Jonathon Barkl of AirGarage

Pivoting, aligning incentives, and the future of parking.

Jonathon Barkl is the co-founder and CEO of AirGarage, a managed marketplace for renting physical space, starting with parking lots. You can follow Jonathon on Twitter @jonathonbarkl.

Where did the initial idea for AirGarage come from?

We started the company because we were trying to find parking near our campus at Arizona State University. 

We were paying $1,000 a year to park on campus, but all these people were sitting there with driveways, so I thought why don't I just go rent a driveway from someone?

I went and knocked on ten peoples doors and said:

Can I park in your driveway? I'll pay you whatever you want

Eventually, I found this guy named Ari who said, sure, I don’t use my driveway and I don’t have a car so give me a hundred bucks for the year and you can park there anytime. 

A hundred dollars was a steal because the campus parking was a thousand dollars for the year.

I took him up on that offer and started bragging about it to all of my friends. I basically said:

Hey, I got this super close and cheap parking spot and, you guys are suckers for paying for the on-campus parking

Just through having those conversations more and more people started saying:

Well, I would love to do that too. I would totally rent someone’s driveway but I don't want to go knock on a bunch of random strangers doors to get the parking spot. 

From there, we built this peer-to-peer driveway rental platform where we went and knocked on everyone’s doors and got some homeowners to list their driveways. 

It was a really cool product and people liked it, the news loved to talk about it, and it made a little bit of money but at the end of the day, what we figured out was that in order to scale, we would need millions of driveways and on a 1 sale = 1 driveway basis, it just never would have made sense in terms of unit economics. 

That's why about a year ago, we pivoted to do what we do now, which is started looking at churches and businesses and saying how do we make one sale and get not just one parking spot, but you know fifty or a hundred parking spots in their parking lots. 

Through co-creating with these parking lot owners, churches, and businesses we figured out that they were open to the idea of selling parking spaces but it needed to be much more than a platform for connecting people and it needed to be fully managed on their behalf. 

We do what we call full-stack parking management where we do the advertising, collect the payments, do the enforcement, and handle the immobilization of the illegally parked vehicles.

We handle all the operations that are involved in taking a parking lot from being just a piece of asphalt with stripes on it to a full-fledged parking operation.

What does a general pitch to these businesses sound like? 

The general pitch is:

You have this asset that you know has monetary value, and you're not doing anything to monetize it, or if you are doing something to monetize it, it's a huge problem, because it's distracting you from running your business, so you should focus on what you do best and let someone else handle a parking lot on your behalf.

For a lot of parking lot owners, churches, and businesses, it’s like we're creating found revenue for them—it’s like anything is better than nothing.

There are also other benefits like helping them better enforce, whereas before, they didn't have an enforcement system, so, our system becomes the system of record for anyone that wants to park there whether they’re a visitor or someone paying to park there.

Also, they can now enforce against illegal parking whereas before they kind of had to guess who was who and who was parked illegally and who wasn’t.

Which side (demand/supply) is your priority now and why?

We’re focusing most of our energy on the supply side of the marketplace and the reason we’re doing this is because the demand pretty much exists already, parking is a known problem. 

By being able to focus our energy on the supply, we're able to really focus on growth. 

Right now, what we're focused on is getting as many parking lots on board as possible.

What winds up happening is we, being the sole operator of the parking lot, install signs saying, if you're a church visitor, you have free parking, if you're not a church visitor, here’s how you pay for parking.

Essentially, the parking lot becomes a billboard for AirGarage. If you’re driving down the lot and see a park with AirGarage sign, you just pull in, pay, and do everything from your phone.

The nice thing is that the parking lot effectively acquires the demand for us so we can focus on the supply. 

What does the competitive landscape look like? 

Generally speaking, we see three kinds of competitors.

The first type is other parking apps that everyone initially thinks of, such as SpotHero, Parkways, and Park Mobile, which have come out in the last ten years, where they're just a payment layer or reservation layer on top traditional parking infrastructure.

All they do is help you find parking lots that already exist, and then they take a cut as a payment processor from the traditional parking operator that they're working with.

That was innovative in 2008 when you couldn't pay for things with your credit card in a lot of places, but now, it's not that interesting or innovative.

These things could be replaced by something from Venmo. If you run city meters, you can just put your Venmo handle on the meter and say Venmo is $5.00, with their license plate attached, and that's the equivalent of what these parking apps do.

