3. ParkIt April-2010
Table of Contents
Executive Summary 2
Company Mission 3
Product and Service Offering 3
Identifying the Opportunity 3
Providing a Solution 3
Benefits and Impact 5
Market Landscape 5
Parking 5
Mobile Phone 6
Competition and Substitutes 7
Target User Research 8
Market Segment Identification 8
Phases 9
Management 10
Key Job Descriptions 10
Management Team 11
Marketing and Sales 11
Marketing 11
Distribution 12
Financial Summary 12
Pro-Forma Summary 12
Assumptions 12
Income Statement 12
Balance Sheet 13
Cash Flow Statement 14
Exit Strategy 15
Key Challenges 15
Strengths, Weaknesses, Opportunities and Threats 15
Risk Analysis 15
Appendix 18
Exhibit 1 - Survey Characteristics, Results and Conclusions 18
Exhibit 2 – Focus Group Results 22
Exhibit 3 - Financial Details 24
1
4. ParkIt
April-2010
Executive
Summary
Sixty-six
percent
of
cars
parked
in
Madrid
have
been
shown
to
not
pay
fees.
This
results
in
a
lack
of
revenue
for
the
city.
With
88M
in
revenue
which
could
be
260M ,
this
is
an
issue
in
which
our
venture
can
help
Madrid.
ParkIt
has
been
created
with
the
intention
of
becoming
the
next
breakaway
technology
that
will
revolutionize
the
way
people
park
in
Madrid
and
eventually
Europe.
Background
Like
many
major
cities
in
Europe
there
is
an
issue
with
the
congestion
of
cars
in
Madrid.
This
issue
has
become
a
problem
for
many
people
driving
in
the
city
and
the
biggest
bottleneck
in
the
process
of
commuting
to
and
from
Madrid
is
the
park.
For
a
driver,
finding
an
on-street
parking
space
is
not
an
easy
task
in
some
crowded
cities.
Often
times
a
driver
can
be
circling
the
block
for
up
to
45
minutes
depending
on
the
city
and
time
of
day.
Madrid
is
no
different
in
this
case.
However,
due
to
clear
efficiency
issues
not
to
mention
the
average
Madrileños
lack
of
coins
on
hand
at
any
given
time,
this
system
is
antiquated
and
every
one
knows
it
and
despite
the
steep
fines
associated
with
lack
of
payment
people
find
creative
ways
to
avoid
it.
Sixty-six
percent
of
cars
parked
in
Madrid
have
been
shown
to
not
to
have
paid
parking
fees.
This
results
in
a
significant
lack
of
revenue
for
the
city.
The
current
number
amounts
to
88M
which
could
be
260M ,
this
is
an
issue
in
which
our
venture
can
help
Madrid.
The
Concept
The
founders
of
ParkIt
realized
that
with
today’s
technology
they
could
offer
the
city
of
Madrid
an
opportunity
to
advance
the
cities
parking
system
to
the
21st
century.
Not
only
offering
a
better
way
to
administer
the
system
more
efficiently
by
adding
a
network
of
sensors
in
the
city
that
makes
paying
easier
so
much
so
that
it
can
be
done
on
a
smartphone,
but
also
showing
where
people
are
going
over
their
time
or
not
paying
at
all.
This
new
parking
system
can
control
parking
rates,
times,
and
other
information
to
give
more
data
to
the
administrators
of
the
system.
Given
that
the
smartphone
trend
is
increasing
and
the
penetration
of
mobile
phones
in
Spain
is
114%,
there
is
an
opportunity
to
utilize
this
information.
Park
it
will
also
give
this
information
to
drivers
who
can
find
their
spot
quicker
and
easier
reducing
congestion
in
the
city
and
make
the
city
cleaner
with
reduced
carbon
emissions
and
traffic
flows
more
smoothly.
The
Solution
By
importing
a
technology
from
a
US
partner,
Streetline
Networks,
we
will
implement
a
system
to
address
these
issues.
With
an
investment
of
200.000
in
addition
to
financing
from
the
US
Ex/Im
Bank
we
propose
a
phased
installation
of
this
system
in
Madrid
then
expanding
to
other
cities.
