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Prices may vary. The problem, I think, in San Francisco is you've got some really hot competitors, right?
Yeah. I mean, this was quite possibly one of the most stressful periods that we had experienced to date.
Not only had we had only raised $7 million, but these companies had raised $40, $50, $60, $77 million.
dollars. Wow. I remember a board meeting where I was told, Mark, we've been telling you're going slow.
You're not expanding fast enough.
And now there's this new model and it looks like you guys are dead.
You're being disrupted before you have the chance to disrupt.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
I'm Guy Raz, and on the show today, how thousands of dollars in parking tickets drove Mark Lawrence to launch Spot Hero, a service that, since launch, has parked 50 million cars across North America.
more often than not it's the seemingly boring businesses that succeed these are businesses that don't dazzle us with fancy technology or wildly disrupt an established industry they just do a better job of tackling age -old run -of -the -mill problems some of these stories we've even told on the show for example pods that company didn't invent storage it just did it better.
Or 1 -800 -GOT -JUNK. That business simply made it more convenient to haul your stuff away.
It's more or less the same playbook Mark Lawrence used, though it took him quite some time to get there.
Back in 2011, Mark got into what seems like a pretty boring industry, parking.
He named his company Spot Hero.
Initially, he and his co -founder wanted to create a sort of Airbnb for parking, a peer -to -peer service where people would rent out their driveways in exchange for a fee.
Mark launched the idea in Chicago, around Wrigley Field, where parking is notoriously challenging.
But as many of these stories go, that model couldn't scale.
It turns out many people who live around Wrigley Field were perfectly happy to stand in front of their driveways on game day with the sign that said, parking, 50 bucks.
So like all good startup founders, Mark Lawrence pivoted.
He decided to try and partner with parking lot owners to sell their excess inventory.
Mark would build the Spot Hero app and then get a cut from every parking spot sold.
The problem? Well, a lot of other entrepreneurs had a similar idea.
And in quick succession, similar businesses started to spring up all over the U .S.
Many of them were far better funded and growing at breakneck speed, and the pressure on Mark to try and copy them was mounting.
But instead, he took a slow and steady approach.
First Chicago, then D .C., then Boston, and so on.
Mark resisted calls to try and get into price wars with his rivals, in large part because he believed that their business models were not sustainable.
and ultimately, as you will hear, he was proved correct.
Today, Spot Hero is one of the largest digital parking platforms in North America with service in about 300 cities.
Before he set out to start his own business, Mark took a job at Bank of America in Chicago right out of college.
This was right before the financial crisis of 2008.
And just as luck would have it, Mark was assigned to work on mortgage -backed securities, a massive bubble that was about to pop.
Yeah. The movie The Big Short for me is a documentary.
It's funny and it has ridiculous things, but that's like exactly how it was.
Like, I remember that some of the countrywide financial guys that came and they were making jokes about writing mortgages to dogs.
And so, I mean, like, it was not a very pleasant kind of place.
There were pleasant people, you know, and I did make some friends and I worked with some great folks.
But, you know, a lot of the talk was like, hey, did you hear we're not going to get bonuses this year?
Isn't that ridiculous?
And I was like, what would the bonuses be for?
So you're working there.
And I guess, I mean, and I'm basing this off of some research we did because we unearthed a blog that you used to write called Lifestyle Ignition.
I don't know if this is something you're embarrassed about or not.
It's kind of interesting.
And you had a blog, which a lot of people did and do.
And you kind of like on this blog chronicled your frustration with working for a big company.
It's so funny. I haven't thought about that in a really long time.
So, yes, a bit embarrassing.
But yeah, I did chronicle, you know, frustrations with working at a big company.
One that I remember was called fake work because it felt like a lot of the work there was just completely fake.
And I remember like I had a doctor's appointment and I was told, well, hey, if you're taking a long lunch, which is like an hour and a half for a doctor's appointment, like you, you gotta be the last one to leave the office.
And, and I was like, okay, well, and there was really nothing to work on then.
And I remember sitting there and there was another guy and he was supposed to be the last to leave.
Cause he took a long lunch for some appointment.
And so we're both just like waiting for each other to leave.
And it's 11 o 'clock at night and we've like been working on nothing.
And we're the only ones there.
We're finally like, let's just leave right now.
So, you know, when your market is down 99 .99%, there was periods of time when, you know, they didn't they ultimately laid off what, like 50 ,000 people between all the various, you know, amalgamations of banks for Bank of America, but there wasn't any work and the work, it was just fake work.
You eventually were one of those laid off in 2010.
Yeah. And was it kind of a relief in a sense?
You know, it was a relief because I started and it was very stressful because I was a week away from getting laid off the entire time I was there.
There was never a moment of like, this is going to be the career.
It was more like, okay, we started and it was like crisis, right?
I never spent any money.
I saved money because I'm like, okay, I'm going to get laid off and I'm probably going to have a very hard time finding a job.
And so it was a relief because I'm like, OK, now it has some finality.
But it also was nice because I literally didn't spend anything.
I was like afraid. And so I was able to save money.
And what's nice is I was able to use six thousand dollars of that to start Spot Hero.
Right. Which we'll get to in a moment.
But But but basically you were you're laid off.
You you saved a bunch of money.
How much money, by the way, did you save?
I want to say about that time it was like fifty thousand dollars.
That's great. So you had a lot of you had a lot of money saved up and you were just living really lean.
I mean, we're living so lean.
I remember there was a friend of mine, Brandon James, who, you know, went to high school with and we ended up reconnecting at Bank of America.
We read the book by Rolf Potts called Vagabonding.
and it was like a contest of like how little we could spend because we're like we're getting laid off and him and i uh we were roommates and we would eat like just rice and beans and i remember when i all i bought was like a chicken breast to eat with the rice and beans that i cooked myself and and i bought a beard trimmer okay like off amazon for like 30 and he was so disappointed he's like i can't believe he's like you don't need the beard trimmer and you don't need the chicken.
I was like, I know, but I've been eating rice and peas for months.
And so we kind of had that like accountability between us.
