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Valets On Demand: Can Luxe Solve Our Parking Mess?
Brian SolomonFormer Staff
Forbes Trep Talks
Anyone who's driven through a city, searching in vain for a vacant parking space that never appears, knows what a hassle parking has become. Curtis Lee is trying to help you with that problem.
One year ago today, Lee launched his startup Luxe, an app much like Uber—except instead of pushing a button to have a driver pick you up, Luxe sends someone to pick up your car. These valets, who roll around on scooters, take your car and stash it in a parking garage Luxe works with. You pay by the hour, or for the full day, then have the car returned when you need it again.
Lee, a Wharton graduate, had previously worked as a product manager at Skype, Google, YouTube, Zynga and Groupon. As CEO, and with the help of about $25 million in venture capital, he's led Luxe from just San Francisco to eight other U.S. cities in a year. He isn't concerned with profitability right now; rather he's focused on a land grab to fend off competitors in what he hopes will be an Uber-like business opportunity—parking on demand. Luxe has grown 40% month-over-month since its launch, and about 80% of customers who try Luxe become repeat customers.
Lee spoke with Forbes recently about what makes Luxe work and the challenges of scaling so quickly, in a conversation that has been condensed and edited.
Luxe cofounder and CEO Curtis Lee (Credit: Luxe)
Brian Solomon: You worked for a number of big tech firms, then left to start your own company. But it wasn't Luxe—what was your first idea?
Curtis Lee: I left Groupon a little after a year, because I had an idea for a workforce analytics company. When I was at Google, we had performance reviews at the end of the year. They were the biggest pain in the ass. Our entire fourth quarter was spent doing this, and they always told an incomplete story, fraught with office politics. It was the same nightmare at Groupon. Our startup idea was to use software to take implicit and explicit signals from your work throughout the year. So it would tie into your calendar. If I were the meeting organizer, other meeting participants would get a quick question prompt right after asking how I did. I wouldn't have to do anything, software would extract the answers for eventual review. But we lost steam on the idea. When you're a cofounder, you're effectively a married couple. Unfortunately, I viewed the world one way and my cofounder viewed in another way.
Solomon: Then Luxe was take two. What inspired the idea and how did you find a new cofounder?
Lee: Luxe is an idea I had for a while. When I'd work at Google or Zynga, I lived in the Pacific Heights neighborhood of San Francisco, and there's not a lot of street parking in the neighborhood. I wished a service existed to just park in front of my house—a valet system. That did exist, but only at restaurants. When you do the whole entrepreneurial thing, it takes a lot of blind faith. Some thought it was a genius idea and some thought it was an idiotic idea. You can easily convince yourself not to do this, especially if you have a cushy job at Google.
I previously worked with my cofounder Craig Martin at Zynga. He was the lead engineer and I was the product manager. Convinced him to quit his job and start the company together. Funny how the dots start to connect. Our first 20 employees were former coworkers at my previous stops.
Solomon: What did you learn working for companies like Zynga and Google that you can apply to your startup?
Lee: At Zynga I learned to be very data-centric. They are notorious for looking at numbers all the time, making tweaks all the time. So at Luxe we have metrics meetings every week; we're pretty obsessed about our data and that gives us an advantage over competitors. At Google, we wanted to make a killer user experience, and as we build our business there are decisions that are almost always in favor of making the best experience possible. As for process and culture, we go closer to Google than Zynga. We want a no jerk culture.
Solomon: How important is that culture to you?
Lee: A lot. I didn't my enjoy job at Google that much because I wanted to grind, work many hours. It was way too cushy, wanted to get stuff done and engineers were in the middle of yoga class. The lack of urgency drove me nuts. Zynga, it's a million miles an hour there, an asshole culture and people burned out. Strangely enough, I loved it because it was everything Google wasn't. I'm naturally a risk taker. The risks of not doing is greater than the risk of doing things. I'd rather folks here work fast and be wrong than take time and be conservative. That's the way I view the world.
Solomon: What about the risks of going too fast?
Lee: There are two modes people should have. First is just full speed, get stuff done. When you've already thought about it, don't let your foot off the pedal. But on other side with ideas, strategy, vision, you have to stop and sit and think. I look at people, look at TV, why is this designed this way, why do they have a cord from this angle. I constantly do that. When I look at our product too, why did we put the button over here when people's fingers are down below?
Solomon: How did you test your idea?
Lee: We started Luxe in the middle of 2013—quit our jobs, got the company incorporated. We launched a beta product in April 2014. Put it in hands of maybe 100 of our friends. We had some users, but I thought it would be more exciting to users than what we saw. I questioned myself: did people want to use the product? What was eye opening was marketing to business people and commuters—they were the users who really embraced it. But we had a long beta, 6-7 months. We spent that time fine-tuning the service before launching officially in October 2014.
Solomon: How did you gain traction?
Lee: We originally went to restaurants. Their customers had difficulty parking and we suggested they promote Luxe. But the challenge is you only go to that restaurant once in 6 months. It's hard to get behavioral change when you're using it so infrequently. The key was commuters: people driving into San Francisco every day. So we targeted those who were driving into work, friends, friends of friends and we allowed users to invite other people. It grew from there. We saw at Salesforce, one person using it became four became eight became 16, and the next thing you know I was talking to exec at Visa who used it.
Solomon: Luxe valets are easy to recognize on the streets, with their blue jackets and scooters. How did you arrive at that look?
Lee: A lot of startups don't think about branding enough, but I think about it a lot. Our scooters and blue that builds brand awareness. But for the scooters in particular—that's as much about function. We tried everything. Scooters are faster than someone walking, but smaller and less expensive than a bike. We thought about skateboards. But with a scooter everyone could jump on and get it. We timed it: scooters are 3-5x faster than walking, same as someone running or sprinting. It's foldable, goes right into people's trunks.
