AirGarage raises $23M Series B to modernize parking with gateless, license-plate-recognition technology

It's billboard time and we have our next guest in the studio already. Jonathan from Air Garage talking about parking. How you doing, Jonathan? It's time to talk about parking. Everybody's favorite topic, parking.

I'm just glad I finished my lunch before I uh got let in on like, so I'm I'm a little more more prepared than he is. It's a It's a bit of a random stream today. Late, but the heart. Is that a TV? That looks like a TV. Yeah, I wish it was a real hearth. I You know, it's San Francisco. It's June or it's July now, I guess.

But it's uh pretty much always cold, so got to try to stay warm however you can. I think the real hearth comes after the next round. That's right. Once there's some major liquidity in the business, maybe then you can upgrade. Uh but give us the news. What's the latest from you? Yeah, very exciting news today.

We just announced that we raised our series B from and it was led by headline growth and participation from some of our existing investors and customers and all that jazz. So very exciting. $23 million series B and hit that gong. Let's go. Great contact. Great contact. Great contact.

Sounded Sounded very very full from this end. Yes. Yeah. It's fantastic. Um uh so give us uh give us an update on where the business is today. um kind of introduce the business and yourself and then we'll kind of dig into some questions. Yeah, definitely.

So, Air Garage, for people that haven't heard of us before, basically we work with real estate owners that own parking lots and parking garages and we help them manage and monetize their parking assets.

So, you know, if you've ever parked your car in the United States or really just anywhere, you know that it's a pretty terrible experience. There's signs that are confusing. It's like a five paragraph essay on a sign. The machines are broken. They eat your credit card. They eat your ticket. All that sort of stuff.

And you know, I think a lot of people when they first experience that or if they've thought about it at all, it's kind of like one of those schle blindness problems that most people you experience it, but you just kind of ignore it when it happens in your daily life.

If you've thought about it, you're kind of like thinking, okay, maybe it's like this because, you know, that's how real estate owners like it. They want to scam me. They want to like rob me blind. A lot of people, you know, they have it out for real estate owners, but um it's not that way at all.

Real estate owners hate it, too. And so we work with those real estate owners. We've built this basically vertically integrated operating system for parking real estate.

It combines everything involved in taking it from being a piece of asphalt with stripes on it to a full-fledged parking operation that generates income using technology. So, it's the technology you would expect in any other industry, but it's just completely new to the parking industry.

So, we do payments, we do advertising, enforcement, we build hardware, we build software. Basically what we're trying to do is bring as much data and visibility to these assets as possible to generate more income for real estate owners to create a better experience for driver at the same time.

And so you know the net result is we can increase net operating income by 20 to 50% for real estate owners and for a real estate owner that's huge because your asset is valued on NOI and you want to make as much as as much as possible. So uh that is how we've managed to grow as much as we have.

So we've grown 10x since we raised our series A. We're actually cash flow positive as business which is awesome. Congratulations. You know, just trying to get as many locations across the country as possible. So now we have 300 plus locations in 38 states across the United States. Fantastic.

I have two funny stories about parking. One uh once was I I started I stopped carrying a wallet because I was like Apple Pay is so good. I'm fine. I don't need a wallet. And I got locked in a parking garage that didn't take Apple Pay once.

Uh, and I had to talk my way out of it and and hit hit the security guard and be like, "Sorry, I literally have no money of any kind. I I can't do anything. " And then the other time I was parking in a in a garage going to a restaurant.

Um, and and like it's very confusing how to pay for this garage because there's no like there's no like gate. So, you just go in and there's a ticket attendant and the guy comes up to me in like a jack in like a like a you know security vest or whatever and uh says like here, "Yeah, you pay me. " And I pay him.

And I go into the restaurant and the restaurant owner is like, "Yeah, that guy doesn't work there. " And it was just like an enterprising homeless man, I think. And so, you know, good on him, but uh not not the best user experience. So, yeah, I I have a ton of questions.

Um I I want to know I mean, so hardware like that seems actually pretty hard to solve. I mean, taking cash, credit cards, Apple Pay, like the demands are pretty wild. Um do you do you white label stuff? Do you actually develop everything? Do you have manufacturers for this stuff? Is it commoditized?

Um like what is that? What is the shape of that side of your business? Yeah, so the hardware that we do is is all basically cameras and sensors. So it's mostly license plating cameras that sit at the entrance and exit of the garage and they track every vehicle that goes in and goes out.

That gives us real-time occupancy data, gives us enforcement data, but then it also can actually enable these magical experiences where I park in our down near our headquarters in downtown San Francisco. We have a garage right near there. my account because I'm already registered with their garage.

When I drive into that garage, it automatically starts a session for me. When I drive out, it automatically ends my session. I never have to touch my phone. So, to your point, you wouldn't have to carry a wallet anymore and it bills me for exactly the time I use, right?

And it's like that's when you think about it, like that's just how parking should be, but it's not that way, right? It's like so old school. And that's because basically real estate owners, they hire a parking operator, which is basically a property manager to run their property.

