole idea of blitz

36:44

scaling and moving fast, making sure

36:46

that the land grab didn't happen

36:48

by somebody else. And my point

36:51

of view was the parking industry

36:53

is more about relationships. At the

36:55

time, you know, 60, 70% of

36:57

the dollars spent in parking were

36:59

cash. It was a very, you

37:01

know, old school group of folks

37:04

that had, you know, set ways

37:06

of doing things. And this idea

37:08

that you can just throw money

37:10

at a problem didn't work with

37:12

an industry that was, you know,

37:14

really about relationships and trust. But

37:17

I have to imagine with all

37:19

these other competitors out there, a

37:21

lot of the money in Silicon

37:23

Valley was going to those competitors.

37:25

I mean, probably a lot more

37:27

money than you guys had raised.

37:29

Oh, an enormous amount of money.

37:32

And it was very stressful to

37:34

see all of these pins pop

37:36

up in different places that, you

37:38

know, while we were just in

37:40

Chicago. And we were called a

37:42

one-hit wonder, hey. You've got one

37:45

city, it's really great. You know,

37:47

where are you going next? I'm

37:49

curious. Was a part of you

37:51

scared and worried about expanding out

37:53

and to the point where you

37:55

were worried that it could actually

37:58

tank the whole business? I definitely

38:00

was because I saw that happened

38:02

to a lot of different companies.

38:04

They expanded and they got tanked.

38:06

And I'm like, man, if I'm...

38:08

you know, in these different cities,

38:10

I'm not going to be able

38:13

to have the same level of

38:15

care and the whole thing could

38:17

come down. So there was definitely

38:19

a worry of spreading myself too

38:21

thin. We also didn't have the

38:23

same resources as all these other

38:26

companies. Right, because you raised two

38:28

and a half million dollars, so

38:30

you had that runway, and you

38:32

had some cash coming. but you

38:34

didn't have tens of millions coming

38:36

in. Right. Because this is a,

38:39

I mean, it's a doggy dog,

38:41

right? Like if you're not parking

38:43

in my spot, you're parking in

38:45

my competitor's spot. Yeah. The number

38:47

one key thing for why we

38:49

beat them, all of the folks

38:51

in Chicago, is we were only

38:54

in Chicago. Everyone else was distracted

38:56

with all these other cities. Even

38:58

the companies based in Chicago, they

39:00

were focused outside of Chicago. Yeah,

39:02

multiple competitors based in Chicago. It

39:04

just sounds like a nightmare. It

39:07

was hand-to-hand combat, slog, like you

39:09

could not imagine, like, you know,

39:11

I remember having a conversation with

39:13

one of the, you know, CEOs

39:15

at the time of a rival

39:17

parking online company. And I said,

39:20

you know, it's interesting. All of

39:22

my signs disappeared and your signs

39:24

were put in their place. We

39:26

had a hundred of them and

39:28

they all disappeared. But, you know,

39:30

I was told, Mark, you know,

39:32

it's just coincidence. And I'm like,

39:35

coincidence, really? And so, you know,

39:37

we had our, you know, back

39:39

and forth different sign wars. So

39:41

it was a slog, but the

39:43

real thing is, we focused all

39:45

of our efforts. in one city.

39:48

And because all of our efforts

39:50

are concentrated there, dollars, focus, operation,

39:52

relationships, every aspect, we could react

39:54

quickly, we could make changes quickly,

39:56

we could iterate, we had much

39:58

closer attention to the details, our

40:01

response time was extremely fast because

40:03

we don't have 20, 50, 100

40:05

cities, we have one city. But

40:07

it sounds like even some of

40:09

your investors are skeptical of your

40:11

strategy, even people who are on

40:13

your side. are skeptical of your

40:16

strategy. Absolutely. Investors were very skeptical,

40:18

you know, feeling like, hey, the

40:20

trajectory in one city is not

40:22

interesting. The idea. of what Spot

40:24

Hero could be nationwide and then

40:26

worldwide is exciting, and people are

40:29

eating your lunch everywhere. And by

40:31

the way, that's not bad advice.