This book, Vagabonding, it's called An Uncommon Guide to the Art of Long -Term World Travel.
And I guess the idea was you were inspired by this book to save as much as you could with the idea that once you were, whatever happened, if you were fired or you lost your job, you would just travel.
And you write this on your blog post, Lifestyle Ignition, back in 2008 you right i am gonna go on a bike trip across africa so that that was the plan i mean i researched down to the weight of every single item that i would bring on that bicycle because like every you know 10 grams like it all adds up right like especially if you're going uphill where are you going to start by the way in the south or in the north um i was going to start in alexandria egypt and then go to cape town but um the person i was supposed to go with brandon And he biked, he started in Europe and then he biked all across
Asia. And we were supposed to meet up in Africa.
So you're laid off.
The plan is, let me do a bike trip across Africa.
And you start to research this.
But meantime, you had a friend, a guy named Jeremy Smith, who I guess had been a roommate.
Yeah. So here's what's interesting is the reason Jeremy Smith became my roommate is because Brandon, the roommate that - Goes on the bike trip.
He went on the bike trip and Brandon, you know, um, was like, Hey, I need someone to take over the lease.
So I didn't even know Jeremy.
And so Brandon was like, Hey, you guys have to live together so I can bike longer.
So Jeremy moves in and, and who is Jeremy?
What does he do for, what was he doing for a living at the time?
Uh, so he was at, uh, Motorola and, uh, he was in, he was in the finance department at Motorola.
and in the beginning him and I kind of um I don't know the right like we would butt heads because I was so done with the corporate world yeah and Bank of America and he was like in love like with Motorola he's like corporate America is amazing and Motorola is the best and you know going on and I remember you know saying to him I was like I'm sorry I have to say this but I forgot Motorola existed until you reminded me.
But yeah, we definitely butted heads in the beginning.
Yeah. So another thing I think that was happening around this time, which would actually lead you to starting Spot Hero, is that both you and Jeremy, I guess, were having a lot of issues with parking.
Like you were getting hit with a ton of tickets.
Do you remember how much you accumulated in parking fines like over the years while you were working in Chicago?
ago yeah i mean it was it was about five thousand dollars worth of parking tickets it was pretty embarrassing had you and you paid them presumably you paid them all yes i paid you know if you don't pay your parking tickets in chicago they're gonna boot or you know tow your vehicle um and i remember i remember actually like call it call it i don't know if it's like peak demoralization but um i got three tickets for the same thing like about a minute apart which was parking more than six inches away from the curb or something like that.
And so I remember, I'm like, oh, well, I'll just, you know, I'll go down and I'll beat this.
I'll pay one, but I'll save on two.
And so, you know, they're just like, well, is it not true that you were at 301, 302 and 303 PM more than six inches away from the curb?
And I was like, okay, well, technically, but.
And they're like, okay, so guilty.
And I was like, wait, what?
Like, I was like, that's bullshit.
And they're like, you can't say that in court, like, do you want to go to jail?
And I'm like, well, am I going to go to jail for parking tickets?
Yeah. It's amazing how efficient a city like Chicago is in fining people and following up on those fines for parking violations, and how inefficient it is in everything else.
Well, I mean, they're so great at it, right?
Like, here's what's crazy.
Street cleaning. It's so confusing, right?
Like, it's not on a specific date.
It's like the second Tuesday of the last month of, yeah, in the bleep year.
yeah and then what they do is they put up these like temporary signs or these almost pieces of paper or plastic around trees and then you've already parked your car for the night you missed the sign yes yeah and then there's the overnight towing van like if it snows uh you know more than a certain number of inches then they just tow every car i mean there there's there's definitely some efficiency for parking fines uh in the city of chicago so they're so good all right so you're You're dealing with that.
Jeremy moves in and he's Mr. Corporate America.
You're looking to kind of transition.
You're still thinking about a bike trip across Africa.
How do you start to talk about maybe doing a business together?
We weren't like, hey, let's build a company.
We were like, hey, we both have this problem with parking and parking tickets.
Let's see what we could do, right?
Like what we looked at is we're like there's all this parking that you can't have access to, and if we bring all of this parking supply, we're going to start the Airbnb of parking.
Wait. So when you say there's all this parking that's available, you're talking about like people's driveways basically.
Yeah, people's driveways, but also how about a church?
It's busy on Sundays, but it's not busy on other days.
How about a Dunkin' Donuts?
There's no one parking there at 9 o 'clock at night.
Or the bank that on the weekends says, you do not park here, there's our parking lot.
And you're like, the banks aren't open.
Exactly, right? So banks close Sunday, right?
So, you know, the bank's going to be completely open on Sunday.
The church is going to be completely packed, right?
So why can't we bring all this new parking to market and solve all these tickets?
Right. Okay. So you guys start talking about this.
And clearly, you're excited about it.
But initially, I mean, he's working at Motorola.
By this point, you're already laid off from Bank of America?
So I'm already laid off.
And then he got laid off from Motorola as well.
Wow. And then he started working at a pizza place.
Okay. So you guys, you decide, let's see if we can build something.
What does that mean?
What were the first steps you took when you decided to pursue this idea of trying to see if you could use people's unused driveways and Dunkin' Donuts parking lots to turn them into paid parking spots?
Okay. So the first step was I called my friend Brett because he had a parking spot in Wrigley Field that he didn't use.
Not literally on Wrigley Field, but in a neighborhood, Wrigleyville, right?
In the neighborhood of Wrigleyville, in the alley behind his apartment.
So our first spot was called Brett's Spot.
It was named Brett's Spot versus the addresses like today.
So the first thing I did was ask him, hey, can we sell this online?
He said, yeah, I'm not using it.
So no problem. And then the next thing we did, we're like, well, how do we get customers?
So we would go on Craigslist and tell people they could park there.
You see them build a website yet.
First, just starting with one space, one ad on Craigslist.
Correct. And what we would do is we'd have two different ads.
One was for self -park, and then the other was valet, which I was the valet, and I had my car.
So they would park, and then I could drive them as close as you could get to where pedestrians can walk in.
So we had self -park and a valet option for breadth spot.
