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Mark Lawrence kept hearing the same thing from investors: if he wanted their money, he had to expand quickly.
It was 2012 and Lawrence was the co-founder and CEO of SpotHero, a startup that allows drivers to pre-book parking spaces – on a property or in a garage, for example. Competitors spread across the country and investors saw a land grab. The company with the greatest presence seemed the most likely to win. "They said they would invest when we were bigger and when we were in more cities," recalls Lawrence.
But Lawrence had a different idea. He started in Chicago and wanted to rule one city at a time. "I didn't know I was right," he admits. However, entrepreneurs constantly have to make difficult and consistent decisions – balancing the advice of others against their own gut instinct, even when deep down they have no idea who is right.
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How does someone like Lawrence stay with his stomach? He played out different scenarios, justified his plan and set an aggressive schedule. In the end he was right.
In 2012, people called SpotHero a one-hit wonder. It had raised some money, graduated from an incubator in Chicago, and hired a few employees. But the competitors grew quickly. A startup called Parking Panda, for example, started in Baltimore and was already in several other states. When Lawrence sought more funding, investors pointed to companies like Parking Panda and said, "Do this."
But Lawrence had studied his competitors' tactics and found they were missing. Panda parking, for example, had a handful of spaces in Boston and Philadelphia. "Nobody in Philly cares how many locations you have in Boston and vice versa," he says. "People are worried about whether I can park in my city today." Lawrence believed that by covering so much ground, his competitors diluted themselves. They did things to please investors but became memorable for consumers.
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Instead of arguing, Lawrence thought about what investors were looking for. “What they really wanted was a rate of sales growth and a game over path,” he says. So he proposed two plans, with planned revenues for both. In the first case it would suddenly expand rapidly. In the second case, he would act like a conquering army: stay in Chicago for six months to defeat a local rival, then go to DC and defeat Parking Panda, then go to New York and defeat a competitor there and then march to the west coast. The second plan had stronger numbers. Investors cautiously agreed.
Now that SpotHero could focus solely on Chicago, it was able to spend all of its marketing resources on site. That started an important chain reaction. The more Chicago residents used SpotHero, the more operational challenges had to be resolved, which is how SpotHero learned how to work at scale. This, in turn, led to significant revenue in the garages – which became the game changer.
Look at the parking industry. There are large companies that own garages all over America. SpotHero's competitors sent stores to many of them, but no single garage saw a significant drop in sales. Meanwhile, SpotHero was focusing on one area, which meant a lot of money was pouring into some garages – and this was being heeded by the garages' national executives.
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Soon executives spoke to Lawrence about how to get involved in a national rollout. "We actually have the best relationships with the biggest companies just because we focused on one market," says Lawrence. When it came time to expand into DC, SpotHero launched in 100 locations there – a massive move that helped it quickly dominate. Soon SpotHero was on the move, expanding, and buying up rivals (including Parking Panda) while others panned or died.
Today, the company operates in 300 cities, has raised $ 118 million, and expects to total $ 1 billion in parking lot sales by 2021. And when Lawrence looks back, he takes this lesson: Expanding smart is more important than expanding fast – but that's not to say it will ever feel risk free. "If you feel so good in one market and then move on to the second," he says, "you've waited too long."