40:33

I mean, I, these are experienced

40:35

investors, VCs, who had probably invested

40:37

in other platforms and companies that

40:39

had done very well with the

40:42

strategy. So who are you, an

40:44

upstart, young guy, to say I

40:46

know better. Yeah, it's interesting because

40:48

I wasn't thinking like so much

40:50

I know better as I Really

40:52

fear going to another market right

40:54

like you know, so it was

40:57

like like They would try to

40:59

elicit the fear of losing But

41:01

the fear of expanding was greater.

41:03

Yeah, all right. So finally after

41:05

A lot of pressure, the first

41:07

place you go to expand is

41:10

Washington DC, which I, February 2013,

41:12

I was living there at the

41:14

time. Who sort of owned the

41:16

DC market when you guys went

41:18

in? Because again, there were competitors

41:20

everywhere. Who had the best market

41:22

penetration? There was a company called

41:25

Parking Panda. Parking Panda had the

41:27

largest concentration in both DC and

41:29

Baltimore. They had... you know, started

41:31

around the same time as us.

41:33

And by the way, could one

41:35

parking garage, do they have to

41:38

exclusively work with one brand? Or

41:40

could they work with parking panda

41:42

and with you guys? So they

41:44

could work with parking panda and

41:46

us. So some were exclusive, some

41:48

were not, but they could work

41:51

with both. But the way that

41:53

we communicated was different. All the

41:55

other companies were trying to get

41:57

exclusives, and our strategy was like,

41:59

we don't want exclusive. We want

42:01

to prove to you. that we

42:03

can bring more dollars bring more

42:06

than all of them combined and

42:08

we want to do that here.

42:10

In addition, we were the first

42:12

to have any time parking on

42:14

a website and then we were

42:16

the first that had an app.

42:19

We were the first to iOS,

42:21

we were the first to Android

42:23

and the focus of being only

42:25

in two markets allowed us to

42:27

really leapfrog parking pandem. And I

42:29

think very soon after DC you

42:32

expend Baltimore and then Boston. And

42:34

that year, right, because now the

42:36

last time you'd raised money, it

42:38

was in 2012, it was $2.5

42:40

million, now you go back to

42:42

raise money. This is in, you're

42:44

looking for Series A money, you

42:47

know, given the success now, you

42:49

got success in DC, you're expanding,

42:51

but still slowly, were investors lining

42:53

up? Were investors lining up? And

42:55

our traction was... good but not

42:57

great and slightly it was slightly

43:00

interesting but not interesting enough I

43:02

didn't keep in contact with the

43:04

investors the ones that had put

43:06

money in yeah I was just

43:08

focused on building the business so

43:10

you weren't sending regular updates or

43:13

anything not real no yeah that

43:15

was probably not very popular among

43:17

some of the investors not very

43:19

popular and now wow we have

43:21

a burn we're running out of

43:23

money But, you know, we did

43:25

have some investors that did step

43:28

up, you know, COLA the round.

43:30

Chicago Ventures, bullpen Capital, and Mike

43:32

Gamsin, but it was really, it

43:34

was a really hard round. This

43:36

was May. If we didn't have

43:38

that first wire, we would have

43:41

been out of business, right? It

43:43

got to a point, and I

43:45

never lie, but I lied once,

43:47

and it was to... Our accountant

43:49

Stephanie, and I remember she came

43:51

to me and said, hey, I'm

43:54

looking at the bank account, when

43:56

is the round going to be

43:58

done? I said, why? She said,

44:00

well, because we have money coming

44:02

due. Like, we have to pay

44:04

payroll, we have to pay operators

44:06

in like two days, and I

44:09

don't see enough money in the

44:11

account. And I'm like, oh, well,

44:13

there's other accounts, like, don't worry.

44:15

And I didn't know when the

44:17

wires would actually hit. And one

44:19

of the bigger wires, I was,

44:22

you know, asked, hey. I've got

44:24

to delay for a couple of

44:26

weeks because of some capital calls

44:28

and VCs. They're going on vacation.