Given
that
this
is
a
municipal
project,
essentially
a
public-private
venture,
the
long-term
outlook
shows
profits
starting
in
year
7
with
a
payback
in
year
6
and
an
IRR
of
64%
on
the
initial
investment.
The
Team
Brendan
Quirk
an
MBA
with
an
accounting
background
and
C.
Todd
Lombardo,
an
MBA
with
a
technology
and
marketing
background
are
seeking
a
third
partner,
preferably
a
Spaniard
with
experience
in
Madrid
public-private
partnerships
to
launch
this
venture.
2
5. ParkIt April-2010
Company Mission
The mission of ParkIt is two-fold (1) implement an improved parking management system in Madrid
allowing for higher compliance of parking payments equaling higher revenues to the city and (2) to
reduce drivers’ frustrations when searching for a parking spot, decreasing the amount of unnecessary
traffic, congestion and pollution from automobiles due to redundant driving in crowded city centers.
Product and Service Offering
Identifying the Opportunity
Finding parking is an issue in Madrid. Recently there was an issue with certain parking meters
overcharging resulting in a backlash and a request for 400.000 parking fines to be nullified and a loss
of revenue for the city. In Madrid's "Blue Zone," 2 out of 3 parked cars have exceeded the time that
has been paid and there was no fine levied.1 This leaves a significant amount of parking fee revenue
uncollected by the city of Madrid. Last year, Madrid collected approximately 89M! in parking fee
revenue2. This equates to approximately 530! per parking spot per annum, which should be closer to
1.055! per annum, assuming 168.000 on-street spots in the city of Madrid. Additionally, there are
approximately 434.000 cars which enter the city of Madrid on a daily basis, half of which have a
destination near the city center and on average a driver takes 12 to 15 minutes to find a spot,
sometimes up to 45 minutes depending on the time, day and neighborhood.3 Due to this demand for
parking, the Ayuntamiento has created a zoning system to regulate the demand, however this has not
solved the problem. Given there is finite space the ability to create new parking spaces is costly and
an option to remedy the problem is to enable better management of parking availability.
Providing a Solution
By capitalizing on the fact that the Spanish mobile market has a penetration of 114%4 and that 25%
of Madrileños have smartphones, our plan is to offer a complete solution which incorporates sensors
installed on the street, use of the existing parking meters, the internet, and a downloadable
smartphone application to bring together a solution to increase the city’s parking fee revenue.
The process works as such: Sensors installed in the street send wireless signals to base stations
(located in parking meters) which then communicates either via cellular 3G network or the internet the
status of each sensor. A centralized database manages this information and relays it out to the user's
mobile phone in real time.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1 http://revista.consumer.es/web/es/20080201/actualidad/tema_de_portada/72320_5.php#madrid (Accessed 25-April-2010)
2 http://www.gonzalomontero.com/noticias/Ayuntamiento_Madrid/Proyecto_%20Presupuesto_2008_tomo2_1_Pagina_082.pdf (Accessed 20-April-2010)
3 http://www.20minutos.es/noticia/195235/3/ (Accessed 27-April-2010)
4 http://ec.europa.eu/information_society/doc/factsheets/14thimplementation/14th-progress-report-es-final.pdf (accessed 28-April-2010)
3
6. ParkIt April-2010
A downloadable software application from the Internet onto a smartphone over-the-air (OTA) will
utilize the phone’s geo-location ability either via GPS or via co-location of cell-towers and identify
where the user (i.e. car) is located. The application will display a street map of the local area with an
overlay of the availability of parking spaces. There would not be individual spaces highlighted, rather
only probabilities represented by a color. Zones in displayed in red would signify low-probability of an
available space, yellow, a medium probability and green high probability.
Once a user has located and parked in an available spot, the user can pay for the parking fees with
via their smartphone. This reduces the need for specific coins or a pre-purchased card. When the
allotted time is up, the user is sent a message to their phone for either renewal of the fee, or a
message requesting them to move their car. Options are presented for the user to renew the fee or
leave the parking spot. This can increase the compliance for payment as well as increase the revenue
the city earns from parking fees.
The technology is provides by Streetline Networks (Streetline) in the United States.