And this is all for Wrigley Field?
Yeah. And there's a phone number or there's like an email address that they can respond to?
Okay. So what happens?
I mean, we would sell out his spot every day on Craigslist.
During the season? During the season, correct.
And how much were you charging for the spot?
$20 for South Park and $40 for Valet.
All right. You can't really build a business off $20 a day or $40 a day, right?
But this is a start.
It's just a start to kind of see, and you're selling the spot out pretty much every day through Craigslist.
Correct. Through Craigslist.
We were selling it out every day.
And did you need any money to start?
I mean, you didn't need money to advertise on Craigslist, but did you – I mean, you had saved $50 ,000, a lot of money for a guy who's 24, 25.
How much money did you guys put in?
So we each put in $6 ,000.
And so then the next step was I called my uncle, my mom's brother.
And he was an engineer, software engineer by background.
And I said, you know, what do you think I should do?
And he said, well, you should use Python.
And it's funny because obviously Python is a critical component of what we do, but I said to him, I said, what's a Python?
What does that mean?
The programming language, but did you know how to code?
No, I did not. And so he made an introduction to someone who he knew that was willing to contract for us.
And just to be clear, I mean, this was to build a website and platform?
This is what you hired this coder to do?
Correct, yeah. So initially, the idea starts at Wrigley Field, which is smart because you're thinking, hey, Wrigley Field, it's a dense area, built up area.
It's not easy to park there.
But there's a lot of people who live around there who could probably make an extra cash.
It's like Airbnb. You can rent out your air mattress and make some extra cash.
How did you find people who you could, you know, whose spots you could put on the platform?
I mean, we would just go door to door.
You and Jeremy? Yes.
And some people were extremely upset, like, no way, I do it myself, I don't need you.
I stand on a corner with a sign, and there's a big culture around that.
And other people were like, yeah, like, of course.
Like, wait, I don't have to do anything, right?
Like, I'm in. And what was the fee that, what was the split that you sort of gave them?
So the fee was 15 % plus 99 cents.
But, I mean, you're talking about like $3 .50 that you guys earn from a spot.
That wasn't a lot of money.
No, it was not a lot of money, but it was more exciting to sell one spot.
Like at that time, it wasn't like, oh, we're making $3 .50 or here's a financial model.
It was like, I remember, I'm like, wow, like how good it felt when someone went on our own website and purchased one single spot.
It was so cool. And then I remember the first month where we had double -digit sales, 11 spots sold.
It was like we hit a milestone.
We have double -digit sales, 11 spots sold in a month.
So going door -to -door in Wrigleyville, I mean, that's a lot of work.
I mean, that's like, let's say, one out of five or ten people are going to do it.
You've got to go to ten houses before one person is going to be like, I'm in.
And then you've signed them up for, you know, you're basically going to make $3 .50 cents off of them every time they rent the spot.
So that's a lot of work.
I mean, that is really painstaking work.
Yeah, and it's not also easy in Chicago in the snow, you know, because we would try to get ahead of it.
So in the winter, we went and wanted to get ahead for the season.
So we would, you know, tell people like, hey, you know, six months from now, you know, we can make you money on your spot to get contacts.
So, you know, we went to, I don't know how many homes, but ultimately even people that said yes, they might've moved or they're like, I need my spot now.
And we were able to get about 50 spots after about a year.
Took a year to get 50 spots.
Yeah. That is, I love this because this is what a business is about.
It's painful. Yeah.
It's, you know, like thinking back, it seems ridiculous.
like gosh like 50 spots a year but at at the time it was like one foot in front of the other we've got five spots we've got 10 spots wow we've got 25 and when you're kind of like crawling around in the dark you don't know what's next like it could be a hundred spots right like it could be 200 but i mean even just back of back of the envelope math i mean 50 spots after a year If all of them were rented out every day for the game, you'd make $200 a day.
I mean, it's small.
I mean, it's slow going.
Right, but I wasn't thinking about it like that.
I was more like, okay, we got double -digit sales in a month, right?
You know, a funny milestone was when two people tried to buy the spot at the same time, and the site crashed.
All right, so you've got 50 people signed up to sell their spots, right?
through your website, through Spot Hero.
Let's talk about the name for a moment, because it's a great name.
How did you come up with it, and was it just a domain that was available?
Yeah, the domain was available.
It's interesting, because we had a brainstorming session.
You and Jeremy. Me and Jeremy and some other friends.
And we came up with a whole bunch of different names.
And it's actually kind of funny, because Spot Hero was the second name we wanted, the first name.
I'm so glad the domain was not available.
But the first name was Park Shark Park Shark but the domain was taken so we went to the second one which was Spot Hero and so the first you know we got bought the domain spothero .com and then we went on 99 designs and paid $99 to get a logo made yep so you really started 99 designs just whatever you bid whoever bid the lowest amount so you have a logo you've got a website and how did it work in terms of like I mean we're talking this is 2010 -2011 let's say you click on a spot and you pay for it through the site right and then what happens and you get like a code yeah so i mean there was definitely
a lot of friction because the only way that it would work is you had to print out your confirmation so you had to print out an email so you had to have a printer okay and so you know and if you didn't print it out and put that on your dashboard you would get towed so there was definitely enormous friction no app just a website and required a printer.
Got it. All right, so you launch a website.
You've got, it's kind of janky, it sounds like, but it's good enough.
How do you even get people to be aware of it?
Like, how did you even know how to find customers?
I mean, I Googled, how do you get customers?
Nice. When we come back in just a moment, Spot Hero expands into parking garages and then hunkers down as competition spreads across the city and the country.
Stay with us. I'm Guy Raz, and you're listening to How I Built This.
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Hey, welcome back to How I Built This.
I'm Guy Raz. So it's 2011, and in order to get customers for his new parking service, Mark Lawrence literally Googles, how do I get customers for my new parking service?
And one idea he has is to start a blog about parking.
So I went on the street, and I would map every inch that you could park for free with pictures of the signs and where you couldn't park.
And we had these maps that I made in Microsoft Paint.
So if you thought our website Spot Hero was janky, you should see my artwork of maps for free parking.
