Jonathon Barkl: Putting Parking Real Estate Online

I'm excited to have you unpack the story, because this is one of those things that I think about a lot, where you have these categories that really make the world run. Obviously, you found this very sneaky, big problem. Walk me through how you landed on parking and why this is the sneaky, big problem that you're tackling.

It's a great description you just gave of parking as one of these industries that nobody really thinks about, even though it touches all of our lives every single day. I think we came at it from the angle that most people come at it from, which is that parking as a consumer in the 2020s, it's just still terrible as an experience.

It's amazing. If you think about parking day to day, I think for a lot of people, especially if you live in a relatively dense city, parking affects your decision making and your behavior on a daily basis. I'll be thinking, hey, I want to go out onto the town and meet up with a friend and go to a restaurant or go to a bar. And one of the first things I have to think about is, is there parking near there? How easy is the street parking in that neighborhood? Am I going to be able to find a garage spot? All these sorts of things that affect, therefore, where I go and how I spend my time. And it's just, how can you make a better experience?

So to answer your actual question, we came at it from that angle as consumers. And when we were consumers, we were actually students at the time. So Scott, Chelsea and I met at Arizona State University. Those are my co-founders. And we all had this problem as students that parking on campus near the university, obviously, is very expensive. It isn't very easy to find a space. And even if you do find a space and you get a permit, the university has really terrible systems for booking it. And then also, when they have football games, they kick you out of your space so that they can make more revenue from football games.

And so we saw that problem and started thinking about what ways could you solve this? Because it's really just a supply and demand problem. And originally, the way we did that was literally by starting what we refer to lovingly as AirGarage 1.0. It was just going door to door in neighborhoods near the university and knocking on people's doors and seeing if they would rent out driveway spaces to us.

And we've come a long way since then. We managed massive parking garages and parking lots in downtown urban areas. It's not at all driveways anymore. But that common thread from then to now is there's this misallocation of parking real estate in urban areas. And we had identified that at the beginning from driveways. And now we've realized, wow, there's an even bigger problem, which is 30% of the average American city that is dedicated to parking and parking real estate and using that real estate for car storage. But it's just woefully mismanaged, underutilized, not digitized in any way, shape, or form. And so we're working on how do you take that real estate and put it online for the first time?

I love that. There's not a day goes by that I have to park my car that I don't think about Ant-Man technology, where I wish I could just shrink my car and stick it in my pocket because it's such a terrible experience.

That'd be awesome.

What's really interesting is that not only is parking this invisible problem that a lot of people don't think about, it's also a very multimodal, multifaceted problem that you have to solve. There's a lot of complex pieces. So talk to me about the AirGarage product today, lay it out, and then maybe we can double-click into some of the decisions that you made there.

What you just highlighted there is the reason that parking today fundamentally hasn't changed much. Basically everything around us since the 1990s has fundamentally changed because of technology, because of the internet. And the reason parking hasn't is because it's this, like you said, multifaceted, very deep problem that you have to solve.

And what I mean by that is, if you look at a high-level industry overview, the bottom layer of this cake of the parking industry is the real estate asset owner, right? Somebody that actually owns the physical real estate. Typically what they do is they will hire a parking management company, also known as a parking operator. That's the next layer of the cake. You can think of that as literally just a property management company, but for parking, right? And those companies have been around for 50 or 100 years. They have been doing things more or less the same way since the 1980s. They install a gate arm machine to collect payments. They hire an attendant. They collect cash. It's all on paper. It's not automated.

And in the last 20 years, there's been a lot of people that are software entrepreneurs coming into this industry and having the same pain points that we had of parking just sucks as an experience and thinking to themselves, wow, this is such an old school, backwards industry. We can fix it because we know how to write software, and so we're going to do that. And what they inevitably do is they become this layer on top of that cake and band-aid on top of that, where basically they say, we can build this software, but it'd be really difficult to distribute it directly to the real estate owners, so let's go distribute it to the parking operators, the parking management companies, because they already have all the contracts with the real estate. And so we'll just sell technology to them to enable them to do their stuff more effectively and hopefully transform the industry in the process.

