Secrets of the $131 Billion Parking Industry with Jonathon Barkl (Co-founder and CEO of AirGarage)

In a comprehensive discussion with Turner Novak, Jonathan Barkle, co-founder and CEO of Air Garage, delves into the complexities of the $131 billion parking industry, highlighting its outdated systems and inefficiencies. He explains how Air Garage, a full-stack parking management company, aims to revolutionize the sector by integrating technology to optimize parking lot operations, enhance user experience, and increase revenue for real estate owners. Barkle shares insights into Air Garage's evolution from a peer-to-peer driveway rental platform to managing over 225 locations across the U.S., emphasizing the importance of dynamic pricing, strategic partnerships, and effective sales processes in scaling the business.

• The parking industry functions like a "layer cake" with multiple levels of stakeholders: asset owners, parking management companies, and software vendors.
• Asset owners hire parking management companies to handle day-to-day operations, while software vendors provide technological solutions.
• The industry suffers from inefficiencies and a poor user experience due to the patchwork of systems from different vendors.

"Typically when that asset owner at the bottom is hiring a parking management company, that company doesn't build any technology themselves and so they're buying a machine, a gate arm from one vendor, they're buying an app from a different vendor, they're buying their backend data analytics system if it exists from a different vendor."

• This quote highlights the fragmented nature of technology solutions in the parking industry, leading to inefficiencies and a poor customer experience.

• Some parking operations make more money from ticketing and towing than from parking fees, due to skewed incentive structures.
• Revenue splits between parking fees and enforcement can lead to a focus on ticketing rather than customer satisfaction.

"There's certain lots that you pull into and it's very obvious that that's actually not the business that they're in and if you look at like the P&L of that location, you can find that out pretty quickly."

• This quote reveals how some parking businesses prioritize enforcement revenue over parking fees, impacting customer experience.

• AirGarage aims to rethink traditional parking management using technology to streamline operations and improve the user experience.
• The company focuses on dynamic pricing and a unified system to increase revenue and efficiency.

"When we started AirGarage, we really tried to think from the ground up what are some of the things that are taken for granted in the industry and like how can you rethink them from first principles."

• This quote emphasizes AirGarage's innovative approach to addressing inefficiencies in the parking industry through first-principles thinking.

• Parking significantly influences city design, with up to 30% of urban surface area dedicated to parking.
• Historical zoning laws and parking minimums have shaped cities to be less walkable and more car-dependent.

"The average American city, about 30% of the real estate surface area in an average American city is dedicated to parking and basically transportation of vehicles."

• This quote underscores the substantial impact of parking on urban planning and the challenges it presents for city design.

• The U.S. parking market is estimated to be worth $131 billion, but the exact figure is uncertain due to the private nature of most parking companies.
• AirGarage sees significant opportunities in optimizing underutilized parking assets across the country.

"Our estimates based on our database is that there's, you know, about 60,000 is or so parking lots and garages that are like paid public parking in the United States."

• This quote highlights the vast potential for growth and optimization in the U.S. parking market.

• Parking revenue can significantly enhance the value of real estate through increased NOI (Net Operating Income).
• Real estate owners often overlook parking as a revenue source, presenting opportunities for optimization and increased property value.

"If you increase the person's revenue or the NOI on an annual basis by $1, the value of their property just went up by $20."

• This quote explains the financial impact of parking revenue on real estate valuation, demonstrating the potential for increased property value.

• Dynamic pricing in parking involves setting flexible rates based on demand, similar to airlines and hotels.
• Traditional parking systems are fragmented with multiple vendors, lacking integrated data and communication.
• AirGarage's integrated technology stack consolidates data and enables dynamic pricing.
• Dynamic pricing is not about simply increasing rates; it's about finding the optimal price through experimentation.
• Experiments involve showing different rates to drivers to determine willingness to pay and optimize revenue.

"Nobody does dynamic pricing in parking because it's harder than dynamic pricing in airlines and hotels."

• The complexity of dynamic pricing in parking is often underestimated compared to other industries like airlines.

"It's not about just jacking up the rates; it's about finding the optimal price."

• Dynamic pricing aims to find the best price point based on various factors, not merely increasing rates indiscriminately.

• AirGarage's technology integrates payment systems and data collection into a single platform.
• The system allows for real-time data analysis and dynamic pricing adjustments.
• The technology stack includes web pay products and mobile apps for seamless user experience.

"Our technology being integrated full stack, like owning the whole thing, is what enables us to do this dynamic pricing."

• Owning the entire technology stack allows AirGarage to implement sophisticated pricing strategies.

• AirGarage's dynamic pricing experiments have led to significant revenue increases in various locations.
• A Charleston parking lot saw a 44% revenue increase through dynamic pricing, despite stable or declining traffic.
• Traditional pricing methods often result in undercharging and missed revenue opportunities.

"We increased the revenue at that lot by like 44% over the first six months."

• Dynamic pricing can significantly boost revenue by optimizing pricing based on demand and customer behavior.