And then when it was there, it was like, hey, if you don't want to risk free parking, click on this link to go to Spot Hero.
That is absolutely brilliant.
That's such a smart idea.
So you would spend all this time writing blog posts on how to find free parking near a sports arena.
People would find it because they might type that in.
And it was really designed to get them to become aware of Spot Hero.
Yeah. And so that was where our first customers came from.
In addition, we also posted on Craigslist, too.
Those would always get flagged and we'd have to go through different hoops.
But between the content marketing and SEO and Craigslist and, you know, we just went down the list.
When you Google how do you get customers, there were, you know, things came up like Pay Per Click or SEM.
And our budgets were super low, like, you know, a few hundred dollars a month.
But, you know, it added up.
We didn't have too many parking spots, but we were able to kind of, you know, grow neighborhood by neighborhood.
Got it. But still, I mean, the business basically started by going to people and saying, hey, rent us your spot, right?
Like, just like Airbnb.
be. But I guess after a year of doing this, you realize that this is not scalable, right?
This is not a great model.
And I think it was around this time that you started to meet people who actually owned parking garages, right?
Right. We were using Twitter at the time to tweet about parking and seeing, can we attract people or see people who are frustrated with parking in Chicago go over for wrigley and say hey have you heard of spot hero um it caught the eye of of someone named eric elo who was at central parking which at the time was the the second largest parking company in the country he saw your twitter feed yeah and so he had reached out and so we met and it was interesting because again i never sold parking in a garage um and to date we had 50 spots like 50 spots it was a peer -to -peer system yeah and so you know
some of the conversations with eric like looking back are just you know kind of kind of you know funny because you know he said you know what i'll try this out why don't we start something small like a couple of thousand spots and and i and i remember i like you know try to keep it cool i'm like wow a couple spots I remember I said Eric so are the are the spots open every day and he's like what do you mean it's a parking garage but I'm like yeah well like a lot of the people we work with sometimes they're at work or like they need to move their car they use it on a certain day and he's like yeah
it's a it's a parking garage it's open 24 7 like so instantly you go you go from 50 spots to a thousand or more, even more.
Initially, when Eric said, hey, let's try this, I'm curious to see how this will work.
Was it cheaper? Would it be cheaper to go through Spot Hero rather than just to go directly to the garage and pull a ticket and go park?
So yes, it was cheaper and they would sell excess inventory.
So they knew, for example, I'm going to have 800 empty spaces after 3pm and I might only have, you know, 50 spaces during the day.
Right. Okay. So you're starting to work with parking garages and I guess you meet this guy named Harlan Karp, I think.
And not only does he have garages, but he's also kind of building or developing scanning equipment like those machines that we use today where you scan your ticket to go in.
And I guess he wants you to start using those as well, right?
Yeah. And again, in hindsight, it seems obvious.
But at the time, I'm like, go get spots for Bears games.
We have zero. Harlan has these spots.
And he's like, hey, let me show you this future vision of parking.
And he was telling us about a problem that he was solving that we didn't have because we didn't experience it.
We never sold parking in a garage.
And so ultimately at that location, the Park Connect from Harlan stuff was put there and you could scan to get out.
You would scan your printed out, the printout?
So you could scan a printout or you could scan it from a phone.
Right. And so it depended on the equipment.
But that was the first actually, you know, that was one of the first garages that we got the equipment in.
So it was perfect because, I mean, with Harlan's technology, it could become more seamless.
Right. And we ultimately were able to get, you know, these different garages on board from three of the largest parking companies in the country.
Oh, wow. And I guess in the meantime, like neither you nor Jeremy were all that like technically minded.
And so I guess around this time you brought on somebody who had more like technical skills because a guy named Larry Kiss to be your CTO.
Correct. Yeah. And this, I think, is around 2012.
And that was the year you also applied to Y Combinator, which, of course, famously incubated Airbnb and Coinbase and Instacart and a couple of other major companies and brands.
So what happened with that?
I mean, the interview was interesting, but it didn't go well off the bat.
And the key reason they said no was because they didn't believe that we knew Larry long enough.
And they were like, it's a huge risk to have two business founders and a technical co -founder of which was such a new relationship.
Yeah, interesting. No, I mean, it makes sense.
And their record's very good, but obviously they have to make a decision.
Was that disappointing when you didn't get in?
You know, it was, but I was so like excited at the time to be in San Francisco to have just been in the room at a Y Combinator, you know, interview.
I felt it also clarified a lot of things for the business just by actually filling out the application.
You know, because of the experience, I was so excited to apply to other ones and, you know, did all these interviews and, you know, kept getting turned down.
And then, um, I remember we got in, they accepted us into Techstar Chicago and it was interesting because we all weren't sure if we want to do it.
And, you know, myself, Larry and Jeremy talked and we actually decided no.
And, you know, ultimately sat for, you know, a few hours talking to them, um, about, you know, pros and cons and like what we're going through and, you know, conversations like Like, you said I have to be in all these meetings, meeting all these different people.
I'm like, I don't have time for anything.
I'm going door to door.
I'm having meetings to get parking spots.
I'm doing our SEO and our pay -per -click.
I'm like, right now, I'm like, look, I'm missing customer service calls.
People need me, and I can't answer the phone because I'm here in this meeting with you.
And I was told, well, you could hire someone.
Have you thought about hiring anyone?
And I'm like, hiring anyone?
So I never thought, you know, it's like it's been a year and a half of like I didn't realize you could do that.
It just wasn't a thought.
OK, so you change your mind you and you wind up joining Techstars, the incubator.
And to get into it, just to clarify, I mean, to get into one of these incubators would work to your advantage.
Right. Because, of course, you get it usually in an office and the office space and a network of people and mentors and investors who can come by for the pitch day.
Right. And oftentimes they get sometimes not always these incubators, depending on what they are, to get a little bit of equity in the company.
Yeah. So they got six percent of the business and we got fifty thousand dollars.
Did you need the money at that point?
I would say yes. I mean, I know how beneficial, you know, joining Techstar Chicago is now.