We, on the other hand, are focused on competing with the traditional operators, which is the second category.

These are the companies that come in and sign a contract with a lot owner, and they either stick someone there to man the lot during the hours of operation, or they install a parking machine or a parking gate.

There's a wide range of these parking operators that are small-time operations all around the country with just one or two guys that run a few parking lots, or there are massive national groups like SD Plus which is the one publicly listed parking company.

They range in size, obviously, but there's about 10,000 of them around the country. They're extremely fragmented, and each one is pretty localized, generally speaking, except for the really big players. They’re also manual, offline, and quite old school.

What we're doing is building the tools to automate and streamline the back-ends that these guys are handling, so that we can become the distributed, larger-scale parking operator and operate parking lots that are less lucrative or out of the way where these guys can't survive, because their fixed costs aren't justified.

The third group of competitors are companies that compete with us in terms of supply in adjacent markets, i.e. companies that are going after this real estate but not necessarily for parking purposes—which is more of a future issue.

Why is right now the perfect time for AirGarage to exist? 

I think there are a lot of trends that are culminating towards what we're building.

One of which is the giving economy and the sharing economy.

I don't traditionally think of us as a sharing economy company, but we are in the sense of taking an asset, better utilizing it, and sharing it with more than the traditional users. So, it's like taking something that was previously single tenant and single-use and turning into a many tenant and multi-use space.

Another trend is the transition to contractor roles on demand—that's something we're doing that supports our position and our operations in the way that we do enforcement in our parking lots.

If you're a driver and you use our app to find parking, you can join what's called the Space Force. If you join the Space Force, you just can scan other driver’s license plates and report violators to us to earn free parking credit.

Previously, the job would've required someone to basically be on full-time staff and drive around in circles to check license plates constantly. We've broken it down to the individual task-based basis where you can scan a singular license number, and we’ll pay you for that single license plate.

Overall, I think the really important thing is if you can take a physical system, and make it legible to a digital system you can unlock a lot of value. That’s what we’re trying to do. We ask ourselves, how do we keep these parking lots, improve their occupancy rates, and utilization?

By doing so, we can reduce transaction costs and open these spaces up for new users to use.

To reiterate, there are a few macro trends that are going into it that enabled us to do this.

But, I think one of the more important ones is that we figured out a way to break down and itemize the back-end operations in many ways. A lot of parking operators had to have full-time employees for things we’ve broken down and gotten to our users as a simple task by task things.

What do you envision AirGarage's competitive advantage(s) being? 

There's a lot of things that go into us being competitively advantaged over traditional parking operators, even just basic things that seem obvious to a tech company but are very non-obvious for traditional, old school operators.

For example, an old school operator will rent the parking lot from you for a flat rate every month, then they'll sign a lease with you and they'll pay you $3,000/month to operate your parking lot, and then they'll pay something like $4,000/month to actually operate the parking lot. So, then they wind up having this $7,000/month fixed cost that they have to recoup.

This means their incentives are misaligned with those of the parking lot owner because their goal is to minimize the amount of time that you use your parking lot, so they can maximize the number of drivers that are paying for parking and using their lots so that they can maximize their revenue.

This creates a terrible user experience for the supply side. And, in this business, all that matters is the supply—if you own the supply, then you own the marketplace.

This thesis carries over to why the other parking apps have failed—because they built something similar to what Uber was built on, Uber built a marketplace where if one driver turns off their app, they can be replaced just as easily with the next driver and the rider will never know the difference.

The thing that's not true about parking is that the supply of lots is not identical because customers have a preference between parking lots, depending on which one is located next to where they're trying to get to.

Parking apps have been focused on this control and direct the demand thesis, but what they found is that actually doesn't give them the leverage that they were hoping for, only the suppliers.

The suppliers, these old school operators, still basically control this entire parking market and this parking economy. And it's a mess, and that's why parking is still such a terrible thing and prices are obscure, the experience is just awful, it’s all because the suppliers control everything and they're old school.

Those are a couple of our competitive advantages.

Our incentives are aligned with our lot owners, and we therefore also have low fixed costs where we can take risks on parking lots that might not necessarily make a ton of money because we're not paying them a fixed lease.

We're only paying them a percent of whatever we're earning.

The final thing that we're focused on is how do we build tools for the suppliers and the people that own the supplies so that we can then open up that supply for people to commence on demand. Those are kind of the things that we think about that accumulate advantages over time.

Hopefully, in the future, we’ll have strong network effects. But at this early stage, those are not things that we can necessarily measure.