But our opinion and our thesis is basically that you cannot do that. That doesn't work. You can't sell technology to these old school operators and actually expect them to embrace it because they're duct taping together five different technology systems. They have a payment machine from one company, an app from a different company, a back-end analytics system from a different company. And they're expected to duct tape all this together. But, again, this company is 50 or 100 years old, and they're paying $30,000-year front-line, on-the-ground employees to try to stitch this together. It just doesn't really work and isn't integrated.

And so our thesis has always been you need to build the software and build the technology and use that to out-compete the old-school operators at their own game. So we go directly to the real estate owner, and that means that we both have to be an operating company and a software business, which a lot of software companies just aren't willing to do, right? They don't want to get their hands dirty. They don't want to spend time in parking lots. I spend probably more time in parking lots than I do in our office, and I spend more time in parking lots of our competitors than they do in their own parking lots, right? I'm constantly in parking lots, and that's one of the important things that we do.

And so what I mean by all of that is AirGarage is this full-stack parking system and solution, right? So we're both the parking operator management company and the technology company. And those two things need to go hand-in-hand for this to really succeed, where we build all our software, so we collect all the payments from drivers, we advertise the spaces across all the listing platforms, we do real-time dynamic pricing, we do license plate reading cameras, we have enforcement software and a dashboard for owners, all of that.

And then we also do all of the operations. So we sweep the locations, we pick up the trash, we plow the snow, we do the enforcement, we immobilize cars, we boot cars, we tow cars. We do everything involved in taking it from being just a piece of asphalt with stripes on it to a full-fledged parking operation that generates income, both on the technology side and on the operations side.

So if I unpack that, in the old-school model there's this other layer: not just the technology layers that exist in a traditional parking garage, but there's also typically this management company, right? There is the real estate asset owner, but they're usually paying a management company to keep track of everything, and then they're layering on technology. You guys have taken it a step further. I mean, the only thing left for you to do is to own the real estate and own the parking garages yourself. You've gone completely vertically integrated, where you're actually the management company, and then you're implementing all of this technology. Am I understanding that correctly?

Yeah, that's exactly right. We are both the management company and the technology company just doing everything for the owner, and we really don't buy technology from any third parties, which is very different from a traditional management company where the owner hires them, and then they're buying their app, their website, their analytics, their different products from a third party and bringing that in and then trying to make it all one cohesive system.

One of these things that is so common in vertical market software, a lot of people think of it as, hey, I build software for garage door repair service providers, and it's a guy with a truck. And the reality is, there's tons of guys with trucks, for sure, but there are also these massive enterprise fleets that have 50, 100 trucks that they dispatch at different jobs, and they're managing garage doors for warehouses as much as they are houses. So even in these quote unquote SMB verticals, you have a broad swath of different types of companies. And so in parking, are there similar, almost oligopolies, where there are a few asset owners that own a huge portion of the garages that you've probably been in? Or is it one of these ridiculously fragmented markets where there's really no big player?

Yeah, it's definitely more on the fragmented side. I think parking is really interesting for that reason, where most real estate owners, especially before the last 10 or so years, really only ever thought about parking as an ancillary nice to have or add on to their core business, right? They own an office building, they have a parking garage that their tenants park in. They own a retail center, they have a parking lot that the customers are coming to. And it's not the core business. And what that means is that most real estate owners, even ones that we talk to day to day, don't identify as parking lot or parking garage owners. They identify as, I own office buildings, or I own retail centers. Oh, and yeah, I guess I also own parking. But it's never, I identify as a parking owner.

And so the statistic that we've seen is something like 55% to 60% of the parking real estate in America supposedly is owned by more like mom and pops. And when I say mom and pops, I don't even mean SMBs. I mean more like literally your uncle bought a parking lot in 1970 and passed it down to you when he passed away. And you happen to own a parking lot, but you have a full-time job. You would never identify as a parking lot owner on any statistical survey. You just happen to own this piece of real estate, the same as if you just happen to own a duplex or a fourplex for passive income.