I didn't at the time, but I remember thinking when we raised like we're like we raised fifty thousand dollars like it just felt so good.
And I'm like, we did it.
Like, it took a year, almost a year and a half to hit $1 ,000 of sales in a month.
OK. And which meant, like, we're taking home, what, like, you know, $150 bucks.
But I remember in 2012, sales ramped in, you know, January, February, March, April, May from, you know, $5 ,000 a month to $80 ,000 a month in May.
But the worry was, is this going to last?
And so we were, you know, kind of scared to hire someone.
And that $50 ,000 gave us the confidence to make our first hire.
But when Techstars brought you in and they, you know, 50 grand, they get 6 % of the business.
I mean, essentially the business is valued at just over a million dollars at that point.
I think less. If we gave up 6 % for $50 ,000.
Yeah, a little less than a million dollars.
Yeah. Did anybody say, that's a lot, that's giving up a lot?
Oh, like everybody.
Yeah. Yeah. But I like and that was kind of like why we initially said no.
And I thought about it after the conversation.
I remember I was sitting, you know, by myself in the car.
Everyone was like, you should negotiate, you should do this.
And like, no, you should say no, you guys are already doing 80 ,000 a month.
And I remember just thinking, I'm like, okay, what is the best possible outcome?
If I say yes to this?
And what's the worst possible outcome?
And thinking through those like different scenarios it became clear like okay I I want to do this.
So you guys now have significant revenue coming in 70 80 grand but again if your costs were that were super low I mean was that so I mean were you profitable in that year?
Yeah we were profitable yeah.
And so with that so essentially I'm thinking now you've got some traction you've got real money coming in I mean, you're going to hit almost a million dollars in revenue in 2012.
And so I have to assume that the strategy now is to just expand, get more and more and more, work with more and more parking garages.
Yes. And the idea was, can we create a model that we can then bring and scale to other cities?
And so our expansion, we were the only like, you know, we started out all these different competitors pop up.
And many were in, you know, 10, 20, 50, 150, 200 cities, we were only in one city.
And our focus was, can we really get a true playbook for this business in a single market and then go to our next market?
And I guess you raised a seed round in December of 2012.
It's about two and a half million dollars you guys raised.
And your your idea is, let's do this slowly.
Let's really first own Chicago and then we'll expand out.
Then we'll go to other cities.
Essentially, you were able to iron out all the potential friction points by really focusing on Chicago.
Yeah, the friction points because if you think about it, we've talked about, OK, there's the parking operators and there's the drivers, right?
There's the parking spots, spaces and drivers.
But the third leg of the stool is the point of sale systems or parks, which, you know, help enable that consumer experience.
And so, like, it's not just as simple as getting the spots and the drivers.
So working out the different kinks, understanding each detail that's needed by the different partners, right?
Like there were also, you know, folks in the garage that we could talk with and understand what's happening.
How does this work?
But meantime, all over the United States, clones started to pop up.
companies doing the exact same thing, but expanding faster in New York and Washington, D .C.
and L .A., et cetera.
Give me a sense of how investors reacted to that.
Were even your seed round investors, were they saying, hey, what's going on?
Why are you just in Chicago?
Yeah, I would say there was a lot of pressure.
Why are you just in Chicago?
If you're not in these other markets you're not relevant um uber was also launching and and and and lyft and there was this whole idea of blitz scaling and and moving fast making sure that that you know the land grab didn't happen you know by by somebody else and my point of view was the parking industry is more about relationships um at the time you know 60 70 percent of the dollars spent in parking were cash It was a very old school group of folks that had set ways of doing things.
And this idea that you can just throw money at a problem didn't work with an industry that was really about relationships and trust.
But I have to imagine with all these other competitors out there, a lot of the money in Silicon Valley was going to those competitors.
I mean probably a lot more money than you guys had raised.
Oh, an enormous amount of money.
And it was very stressful to see all of these pins pop up in different places that, you know, while we were just in Chicago.
And we were called a one hit wonder.
Hey, you've got one city.
It's really great. You know, where are you going next?
I'm curious. Was a part of you scared and worried about expanding out and to the point where you were worried that it could actually tank the whole business?
I definitely was because I saw that happen to a lot of different companies.
They expanded and they got tanked.
And I'm like, man, if I'm, you know, in these different cities, I'm not going to be able to have the same level of care and the whole thing could come down.
So there was definitely a worry of spreading myself too thin.
We also didn't have the same resources as all these other companies.
Right, because you'd raised two and a half million dollars.
So you had that runway, and you had some cash coming in, but you didn't have tens of millions coming in.
Right. Because this is a, I mean, it's dog -eat -dog, right?
Like, if you're not parking in my spot, you're parking in my competitor's spot.
Yeah. The number one key thing for why we beat them, all of the folks in Chicago, is we were only in Chicago.
Everyone else was distracted with all these other cities.
Even the companies based in Chicago, they were focused outside of Chicago.
You had competitors who started, who were also based in Chicago.
Yeah. Multiple competitors based in Chicago.
That just sounds like a nightmare.
It was hand -to -hand combat, slog, like you could not imagine.
Like, you know, I remember having a conversation with one of the, you know, CEOs at the time of a rival parking online company.
And I said, you know, it's interesting.
all of my signs disappeared and your signs were put in their place.
We had a hundred of them and they all disappeared.
But, you know, I was told Mark, you know, it's just coincidence.
And I'm like, coincidence, really?
And so, you know, we had our, you know, back and forth different sign wars.
So it was a slog, but the real thing is we focused all of our efforts in one city.
And because all of our efforts are concentrated there — dollars, focus, operation, relationships, every aspect — we could react quickly, we could make changes quickly, we could iterate, we had much closer attention to the details.
Our response time was extremely fast because we don't have, you know, 20, 50, 100 cities.
We have one city. But it sounds like even some of your investors are skeptical of your strategy.
Even people who are on your side are skeptical of your strategy.
Absolutely. Investors were very skeptical, you know, feeling like, hey, the trajectory in one city is not interesting.
The idea of what Spot Hero could be nationwide and then worldwide is exciting.
And people are eating your lunch everywhere.