44:30

You don't mind waiting a couple

44:32

weeks, right? In my head, I'm

44:35

like, well, if I tell them

44:37

no, they're going to be like,

44:39

why are you out of money?

44:41

Right? So I said, fine. Luckily,

44:43

we were able to get a

44:45

wire on the day that we

44:47

had to pay payroll and operators.

44:50

And so it was fine. But,

44:52

you know, very hard. All

44:54

right, so you, but you raise

44:57

four and a half million. You

44:59

know, again, you've got well capitalized

45:01

competitors. You're still under pressure to

45:03

expand. And by the end of

45:06

that year, December 2014, you do

45:08

go to San Francisco, which is

45:10

a tough place to go to

45:13

simply because, you know, there's tons

45:15

of competitors, the smart, you know,

45:17

again, I don't want to say

45:19

the smartest, but look, just statistically,

45:22

if you look at the stats.

45:24

the smartest startups and VCs are

45:26

here in the Bay Area. They

45:29

are. I mean, you've got Stanford,

45:31

you've got Berkeley, a lot of

45:33

them are coming out of here,

45:35

the money is here, is on

45:38

Sandhill Road and in Silicon Valley.

45:40

So it's a tough place to

45:42

come to from Chicago, right? Did

45:45

it feel intimidating? It was extraordinarily

45:47

intimidating, and I didn't want to

45:49

expand to San Francisco because of

45:52

that. And bullpen capital who, you

45:54

know, co let our round. Their

45:56

view was you're not raising a

45:58

Series B and you're not going

46:01

to be taken seriously if you're

46:03

not in San Francisco. But I

46:05

feared expanding to San Francisco the

46:08

most. When we come back, Spot

46:10

Hero goes west, where its competition

46:12

has more visibility and a lot

46:14

more money. Stay with us. I'm

46:17

Guy Raz, and you're listening to

46:19

how I built this. Hey,

46:36

welcome back to how I built

46:38

this. I'm Guy Ross. So it's

46:40

the end of 2014, and after

46:42

much hesitation, Mark and his partners

46:44

decide to expand Spot Hero to

46:47

the city they fear most, San

46:49

Francisco. The problem, I think, in

46:51

San Francisco is you've got some

46:53

really hot competitors, companies like Lux

46:56

and Xerks, raising insane amount of

46:58

money, because they believe that the

47:00

future is valet parking. not you

47:02

park self-parking but valet parking and

47:05

I guess they capture the attention

47:07

of a lot of VCs who

47:09

agree they're saying this is the

47:11

future. I mean this was quite

47:14

possibly one of the most stressful

47:16

periods you know that that we

47:18

had experienced to date we had

47:20

worse ones later but to date

47:23

that was enormously stressful because not

47:25

only had we had only raised

47:27

seven million dollars, but these companies

47:29

had raised 40, 50, 60, 77

47:32

million dollars, Lux, Xerks, Batler, Carbon,

47:34

and they were also extremely visible

47:36

with the umbrellas and the, you

47:38

know, skateboards and, and I remember

47:41

a board meeting where I was

47:43

told, hey, Mark, you are going

47:45

slow. We've been telling you're going

47:47

slow, you're not expanding fast enough,

47:50

and now there's this. new model

47:52

and it looks like you guys

47:54

are dead. You're being disrupted before

47:56

you have the chance to disrupt.

47:59

Half a billion dollars went to

48:01

fund companies that said we were

48:03

the relic and meetings in the

48:05

valley were extremely demoralizing because people

48:08

would say, hey, like, you know,

48:10

I've heard great things about you.

48:12

Clearly, like, this business isn't going

48:14

to work out, but I wanted

48:17

to get to know you for

48:19

your next one. Lux and Xerks

48:21

were the hot ones. You saw

48:23

their logos all over the place.

48:26

Their logos were all over the

48:28

place. Everybody knew who they were

48:30

because they were spending, you know,

48:32

crazy amounts of money. The other

48:35

thing is, our cost of customer

48:37

acquisition, we're exploding because they were

48:39

just paying, unlimited. And so costs

48:41

of acquiring customers were going up.