Streetline is building the future of cities with ultra-low power radio technology wireless networks,
sensors and management systems. Streetline builds solutions to longstanding problems in city
management and operations, through the customized design and application of new sensing
technologies. Our parking management system offers cities the first real control and oversight of
their complex inventory of on- and off-street spaces, and forms the backbone for other
innovative sensing solutions that lower city costs and improve public services.
At the heart of the sensors are electromagnetic sensors manufactured by Dust Networks. Streetline
has combined all of the hardware, middleware and software into a total solution package and has
successfully implemented this solution in the City of San Francisco. More information can be found at
SFPark.org. They are currently expanding to Los Angeles, CA as well. Our intent is to import this
technology and install an analogous system here in Madrid.
4
7. ParkIt April-2010
Benefits and Impact
This proposed parking solution is estimated to cause an increase in revenue per parking spot. Applied
over 10.000 spots in the most congested areas of Madrid, there could be significant reduction in
traffic as well as an increase in revenue due to the increased ease of use and the convenience of
payment ability with the system.
It is estimated that in large cities people who are circling the block looking for a place to park their car
cause 20-40% of driving traffic.5 This results in consumption of over 177.000 unnecessary liters of
gasoline or the equivalent to driving around the globe approximately 14 times. One study by the
Texas Transportation Institute in 2000 suggests that traffic congestion from unnecessary driving
wasted an estimated 67.5 billion dollars, based on lost productivity and fuel consumption.6,7 Should
this system be successfully implemented in Madrid, traffic could flow smoother, drivers could make
more informed decisions about when and where to drive in the city and the environment and the city
will benefit. The user will be informed of when the fee is up along with the convenience for payment.
There would be no need for coins nor purchased cards, only a mobile phone is necessary.
After a significant mass sensors are installed and the majority of drivers are using the system, variable
pricing schemes could be offered to give drivers the ability to make more informed decisions prior to
getting into their car. This could reduce traffic and congestion and also have the potential to increase
the revenue to the city. For example: in blue zone parking, the time limit is 2 hours. However if the
user wishes to stay for a 3rd hour, they would be charged a higher rate such as 10! to incentive-ize
the driver to move their car, and the city receives this revenue without having to issue any particular
fines.
A final benefit is one of security. By having the technology available in sensitive areas, the length of
time cars are parked in certain locations can be tracked. This may prove useful to foreign embassies
and other organizations that may have any terror threats to consider.
Market Landscape
Parking
There exist two zones of on-street parking in Madrid: "Blue" for short-term (less than two hours)
parking and "Green" for resident parking. There are an estimated 168.000 on street parking spaces in
Madrid. See figure 1 for the distribution of on-street parking places in Madrid.
In the blue parking zones, preferably reserved for visitors, parking is permitted to non-residents and
residents of specific district, for a maximum of two hours as a rate of 1,05!, with some minor variation
depending on time of day and season. Additionally, commercial and industrial vehicles displaying the
appropriate orange decal are permitted for up to five hours. The time intervals are fractions, except for
the first twenty minutes, intermediate time intervals between two rates, in multiples of 0.05! in
proportion between the anterior and posterior rate. Supplement charges are incurred for the excess
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
5 Markhoff, John (2008). Can’t Find a Parking Spot, Check Smartphone New York Times
http://www.nytimes.com/2008/07/12/business/12newpark.html?ex=1373601600 (Accessed 9-August-2009)
6 Downs, Anthony (2004). Still Stuck in Traffic: Coping with Peak-Hour Traffic Congestion. Brookings Institution Press, Washington, D.C., USA
7 Driven to Excess: What under-priced curbside parking costs the Upper West Side. Transportation Alternatives.
http://transalt.org/files/newsroom/reports/driven_to_excess.pdf (Accessed 9-September-2009)
5
8. ParkIt April-2010
up to an hour on the time authorized in the ticket: 3! (without penalty). After the maximum permitted
period, a car may not park in the neighborhood for a four hour window.
In the green parking zones, non-residents in the district can park their vehicle specific for a maximum
of 1 hour. Local residents may park their vehicle without time limit, exhibiting their specific residence
on the front windshield of the vehicle. In Madrid, there exists about two times as many green parking
spaces than blue parking spaces.