And then 40% to 45% of the parking real estate is owned by more institutional investors across the country. And that is shifting in favor of the institutions as this urban infill trend has been happening over the last 10 or 15 years, where people are coming back into cities, investors are buying back the parking lots and parking garages in downtown areas from these mom and pops. The mom and pops generally bought in the 80s and 90s when downtowns were out of fashion and crime ridden and drug ridden, supposedly. And so these people were able to buy in for cheap. And now that's transitioning back to the larger owners, but even still most large asset owners don't think of themselves as parking owners. They think of themselves as office owners or retail owners, and then they also happen to own parking.

And so there are large owners of parking as a result of that, because they happen to own $100 billion worth of office buildings, and so therefore they also own a significant amount of parking. But generally, it's not, for the most part, people going and executing on a strategy to buy up parking real estate specifically, although I think that there's a lot of opportunity in that. And we've started to see some people pick up on that thread and go after a little bit more, which we're excited about.

It's a big challenge to undertake when you have this really fragmented market, especially when it is an afterthought, right? You have to find a way to get in touch with these real estate owners, not necessarily people who are eating and sleeping and breathing parking lots and strategy. Even from the very beginning, you have to go to one of these folks and convince them that you should become their parking management company. How complicated is that? How much pushback is there? Are there blue chip parking lot management companies out there that you have to beat out? What is that conversation like?

Yeah, absolutely. There definitely are blue chip parking lot management companies out there that we had to beat out, right? The national names that people may be familiar with. There's something like SP Plus, which is basically the only publicly traded parking management company. They also do a lot of other things. If you've heard of ABM, which does building services, they also have a parking arm. LAZ Parking is a really big one. It's privately held. Ace Parking is pretty large. There's a lot of different parking businesses out there.

And to be honest, that scared us out of diving right into the market in the beginning. Like I said earlier, we started with driveway rentals, right? Literally a peer-to-peer marketplace for driveways. It was like Airbnb for parking. And we worked on that probably for about a year before realizing that, hey, you can't really build a business on this. If we only make $50 a month renting out each space and we only take 10%, we get $5 a month per space. You need millions of spaces to scale this to any meaningful size. And it just won't sustain a door-to-door sales force. I was literally going door to door in the Phoenix heat, knocking on people's doors and saying, hey, would you rent out your driveway to a student? But you can't do that for $5 a month per spot.

And so in middle of 2018, we actually started talking to our first real parking lot, where it was this church that had been selling parking for 30-plus years. And the way that they would do it is they would just hire some guy to sit there from 5 a.m. to 12 p.m., and another guy would sit there 12 to 7, and he would take $10 flat rate cash from you, give you a little raffle ticket to denote that you'd paid, and then you would be on your way. And that worked for them for a long time. But I think them and a lot of other businesses five years ago started feeling this labor crunch, where they couldn't get somebody to take that role and actually be there consistently.

And so we happened to start talking to them right around this fortuitous time where they had this hair on fire problem. They actually kept hiring people, this church. They would hire people to sit there and they would stay for about a week and then they would disappear with the cash. And so for a church, that was obviously devastating, because they were making $4,000 a week from their parking lot. And that was all of the money they were using to fund their programs.

And so we started working with them basically hand in hand through May of 2018 to co-create what AirGarage is today. Because before that point, we only rented out driveways. We were just a marketplace. We were just listing. We were not doing any of the operations. And thankfully, we worked with them basically to create what AirGarage is. So doing the advertising, installing signage, doing the enforcement, taking care of the parking lot, doing everything involved in it. And they were basically willing to take a bet on us and go based on the reputation that we built with some other churches on our old platform and help us develop what does it take to actually run a parking lot.