48:44

They were also prepaying for six

48:46

months or a year to shut

48:48

us out completely of some great.

48:50

you know, locations. Wow. So they

48:53

were subsidizing parking for people, basically.

48:55

Extremely. I mean, totally subsidizing. And

48:57

we were, you pay $15 or

48:59

$20 to park and you park

49:02

your car yourself. They also had

49:04

to pay for labor. So you

49:06

would pay 15 or 20 bucks,

49:08

but they would park it for

49:11

you. Right. So they were, you

49:13

know, our average was like $20

49:15

dollars to park. So they made

49:17

it where it's 15. But they

49:19

would valet your car both ways.

49:22

So, so, so, so... The consumer

49:24

experience was quote unquote remarkable like

49:26

wow I can just press a

49:28

button right my car gets picked

49:31

up wherever I'm at and then

49:33

dropped off and brought back to

49:35

me it sounded amazing on paper

49:37

and yeah and there was actually

49:40

a vote to pivot the company

49:42

to be on-demand valet there was

49:44

a vote from from who the

49:46

board your board voted to pivot

49:49

your company it was more of

49:51

like hey all in favor of

49:53

pivoting the company, like it's very

49:55

clear like this is where things

49:58

are going, and I'm like, all

50:00

right, well, you know, that's great.

50:02

But it was very clear this

50:04

was definitely not going to work.

50:07

Didn't make sense. It wasn't sustainable.

50:09

You'd have to hire, I mean,

50:11

all your costs would go to

50:13

paying for valets, humans who are

50:16

parking the car. It made absolutely

50:18

no sense. You had to pay

50:20

for humans parking the car, but

50:22

here's the other thing. There was

50:25

a thesis that, well, if you

50:27

park the car farther away, you

50:29

can get an arbitrage, and especially

50:31

in New York City, it's... could

50:34

be $100 to park in a

50:36

specific area, but it's only, you

50:38

know, $15, you know, a couple

50:40

of streets over. But the problem

50:43

is that as you get farther

50:45

and farther away to get lower

50:47

costs, lower and lower parking, the

50:49

amount of time it takes to

50:52

bring the car there and back

50:54

increases, so your labor costs go

50:56

up. So for a consumer standpoint,

50:58

when it launch on San Francisco,

51:01

when it launch on San Francisco,

51:03

Everyone was like, wow, I pressed

51:05

a button. Had a valet come

51:07

in two minutes. Yeah. And it

51:10

felt like Uber. Okay, but then

51:12

fast forward. And, you know, there

51:14

was people screenshotting. It's, the valet's

51:16

coming in 72 days. Because the

51:19

algorithm was like, well, there's this

51:21

many valets, and there's this many

51:23

people pressing the button. And so

51:25

it did some crazy calculations. Right.

51:28

And people like, 72 days, I

51:30

need my car now. Right. And

51:32

so, you know, tested this in

51:34

New York and Chicago and it

51:37

just did not work and I

51:39

presented to the board the findings.

51:41

And clearly they would, because they

51:43

had voted to pivot the company.

51:45

Yes, but the findings were pretty

51:48

clear and the discussion was, okay,

51:50

well then why are they able

51:52

to get such mind share? They're

51:54

like, if this is going to

51:57

be the thing, we need to

51:59

make sure that... we are also

52:01

part of that thing. If it

52:03

is not the thing, okay, fine,

52:06

but they have... How much more

52:08

money than us in terms of

52:10

capital? How long can they be

52:12

irrational? And what are we gonna

52:15

do to survive this? Right? We're

52:17

shut out of parking spots. Our

52:19

cost of customer acquisition is going,

52:21

everything is blowing up. Like what

52:24

are we going to do in

52:26

order to survive this and get

52:28

to the other side? This is

52:30

such a great, like case study

52:33

and sticking to your core principles

52:35

because it's. It makes sense to

52:37

me why investors will want you

52:39

to do this, right? Because at

52:42

the end of the day, their

52:44

goal is to make money, right?