Mobile Phone
Spain itself has a mobile phone penetration of 114%8, meaning that nearly everyone has a mobile
phone and many have more than one. According to an extensive study “Smartphone & Chip Market
Opportunities,” Smartphone’s will grow 13% in 2009 to 164 million units. Forward Concepts forecasts
a compound annual growth rate of 21.7% to the 387 million-unit level in 2013.9 As of today Madrid is
one of the most sophisticated cities in Europe, and has a continuously growing base of Smartphone
users. Our research in the Barrio de Salamanca showed that 54% have a smart phone (iPhone,
Blackberry or other 3G phone) that would support ParkIt’s offering. The remaining 46% of the users
have regular phones. Currently smartphones make up 25% of the entire mobile market in Spain and
this is expected to more than double over the next two years, as smartphone’s will soon become a
common good. This increasing competition will help prices for smartphone’s to decrease, and
therefore becoming available to almost all mobile phone users.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
8 http://ec.europa.eu/information_society/doc/factsheets/14thimplementation/14th-progress-report-es-final.pdf (accessed 28-April-2010)
9 Marsal, Katie (2008) Apple's Smartphone share closer to 13%, still ahead of Microsoft
http://www.appleinsider.com/articles/08/12/04/apples_smartphone_share_closer_to_13_still_ahead_of_microsoft.html (Accessed 29-August-2009)
6
9. ParkIt April-2010
Nokia continues to be the leader in Smartphone shipments in Europe however this is changing rapidly
as Apple's iPhone and Google's Android platforms gain popularity and traction. With an estimated
2008 market share of 34%, followed by RIM at 13%, Apple at 9.6% and Sharp at 5.7%. Sony
Ericsson follows with a 5.3% market share, and then HTC at 5%, Motorola at 4.6% and Samsung at
4% and 16 other smartphone vendors constitute the other 18% share. See Figure 2.10
The applications provided by this mobile phones, provide a segment of the mobile phone industry
easily accessed by external parties, which are not provided by the main phone companies.
Competition and Substitutes
To our knowledge there are no other companies operating this exact business model in Madrid. There
are a number of substitutes in the form of public and private garages offering off-street parking. The
private parking garages have a higher cost per hour, however unlike some countries the cost is not
exorbitant. Average costs to park in a garage in Madrid is approximately 34.5!/24 hours, however in
higher demand areas this cost is upwards of 3,40!/hour.
FCC – manages 25.000 on-street parking spaces in Madrid
Versia Holdings – manages 56.000 parking spaces in Madrid
SICE - Sociedad Ibérica de Construcciones Eléctricas, S.A – manufactures and installs parking signs,
magnetic card readers, cash payment machines and handicap sensors
Vinci Park – Operates 5 underground garages in Madrid
InterParking – Operates private underground parking 7 garages in Madrid
Madrid Movilidad operates 5 garages in Madrid which are primarily for residents
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
10 ibid
7
10. ParkIt April-2010
Target User Research
In order to understand the end user, a survey was conducted to determine the attractiveness of the
planned product offering. The survey evaluated potential clients’ interest in using ParkIt to find parking
and also provided information on individual’s behavior while traveling in Madrid. This information is
essential to narrow down the company’s target population in calculating utilization and penetration
estimates. The results of the survey suggest that the product would be well received and we could
use some data extracted in estimating our potential customers.
Since ParkIt target clients are both commuters residing outside of Madrid as well as local Madrid
residents when traveling their timing needs may differ, however these parking spots act as a direct
channel to segment potential customers into the two categories of commuters and residents.
Surveyed individuals included men and women between the ages of 25 and 45. The survey sought to
gather data on drivers’ behavior while parking in Madrid, their interest in improving the parking
experience, means of getting to know the city parking availability and information sources that they
use for arranging parking both public and private.
Of the total sample, 76% had used more than 2 hours of parking during their stay in Madrid and 24%
had less than 2 hours. Therefore, the majority of the public would need 3-4 hours of parking.
Preferred parking by individuals who took the survey overwhelmingly prefer public parking and we
infer that this is due to convenience and price.
All of the interviewees had mobile phones and preferred to use the internet with their smart phones to
find information on parking.