And by the way, that's not bad advice.
I mean, these are experienced investors, VCs who had probably invested in other platforms and companies that had done very well with the strategy.
So who are you, an upstart young guy, to say I know better?
Yeah, it's interesting because I wasn't thinking like so much I know better as I really fear going to another market.
Right. Like, you know, so it was like, like, they would try to elicit the fear of losing, but the fear of expanding was greater.
Yeah. All right. So finally, after a lot of pressure, the first place you go to expand is Washington, D .C., which I February 2013.
I was living there at the time.
Who sort of owned the D .C.
market when you guys went in?
Because, again, there were competitors everywhere.
Who had the best market penetration?
There was a company called Parking Panda.
Parking Panda had the largest concentration in both D .C.
and Baltimore. They had started around the same time as us.
And by the way, could one parking garage, did they have to exclusively work with one brand?
Or could they work with Parking Panda and with you guys?
So they could work with Parking Panda and us.
So some were exclusive, some were not, but they could work with both.
But the way that we communicated was different.
All the other companies were trying to get exclusives and our strategy was like, we don't want exclusive.
We want to prove to you that we can bring more dollars than anybody else.
Here are references from Chicago, from people in your company, some they know, some they don't, and they work with three, four, five, six, seven, eight players and we bring more than all of them combined.
And we want to do that here.
In addition, we were the first to have anytime parking on a website.
And then we were the first that had an app.
We were the first to iOS.
We were the first to Android.
And the focus of being only in two markets allowed us to really leapfrog Parking Panda.
And I think very soon after DC, you expand to Baltimore and then Boston.
And that year, right?
Because now the last time you'd raised money was in 2012.
It was $2 .5 million.
Now you go back to raise money.
This is in – you're looking for series A money.
Given the success now, you've got success in D .C.
You're expanding but still slowly.
Were investors lining up to back you at this point?
No. Investors, no way.
They were not lining up.
Not only were they not lining up and our traction was good but not great and slightly.
It was slightly interesting but not interesting enough.
I didn't keep in contact with the investors.
The ones that had put money in?
Yeah, I was just focused on building the business.
So you weren't sending regular updates or anything?
Not really, no. Yeah, that was probably not very popular among some of the investors.
Not very popular. And now, wow, we have a burn.
We're running out of money.
But we did have some investors that did step up, you know, co -led the round with Chicago Ventures, Bullpen Capital and Mike Gamson.
But it was, it was really, it was a really hard round.
This was May. If we didn't have that first wire, we would have been out of business, right?
It got to a point and I never lie, but I lied once.
And it was to our accountant, Stephanie.
And I remember she came to me and said, hey, I'm looking at the bank account.
when is the round going to be done?
I said, why? She said, well, because we have money coming due.
Like we have to pay payroll.
We have, we have to pay operators and like two days and I don't see enough money in the account.
And I'm like, oh, well, there's other accounts.
Like, don't worry. And I didn't know when the wires would actually hit.
And one of the bigger wires I was, you know, asked, hey, you know, I've got a delay for a couple of weeks because of some capital calls and VCs, they're going on vacation.
You don't mind waiting a couple of weeks, right?
And in my head, I'm like, well, if I tell them no, they're going to be like, why are you out of money?
Right? So I said, fine.
Luckily, we were able to get a wire on the day that we had to pay payroll and operators and so it was fine but you know very hard all right so you but you raised four and a half million you know again you know you've got um well capitalized competitors you're still under pressure to expand and by the end of that year december 2014 you do go to san francisco which is a tough place to go to simply because you know there's tons of competitors the The smart – again, I don't want to say the smartest, but look, just statistically, if you look at the stats, the smartest startups and VCs are here in the Bay
Area. They are. I mean you've got Stanford.
You've got Berkeley.
A lot of them are coming out of here.
The money is here. It's on Sand Hill Road in Silicon Valley.
So it's a tough place to come to from Chicago, right?
Did it feel intimidating?
It was extraordinarily intimidating, and I didn't want to expand to San Francisco because of that.
And Bullpen Capital, who, you know, co -led our round, you know, their view was you're not raising a Series B and you're not going to be taken seriously if you're not in San Francisco.
But I feared expanding to San Francisco the most.
when we come back spot hero goes west where its competition has more visibility and a lot more money stay with us I'm Guy Raz and you're listening to how I built this it takes a lot to grow your business you've got to attract audiences score leads manage all the channels.
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Hey, welcome back to How I Built This.
I'm Guy Raz. So, it's the end of 2014, and after much hesitation, Mark and his partners decide to expand Spot Hero to the city they fear most, San Francisco.
The problem, I think, in San Francisco is you've got some really hot competitors, companies like Lux and Zerks, raising insane amount of money because they believe that the future is valet parking, not self -parking, but valet parking.
And I guess they capture the attention of a lot of VCs who agree.
They're saying this is the future.
I mean, this was quite possibly one of the most stressful periods.
periods um you know that that we had experienced to date we we had worse ones later but to date that was enormously stressful because not only had we had only raised seven million dollars but these companies had raised 40 50 60 77 million dollars lux zerkz battler carbon and they were also extremely visible with the umbrellas and the, you know, skateboards.
And I remember a board meeting where I was told, hey, Mark, you are going slow.
We've been telling you're going slow.
You're not expanding fast enough.
And now there's this new model, and it looks like you guys are dead.
You're being disrupted before you have the chance to disrupt.
Half a billion dollars went to fund companies that said we were the relic and meetings in the valley were extremely demoralizing because people would say hey like you know i've heard great things about you clearly like this business isn't going to work out but i wanted to get to know you for your next one lux and zerks were the hot were the hot ones you saw their logos all over the place their logos were all over the place everybody knew who they were because they were spending you know, you know, crazy amounts of money.
The other thing is our cost of customer acquisition were exploding because they were just paying unlimited.
And so costs of acquiring customers were going up.
They were also prepaying for six months or a year to shut us out completely of, you know, some great, you know, locations.
Wow. So they were subsidizing parking for people, basically.
Extremely. I mean, totally subsidizing.