And then basically, we spent 2018 and 2019 actually focused on that thesis of going after churches, businesses, hotels, locations that own a parking lot, but it's not necessarily their core business, and trying to work with those folks. And at the time, really, it was because we didn't think that tier one, quote unquote, real estate owners would want to work with a small startup. Because if they're working with SP Plus or LAZ, why would they trust a small startup with their revenue that they're already making? So we thought we had to go after this market to create found income for these people and open up underutilized spaces.

In retrospect, that was actually really good for us because it was a good training ground, where we would take churches from making $0 a month to making $10,000 a month. And so if our system went down for a day, they wouldn't really care that much because they're like, well, we were making zero six months ago and now we're making $10,000. We lost the day of revenue, but net we're up pretty well.

Our revenue actually dropped 90% from the first week of March to the fourth week of March in 2020, which was devastating at the time. But a few months later, what we started seeing was actually these tier one real estate owners starting to reach out to us and saying, hey, I've been working with SP Plus for 20 years, and I'd like to basically work with AirGarage instead. And we were looking at them like, are you sure? Do you know who we are? We're just this tiny little startup.

And so we realized that SP Plus and a lot of these other big companies were having a really tough time during COVID. And it gave us an opportunity to realize that, oh, we could work with these tier one owners and they would work with us. And they were a lot easier to sell to than these ancillary use cases, where they knew what parking was. They knew why they wanted to make money and they just wanted to do it better and have better technology and have better reporting and make more money. And so we started selling to those people. And that actually is where the business really took off, was selling to these real estate owners and realizing that they are not necessarily happy with the status quo like we thought that they were. They're not necessarily happy with the blue chip companies that are out there like we thought they were. There was a lot of opportunity to bring technology into the market, and they were excited about that because they knew it would make them more money.

That's a really good segue. The product is really interesting. Something that is unique about you guys, and you have this great graphic that we were able to include in our research memo, shows, hey, here's the technology stack that exists in a normal parking garage. AirGarage is doing it all. Why take that approach? Why run the entire stack all at once?

Actually, the reason we started doing that was because every time we would try to outsource something in our technology stack, we would always inevitably wind up being disappointed. I remember at the very beginning, like I mentioned, a lot of software companies don't want to necessarily take on the operations, right? And we at the beginning were in the same mindset. We were like, oh, well, we're just going to be this software company, because before we'd been doing this marketplace. We don't really want to do the dirty work here. And so we tried to actually, in literally the first month, outsource enforcement of our first parking lot to some third party. And they just totally bungled it.

And so we were like, well, OK, we can't trust anybody, we can trust ourselves. And so we will just do this ourselves, and it forced us to be creative, to figure out how can we tackle this? And that was actually the genesis of the Space Force, which is our enforcement team. The constraint of not being able to rely on anybody has forced us to develop a lot more sophisticated technology that is integrated very deeply, so that then everything flows into one place.

There's a scene in the Indiana Jones movie where he's basically trying to swap the skull for a bag of sand. And so he's trying to grab it off the pedestal and swap in the bag of sand and not set off any booby traps. And that's what the first couple of years of our product development were like: how do you build the software to do everything that the old school operators do exactly how they do it, almost to the point that an owner will not notice the difference? And so we can just sell to them as if we are any old generic parking company. And they don't really realize the technology behind the scenes, but they don't really care either, right? They just want to know that they're going to get the result.

And then the last few years has been, okay, now that we have built that foundation, how do you build these really interesting things on top of that, that you can only build if you've built that data and technology foundation, which is dynamic pricing, license plate reading cameras at the entrance, the exit, real-time tracking of vehicles that are moving throughout the parking facility. All of which has to be built on top of this walled garden technology approach.

So I wish it was more of a strategic, like we absolutely knew at the time that if we wanted to be building the products that we want to build today, five years on, that we chose that strategically, that route. But it was more like we just kept trying to outsource things. And every time we tried to outsource things, it never went well for us. And so we just had to do it ourselves to make our customers happy.