What does the legal & regulatory landscape look like for something like Airgarage?

The nice thing is right now we're doing something well-defined already. We're just doing it in a way that's more technologically advanced.

The traditional parking operators are doing pretty much the same thing that we do, where they make a deal with private owners and sell parking on their lot. Towing is defined, and the mobilization of vehicles is defined. It's not like Uber or Lyft where you're defining something new.

We're just reinventing how we think about traditional parking operators, and take them and ask, if you could just start from scratch, how would you design a parking operator, given the tools you have in the 21st century?

So, the nice thing is legally speaking, everything's pretty cut and dry in the parking market.

What would a world with autonomous vehicles and AirGarage look like?

 Around 30 percent of the average American city is dedicated to parking.

This space isn’t always efficiently used, it's just poorly allocated. There are eight parking spaces for every car in this country—that's ridiculous overbuilding, and it's because 1) there are so many parking lot owners, 2) people have private parking lots and 3) the spaces are inefficiently used.

So, what we're trying to do is take these spaces that have traditionally been single-use, single-tenant spaces and transform them. Once we transform them into multi-tenant, multi-use spaces, we can open them up for many drivers to come in and use.

When we start to think about the future after we’ve built out this giant portfolio of real estate in cities, we ask ourselves:

  • What are some other use cases to extract value, higher value from these spaces than just parking?

  • How can we support the delivery, charging, and logistics for autonomous vehicles in the future?

  • How can we start to support that the charging and logistics of the micro ability solutions, such as scooters and electric bikes?

  • How can we support the future of cloud kitchens that are gonna be popping up in cities closer and closer to where people want to be in with delivering networks being built out today?

  • How do we support things like on-demand warehousing for someone like Amazon? Because as they get faster shipping, they need more fulfillment centers closer to consumers.

So, really what we're trying do is basically open up this portfolio in real estate and make it available as a platform that other businesses and people can build on top of, so they we can make cities more dynamic and more fluent, so that you don't have to, if you're like Enterprise Car, share a zip car, you don't have to go around to individual business owners and make deals with them individually in order to basically park with the cars throughout the city, and change this contract every six months when you need to reallocate your expenses.

You'll just be able to tap into the AirGarage API and build on top of the real estate portfolio that we're already managing as a distributed property manager or produce parking lots and other intention real estate and be able to just build your business much more fluidly and much more quickly.

Our goal is that, in the same way, that Stripe has become this API for interacting with the legacy payment infrastructure, and Twilio has become this API for interacting with the legacy phone infrastructure.

AirGarage will become this API for interacting with the legacy real estate infrastructure in a city so that businesses can be built on top of the cities more easily.

What was the process of raising capital like for you? 

The process wasn’t an “overnight success”, it was more so a years in the making type of thing, we had been just refining the business model and working closely with our customers for a long time.

When we finally decided that the product and operations were in a good place, it was time to prove out the thesis that these parking lots exist, we can acquire them and manage them, and, like, the best way to do that is to go out there and do just that.

That's why we decided to raise the seed round. We started with trying to raise an angel round. It was a small round of about $250,000, and our goal was to find people that have direct experience operating a marketplace company that interacted with the offline world but were online businesses.

We were talking to people from companies like Omni, Uber, and Opendoor—the types of marketplaces where they were built with technology, but manipulate the atoms of the physical world.

That's what we're interested in because that's what we're doing. It's very different than building a SaaS company. Because of this, we were looking for mentorship and advisors and convinced them to join us, and don't get me wrong, we had a lot of investors tell us no, so it's not like it was easy.

But after they got on board, they started saying:

This is sounding good. You should probably raise more money, get more runaway, and bring more people on to the team to really expand faster

Mainly because a part of this business will be a land-grab business—whoever gets these parking lot owners online and makes money first will probably be the one they'll stick with in the long run.

If you take someone from making zero dollars a month to making $1,000 a month, they're not likely to switch to another operator for an extra $100 a month, because you made them. That was a big part of it.

Fundraising felt like we were not making any progress for a while. And then suddenly, you’re brazed around. It’s just really weird trying to interact with investors and get them to follow whatever schedule you need, play your cards right, and stuff like that.

We talked to several firms and wound up choosing to go with Floodgate because they had already bought into the vision that we were pitching them on before we had pitched them on it—they had seen the future that we were trying to build in their light and were excited about the way that we were unfolding it.

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