52:46

And there's nothing wrong with that.

52:48

That's what an investor is there

52:51

to do. They're not in the

52:53

charity business. And so when they

52:55

see these other hot brands doing

52:57

these things and all their friends

53:00

are talking about and everyone's talking

53:02

about it, you're in San Francisco,

53:04

you're thinking, well, this is where

53:06

it's at. This is where it's

53:09

all headed. say that to you,

53:11

but on the other hand, it's

53:13

very reactive, right? And humans are

53:15

reactive. We're not patient by nature.

53:18

It's very rare to find somebody

53:20

who's like, no, let's look 10

53:22

years down the line. So it

53:24

is kind of remarkable that you

53:27

were able to withstand that pressure

53:29

and prove that this really wasn't

53:31

going to work. This wasn't sustainable.

53:33

Yeah, it was definitely extraordinary stressful

53:36

for so many reasons. And me

53:38

questioning myself and thinking, okay, I

53:40

remember when different parking companies would

53:42

tell me nobody is going to

53:45

buy parking on a telephone. Hey,

53:47

this internet stuff is a fad.

53:49

And laughing at how ridiculous the

53:51

things were that they were saying.

53:54

And remembering them saying, listen, I've

53:56

been in parking for 57 years.

53:58

I've been in parking for 37

54:00

years, 50 years, 40 years, right?

54:03

What do you know? And I

54:05

remember thinking, well, I've been in

54:07

parking for, you know, five years.

54:09

And then thinking, wait, am I

54:11

being just like that? Yeah. So

54:14

the amazing thing about this story,

54:16

because I'm going to give it

54:18

away here, is that a year

54:20

later, 2016, Xerks shuts down. And

54:23

I think the next year, 2017,

54:25

Lux ceases operations. They both fade

54:27

away. They fizzle out. And the

54:29

other ones did too. Even though

54:32

in 2015, everyone was like, this

54:34

is where it's at. These are

54:36

the hottest companies out there. Yes,

54:38

these are the hottest companies, this

54:41

is where it's at, and this

54:43

is where half a billion dollars

54:45

from dozens and dozens of the

54:47

top Silicon Valley firms are putting

54:50

their money. You know, listen, that's

54:52

what investing is about. You're going

54:54

to win some loose. But it

54:56

is amazing how we are, our

54:59

perception is so biased, right? scute,

55:01

our reality, and I'm applying this

55:03

to anything. It's just so flawed.

55:05

I include myself in this. The

55:08

way we see the world, we're

55:10

so certain because it's how we're

55:12

seeing it. And so often it's

55:14

just not the reality that is.

55:17

Now I sound like a word

55:19

salad there, but you know what

55:21

I'm talking about. I know exactly

55:23

we're talking about. I mean, whether

55:26

it's recency bias or whatever you

55:28

want to call it. The idea

55:30

of what is right in front

55:32

of me is exactly how it

55:35

is now and how it always

55:37

will be is is is definitely

55:39

not the case and It was

55:41

certainly not the case with with

55:44

on-demand valet All right, so you

55:46

withstand that Very difficult time isn't

55:48

2015 We were doing our series

55:50

B We're trying to raise 20

55:53

million dollars, which which at the

55:55

time that was a pretty sizable

55:57

series B in 2015 so you

55:59

you raised the money And that,

56:02

of course, enables you to continue

56:04

to expand. And as you grow

56:06

right I imagine you're not profitable

56:08

right at this point we're not

56:11

profitable no but 2017 you acquire

56:13

your previous competitor parking panda yes

56:15

made better when you went to

56:17

DC yeah and that gave you

56:20

access to Canadian cities what was

56:22

interesting though was parking panda is

56:24

they basically decided they're like worse

56:26

selling And so it was interesting

56:29

because they were actually the number

56:31

two at the time. They were the

56:33

second largest at the time, and we

56:35

were the first. And there was a

56:37

moment where I wasn't sure if I

56:40

wanted to buy them. And you know,

56:42

you're kind of cagey because you're like,

56:44

if I give too much to my

56:46

competitor, then they don't buy me, then

56:49

they know my secrets, so to speak.