If you step back and think about the business model you guys have built in simplest terms, you think about price times quantity. So how do you think about those equations? What are you building and focusing revenue on and charging for? And where are you prioritizing in terms of the quantity side?

I think what's really interesting about parking from a pricing standpoint is that parking actually, in this way, is like a disposable good. You don't really think about it, but it goes bad, right? In the sense that parking is a space and that space has a time component attached to it. And so if we don't fill a parking space for a certain amount of time, you've actually lost revenue that could have been there, right? If you think about it, not in terms of parking, but in terms of an apartment building, how does an apartment building owner think about their revenue and their revenue potential? They think, I have 10 units, I can lease them out for $100 per month per unit, I could be making $1,000 per month. Anytime that a unit is sitting empty, I have a cost that is that vacancy cost, right? And the same thing goes for parking.

Yeah, occupancy rates, totally.

Exactly. And I think that one of the interesting questions in parking generally is that as a consumer, anytime you show up to a parking facility and you have to pay for parking, it's the bane of your existence, right? And why is that? It's because when you're parking as a consumer, it doesn't feel like there's actually any immediate direct cost to what you're buying. And so any parking rate feels absurd because you're like, well, there's this space and it's sitting empty and it's going to quote unquote go bad if nobody uses it. So I should just be able to use it for free. And so it becomes this really interesting supply and demand standoff in terms of parking.

And there's actually been a lot of interesting research done here in the last 30 or 40 years by this professor named Donald Shoup, who has started this zeitgeist around parking and how parking should be charged for in America and how parking being free in America is actually what is one of the big sources of misused land and things like that. And we're not necessarily super involved in that research, except in as much as we're doing real-time dynamic pricing that nobody else is doing. His research is mostly on the on-street stuff, but the off-street stuff is what we manage.

And it's where there's a lot of interesting data that we can pull and learn from, because we can run experiments in real time with consumers, where you pull into a facility and there's five different groups that we're putting you into. And so five different consumers pulling into the five different groups in that same facility will actually be shown five different rates. And then we can see based on those rates, how did you react? Did you see that rate and then want to leave, or did you not come back, or did you violate instead of paying? What was your rating at the end of the session? And that's the first time that anybody's really doing that sophisticated pricing, which is the same thing an airline or hotel industry does very normally, but nobody's really done that in parking.

And so that all bakes back into the philosophy that we have, where I think you asked about our business model here as well, which is that we just operate on a revenue share with owners. We want to be really transparent for owners. We don't want to have misaligned incentives. And so what we do with them is a revenue share on the gross revenue of the facility. So say it's a 70/30: they get 70%, we get 30%. And our 30% goes toward covering all the operating costs of the facility.

And so our incentive then becomes how do we make as much money for the facility as possible? Because that's how we maximize our share of that revenue. And then how do we basically automate and drive down costs while also still maintaining a good driver experience, so that then our gross margin is as good as possible. And so we've always taken that incentive alignment mindset to this, because then that also drives us wanting to do dynamic pricing and wanting to have the best technology, because that increases our pie or increases our gross margin on our share of the pie. And so that alignment from the very get-go drives a lot of decision-making later on from the company.

And so then how does that translate into traction, and what are you most focused on? Obviously, there's easy top-line revenue. It could be number of spaces managed, number of locations, whatever. How do you quantify traction, and what are the North Star metrics that you're focused on?

We mostly track GMV. So that's technically gross merchandise value, which is the classic marketplace metric. We mostly think of it as gross marketplace volume, even though that's not technically what the acronym stands for. But we mostly track our GMV and then our take rate as a percentage of that GMV and then what our gross margin is on that take rate, right? Because when I'm thinking about our business, what I care about at the end of the day is how much money is the operating business of our parking lots spitting off to cover our overhead expenses, because that's how we eventually become a profitable and very large self-sustaining company.