• Many parking lot owners lack financial transparency and are unaware of their real estate's potential.
• Traditional lease models often result in owners being underpaid relative to the actual revenue generated.
• AirGarage offers a revenue share model to align incentives and provide financial transparency.

"There's a lot of owners of real estate that are basically being screwed, and we're trying to help them not be screwed anymore."

• AirGarage aims to provide fair compensation to parking lot owners by offering more transparent and profitable management models.

• AirGarage uses a network of gig workers, known as the Space Force, to enforce parking regulations.
• These workers use an app to scan license plates and issue tickets, providing scalable enforcement.
• The model allows for flexible and efficient enforcement without full-time staff.

"The beauty of it is we basically have this ability to scale up and scale down enforcement anywhere and everywhere in the country."

• The Space Force model enables AirGarage to enforce parking rules effectively across diverse locations.

• Gig work provides flexible income opportunities for individuals who may face barriers in traditional employment.
• The Space Force model incentivizes workers based on performance, allowing them to control their income.
• This model supports individuals with diverse backgrounds and needs, offering a chance to earn money on their terms.

"What you put in is like what you get out of it in the most pure, raw form."

• Gig work allows individuals to earn based on their effort and availability, providing a flexible income source.

• AirGarage's payment system is designed to be user-friendly and efficient, using mobile phones for transactions.
• Drivers pay for the exact time they park, offering a fair and transparent pricing model.
• The system includes license plate recognition for seamless entry and exit, reducing the need for manual interactions.

"You pay through your phone, and we charge you for the exact amount of time that you actually parked for."

• The payment process is designed to be simple and transparent, enhancing the user experience and ensuring fair charges.

• AirGarage operates with a lean team, managing a large portfolio of properties with minimal full-time staff.
• The use of technology allows for efficient operations and reduces the need for on-site personnel.
• The company focuses on optimizing revenue and providing value to property owners.

"We manage basically like 225 parking lots and parking garages across about 37 different states now."

• AirGarage's operational model leverages technology to manage a vast number of properties efficiently.

• AirGarage's growth strategy involves cold calling and expanding nationally due to low liquidity in the parking market.
• The company targets real estate owners who may not actively seek parking management solutions.
• A national approach allows AirGarage to capture opportunities across diverse markets.

"Real estate owners tend to not be looking for a change; they're not going out and actively Googling parking lot management companies."

• AirGarage's proactive approach in acquiring clients involves reaching out to property owners who may not be aware of the potential benefits of their services.

• Transition from traditional business development to a mechanized sales approach in the parking industry.
• Implementation of a separate sales and operations team to enhance efficiency.
• Recognition of parking as a legitimate asset class with potential for revenue growth.

"We're basically trying to apply this like B2B SAS go to market motion that everybody does sort of like in SAS sales pretty typically of like building a sales machine."

• Explanation of adopting a B2B SaaS sales model for the parking industry to increase efficiency and scalability.

"It's a legitimate asset and like you want to manage it effectively just like you do any other asset."

• Emphasizes the importance of treating parking spaces as valuable assets that require strategic management.

• Diverse parking lot sizes affect revenue potential; larger lots do not always correlate with higher revenue.
• Example of a successful parking lot investment transforming a former gas station into a high-revenue parking space.
• Revenue sharing model with property owners to align incentives and increase overall income.

"You know, they bought it for a very reasonable price. It was just a dilapidated gas station...that parking lot does like 50 Grand a month."

• Illustrates the potential for high revenue from strategic real estate investments in parking spaces.

"Our incentive is we want to increase the pie because that's how we make our portion as big as possible."

• Describes the revenue-sharing model that aligns the incentives of the parking management company with property owners.

• Low customer churn and high net dollar retention drive compounding growth.
• Importance of signing larger cohorts and maintaining high retention rates for business success.
• Strategic focus on differentiating products from traditional competitors to enhance customer acquisition.

"Our turn on like a GMV dollar basis is like sub 2% per year...they just stick around forever."

• Highlights the low churn rate and high customer retention as key factors in business stability and growth.

"How do we truly make a product that is different and not just better than the traditional companies?"

• Focus on creating a distinct and superior product offering to stand out from traditional parking management solutions.

• Initial concept of AirGarage as a peer-to-peer driveway rental platform.
• Transition to managing entire parking lots and garages for churches and other organizations.
• Development of a full-stack service model similar to Airbnb running a hotel.

"Air Garage today is like if Airbnb came to your house and ran it like a hotel."

• Compares the evolution of AirGarage from a simple listing platform to a comprehensive parking management service.

"The foundations of everything that exists today for AirGarage like basically got built in like a couple weeks by Scott."

• Describes the rapid development and implementation of the current AirGarage model to meet customer needs.

• Emphasis on the importance of hands-on sales experience for learning and growth.
• Reference to influential sales literature, such as "Never Split the Difference," for negotiation tactics.
• The role of discomfort and rejection in developing effective sales skills.