56:51

But if you don't give enough, then

56:53

it's not interesting. And I was asking

56:55

them like... I'm like, I need to

56:57

see more detailed revenue by city. And

57:00

they were so cagey. They showed

57:02

me a breakout and I was

57:04

like, why are you like, he's

57:07

like, I'm gonna turn the computer.

57:09

I'm like, why are you so

57:11

afraid? Like, remember, if we're gonna

57:14

do this together, like, we need

57:16

to understand, like, where, not just

57:18

your P&L, but like, where are

57:21

you doing revenue? And I said,

57:23

where? And I'm looking at the,

57:25

and I'm like, you're doing how

57:28

much in Sacramento? What? Secondary

57:30

cities were actually

57:32

arguably proportionally more

57:34

profitable. Yes, and that

57:37

meant that together, the overlap was

57:39

so low, there's literally going to

57:41

be 5%, maybe 10% overlap. And

57:44

that was, that was a really

57:46

great acquisition. I'm really happy we

57:48

did that. All right, so now you've

57:50

got parking panda and... You

57:53

are really starting to

57:55

emerge as a big player

57:57

if not the big player

58:00

in the parking space. And, you

58:02

know, we're not gonna go through

58:04

all the additional rounds of funding

58:06

because you start to raise more

58:08

money. And by the way, I

58:11

mean, you know, 50 million round,

58:13

Series D, was that, by 2019,

58:15

I have to imagine it gets

58:17

easier at that point to raise

58:19

50 million. I wouldn't call it

58:22

easy. We've always been. in a

58:24

category that has always something wrong

58:26

with it, right? Yeah, what do

58:28

you mean by that? Well, obviously

58:31

it's my fault I didn't keep

58:33

in touch with investors or give

58:35

updates. I'm very good about that

58:37

now. But let's take, you know,

58:39

Series A, right? The idea that

58:42

every day in the media, Uber

58:44

and Lyft is saying parking is

58:46

dead. The future is no car

58:48

ownership, but everybody Uber bringing in

58:50

Lyft everywhere. Right? Then it was,

58:53

okay, parking is not dead, it's

58:55

the future and everybody is going

58:57

to, car ownership is great, but

58:59

valaying those cars is the future

59:01

and it's not you. Yeah. Then

59:04

it was, actually, sorry about that,

59:06

it's not labor that's going to

59:08

scale this industry. The cars are

59:10

going to drive themselves and they're

59:13

going to be in perpetual motion.

59:15

And so they don't ever need

59:17

to park. And I'm just like,

59:19

come on, can we get a

59:21

break? Yeah. We've never been like

59:24

what I would call on trend,

59:26

right? Like we've never been this

59:28

like on theme type company for

59:30

a raise. Because you're not that

59:32

hot thing. It's like, oh, well,

59:35

what about this AI company or

59:37

that tech startup and you're doing,

59:39

you're selling parking lot parking spots.

59:41

Right. So it's boring, but it's

59:44

also, the thing is, I don't

59:46

mean boring, but, but, but the

59:48

boring, the quote unquote boring businesses

59:50

are. Very often the most successful

59:52

businesses. Well, here we are. Here

59:55

we are. All right, let's go

59:57

to let's get to COVID because

59:59

I you know, you're plugging, you're

1:00:01

growing everything. looking great. You've raised

1:00:03

at this point up to this

1:00:06

point. I think now you're looking

1:00:08

at them at least, you know,

1:00:10

close to $100 million by the

1:00:12

time COVID comes around. And then

1:00:15

that's it. It's like the world

1:00:17

shuts down and you're now in

1:00:19

the movie theater business. No one's

1:00:21

parking all of a sudden. Yeah.