Also discovered in the data collection and analysis was that while commuting, the majority of the
interviewees did not obtain information before parking to find a spot. Most people use no method to
find parking and according to a study done in New York there are more than 55% of people who do
not pay for public parking because they either have no coins or are simply not paying. These last two
data-points are imperative for ParkIt’s planned communication strategy as they highlight the
importance of reaching potential customers through the internet and informing them to the benefits of
the new technology being used to facilitate parking in Madrid.
In terms of ParkIt’s service per se, the majority of interviewees are drivers with the use of a smart
phone as 54% own one and 25% use phone applications. However, as the usage of smart phones
grows so will our potential penetration into the market. We even consider the possibility of people
getting smart phones and using the applications to increase in Madrid because they realized the
benefits of our application.
Eighty-eight percent of people surveyed were interested in using the ParkIt application, of which 59%
would purchase the service on a monthly fee basis and 29% would pay for it on a per-use basis.
However, because we are offering a way to not only support the customer, and more so the local
government and parking administrators in capturing more paying customers and better control of the
parking system in Madrid, we are planning on offering the application for free to offer an incentive to
customers to use the service. This added value will help build up a base of users quicker than if there
was a charge to use the system.
Market Segment Identification
In order to arrive to a potential number of ParkIt clients per year the following filters were applied to
the survey results.
According to most recent estimates from the Spanish National Institute of Statistics there are
2,981,541 licensed drivers in the Comunidad de Madrid. There are 434,000 cars entering Madrid on a
daily basis and just over half them are going to the center of the city. This is important to understand
about how many customers are going to be downloading the application available on line.
8
11. ParkIt April-2010
According to the European Commision there are 114% of Madrid citizens use mobile phones and of
those mobile phones 25% are smart phones. We can break those smart phone users down to the
different phones available in the market. There are 78% iPhone, 10% Symbian, 8% Andriod and 4%
others. Of those smart phone users we looked into those purchase applications and find that we can
drill this number down even further using the smart phone application purchasers who use each type
of smart phone, 50% iPhone, 10% Symbian, 19% Android, 10% others.
Target customers should satisfy all of the following conditions to be considered a potential user:
1. Must be a licensed driver in Madrid either commuter or resident
2. Must use the public parking services and not be a private parker
3. Be a smart phone user
This first filter yielded in 20% of interviewees to be considered as potential ParkIt clients. Such
respondents should also use smart phone applications (and be familiar with their use). This additional
filter reduced the figure to 15%. That said, this last filter was applied for conservatism, as instructing
an individual to use a smart phone application should not be considered a tedious task.
These figures were used to estimate the market for the number of people who we could consider as
clients of our service and potential users to bring us to our basic assumptions of users of the
technology and the penetration into the market we can have in our key area of the pilot.
Using this information ParkIt’s total initial market is considered to be the average number of drivers
per year in Madrid, and based on the aforementioned filters, 15% of this total would be our initial
clients. An initial penetration level of such potential client base was assumed to be high in our target
area of Salamanca, resulting in high ParkIt customers’ penetration into the key target market where
we test the project.
The average number of expected drivers per day allowed for a calculation of the minimum number of
sensors needed in ParkIt’s network. Of the total parking spot utilization level of 60% was inversely
assumed to generate our potential penetration into the market of drivers. This came to be a initial
assessment of our market and is the basis for our estimation of a pilot program of 325 sensors to
launch the business.
Phases
The project will be completed in phases, with the continuation of each phase expanding the business
further.
Phase 1 - Barrio 41 - Recoletos - Approximately 8 city block consisting of 325 sensors installed
south of Calle de Villanueva to Calle de Alcalá between Calle de Serrano and Calle de Velasquez. This
phase can prove to be a testing ground and also offer a study of parking behaviors so that the local
parking ordinances can be optimized in Phase 2.
9
12. ParkIt April-2010
Phase 2 - Once the pilot is implemented and proven successful, the project can begin to grow to
other areas of the city. We expect this to occur after one year of business operation, and about 6
months after implementation of the pilot area.
Phase 3 - Expand into other cities - First in Spain: Barcelona, Valencia, Bilbao and then to Europe.
For the purposes of our financial analysis we only included Madrid, however similar implementation
costs would apply at each new city.