"You can read as many books as you want but...until you actually experience it."

• Stresses the importance of practical experience over theoretical knowledge in developing sales skills.

"One of the most impactful things you can learn to do is just to be quiet sometimes."

• Highlights a key negotiation tactic of allowing silence to prompt the other party to speak.

• Recognition of poor unit economics in the original driveway rental model.
• Strategic pivot to focus on managing larger parking facilities with better revenue potential.
• The role of customer feedback and market demand in guiding business pivots.

"It was all about like just bad unit economics...we just kind of kept pulling on the thread that customers were giving us."

• Explains the decision to pivot based on unsustainable unit economics and customer feedback.

"We did customer discovery and we figured out what they needed, and we built it for them."

• Describes the process of adapting the business model to meet customer needs and market demands.

• Importance of being in a startup hub like San Francisco for networking and fundraising.
• Experiences of cold outreach and building connections with potential investors.
• Challenges and benefits of moving to a major startup city to accelerate business growth.

"We didn't want to stay in Tempe...we should probably move to the place that's the best place to start a startup."

• Justifies the decision to move to San Francisco to be part of a vibrant startup ecosystem.

"I would just like DM people on Twitter...and we went back and forth like rapid fire at like 10 p.m. on a Tuesday."

• Illustrates the proactive approach to networking and building investor relationships in the startup community.

• COVID-19 led to a significant revenue drop for many startups, but it also presented opportunities for growth and pivoting.
• Seed-stage startups were less affected by revenue loss compared to established companies due to smaller revenue bases and more runway.
• The pandemic forced startups to be frugal and maintain clear communication with investors.

"We had a lot of, you know, runway and we had been I think pretty frugal with the seed round and like sent consistent investor updates."

• Maintaining a frugal approach and regular investor communication helped the startup navigate the challenges posed by the pandemic.

• Some investors, like Floodgate, proactively offered financial support to startups during the pandemic to ensure their survival.
• This support was seen as a long-term investment in the startup's potential rather than immediate returns.

"Mike at Floodgate came to us and was like, hey, we don't know how long this is going to last... we'd like to give you more money so that you guys have at least this much runway."

• The willingness of investors to provide additional funding during uncertain times highlighted their belief in the startup's potential.

• The pandemic allowed the company to pivot from focusing on smaller clients like churches to larger, more profitable tier-one parking lots and garages.
• The shift was driven by the realization that larger clients already understood the value of optimizing parking revenue.

"We always wanted to move up market to sort of the tier one parking lots and parking garages that you think of when you think of a parking lot or parking garage."

• The pivot to targeting larger clients was a strategic move to align with more profitable and receptive markets.

• The traditional parking industry faced significant challenges during the pandemic, creating opportunities for smaller, nimble companies.
• Fixed lease agreements became untenable for many traditional parking companies, opening doors for new business models.

"They were happy to take all the upside when the times were good and now they don't want to take the downside when the times are bad."

• The inability of traditional companies to adapt to the downturn highlighted the need for more flexible and innovative solutions.

• The company shifted from in-person sales to a data-driven cold-calling strategy to reach real estate owners.
• This approach involved building a robust data system to identify and contact potential clients efficiently.

"We shifted our entire go-to-market motion to be around this kind of cold calling outbound and building like a really solid data machine."

• The transition to a data-driven sales strategy was crucial for scaling and reaching new markets efficiently.

• Raising a Series A requires a structured process and building relationships with potential investors beforehand.
• Having a clear vision and aligning with investors' theses is crucial for securing funding.

"Building a relationship with the investor beforehand is the best thing to do because then when you get into the process, then you already are familiar with them."

• Establishing relationships with investors before the fundraising process can significantly enhance the chances of success.

• Branding is essential for differentiation in the parking industry, where most companies do not focus on consumer experience.
• A positive brand experience can create a competitive advantage and drive consumer preference.

"We're the only orange parking company, so immediately we stand out against the crowd."

• Unique branding helps the company stand out and fosters positive consumer experiences, leading to increased loyalty.

• The long-term vision involves creating a digital system of record for parking, enabling scalable and flexible real estate usage.
• The goal is to make real estate usage as dynamic and accessible as cloud computing resources.

"You can start to move toward more of like the AWS scale up and scale down your real estate use on demand."

• The vision aims to revolutionize real estate usage by making it more flexible and accessible, similar to cloud computing.

• Learning from historical and contemporary successful founders can provide valuable insights into business strategies and resilience.
• Emphasizing unit economics and customer relationships are crucial for long-term success.

"I really love everything about Sam Walton and what he did at Walmart... it's just like really impressive what they did with so little."

• Studying successful founders like Sam Walton provides lessons in resourcefulness and customer-centric business practices.

• The podcast highlighted the importance of adaptability, strategic pivots, and building strong investor relationships in navigating challenges.
• The company's journey underscores the potential for innovation and growth even in traditional industries like parking.