1:00:23

I remember right before COVID. We

1:00:26

had a board meeting in February

1:00:28

early February. And, you know, it

1:00:30

was a kickoff to the year

1:00:32

and I gave a bit of

1:00:34

a preamble. Every year in the

1:00:37

company we had an existential threat

1:00:39

to parking and spot hero. And

1:00:41

I went through everyone for every

1:00:43

year just to remind people of

1:00:46

what we had, you know, transcended

1:00:48

and come through and I said,

1:00:50

and this is the first time

1:00:52

that we sit here today without

1:00:54

an existential threat to spot hero

1:00:57

and parking. I am reminded by

1:00:59

the board constantly about the words

1:01:01

that I should eat because obviously

1:01:03

COVID happened and I always thought

1:01:05

about two three weeks later two

1:01:08

three weeks later I'm like oh

1:01:10

man and I I remind them

1:01:12

I said well it wasn't an

1:01:14

existential threat to parking it was

1:01:17

an existential threat to everyone but

1:01:19

yeah it was two or three

1:01:21

weeks later and that was by

1:01:23

far the hardest time that we

1:01:25

as a company had to go

1:01:28

through I mean brutal brutal brutal

1:01:30

I you guys put on your

1:01:32

blog that you're you're you're you're

1:01:34

looking at 90% drop of 90%

1:01:36

bookings yes instead by April of

1:01:39

2020 April was 98% 98% yeah

1:01:41

May was 95 yeah it was

1:01:43

it was just a absolute brutal

1:01:45

set of decisions to, you know,

1:01:48

having to lay off, you know,

1:01:50

close to 70% of the company.

1:01:52

But it made it easier. to

1:01:54

be brutal externally, right? Yeah, meaning

1:01:56

what? What I mean, meaning that

1:01:59

is like, okay, we signed some

1:02:01

SAS contract in January. Don't care,

1:02:03

not paying it, right? Like, you

1:02:05

just stop paying it. Just stop

1:02:07

paying literally every bill. It's some,

1:02:10

some like, some like, I don't

1:02:12

know, customer relations management or something.

1:02:14

Voice automation, like, you know, you

1:02:16

name it. Wait, I have to

1:02:19

decide between paying for some software

1:02:21

to some stranger that I don't

1:02:23

even need to use because of

1:02:25

some contract and then I got

1:02:27

to fire somebody else, someone is

1:02:30

going to lose their livelihood because

1:02:32

of this. I'm like, absolutely not.

1:02:34

Even as people start to emerge

1:02:36

from COVID, you guys, I mean,

1:02:38

I have to imagine it was

1:02:41

slow going because I mean, even

1:02:43

to this day, San Francisco, as

1:02:45

you know, 30% of office space

1:02:47

is still. empty. Have you recovered

1:02:50

from the pre-covid, you know, sort

1:02:52

of, I mean, has it, have

1:02:54

you fully recovered and more? Or,

1:02:56

and if so, how long did

1:02:58

it take? Yeah, so, I mean,

1:03:01

we have fully recovered it more.

1:03:03

Right now, we are, you know,

1:03:05

three and a half times larger

1:03:07

now than we were pre-covid. And

1:03:09

there's a number of different factors

1:03:12

for that. But there is actually

1:03:14

a greater percentage of people driving

1:03:16

and parking. Because they're not using

1:03:18

public transit. Right, public transit, you're

1:03:21

used to the routine, you go

1:03:23

in five days a week, you

1:03:25

always take the train. You're coming

1:03:27

in two days a week, one

1:03:29

day a week. You're going to

1:03:32

drive. You're going to drive, drive

1:03:34

and park, right? Interesting. So the

1:03:36

public transit crisis, in a sense,

1:03:38

has kind of benefited the parking

1:03:40

industry. It is part of it,

1:03:43

but the other part too, there

1:03:45

was a... time where people were

1:03:47

worried about public transit, regardless of

1:03:49

the different servicing issues in different

1:03:52

cities, you know, people just felt

1:03:54

safer in their cars. Yes. And,

1:03:56

you know, we ultimately obviously had

1:03:58

a snapback and we ended up

1:04:00

hiring a lot of folks that

1:04:03

we unfortunately had to let go

1:04:05

and, and, you know, they're, they're,

1:04:07

they're still with us, which is

1:04:09

great. And now, you know, you

1:04:11

start in 2011, lots of competitors

1:04:14

are still our competitors out there.