And I think that also when I'm thinking about how we pitch ourselves to investors, I usually like to surprise them for the better, where usually the way I'm describing it is, hey, this is how much GMV we're processing. And then naturally, their next follow-up question is, oh, but what's your take rate on that GMV? Our standard is 30%. Our blended is 25-something percent. And usually they're like, oh, that's a lot higher than I expected, because a lot of marketplaces are a lot lower than that, because they're not adding as much value to the thing that they're transacting in, whereas we're actively managing these properties, right?

And then they naturally ask about our gross margin. And usually when I tell them, they're like, oh, that's higher than I expected. And ultimately, what I care about is that gross margin on the take rate, because that gross margin winds up being our equivalent to a SaaS revenue figure. So it's like if we're making $10 million of take rate, cool, but what's your gross margin on that? Because all that matters is the pure profit money that's being spit off by the business, because that's what we've earned as more of a SaaS fee after the operating expenses. So after we've paid for snow plowing, after we've paid for sweeping, whatever gross margin or gross profit is left over, that's what we care about as a company in terms of economic viability.

But GMV is mostly the North Star that we track to see how much money is flowing through us, because different parking lots obviously vary in size. We have parking lots that do $50 a month in GMV, and we have parking lots that do $250,000 a month in GMV. And it's just a whole gamut of things in between.

So where are you guys at today, whether it is GMV or number of locations, number of states you're in, whatever you think about?

We manage about 250 properties across 35 or 36 states now. So we're across most of the United States. We have properties in pretty much every major metro area at this point. And we also have properties in places as small as towns of 14,000 people in West Virginia. And we have to make it work no matter how much is around us and no matter where we are. So we're very much nationwide, but operate about 250 properties today.

It's such an interesting model that you have, and I love the way you articulated where the actual value capture is happening in your business. So many people are so focused on, we're creating a ton of value. And it's like, great, but if nobody will pay you for creating that value, that's not a great business. Are there any concerns if you step back from that, maybe what keeps you up at night? That model is operationally complex, I would imagine. Are there breaking points? Are there difficulties with scaling that? What are the things that are the weight of gravity on a business model like that?

It's an interesting question. And to your point about capturing value, I think that one of the most common things that, at least in the early days, investors would compare us against was, oh, I've used ParkMobile or PayByPhone or SpotHero or whatever it happens to be, one of these just pure software payment apps to pay for parking before. And generally speaking, those are effectively just a wrapper on Stripe, right? And at the end of the day, they only charge basically marginal percentage points above what payment processing rates are, because at the end of the day, they're not adding that much value and they're very interchangeable, right? So it's definitely a question of how do you capture value, not just create the value, or create the value and capture it, ideally.

But as far as challenges for the business, I think that one of the things that's always been interesting to us is just how do you scale effectively and do it with as few people as possible? So right now, AirGarage's operations team is, I think, six full-time people. And that compares with oftentimes some of these old school parking companies, they will have six operations employees just in one parking garage or just in one city. And so we're very, very, very lean from an operations standpoint. And that both is created by the fact that we've built technology from the get-go, but then also forces us to build more technology. So a big push in the last quarter for us has been how do we build some new products that will take a lot of the work off their operations team.

And I think that scaling from that point of view, though, I'm not too worried about, because a lot of the services that we provide on a daily basis are outsourced to third-party vendors, right? And we basically get to benefit from the fact that there's market competition for those third-party services. So if one of our vendors is dropping the ball in New Orleans doing sweeping in parking lots, we'll call all the other vendors in New Orleans that manage parking lots.

And so what that means is that our operations team winds up looking a lot more like a thought partner or an asset manager for the owner, instead of just, oh, we just need to get stuff done, rote day-to-day. So that technology automation allows us to spend a lot more time thinking about the asset management side of things, how to be a good partner, how to be proactive for the owner.