And we were, you pay $15 or $20 to park.
and you park your car yourself.
They also had to pay for labor.
So you would pay 15 or 20 bucks, but they would park it for you.
Right. So you, they were, you know, our average was like $20 to park.
So they made it where it's 15, but they would valet your car both ways.
So, so the consumer experience was quote unquote remarkable.
Like, wow, I can just press a button and my car gets picked up wherever I'm at and then dropped off and brought back to me.
It sounded amazing on paper.
And there was actually a vote to pivot the company to be on -demand valet.
There was a vote from who?
The board. Your board voted to pivot your company.
It was more of like, hey, all in favor of pivoting the company.
It's very clear this is where things are going.
And I'm like, all right, well, that's great, but it was very clear this was definitely not going to work.
It didn't make sense.
It wasn't sustainable.
You'd have to hire – I mean, all your costs would go to paying for valets, humans who are parking the car.
It made absolutely no sense.
You had to pay for humans parking the car, but here's the other thing.
There was a thesis that, well, if you park the car farther away, you can get an arbitrage.
And especially in New York City, it could be $100 to park in a specific area, but it's only, you know, $15, you know, a couple of streets over.
But the problem is that as you get farther and farther away to get lower costs, lower and lower parking, the amount of time it takes to bring the car there and back increases.
So, your labor costs go up.
So, from a consumer standpoint, when it launched in San Francisco, everyone was like, wow, I pressed a button, had a valet come in two minutes.
Yeah. And it felt like Uber.
Okay, but then fast forward and, you know, there was people screenshotting.
It's – the valet is coming in 72 days because the algorithm was like, well, there's this many valets and there's this many people pressing the button.
And so it did some crazy calculations, right?
And people are like, 72 days?
I need my car now, right?
And so, you know, we tested this in New York and Chicago and it just did not work.
And I presented to the board the findings.
And? Clearly, they had voted to pivot the company.
Yes, but the findings were pretty clear, and the discussion was, okay, well, then why are they able to get such mindshare?
They're like, if this is going to be the thing, we need to make sure that we are also part of that thing.
If it is not the thing, okay, fine, but they have how much more money than us in terms of capital?
How long can they be irrational?
And what are we going to do to survive this, right?
We're shut out of parking spots.
Our cost of customer acquisition is going – everything is blowing up.
Like what are we going to do in order to survive this and get to the other side?
This is such a great case study in sticking to your core principles because it makes sense to me why investors will want you to do this, right?
Because at the end of the day, their goal is to make money, right?
And there's nothing wrong with that.
That's what an investor is there to do.
They're not in the charity business.
And so when they see these other hot brands doing these things and all their friends are talking about it and everyone's talking about it, and you're in San Francisco, you're thinking, well, this is where it's at.
This is where it's all headed.
And so it makes sense to me that they would say that to you.
But on the other hand, it's very reactive, right?
And humans are reactive.
We're not patient by nature.
It's very rare to find somebody who's like, no, let's look 10 years down the line.
So it is kind of remarkable that you were able to withstand that pressure and prove that this really wasn't going to work.
This wasn't sustainable.
Yeah, it was definitely extraordinarily stressful for so many reasons.
and me questioning myself and thinking, okay, I remember when different parking companies would tell me nobody is gonna buy parking on a telephone.
Hey, this internet stuff is a fad.
And laughing at how ridiculous the things were that they were saying.
And remembering them saying, listen, I've been in parking for 57 years.
I've been in parking for 37 years, 50 years, 40 years, right?
What do you know? And I remember thinking, Well, I've been in parking for five years and then thinking, wait, am I being just like that?
Yeah. So the amazing thing about this story, because I'm going to give it away here, is that a year later, 2016, Zerx shuts down.
And I think the next year, 2017, Lux ceases operations.
They both fade away.
They fizzle out. And the other ones did too.
Even though in 2015, everyone was like, this is where it's at.
These are the hottest companies out there.
Yes. These are the hottest companies.
This is where it's at.
And this is where half a billion dollars from dozens and dozens of the top Silicon Valley firms are putting their money.
You know, listen, that's what investing is about.
You're going to win some, lose some.
But it is amazing how our perception is so biased, right?
What we think is right is so skewed.
Our reality, and I can apply this to anything.
It's just so flawed.
I include myself in this.
The way we see the world, we're so certain because it's how we're seeing it.
And so often it's just not the reality that is.
Now I sound like a word salad there, but you know what I'm talking about.
I know exactly what you're talking about.
I mean, whether it's recency bias or whatever you want to call it, the idea of what is right in front of me is exactly how it is now and how it always will be is definitely not the case.
And it was certainly not the case with on -demand valet.
All right. So you withstand that very difficult time.
This is in 2015. Mm -hmm.
We were doing our Series B.
We're trying to raise $20 million, which at the time, that was a pretty sizable Series B in 2015.
So you raised the money, and that, of course, enables you to continue to expand.
And as you grow, right, I imagine you're not profitable, right, at this point.
We're not profitable, no.
But 2017, you acquire your previous competitor, Parking Panda.
Yes. That was my main competitor when you went to D .C.
Yeah. And that gave you access to Canadian cities.
What was interesting, though, with Parking Panda is they basically decided, they're like, we're selling.
And so it was interesting because they were actually the number two at the time.
They were the second largest at the time, and we were the first.
And there was a moment where I wasn't sure if I wanted to buy them.
And, you know, you're kind of cagey because you're like, if I give too much to my competitor and they don't buy me, then they know my secrets, so to speak.
But if you don't give enough, then it's not interesting.
And I was asking them, like, I'm like, I need to see more detailed revenue by city.
And they were so cagey.
They showed me a breakout and I was like, why are you like, he's like, I'm going to turn the computer.
I'm like, why are you so afraid?
Like, remember, if we're going to do this together, like we need to understand like where, not just your P &L, but like where are you doing revenue?
And he's like, well, our strategy was we went to all these places to hide so that you wouldn't compete with us, to grow our revenue.
And I said, where? And I'm looking at, and I'm like, you're doing how much in Sacramento?
