Brakes go on for US valet parking firms

Venture capital firms bet tens of millions of dollars that startups offering affordable valet parking to harried urbanites would flourish in the on-demand economy pioneered by Uber.

Parking valets working for companies with names like Luxe, Zirx, and Valet Anywhere became a common sight in the congested precincts of San Francisco, Chicago, and New York.

With a few taps on a phone, customers could summon a valet and avoid the hassle of finding a parking spot and then squeezing into it.

Once they’d finished shopping, dining or taking a meeting, the valet would drive up with the vehicle.

Turns out it’s hard to make money parking cars.

Two startups — Caarbon and Vatler — quickly imploded and three more — Luxe, Zirx, and Valet Anywhere — are shifting away from the on-demand model and selling their services to companies instead of consumers.

Their retreat is a cautionary tale for scores of startups flogging instant gratification to people who, on the spur of the moment, want their cocktails mixed, laundry folded and bodies massaged.

“Uber became huge so people felt everything needed to be on-demand,” says Ryan Sarver, an investor at Redpoint Ventures and a Luxe board member.

“Then people went out of business because it doesn’t have to be,” he said.

In the beginning, on-demand valet parking had plenty to recommend it.

For no more than $35 (€31) someone attending a Broadway show could have her car parked and then driven back to the theatre.

For a few dollars more, a Zirx valet would top up the tank and wash the car. By contrast, self-parking the vehicle in a midtown Manhattan parking garage would cost more than $45.

After raising $36 million, Zirx quickly expanded from San Francisco to five more cities. Like its rivals, Zirx was chasing economies of scale.

But Zirx began burning through cash because it had to pay its growing legions of valets — including the time they spent hanging out waiting for a text alert.

Meanwhile, the company was struggling to extract meaningful discounts from parking garages because there’s no shortage of demand for the limited number of parking spots.

The upshot: Zirx was losing money on many transactions.

So along with its rivals, Zirx tried surge pricing and cut costs by parking farther away in cheaper garages. Service suffered, and customers rebelled.

Sean Behr, Zirx’s founder and chief executive, remains enamoured of the concept but grudgingly bowed to the unworkable maths and shut down the consumer side of the business at the end of February.

Now he’s selling parking and other car-related services to companies.

It’s a more predictable business because workers typically show up and leave at the same time every day.