Those parking operators, they're 50 to 100 years old. They've been doing things the same way since the 1980s. They use cash and machines and attendance. And yeah, they all use basically parking machines in their locations. And it turns out the parking machines are just kind of the wrong way to run a parking facility.

You have those gate arms. People more often than you would think, people drive through those gate arms. A lot of owners when they're switching to Air Garage, they're telling us about, you know, 15 times a month somebody breaks their gate arm and it's like $4,000 to fix it every single time.

And that's on top of you spent $100 $200,000 to buy the gate arm in the first place and then you just need an attendant to sit there and like babysit it.

So one of the things that we do differently at Air Garages is we're in entirely a gateless system which means you remove that entire huge sort of headache and expense of maintaining and and keeping these gate arms in your facility. And so when you're a driver, that's also a better experience.

You drive in, you drive out. The license preing cameras track your car. We get real-time data.

You get a better experience and you have a lot less expense and sort of uh you know maintenance issues to to deal with with the gate arm because I think a lot of people can relate to the experience as well of like especially after a big you know sporting event or event that you've been to, you're trying to get out of a parking garage, you're sitting there for an hour because people are taking so long to go through that gate one at a time.

You get rid of those you entirely get rid of the bottleneck and it's a way better driver experience. So our hardware, the way we build hardware, we build it all actually inhouse, which is very unique for any parking company. Most parking companies, they don't even build their software in house.

We build software and hardware in house to give us the best control and visibility. Uh but the critical thing is you don't make the hardware a dependency, right?

If if a camera goes down for some reason, people can still drive in, still drive out, they can still pay, we still have a functioning system through the software. So you remove that dependency and it makes it a way better experience and also you just get a better experience as a driver and as an owner.

Okay, I gotta ask two VC coded questions. I'm sure that I'm sure you got in the raise, but I'm curious. So uh we had the CEO of Metropolis on uh I'm sure you guys were competing in a maybe at at some point in a more intense way. They've taken the more rollup approach in terms of asset heavy at very asset heavy.

They raised 1. 7 billion to buy it's not and not technically asset heavy because they're not like purchasing the assets themselves but they did basically just go acquire operators.

So they just took yeah to your point they took a an inorganic growth strategy which yeah I certainly have lots of thoughts on but finish your question. Sorry. Yeah.

No and I'm just curious like I'm sure every you know investor meeting leading to this B people were like have you thought about raising a billion and doing this strategy and and you did not. So, um I'm curious kind of the um h how you how you evaluate those two approaches.

Yeah, I think that there's a lot of different ways to build a company and you know, basically the thesis that they're working on is actually the same thesis that there's another company called Reef Parking.

I don't know if you've heard of them, but they took the same approach and what they did is they raised about a billion dollars from SoftBank in 2018 2019 that was right as we were raising our seed round. So, a lot of people were looking at that saying like, "Ah, they beat you to it. Sorry, you're out of luck.

But the thesis is basically, okay, we have this technology, we have this platform, we're going to raise a bunch of money, we're going to acquire this old school operator that has all of these locations and contracts already. And of course, we're going to, you know, it's going to look beautiful in a spreadsheet.

We're going to replace all of this GNA or this overhead or this cost of goods sold of human labor. We're going to replace it with this technology and and our margins are going to look great and there's going to be a bunch of upside. It's kind of like classic private equity playbook.

um you know it's it's a very like investor obsessed spreadsheetdriven way of building a business and the critical ingredient that has to be true in that is like we have the technology and that's what wasn't true really for reef parking and that's why that whole thing sort of went sideways and they're no longer really a business I mean they're working through restructuring uh mubadala has like taken over that business and is trying to sell it last I heard and uh you know that's the question for Metropolis is like do they have that technology and we're taking a very at air garage.

From day one, we started by taking over one parking lot, working from first principles, figuring out how do you run this parking lot using the technology that we have available to us. We didn't know what a parking company was. We didn't know what a parking operator was. We knew nothing.

We were just completely making it up from scratch, which is a huge advantage compared to doing things the way they've always been done. And so, we've built the platform as we've gone along to actually truly do what we say it does, right?

And that's the question for them is as they're going through their portfolio and trying to transition people, are those people actually going to transition to the platform? Does the platform actually work?

And the thing is, real estate owners have been burned so many times in the last 20, 30 years by vaporware software and people saying like, "Oh, we have technology and you real estate people are so old school and you don't get it and like we're going to change your life and make things everything great with this technology.

" And it hasn't played out many times. And so it's very hard to earn that trust with real estate owners.

And so if you start taking over locations and you don't have that technology and it doesn't work out then you sort of quickly fall out of favor and so they're making that bet and that's the question is do they have it remains to be seen.

I you know I have an opinion on that of course I won't comment directly on that but yeah it's just a different vision for how to build that endstate and then you know do we go and do roll-ups in the future as well potentially because we do actually have the technology. Mhm. Jord, second question.