Management
Key Job Descriptions
Chief Executive Officer (CEO): The CEO will need to report to the Board of Directors on a monthly
basis of the continuous development of the company, s/he will have full authority over the 3 directors,
and will need to reach the pre-established goals by the Board of Directors. Parkit’s CEO will direct
and overlook the company as whole as well as playing an important roll as Sales and Public Relations
agent in order to visit and negotiate with the Ayuntamiento to target new locations. She or he will be
acting as the direct image of the company. At the same time the assigned person must have a
minimal understanding of Information’s Systems in order to fully recognize the operations of the
business and be familiarized with ParkIt’s technology operational details when they need to be
explained.
Chief Information Officer (CIO): will be in charge to direct all IT related activities within the company
making sure that all hardware (sensors at the street) and software (servers) are running at full capacity.
S/He will be responsible for all communication with the technology providers and suppliers. The
maintenance team will be in charge of installing, repairing and adjusting the sensors whenever it is
needed. The CIO will serve as director of research and development and will play a major role in the
success of the company; s/he is in charge of developing all the required application software for the
product and all the IT requirements in order to process all sensor information.
Chief Operating Officer (COO): The COO will be responsible for keeping all companies assets in
optimal shape. He will be responsible for having all sensors and antennas operating correctly as well
10
13. ParkIt April-2010
as all the IT equipment at the same time he is responsible for supervising all technicians operating the
service.
Chief Financial Officer (CFO): The CFO will have the responsibility of generating accurate financial
statements on a quarterly basis for review with the CEO and Board of Directors. ParkIt’s CFO will
have a background both in accounting and law as this person will be in charge of dealing with all
fiscal and legal matters of the company. In charge of dealing with: company salaries, company
contracts, fiscal policies and tax payment, HHRR legal hiring formalities, bank accounts and transfers
management, accounts consolidation and financial forecasts.
Management Team
Brendan Quirk (CFO) was the Interim Director of Finance and Administration for the Latin American
Headquarters of Covance Inc. where he managed the company's growth and expansion into five
different Latin American countries. His Latin American experience began in Mendoza, Argentina,
where he learned to speak fluent Spanish and was the Finance Manager for the start-up wine and real
estate business, Vines of Mendoza. A 2001 graduate of the Boston College Carroll School of
Management with a Bachelors degree in Accounting and Business Information Systems, Brendan has
successfully completed the Massachusetts CPA Exam (2003) and has worked in various capacities as
an auditor and consultant for both the government and private sector. He also holds an International
MBA from IE Business School, where he led the Ultimate Frisbee team to victory in the 2010 Spring
Fling.
C. Todd Lombardo (CIO/COO) is a 35-year-old American with over 10 years experience in product
marketing and strategy in the biotech and technology sectors. He has been the founder or co-founder
of a number of web ventures and most recently Powerpointology, a presentation consulting service.
In addition, he has led teams to promote various conferences on product management in Boston and
was one of the initiators of TEDxMadrid. He holds a bachelor’s degree from Merrimack College, has
studied Biomedical Engineering at University of Connecticut and holds an International MBA from IE
Business School.
A third member of the team (CEO) to be appointed, who has connections to the Madrid Ayuntamiento
and Muni Madrid with experience in Spanish public-private partnerships would be an ideal CEO to
complete this team.
Marketing and Sales
Marketing
Given the phased approach to the implementation, the initial pilot project would be only marketed via
a direct mail campaign and flyering in the specific area. This cost is expected to be minimal.
As the project moves to phases 2 and 3, the ability for bringing awareness to the program will be as
follows:
In conjunction with mobile operators, targeting specifically those users who live in the
congested areas.
News coverage of system installation as newspapers may wish to cover the topic.
ParkIt will also develop a marketing plan with the Ayuntamiento of Madrid, where together we will
market the product. The Ayuntamiento should engage in a personal marketing spree communicating
their intention to provide a vast and reliable service to the community that will reduce traffic, facilitate
day-to-day activities and at the same time reducing pollution within the city, this marketing initiative
should focus on the local media (newspapers and radio). ParkIt will also peruse the Ayuntamiento to
place a small advertisement on the actual “parquímetro,” with the ParkIt logo and some small
description of the application and how to obtain it.
11
14. ParkIt April-2010
Distribution
Distribution of the smart-phone application will be through the app stores such as Apple's iTunes,
Google's Android Market, the Blackberry App store and Nokia's Ovi Market. The application will
simply be downloaded from those sites onto their phone. In each market, if the application is offered
for free, there is no charge to use the market's distribution channel. If there is a price to the
application, then each will take a 30% fee.
