Nail it and scale it. That’s startup-speak for a popular strategy for launching a successful tech company: First build and refine your product, then conquer a test market to demonstrate its viability, and then—and only then—expand into additional markets. Win your hometown before you buy a tour bus, in other words. It’s been a fine strategy for Chicago tech successes such as Groupon Inc. and GrubHub Inc., which gained traction here before attempting to build nationwide audiences and confront their respective archrivals, LivingSocial Inc. and Seamless Inc., on neutral territory. It also would be an ideal path for two of the city’s most promising up-and-comers, ParkWhiz Inc. and SpotHero Inc., except for one problem: Both companies have been trying to establish the same product in the same city at the same time. The two offer mobile phone users the chance to reserve downtown parking spaces—often at a discount—in garages operated by parking-industry giants such as LAZ Parking Ltd. of Hartford, Conn.; Cleveland-based ABM Industries Inc. (formerly Ampco System Parking); and Chicago’s SP Plus Corp., formerly Standard Parking. “It’s an interesting situation,” ParkWhiz CEO Aashish Dalal says of the crowded field. “In Chicago, it’s ParkWhiz versus SpotHero. But this is a worldwide opportunity.” It’s also an interesting case study for Chicago because, as the city’s tech community grows—area companies raised $1.06 billion in venture capital in 2013, more than double 2012’s $391 million, according to Built In Chicago—the odds increase that it will spawn similar rivalries here in the future. To some extent it’s already happening. Local venture-capital firm Chicago Ventures participated in a $2.25 million investment in tech-enabled delivery service Zipments Inc., which is based in New York but is building a Chicago operation to compete with WeDeliver Inc., a Chicago-based startup that has a similar business plan and raised $800,000 in January.
Take the process of signing on the garages that allow SpotHero and ParkWhiz to act as inventory resellers. Mr. Dalal, 36, first pitched LAZ Parking on the idea of selling downtown garage reservations online in 2006. “Back then, I knew there would be a market, but we didn’t have the technology in place and it would have been a clumsy solution,” says Tony DiPaolo, regional vice president at LAZ. By the time Mr. Dalal added daily downtown parking to the ParkWhiz menu in 2010 (after spending the interim
building a nationwide event-parking business), he was competing with SpotHero. SpotHero co-founder Jeremy Smith acknowledges that he had a relatively easy time of it, thanks to Mr. Dalal’s hundreds of cold calls. The garages “were open to the conversation of reservations because of ParkWhiz,” Mr. Smith says. LAZ now works with both companies. PROXIMITY PROBLEMS Fundraising is another aspect of business-building that is made more complex by the companies’ proximity to each other. Chicago’s Hyde Park Venture Partners led a $2 million investment in ParkWhiz in December 2012, but SpotHero’s presence in the local market didn’t help. “Having SpotHero here made me less interested,” says Ira Weiss, a partner at HPVP. “I never want more competitors in a space; it just complicates things.” That same month, SpotHero raised $2.5 million of its own, a round that was led by Boston-based Battery Ventures and included three Chicago VC firms: OCA Ventures, Lightbank and New World Ventures. In both cases, the VC money was intended to help the companies expand their operations, meaning that both ParkWhiz and SpotHero have graduated from the “nail it” phase to the “scale it” phase. Neither ParkWhiz nor SpotHero will disclose annual revenue, but ParkWhiz has 21 employees and works with more than 500 parking venues nationwide, and SpotHero has grown from three employees to 23 since summer 2012. They make up two-thirds of the playing field nationally in the parking-reservations space; their other rival is Baltimore-based Parking Panda Corp., which launched in 2011 and raised $4.7 million in March. (All three companies are investigating raising additional investment capital.) ParkWhiz and Parking Panda offer daily parking in dozens of cities, and SpotHero opened last fall in New York, its seventh market. Now the three are aiming for national supremacy. Mr. Dalal estimates that off-street parking is a $70 billion market worldwide—including $20 billion in the U.S. Considering that ParkWhiz earns 15 percent of each transaction it facilitates, the U.S. market opportunity for ParkWhiz or SpotHero is about $3 billion annually. Even as ParkWhiz, SpotHero and Parking Panda compete in the Internet-enabled garage-reservations space, each is keeping an eye on other parking-tech companies such as Foster City, Calif.-based Streetline Inc., which raised $25 million last year. Streetline puts sensors in street- and garage-parking spaces to gauge whether they’re occupied—a business model that recalls Mr. Dalal’s original plan for ParkWhiz, until he deemed the implementation too expensive. Other companies such as Santa Monica, Calif.-based ParkMe Inc. and London’s Parkopedia Ltd. are working in other corners in parking tech; Parkopedia is partnering with automakers including BMW and Ford to provide parking apps for connected-car dashboards. Mr. Dalal expects substantial crossover and consolidation among the different parking-tech companies over the next 18 months and predicts that a larger tech company will attempt to enter the market through partnership or acquisition. But enough about the future. Let’s take a closer look at what it’s meant for ParkWhiz and SpotHero to share the same home market, and how their joint presence in Chicago has affected their fortunes in three areas: raising money, building their businesses and engaging the local tech ecosystem. See on www.chicagobusiness.com Accelerators & Incubators, accelerateur, incubateur, entrepreneur, entrepreneurship, Executive Business Accelerator, Gilles Bouchard, Harvard Business School, Harvard Business Angels, innovation, Louis Catala, reconversion, startups, Audra Shallal, expertise, entrepreneur investisseur, développement, international, entreprise de croissance, accompagnement cadres et dirigeants, cadres, dirigeants, grands groupes, outplacement, startupper