And so I think that's probably where I spend the most time thinking on the scaling side: how do we continue to enable that in the future? And maybe it's some crazy thing about, oh, we pull in so much data from the parking lots and parking garages, and then we're able to do this AI-driven asset management and basically be the most proactive parking company, because that quote unquote AI asset manager is constantly watching the data feed that's coming in, constantly watching the transactions, the average order value, the dynamic pricing reports, all this sort of stuff, and seeing how is this affecting the total GMV that this property is doing and making suggestions to owners. And so basically the question is, how do you scale up that asset management and partnership mindset as we continue to grow and not get sucked back down into just day-to-day operations? It's a constant balance, obviously, to scale effectively in that way.

So if I understand that correctly, you mentioned 250 locations, six operations managers. So that is basically six people managing 250 locations with, it sounds like, every location having third-party service providers. But when it comes to the full-time folks that you have making sure these properties are running on time, it really comes down to those six people running a massive network of coordination. Is that right?

That's exactly right.

Talk about leverage, right? If you were to go out and say, hey, let's just start a parking management company, you couldn't do that with six people, because you have to be juggling these nightmare pieces of technology that are constantly letting you down. So you need maybe 100-plus people to manage 250 locations because you have no leverage from the system. But for you guys, it's that perfect hand in hand, it sounds like.

Yeah, that's exactly right. You benefit a lot, especially over time, from optimizing that operations process. And honestly, half the time, when we're building software, we're building software with ourselves as the customer. It's like, how do we build software to make our operations team more effective, to make our sales team more effective, so that then we can be a better partner, a better manager for the owners that we're working with? Sometimes the software we're building is for the owners, sometimes the software we're building is for consumers, sometimes it's for us. And the engineers and the operations people sitting in the same room, sitting under the same roof in the same company, makes a world of a difference for that.

Because I was talking to a startup recently, and they basically were building a product that they wanted to be able to drop into our payment flow as an experimental thing. And it was interesting because the founder basically was suggesting that, hey, I had a conversation with some of the other old school parking companies, and they were all really excited about being able to do this. But when it came down to it, they realized that they don't control their payment flow. And so they couldn't actually do this experiment. They had no way to insert this technology or new code into the payment flow. Meanwhile, AirGarage, we just spent six months rebuilding our payment flow from the ground up to be two and a half times faster, just because we know that the easier it is, the more drivers pay, the more money we make.

Because of that incentive alignment, it drives us to be like, hey, how do we keep expanding the pie? How do we make sure that people are paying as much as possible, this high of a frequency or capture rate as possible? And how do we drive down costs? And so all of that incentive alignment flows back into us just constantly questioning every premise and saying, how do we build the best technology to be the best operators, to be as efficient as possible? Because it flows back to our owners.

And it's the same philosophy that Sam Walton of Walmart talked about a lot. It was like every dollar that we spend or that we save either gets charged to or gets saved by our customers. And that's our mindset as well: everything we can do to make more money for the parking lot or drive down costs benefits our owners. And so we're going to continue to do that because what benefits our owners benefits AirGarage.

So you've got 250 locations, maybe that represents millions in GMV. What is the capacity you can go to? Is there a certain number of locations you have in the back of your mind where you think, man, if we can get 1,000 of them, 3,000 of them, that would represent X millions of dollars of revenue? How do you think about quantifying the ambition that you have for what AirGarage can become?

It's a really interesting question because we think about this a lot. One of the other interesting things about the parking market is just nobody has really built data sets around the parking market or real estate or quantified it in any meaningful way in the past. People have made attempts to, but it's all in different places and locked up behind doors.

And so one of the most interesting things we've tried to do over the last year is, in order to enable our go-to-market machine to keep going at the rate that we want it to, we have to pump a ton of data into it. And so we have to build basically this map of every parking facility in America, whether it be a parking lot or a parking garage or free parking or paid parking.

And our rough estimate is that there's somewhere in the range of 60,000 to 80,000 parking lots in the United States, right? And so that's pretty big, but assume very conservatively that only 50% of them are actually owned by private entities that actually want to charge for paid parking. So maybe there's 30,000 to 40,000 parking lots we can go after. Even still, that's a pretty large market for us to be going after, considering we only have 250 properties.