What? Secondary cities were actually arguably proportionally more profitable.
Yes. And that meant that together the overlap was so low, there's literally going to be 5%, maybe 10 % overlap.
And that was a really great acquisition.
I'm really happy we did that.
All right. So now you've got Parking Panda, and you are really starting to emerge as a big player, if not the big player in the parking space.
and you know we're not going to go through all the the additional rounds of funding because you start to raise more money um and and by the way i mean let you know 50 million round series d was that by 2019 i have to imagine it gets easier at that point to raise 50 million um i wouldn't call it easy we've always been in a category that has has has always something wrong with it right yeah what do you mean by that well obviously it's my fault i didn't keep in touch with investors or give updates i'm very good about that now but yeah let's take you know series a right the the idea every day in the media uber
and lyft is saying parking is dead the future is no car ownership but everybody ubering and lyft everywhere right then it was okay parking is not dead.
It's the future. And everybody is going to, car ownership is great, but valeting those cars is the future and it's not you.
Then it was actually, sorry about that.
It's not labor that's going to scale this industry.
The cars are going to drive themselves and they're going to be in perpetual motion.
And so they don't ever need to park.
And I'm just like, come on, can we get a break yeah we've never been like what i would call on trend right like we've never been this like on theme type company for a raise because you're not that hot thing it's like oh well what about this ai company or that tech startup and you're doing you're selling parking parking spots right so it's boring but it's also the thing is that i don't mean boring but but but But the boring, the quote -unquote boring businesses are very often the most successful businesses.
Well, here we are. Here we are.
All right. Let's get to COVID because you're plugging, you're growing.
Everything's looking great.
You've raised at this point, up to this point, I think now you're looking at at least close to $100 million by the time COVID comes around.
And then that's it.
It's like the world shuts down and you're now in the movie theater business.
No one's parking all of a sudden.
I remember right before COVID, we had a board meeting in February, early February.
And it was a kickoff to the year and I gave a bit of a preamble.
Every year in the company, we had an existential threat to parking and Spock Hero.
And I went through every one for every year just to remind people of what we had transcended and come through.
And I said, and this is the first time that we sit here today without an existential threat to spotty and parking.
I am reminded by the board constantly about the words that I should eat because obviously COVID happened.
And I always - And that was what, two, three weeks later?
Two, three weeks later.
I'm like, oh man. And I remind them, I said, well, it wasn't an existential threat to parking.
It was an existential threat to everyone.
But yeah, it was two or three weeks later.
And that was by far the hardest time that we, as a company, had to go through.
I mean, brutal, brutal.
You guys put on your blog that you're looking at a drop of 90 % bookings.
Yes. Instant, by April of 2020.
April was 98%. 98 percent yeah may was 95 yeah it was it was just this absolute brutal set of decisions to you know having to lay off um you know close to 70 percent of the company but it made it easier to be brutal externally right yeah meaning what what i mean meaning that is like okay we signed some SaaS contract in January, don't care not paying it, right?
You just stop paying it.
Just stop paying literally every bill.
It's some, like, some, like, I don't know, customer relations management or something.
Some voice automation, like, you know, you name it.
And I'm like, wait, I have to decide between paying for some software to some stranger that I don't even need to use because of some contract.
And then I got to fire somebody else someone is going to lose their livelihood because of this I'm like absolutely not even as people start to emerge from COVID um you guys I mean I have to imagine it was slow going because I mean even to this day San Francisco as you know 30 percent of of office space is still empty have you recovered from the the pre -COVID you know sort of I mean has it have you fully recovered and more?
And if so, how long did it take?
Yeah. So, I mean, we have fully recovered and more.
Right now, we are three and a half times larger now than we were pre -COVID.
And there's a number of different factors for that.
But there is actually a greater percentage of people driving and parking.
Because they're not using public transit.
Right. Public transit, you're used to the routine.
You go in five days a week, You always take the train.
You're coming in two days a week, one day a week.
You're going to drive.
You're going to drive, drive and park, right?
Interesting. So the public transit crisis, in a sense, has kind of benefited the parking industry.
It is part of it. But the other part, too, there was a time where people were worried about public transit, regardless of the different servicing issues in different cities.
You know, people just felt safer in their cars.
Yes. and you know we ultimately obviously had a had a snapback and we ended up hiring a lot of folks that we unfortunately had to let go and and um you know they're they're they're still with us which is great and now you know you start in 2011 lots of competitors there still are competitors out there where are you in the competitive landscape would you say you guys are the biggest or among the three biggest or or or what yeah i would say like we are we're the largest like we have 1 ,600 parking companies that we partner with and when you look at the sales that we're doing usually it's greater
than all the others combined I started this with the idea of how do I stop getting parking tickets and love to drive, hate to park I'm actually loving to park a lot more now and I'm just absolutely jazzed about what we could accomplish Right.
Like to me, it's focused on executing.
How do we change the moments of people's days?
Right. How do you make it so people don't even have to think about parking?
When you think about the journey you've taken, you know, we started out as this little kind of project in 2010 and where you are now.
And all that you've been through, how much of where you got to, because you could have been crushed at many points along the way, right?
So many variables. how much do you attribute the fact that you guys are here and successful and now the sort of the 800 -pound gorilla on the block, so to speak, is due to how hard you worked in the grind and how much do you attribute to just getting lucky?
I mean, I think there's a value to consistency.
There's something to be said for focus.
Our focus, consistent focus, you go through the history of company, every aspect, all these potential distractions or things to spread ourselves too thin or things that could, you know, have killed us sooner.
Our focus on just one thing and one thing very, very well has contributed.
Yes, of course, there's always luck.
And I do believe in luck, but I also believe in manifesting it.
And I think that consistency and focus has been key across everything.
That's Mark Lawrence, co -founder and CEO of Spot Hero.
By the way, remember that bicycle tour Mark was planning to take across Africa before he started the company?
Well, he still hasn't done it, but that ride from Cairo to Cape Town, it's actually a pretty popular trip.
It's nearly 7 ,000 miles, and the fastest that anyone's ever completed it?
41 days, 10 hours, and 22 minutes.
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