The Luxe app (Credit: Luxe)
Solomon: The name Luxe even sounds expensive. Can this service be bigger than just valets for rich people?
Lee: We bring a luxurious experience, but it's an affordable experience. As Uber shows, you'll never build a big company just focusing on the top 1%.
Solomon: How do you manage supply and demand between users and valets?
Lee: With these businesses, transportation is commoditized and there's a large network effect. The more supply you have, the better user experience. So the more valets we had, the shorter return times we had, the coverage areas got bigger, so people would use it more. We did have to over supply up front, then increase efficiencies and lower prices and create more demand. But this is only indicative of businesses in transportation industry. As we scale our service gets better and user experience and economics get better.
What made us confident early on was high engagement rates. Our repeat rates were extremely high, especially for an on demand business. Most are less than one use per week or month. We saw two per week for the average user. It was a relatively small number of users, but high engagement rates gave us the confidence. And that's sustained almost exactly. And we're focused a lot on the commuter market, using us 4-5 times per week. A lot of them have canceled their monthly parking lot pass and have replaced them with us. They don't need to know where their car is—it's like storing files in the cloud.
Solomon: How do you make the unit economics work? Do you strike deals with parking lots?
Lee: Yes, what we're doing is what Priceline does with hotels. Parking lots have inventory that expires on a daily basis. Even in a crowded neighborhood, there's always remnant inventory. What we do is talk to parking lot operators and make a deal. Let's say the price for a spot is $300 a month. If you can turn that over one time each work day, 20 days in a month, the effective cost is $15 per day. And we use nearly 100% of our spaces on a daily basis—many of them multiple times per day, so the total uses per spot per month goes up to 40 or 60 times, driving the effective cost down. It's all about the utilization.
Plus, we often lease these parking spaces in bulk, so we get them for less, maybe $200-250. And they might be in fringe areas, lesser desired. Cities don't want to put another parking lot in an expensive neighborhood, so there's a decoupling of supply and demand, which is perfect for our model. We can park it a little further away, bridge that gap with our valets.
Solomon: On the other hand, Uber, Google and others are saying a few years down the road we can get rid of cars and replace them with a self-driving automated fleet. Is Luxe based on an outdated transportation model?
Lee: It's a romantic narrative in San Francisco or some parts of New York that we're going to get rid of all cars. But cars are best way to get from point to point, period. Especially if you live outside the city. If my kid needs diapers at midnight in the suburbs, I won't wait for Uber. But where we agree with Uber and Lyft is that parking lots in cities are a waste of space that should be civic hangouts and parks. Our network of valet stands can replace parking lots.
Solomon: Do your ambitions for Luxe stretch beyond the parking arena?
Lee: Further out, if we're successful, what we'll have built is one of the largest driver graphs, where they originate, where they end, and have all that data at our fingertips. If Uber is about 1% of professional drivers, the opportunity exists for us to be for 99% of casual drivers who can piece together car pooling and ride sharing. For example, if you're commuting from the suburbs, we could match you with someone to carpool with, who pays you for that service.
Solomon: You've expanded very quickly—only a year after launch you're in 9 cities. Why go so quickly?
Lee: We move fast because we saw demand as we got scale in our existing cities. People in New York were tweeting at us saying "we need you." And we wanted to make sure we got out there ahead of any competitors. One thing different from us vs. ridesharing is that by being first we get access to the best parking inventory. And every single city we launched has grown faster than the prior city. But we take a gradual approach. We don't instantly turn on entire city or put 1000 valets right in.
Solomon: Do prices vary in each city?
Lee: Every city is different. In San Francisco it's $7-8 per hour, and $25-30 all day. So making money is all about driving efficiency. On the valet side, we pay them a $12 hourly wage, so two cars per hour would be per unit rate of $6. But if they can do 3 or 4 in an hour, that increases efficiency. We're also adding things like preferred drop off points, kind of like a virtual valet stand where users pay a slightly lower rate if they drive to us. That makes it easier to turn over the spaces and park in places we prefer. Sometimes it's as much as a 50-100% increase in efficiency.
Solomon: You've also added additional services like car washing and gas refills for an additional cost. How important is it for you to add additional revenue on top of the standard parking fees?
Lee: It's important. We're growing 40% a month in customers and transactions, with revenue outpacing that due to added services.
Solomon: Luxe has raised $25 million in the last year. Why take that much that quickly?
Lee: We've gone from 7 employees to 70, so we're growing quickly. And there's a ton of interest in this space. Transportation is a winner-take-most area, so the rich tend to get richer and people want to invest in the market leader. In past three to six months, we've clearly established ourselves as the biggest company in parking by every metric. We're not actively raising more funding now, but always evaluating.
Solomon: What's next?
Lee: Next year for us is more city expansions and we may even dabble in international. The international market is actually way, way bigger, and factors more in our favor. There are lower wages and a higher crunch on parking. China is a natural one, with huge urbanization trends, cheaper labor, and all sorts of craziness from a growth perspective. Europe is also majorly exciting. Parking prices in London average $50, $60, even $70 per day. It's the highest in the world. Also South America. This is not just a U.S. problem.
Gallery: The World's Youngest Billionaires 2015
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Brian Solomon
Brian Solomon was a Forbes staff writer from 2011 to 2017. He most recently covered technology startups, with a special focus on the on-demand economy of Uber, Airbnb,…
Brian Solomon was a Forbes staff writer from 2011 to 2017. He most recently covered technology startups, with a special focus on the on-demand economy of Uber, Airbnb, and more. Previously at Forbes he wrote about everything from small business to billionaires to Wall Street.
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