Inside story of VATLER’s shut down
We started VATLER during the summer of 2014 as an on-demand valet service in San Francisco. At the time we were part of the Y Combinator Summer 2014 batch. We had just pivoted away from Sweetch — an app where people exchanged on-street parking spot for $5 — after receiving a cease and desist from the city of San Francisco (read the full story here). From Sweetch to VATLER, our vision was to solve the parking problem in congested cities.
Modernizing restaurant valet
With VATLER, we rapidly decided to focus on night-time valet for several reasons. First, even though we were offering a delightful experience, we were losing a lot of money when we were parking cars during the day because of the high cost of parking and the time wasted in traffic by our valets. Second, we realized that many drivers — especially those who live outside of the city — were struggling with parking every time they went out to restaurants and shows in the city. Those drivers loved the convenience of using a valet service but unfortunately few restaurants and venues could offer it because it was too expensive. The average valet company would charge the restaurant $3,000 a month to provide service and charge the drivers between $10 and $20 depending on the neighborhood.
When we dug into this industry, we realized that the majority of valet services at restaurants were under-utilized and did not use technology to be more efficient and provide a better user experience. So we came up with the idea of making several restaurants share the same valet while allowing drivers to request a valet on our app or through text message. The only way our model could work is if we were able to have a high density of restaurant partners in the neighborhoods where we would operate. The service would be free for the restaurant and would cost drivers between $15 and $20 depending on the neighborhood.
First issues with the city
One barrier we knew we had to deal with is regulation around valet parking in the city. The tax code requires valet parking companies to pay 25% parking tax to the city on each vehicle parked and the police code to apply for a permit in each location where a valet is standing with a sign. We reached out to the police department to better understand how this would apply to VATLER since we were sharing valets between locations and using technology.
Getting no answer to our emails and calls, we decided to experiment our model to see if it could work. Within 2 weeks we had 4 restaurants on-board. We were parking their customers only on weekend nights at first to better understand the needs and iterate on our product. My co-founder and I were parking cars ourselves every weekend night. After 4 weeks, a police officer along with a tax officer showed up at one of our locations and asked to see a permit which we obviously didn’t have.
This was good news. We were finally going to get answers to all our questions. We met with the police and tax officials the following morning with the intention of fully complying with their requests to operate our business. We were ok with all the rules except one. In order for us to get a permit, the city wanted us to use a certified third party provider to issue tickets and keep track of our revenue. Obviously we couldn’t comply with this requirement. Our customers requested their car back through the app or by text message. This would have been impossible with paper tickets and we would have been forced to have one valet per location. This was totally against sharing one valet between several restaurants. We discussed our operating model with the city and gave them access to all our data. After realizing how complete the set of data we were able to provide was, they agreed to work with us.
Rise and fall
The next six months were great: 30 restaurants signed up for our offer and we were able to serve up to 400 customers a week thanks to the dozen of awesome valets working for VATLER. We were on our way to reach 100 restaurants by the end of the year. The city granted us the first 5 permits we asked for. We decided to apply for 5 additional permits. We were paying a total of $1,250 for each application.
Suddenly, two months ago, we received a phone call from the city explaining that traditional parking companies were not happy with the way we were poaching business from them and that we had to slow down our growth. We ignored this warning. Ten days later, we received a phone call from the police department telling us that our permits had not been granted and they gave us a warning because we were operating illegally in most of our locations. We were paying thousands of dollars in taxes to the city each month and were complying with all of their requests. We wanted to understand why the city officials changed their minds and tried reaching out to the decision makers find a way to comply with their potential new requirements. No one wanted to meet with us.
It was impossible for us to grow and add more restaurant partners. New restaurants knew we didn’t have permits and did not want to switch providers. We also had to inform our restaurant partners about the situation and some of them decided to stop our relationship. In 2 weeks, we lost major accounts and 30% of our revenue streams without any perspective of growth. We tried to make some restaurants pay but it was just not working. Our model was no longer valid and were forced to cease operations in the city on September 7th.
I am grateful to the incredible team we built at VATLER. I am really proud of what we have accomplished given the limited resources we had. I am sad for our 26 awesome valets. They were part of the reasons we were fighting. I am finally sad to see that there is no valet in many of the small restaurants we were working with and that we can no longer provide service to our amazing customers. As one of our parking partners said, “San Francisco is a forward thinking city with many backward practices”.
But the story is not over for us, we still have a little bit of funding left and a lot of energy. We want to thank our families, friends and investors for their support. We are figuring out our next move, follow me @hamzaouazzanic to stay tuned.
Hamza, on behalf of the VATLER team.