As of today in Europe and the US, around 300 startups are active within the smart parking sector. By screening them it becomes clear that the key business model for start ups targeting services for on- and off- street parking is transaction fees based. A little analysis suggests that pure information/guidance and detection companies won’t be paid for these services in the near future.
In general theses products and services are aimed to minimize parking cruising and reduce traffic due to parking, while reducing OPEX & CAPEX expenditures for cities and increasing parking operators revenues. The market for on- and off- street parking is huge and amounts to around $30B each in Europe and the US, with two-third of the market being off-street parking revenues. The Chinese market is still nascent at around $1B but growing at around 30% per annum, whereas the US and European markets grow only by 1–3% per annum. The pure transaction based slice of that market — taking around 3–5% in transaction fees — will amount to approx. $2–3B in the coming years. Additional markets are Peer to Peer marketplaces and B2B analytic platforms for parking operators.
The smart parking sector can be categorized in transaction fees or B2B platform
In fact the smart parking sector can be categorized into six segments. The first four of them a) info, payment and booking b) e-payment c) on-street guidance and detection and d) Peer to Peer Parking (P2P) platforms make money based on transaction fees. The last two — valet and B2B analytic platforms — have a different business model. The trends of the various segments are outlined below.
Info, payment and booking for on- and off-street parking
Which player has the most parking spaces upon it’s platform? Here a race is occurring. The two largest global players are Inrix and Parkopedia. Both have started with on-street parking data/information and are now also including off-street parking info combined with payment and booking. Currently, automotive companies are willing to pay around 1–2$/year/car for integrating those services into the car infotainment subscription services. Assuming that around 200–300m connected cars will be on the streets within the next 5 years, the market size is relatively small. Therefore, and due to competitive forces, both players are now also including payment services to take transaction fees. This becomes especially interesting when “cars” will automatically pay for parking. Thus the trend is that in the near future pure info platforms will provide such data for free and all players will make $s by taking a transaction fee.
Pure e-payment focused companies for on- and off- street parking
Here, three players are already dominating the market i.e.: a) Easypark, majority owned by Verdane Capital, a private Equity company — potentially looking for an exit, b) PaybyPhone, acquired by Volkswagen AG in December 2016, with approx. $350m in gross revenues and c) Parkmobile, the US entity is owned by the Dutch business travel group BCD, the European entity is owned by BMW. Given the trend in the connected vehicles, these platforms are also including automated booking and information systems about parking, and as such will enter the space of the first segment.
On-street guidance and detection
In this segment, a small amount of startups are active: they crowd-source parking data through smart phone sensors, sometimes combined with dedicated hardware-based sensors, statistics and/or parking regulations/location information. This either feeds directly into their own proprietary apps and/or they provide a Software Development Kit (SDK) for other apps based on their data/algorithms. Making money on this services is not evident and those platforms need to pivot into transaction fees as well.
This model is straightforward as these platforms are parking aggregators of private or business owned parkings to make them available/bookable for other individuals. All these platforms make money by taking a transaction fee. Here, scalability is key, i.e. getting as many parkings online for the lowest customer acquisition cost (CAC) per parking. Many startups are active and as such the sector is ready for a market consolidation.
Various startups were founded in this sector in the US during the last years. Almost all failed (Vatler, Caarbon and Luxe) or pivoted to a totally different area ( Zirx to Stratim). Only one “Valet Anywhere” is still active and offers valet services for monthly subscribers. All of them underestimated the relative high CAC combined with high cost for the valet man force, with very limited economies of scale (there are only 1–2 parking events one person can handle per hour) plus unpredictable demand. In addition, expected discounts with parking operators where not achieved as demand was highest during their peak hours. Often parking spots had to be prepaid regardless of usage. Similar Valet startups are “popping” up in Europe since 2015. We expect that the history as in the US will repeat itself. This segment just doesn’t scale unfortunately.
B2B, data analystics, SaaS
These startups are focusing to increase the yield of parking operators and/or provide parking information for e-payment providers. Especially the ones improving the yield of operators are promising as most are still using excel sheets or even more simpler models. A promising one out of the US in this segment is Smarking .
From an investor point of view, the interesting bets within key segments have already been taken. Interesting investments can still be made within the B2B analytic platforms business segment.