

From beginning to end, the story of a failed parking startup - muzz
http://chrishoog.com/from-beginning-to-end-the-story-of-a-failed-parking-startup/

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jonnathanson
I heard a rumor once, and I have no idea how true it may be. But the rumor
goes something like this: parking lots, beyond being ridiculously lucrative
and turn-key businesses, are also fantastic money-laundering or tax-dodging
opportunities. And so many of them are owned by shady characters, or shady
companies. These types don't necessarily want to deal with things like
processing credit cards, or getting into paper trails (although some modern
parking lots are using credit card readers, for convenience's sake).

This sounds pretty fanciful, but it doesn't seem _entirely_ implausible.

Occam's Razor says that the garage managers weren't interested because they're
doing just fine, and your service wasn't solving a greater problem than the
inconvenience of manually dealing with bids would cause. But I wonder if
there's another factor at play here. :)

Anyhow, this is a great recap of your approach, and I'm sure it's been a
fantastic learning experience for you both. Thanks for writing this, and for
sharing it! On another level, it frustrates me to read your story: it seems
like you guys had identified a real problem with users ready to try it out,
and the other side of the market just didn't have the same degree of need.
That sucks.

~~~
jcampbell1
Tax-dodging seems plausible, but money-laundering seems like it would be
tricky. The income is very consistent, and the buying a lot from an existing
owner would be pricey.

It is much better to buy something like an unprofitable nightclub. It doesn't
raise any alarms when a nightclub goes from $300k/year to $1M/year in cash
under new ownership. The same can't be said for a parking lot.

Strip clubs are also pretty good. It is really hard to prove that the VIP room
gate wasn't $1000/night.

~~~
silencio
> It doesn't raise any alarms when a nightclub goes from $300k/year to
> $1M/year in cash under new ownership.

Actually, these things can happen. It's a bit anecdotal (then again, most of
the "wisdom" I have to part from running a retail biz is) but no end of
business brokers and fellow business owners talk about being cautions
regarding taxes and reporting right around a change of ownership. Combined
with the fact that people don't report as much as they should in the first
place...

At least in California, the BOE and IRS and any other relevant agencies (ABC
for alcohol, the banks used for funding, the city giving out business permits,
etc.) like to pay special attention to these kinds of businesses. Even if the
business is actually doing better, I was told to not deviate from the previous
owner's numbers too much unless I have concrete proof of purchasing more than
usual from easily traceable sources (so probably not the shady small warehouse
store, but Costco Business and Sysco instead). I've seen a friend be audited
because she wasn't reporting anywhere near what seemed right for the amount of
groceries she was buying, and a former owner of another business because the
new owner reported way more in sales for the same amount of business (only
because the new owner was stupid enough to try to flip the business looking
like it was in better shape in a year).

All that said, it's probably easier to eventually raise a nightclub's
"profitability" than it is to do the same for a parking lot.

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chrishoog
Funny how this old post resurfaced after my new published last night. This
post is two years old. See my new insight on where we went wrong, where I slap
myself in the face:

[https://news.ycombinator.com/item?id=6340820](https://news.ycombinator.com/item?id=6340820)

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calinet6
This is 2 years old. Here's a better version: [http://chrishoog.com/the-
helloparking-postmortem-a-look-back...](http://chrishoog.com/the-helloparking-
postmortem-a-look-back-and-a-new-perspective/)

The last part is spot on, and says what you were probably just about to try to
tell him (self-righteously I'd bet!).

~~~
chrishoog
Thanks for sharing. Somehow, in the wake of my new post my old one
resurfaced...

~~~
muzz
Didn't mean to steal a submission. I searched for it and couldn't find it.

~~~
chrishoog
No worries - I'm honored

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normloman
The AirBnB of Parking. The ZipCar of Parking. The Priceline.com of Parking.
The Groupon of Parking.

There's your problem. You kept imitating other businesses instead of doing
what makes sense for your customers.

~~~
chrishoog
It took me two years, but I figured that out exactly. This post is two years
old. See mine from yesterday where I slap myself in the face:
[http://chrishoog.com/the-helloparking-postmortem-a-look-
back...](http://chrishoog.com/the-helloparking-postmortem-a-look-back-and-a-
new-perspective/)

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auctiontheory
_Where possible, avoid creating a two-sided market unless there is
asubstantial want or need on both ends._

This seems like an over-generalization.

I think the idea was a good one - more plausible than many others, and with an
actual revenue model. I suspect that someone with better luck and/or execution
will pull it off.

Interesting and insightful story - thanks.

~~~
mertd
There are many startups like this: SpotHero (Chicago), ParkWhiz (NYC). I
wonder if they are facing a similar fate, or what is different about them.

~~~
psychometry
SpotHero is operating in Boston now, too.

~~~
chrishoog
It seems all of those that are doing well (SpotHero, ParkWhiz) have strayed
from the "rent my spot" model to the Parking yield management model...

~~~
heyjonboy
Yup.

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mathattack
_Angel investors, especially, know that their money will go farther with a
student who can live off cheap rent and Ramen noodles._

Very true point. This seems to be behind YC too. The labor is cheap and the
work ethic is high.

~~~
smacktoward
Ageism: it's awesome!

The More You Know™

~~~
mathattack
Perhaps more unfortunate than awesome. But I get the economics. And as someone
on the other side... There are those who can afford the sacrifice, and those
who prefer to wait until someone else has made that sacrifice. There's room
for both.

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drifting
Thanks a lot for posting this. I'm joining a startup next week as the first
round of employees and there are definitely some good lessons in this article
and the updated version to keep in mind. Thanks again!!!

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protomyth
I know it would probably not be easy[1], but it seems like someone who bought
a parking lot then started building the app might get pretty good result.

1) buying costs $ and running is a pain