1:04:16

Where are you in the competitive

1:04:18

landscape? Would you say you guys

1:04:20

are the biggest or among the

1:04:23

three biggest or, or, or what?

1:04:25

Yeah, I would say like, we

1:04:27

are, we are the largest. Like,

1:04:29

we have 1,600 parking companies that

1:04:31

we partner with, and when you

1:04:34

look at, you know, the sales

1:04:36

that we're doing, usually it's greater

1:04:38

than all the others combined. I

1:04:40

started this with the idea of,

1:04:42

how do I stop getting parking

1:04:45

tickets? And, you know, love to

1:04:47

drive hate to park a lot

1:04:49

more now, and I'm, you know,

1:04:51

just absolutely jazzed about, like, what

1:04:54

we could... accomplish, right? Like, to

1:04:56

me, it's focused on executing, how

1:04:58

do we change the moments of

1:05:00

people's days, right? How do you

1:05:02

make it so people don't even

1:05:05

have to think about parking? When

1:05:07

you think about the journey you've

1:05:09

taken, you know, he started out

1:05:11

as this little kind of project

1:05:13

in 2010 and where you are

1:05:16

now, and all that you've been

1:05:18

through, how much of where you

1:05:20

got to, because you could have

1:05:22

been crushed at many points along

1:05:25

the way, right? So many variables.

1:05:27

How much do you attribute the

1:05:29

fact that you guys are here

1:05:31

and successful and now the 800

1:05:33

pound gorilla on the block? So

1:05:36

to speak is due to how

1:05:38

hard you worked in the grind

1:05:40

and how much do you attribute

1:05:42

to just getting lucky? I mean,

1:05:44

I think there's a value to

1:05:47

consistency. There's something to be said

1:05:49

for focus, our focus, consistent focus.

1:05:51

You go through the history of

1:05:53

the company, every aspect. all these

1:05:56

potential distractions or things to spread

1:05:58

ourselves to sin or things that

1:06:00

could, you know, have... have killed

1:06:02

a sooner. Our focus on just

1:06:04

one thing and one thing very,

1:06:07

very well has contributed. Yes, of

1:06:09

course, there's always luck. And I

1:06:11

do believe in luck, but I

1:06:13

also believe in manifesting it. And

1:06:15

I think that consistency in focus

1:06:18

has been key across everything. That's

1:06:20

Mark Lawrence, co-founder and CEO of

1:06:22

Spot Hero. By the way, remember

1:06:24

that bicycle tour Mark was planning

1:06:27

to take across Africa before he

1:06:29

started the company? Well, he still

1:06:31

hasn't done it. But that ride

1:06:33

from Cairo to Cape Town, it's

1:06:35

actually a pretty popular trip. It's

1:06:38

nearly 7,000 miles. And the fastest

1:06:40

that anyone's ever completed it, 41

1:06:42

days, 10 hours, and 22 minutes.

1:06:44

Hey, thanks so much for listening

1:06:46

to the show this week. Please

1:06:49

make sure to click the follow

1:06:51

button on your podcast app so

1:06:53

you never miss a new episode

1:06:55

of the show. And if you're

1:06:57

interested in insights, ideas, and lessons

1:07:00

from some of the world's greatest

1:07:02

entrepreneurs, sign up for my newsletter

1:07:04

at guyraz.com. This episode was researched

1:07:06

and produced by Catherine Sifer with

1:07:09

music composed by Rontina Rablui. It

1:07:11

was edited by Niva Grant and

1:07:13

our engineers where Patrick Murray and

1:07:15

Quacy Lee. Our production staff also

1:07:17

includes Alex Chung, Elaine Coates, Casey

1:07:20

Herman, Jacey Howard, John Isabella, Yeman

1:07:22

Mahani, Christmasini, Sam Paulson, and Kerry

1:07:24

Thompson. I'm Guy Ross and you've

1:07:26

been listening to How I Built

1:07:28

This.