And I don't know the number off the top of my head, but of those 250 properties, you can imagine there's actually only a small handful that actually produce the majority of our GMV. And so round it down to say there's 100 properties that we actually care about in our portfolio of 250, maybe just to be really conservative. The market is still 400 times larger than us, I guess would be the quick math on that. Or maybe it'd be 4,000 times. I can't actually do that math. I hate doing public math on podcasts, but anyway, it's 40,000 parking lots we can go after. We have 100 of them, say, so there's a lot of room for us to grow.

And if you think in general about, we raised a Series A in 2021 from Andreessen Horowitz, if you think about in general what is an investor looking for in a Series B, they're generally looking for, do you have a predictable, repeatable go-to-market motion, which is what we've been focused on building. And then they're looking at, say, hey, you're about $10 million of annualized revenue right now. Do we think that in the reasonable timeframe of about three years, you could take this from being a $10 million a year company to a $100 million a year company? And then could you raise your next round or go public or whatever it happens to be?

And I think that given the size of the market and how small we are and how advanced our technology is relative to competitors, I'm really excited about where we can go in the next few years. And our growth has only been accelerating each year for the past few years. So it should be a good time going after the rest of this market. And I hope that our competition is at least a little bit scared of us.

Final question for you. As I reflect on the things that you're describing, what I see is a really interesting approach to building technology for a specific vertical. It really feels like the combination of becoming vertically integrated and then building an end-to-end solution, both in the technology and the services side, can be really powerful in a lot of these real-world verticals. So as you step back and think about what you've learned thus far, if you were talking to a founder who wanted to build in a similar way in a totally different vertical, maybe it's elevators, right, they want to go tackle the elevator tech stack, what advice would you give? What's the best lesson you've learned from tackling a vertical like this?

Yeah, I think first of all, please do. I wish there was more founders working on problems like this. It's something that I've been thinking about a lot in the last six months: as AI becomes more commonplace and it becomes cheaper and cheaper to develop pure software, is there any defensibility in any product or any software that is pure software that doesn't have some physical world component? Or do all of the margins get driven out of that just by software being developed really cheaply by AI and solo developers? It's a really interesting question to me.

And so I'm like, this is the perfect time to be going after physical world businesses and trying to look at businesses that have been around for 50 or 100 years and still do things very manually, very offline, very old school. There's so many of them out there. And most of them you don't even notice day to day, just like parking companies. I'm naming parking companies at the beginning of this podcast. You probably have never heard of them. Or if you have heard of them, it's only because you were mad at one of them one time because they did give you a ticket because you didn't pay, something like that. Nobody thinks about these. And I think there's a lot of industries out there like this.

And so I think the biggest thing is go out there and just try to sell the service to the customer to start with, and then start building the technology as you fly the airplane, right? We signed our first contract to take over our first parking lot May 15th of 2018. We took over that parking lot June 1st of 2018. So literally in the span of two or three weeks, my co-founder Scott and Chelsea needed to build all of the technology that underpins what we do today in two weeks, because we hadn't built it before. It didn't exist. We sold this church on the concept, and they didn't know that technology didn't really exist. That's how we got started. And that's how we've always built, by just signing up the first customer and then figuring out exactly what they need and building the software for them and then just iterating from there over many years. And you wind up with something relatively significant after a while.

I love that. I think that's great advice too, right? Don't spend so much time thinking about the approach and the difficulties and all these different hoops you're going to have to jump through eventually. Get into the weeds and understand the problem. Force yourself to solve the problem. And it sounds like one of the other key takeaways you've touched on a few times is align yourself to the problem, right? Don't just try and solve the problem for somebody else, but make the problem your problem. And then your solutions are going to be much better because, selfishly, you're trying to figure out how to run a parking garage the best way you can, and your technology needs to reflect that.

Yeah, that's exactly right. We signed a contract and they're expecting us to make them money by the end of the month. And now we have to figure out at the end of the month, how are we going to make sure that we have money to pay them?