Uh, second VC coded question. We had Alex Roy uh on uh famous cannonball driver wrote the driver. Um, and we were talking a lot about autonomous vehicles. I'm curious how you think AVs will impact the parking industry. Interesting.

Uh, people have had the sense of, oh, there's so much parking in cities and when we have AVs, we won't need them. that's never fully tracked for me because gotta charge them, you have to maintain them, you have to store them.

It there's there's way more demand during rush hour than there is, you know, during um you know, and and I don't want to send my my AV, you know, if I have an AV that that I personally own, I don't want to put a bunch of miles on it, driving it way out of the city to then circle back.

So, it's never fully tracked to me that some people just like parking lots more than parks. Like public parks, you can't really do a lot of car spotting in them. Walk around hunting for the Lamborghini. Can't do cars and coffees in a public park. You got to have a parking lot. No way.

That would be fun though on the grass. You know what's funny is is this was a question I got all the time in our uh series like our seed race and that was like at the peak of the autonomous vehicle hype wave like the classic hype wave that autonomous vehicles has followed.

And this was every VC in the sea round was of course asking about this and that was actually six years behind. What you say? Saying I'm six years behind. You're six years behind.

Well, and yeah, the funny thing to me was that during this this most recent fundra basically nobody asked us about that and that's while at the same time I'm in San Francisco riding in Whimos and cruise cars constantly. And so it's like actually real now versus 6 years ago it wasn't actually real.

Um you know I think I have a lot of thoughts on this.

One of the one of the reasons we chose floodgate actually to lead our seed round at the time was because they saw without us they independently came to the same conclusion that we did that you know basically parking is going to be this really interesting asset class over the next 10 to 15 years at the time based on what they were seeing because uh Ann the partner at Floodgate is on the board of Lyft or was on the board of Lyft at the time and so she was seeing the changes even before autonomous vehicles with just the Uber andyft trend over the last 10 years and so what they saw saw was somebody's going to need to basically figure out what to do with all this space in our cities.

Like 26% of the median urban core by land area, median urban core over 500,000 people, 26% by land area is dedicated to parking. So that doesn't even account for garages under a building. That is dedicated surface area in the urban core of our cities. Not looking at the suburbs, which is even more parking.

That's a massive amount of space in our cities. There's eight parking spaces for every car in the United States. I think the stat is there's enough parking surface area in the United States and eight is the low end. The estimate is actually 8 to 11 parking spaces for every car.

Uh there there's I think one stat that I saw that basically there's enough parking space in the United States to cover the entire state of West Virginia with asphalt. And so regardless of how you look at it, there's going to be some repurposing that needs to happen.

And in order to do that over time, you first need to like understand how that space is being used today. And that's the thing is like that just doesn't exist. Like the parking operators that are in running these facilities right now, they're so old school.

They're doing things manually with paper and like they don't have any real-time visibility about like how many spaces are actually filled right now and like what's our busiest day of the week?

These like basic insights that you know if you were a real estate owner and you called your hotel general manager and said, "Hey, what's our busiest day this month?

" And your hotel general manager couldn't tell you the answer to that question, like you would fire them on the spot because that's like basic information you need to run an asset.

But that's the state of the parking industry is like literally we took over an asset actually last week, massive garage, very large asset in in a sort of tier 2 market.

But you know, the way they were tracking validations is literally a paper spreadsheet in a binder, you know, tracking who gets a validation for going to the retail shops on site. That's the state of the parking industry.

And so our mindset has always been, you know, if someone's going to bring this online, we're going to bring it online and be able to more flexibly use this space in our cities.

Maybe that's autonomous vehicles in the future where they're parking in our facilities and they need to be able to pay for their parking in an APIdriven way. That doesn't exist right now.

There is no default online way to purchase parking or no operating system or no sort of uh system of record for where the space is used in our cities.

And then the other thing that's really interesting from our perspective too is we've taken a lot of things in the parking industry that traditionally were fixed cost parts of your business and turn them into variable costs because we're a software company.

We're a technology company instead of a basically a staffing company which is what these traditional companies are.

So if like parking revenue starts to trend downward, that actually squeezes all of our competitors in a really helpful way for us where like our cost of goods sold is entirely marginal instead of being this fixed cost, which then means that we can survive and thrive in in an environment where parking supply continues to uh decrease because parking demand is decreasing.

And actually parking supply being constrained is great for our business because that's the time when you actually can charge for parking. I mean, I can I can see how this becomes a major catalyst for you guys.

If I drive into a city center in an autonomous vehicle, it drops me off and that and then I want my vehicle to park nearby. Imagine imagining the the interaction right now between the average city center parking garage and an autonomous vehicle. Just not going to work. Yeah. Anyway, so great great congratulations again.

Thank you so much for the progress. Looking forward to the next 10x. Yeah, get get on it. Get on it. We'll talk to you soon. Working on it. Thank you both. Awesome. Have a good one. Cheers. Bye. Uh, next up we have Jonathan from Grock coming. We actually uh are gonna reschedule that