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Aubrey Pringle/MEDILL
The SpotHero team has earned workspace in 1871, Chicago's startup incubator on the 12th floor of the Merchandise Mart.
Parking reservation startup revs up in Chicago
by Aubrey Pringle
Feb 13, 2013
Aubrey Pringle/MEDILL
At spothero.com drivers can book a parking reservation in Chicago's most popular and congested areas.
Aubrey Pringle/MEDILL
SpotHero has partnered with more than 100 parking locations around Chicago, including this parking garage in the Loop.
Company timeline
July 2011 – SpotHero website launched
May 2012 – began the Excelerate Labs startup support program
July 2012 - iPhone app launched
September 2012 - first full-employees hired
November 2012 - Android app launched
December 2012 – expanded to Milwaukee
December 2012 – acquired $2.5 million from investors
Since its launch in the summer of 2011, SpotHero has grown exponentially, forming partnerships with more than 100 parking garages around Chicago. By offering reservations at discounted rates, SpotHero benefits Chicago drivers while parking companies get more business.
As natives of the Chicago area, co-founders Mark Lawrence, 27, and Jeremy Smith, 26, were familiar with the frustrations of parking in the city. They got the idea for SpotHero a few years ago when struggling to find parking near Wrigley Field during the baseball season. They began talking with Wrigleyville homeowners who had driveways they were willing to rent for game-day parking. Soon Lawrence and Smith were renting out those parking spots to friends for Cubs games.
“We started with individual driveways and parking spaces,” Lawrence said. “Eventually we realized there’s a better product we could make.”
The more Lawrence and Smith learned about Chicago parking, the more apparent it became that there is no lack of parking in the city, contrary to common belief.
“We found that the problem isn’t that there’s not enough parking,” Lawrence said. “It’s that there’s too much and you just don’t know where it is.”
The duo decided that they needed a tech wiz to help them start a parking website. Enter Larry Kiss, 32, who signed on as SpotHero’s chief technology officer. SpotHero officially launched its website in July 2011.
The founders had pooled their savings to come up with the company’s initial capital. After putting on road shows for investors around the country, they have been able to attract a substantial amount of venture capital funding.
Here’s how SpotHero works: Customers go to SpotHero.com or open their iPhone or Android app and enter the address of their final destination or the name of a landmark such as Navy Pier. SpotHero then provides a list of parking options close by along with the exact distance from the destination as well as the prices for various times of day.
The driver simply selects the parking option desired, pays online and a spot is secured at that garage for the time selected. At the garage customers can show either a printed receipt or pull the digital receipt up on their smartphone to redeem their parking space.
SpotHero has an allotted number of parking spaces at each garage. If every SpotHero space at a particular garage already is reserved, then the garage will not be listed on the website when customers search for parking.
In terms of payment, SpotHero employs a pricing structure similar to Internet retail giant Amazon.com. Users pay SpotHero directly, and SpotHero, in turn, pays the parking companies while keeping a commission.
Even in the Loop the price of a parking spot can be as low as $6 for several hours of parking. Prices depend upon where, when and how long a person plans to park.
With meter rates shooting up in recent years, many Chicagoans are eager to find affordable parking options. Customers say there is also something comforting in the certainty of knowing they have a spot waiting for them, and that the spot is close to their destination.
Amanda McBee is a weekly SpotHero customer. She uses SpotHero to find parking near work as well as for events around Chicago. “It’s really great,” said McBee. “It’s a very cost effective and convenient way to get parking.”
McBee said she appreciates how easy it is to maneuver around the website. She has recommended SpotHero to number of friends who also have enjoyed the service.
Despite its techy feel, the company puts a high priority on human-to-human business. If someone calls SpotHero with an issue, there is someone to answer the phone and help find a solution.
“We go to extreme levels to make sure we are backing our users,” said Mandy Yoh, SpotHero’s community manager.
Most clients use SpotHero to reserve a one-time parking space, for instance near a friend’s house or an event downtown. SpotHero also offers monthly rates for people who want to reserve a parking space near work or home that they plan to use nearly every day.
People can also sell their personal parking spaces via SpotHero for specific periods of time when their spot is vacant.
Central Parking System is one company that benefits from its partnership with SpotHero.
“It does give us more monthly parkers,” said Souky Sonethavilay of Central Parking Systems. “And it puts us more out there for people.”
One of SpotHero’s big breaks was its acceptance into the Excelerate Labs program. Excelerate Labs is a highly competitive startup training and support program. Each year, thousands of companies from around the world apply, and Excelerate chooses only 10 companies to ‘incubate’ in its lab within 1871 on the 12th floor of the Merchandise Mart.
1871 is an entrepreneur’s paradise – the type of unconventional office where everyone rides around on Razor scooters. The entire 50,000 square-foot facility in the Merchandise Mart provides digital startups with affordable workspace as well as access to mentors and other resources.
Although SpotHero is not yet turning a profit, the Excelerate program has helped put SpotHero on the map and validate the concept with investors. “Excelerate kicked it into the next gear for us,” Yoh said. “They fine tuned everything for the company. We have clearer goals now.”
SpotHero will ‘graduate’ from Excelerate Labs in a few months and relocate to another office in Chicago.
SpotHero consists of a small team of six in the Chicago office, supported by three engineers in San Diego. On average, each member of the Chicago team at SpotHero gets to work around 8 a.m. and doesn’t leave until 7 p.m.
“Even when I have to work a 12-hour day it goes by so fast,” Yoh said. “The motivation here is unreal.”
SpotHero employees’ hard work is paying off. In the last few months of 2012, the company expanded its services to Milwaukee, launched its Android app and acquired $2.5 million in funding from investors.
Venture capital came in from both coasts as well as from three of the top firms in Chicago. Lawrence said it is both reassuring and exciting to have new funds to work with. The new capital should help propel the company into a profitable position.
“We’ve done the fundraising, so now we’ve got the cash and can get back to operating the business,” Lawrence said.
SpotHero is planning to use some of the money to hire on more staff and expand the business to additional cities. Which cities? No one is saying at the moment, but SpotHero promises to announce its expansion plans in the coming months.
“More cities, more happiness,” promises Lawrence. “More people parking and loving it.”
