From beginning to end, the story of a failed parking startup | Hacker News Reader

From beginning to end, the story of a failed parking startup

chrishoog.com

36 pointsmuzz30 comments

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.

That rumor actually makes sense.

I recently heard of a startup that is disrupting the valet industry by helping them get rid of their cash boxes (which apparently are prone to theft) and use mobile payments. They're lining up customers quickly because the product essentially pays for itself by resolving the theft problem alone.

I wondered why we haven't seen anything similar for parking spaces, but the tax dodging, money laundering idea seems like it nails it. These folks wouldn't want anything that creates a paper trail.

> These folks wouldn't want anything that creates a paper trail

If the tech community wishes to actually do something about widespread surveillance, it's going to have to come around to seeing this philosophy as a virtue.

These things aren't binary: there's nothing fallacious about thinking we should have enough accountability to eliminate organized crime syndicates while also not having so much that it jeopardizes the livelihood of innocent citizens.

Actually you've just made two fallacies -

The first is the use of conflicting judgmental criteria that constrain the question to favorable cases. If the idea of innocence is tied solely to the government's rules, then innocent citizens are not jeopardized, by definition. If there is an external concept of innocence, then it's possible for organized rule breakers to be innocent yet unjustly "eliminated".

The second is assuming that rules (and therefore (in)justice) apply stronger to larger organizations. In fact, the opposite is true - as an entity scales, skirting compliance requires a smaller fraction of its resources.

If that's true, it might be lucky that the worst thing that happened to them was their business didn't work out! The Mob is not usually a group that takes kindly to being "disrupted" :D

I'll make it not a rumor, and add used car dealerships who don't appear to sell many cars. Turns out they can be an investment strategy for land.

This is from an online class I took called "Texas Essentials of Real Estate Investment".

"With the elimination in 1986 of preferred treatment of capital gains profits and accelerated depreciation allowances, real estate investments lost much of their glamour as tax shelters. However, the tax laws have preserved other sheltering aspects, including tax-free refinancing, pyramiding through refinancing, special exemptions for profits made from the sale of principal residences, installment-sale deferments, exchanges, and inheritance tax exemptions."

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.

    >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.

If you're the type of person that needs to do a lot of money laundering you might also be the type of person that wouldn't mind negotiating with existing owners demanding lots of money as you would probably have some unorthodox means of swaying negotiations in your favor.

the difference between night clubs and parking garages is that night clubs use more consumables

you can take an average performing and up the price but maintain the level of business on the books (cars per day) but in reality fewer cars enter. another aspect to make cash flow set up a contract for parking with another of your shady businesses and money can start to flow to one legit business (garage) from any shady business

> 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.

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

This is 2 years old. Here's a better version: http://chrishoog.com/the-helloparking-postmortem-a-look-back...

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

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

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

No worries - I'm honored

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.

I think that is the hard part in a startup "doing what makes sense for your customers". Many times, its difficult to find what customers want. Some times, even customers might not know they would need it until you actually have the product ready to use.

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...

To be fair, if I understood the post right, it seems he was making the comparisons retrospectively (i.e., they weren't originally trying to imitate AirBnB because at the time they didn't even know about it).

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.

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.

SpotHero is operating in Boston now, too.

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...

Yup.

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!!!

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.

Ageism: it's awesome!

The More You Know™

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.

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

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