Financial Summary
Pro-Forma Summary
The ten-year pro-forma summary is shown in Table 1 below.
Dic-11 Dic-12 Dic-13 Dic-14 Dic-15 Dic-16 Dic-17 Dic-18 Dic-19 Dic-20
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Net Revenue 99 212 615 1.573 3.840 8.378 17.374 28.551 37.057 42.888
EBITDA (414) (351) (24) 867 3.041 7.425 16.207 27.127 35.396 41.059
Net Income (330) (386) (276) 175 1.309 4.070 9.621 16.422 21.630 25.442
Total Assets 168 226 347 466 585 732 918 1.137 1.221 1.323
Shareholders'
Equity (126) (47) 39 130 226 322 420 515 610 691
Free Cash Flow (754) (1.054) (734) (673) (875) 3.015 5.319 13.844 21.755 26.968
Assumptions
Financial projections from January 2011 to December 2020 are shown in the Appendices.
The following assumptions were made in development of our financial projections:
We assume a consistent increase in costs of 3% per year.
Revenue growth depends on the number of sensors that are installed in the ground and he expect to
have this growing at 25% per quarter based on estimates of worker capacity reaching its limits at
around 50,000 sensors installed in a year.
We will only install sensors in approximately 75% of the 168,885 total spots in the city of Madrid.
Income Statement
Revenue
The revenue per spot is an estimate of the amount of new income generated by the sensors in each
parking spot. Calculating the number of hours each parking spot in the city is operating each year and
using an average charge per hour to come a total income possible for the city that year derive the
amount of new income. We estimate that to be !5,824 per spot per year at capacity. We estimate to
capture 60% of these spots to bring that number to !3,494 per spot per year. This amount is then
multiplied by the percentage of people who pay for parking which is 45%. This is then compared to
the amount we think that the sensors will generate. We estimate that the sensors will have at a
minimum a 15% increased in the payment of parking fees. Therefore, we are looking to capture 20%
of that increase amount in per spot income as a commission we would charge the city for each spot
we have in our system.
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15. ParkIt April-2010
For simplicity, we used 2!/per hour for the cost of parking in Madrid. Taking actual prices taken from
the parking meters in the city in order to simplify the calculations derived this. The actual prices range
from 1! to 3! depending on the zone, day and time.
Expenses
For the operation of the business it will be necessary to purchase the sensors from Streetline
Networks. At this point we decided to work with them because they have the latest technology in
place and a functioning model successfully implemented in San Francisco. However, in the event of a
technology such as ultrasonic which is cheaper but at very developmental stages, we would consider
changing if it were available in the short term.
Additionally, ParkIt will work with Streetline to build an application specifically for Madrid and have the
server that stores and administers the information generated by the network of sensors. For this
service we will pay a maintenance fee to the partner Company for the use of the sensors, application
and the network of information. As mentioned before this is quoted at 300! yet could be reduced
over time with favorable relations and/or bulk orders. Also this price includes installation costs and has
a guarantee of 5 years.
For this purpose we have estimated initially at 136,500! to build the network of approximately 325
sensors in the pilot stage. This will including the information technology and network administration
that will be done by Streetline, but not the cost of building the application which we estimate from
inside sources in the application market to be 73,600! to build the application. We calculate that it will
be 2,000! a year to cover the maintenance of the mobile phone application.
We will also need an office for employees to handle the administrative work of the business and
marketing. Administrative and other office and marketing expenses of the business will need at least
one employee each at first and then build to a total of ten in the 10 year development of the project.
We pay each employee 2,000! salary plus benefits.
As part of the Company’s expected partnerships with the government and our relationship with
current administrators of parking in Madrid we will need to maintain those relationships via quality
service and transparency to the end consumers. Based on the outlined communication strategy, a
marketing budget of 2% of sales has been set for the first year of operation. As outlined in the
following financial summary, total expenses for the first year amount to approximately 570.000!; with
a revenue base of 100.000! (based on 325 sensors at 150! each) yielding an initial loss. As revenue
grows over a predominantly fixed cost structure, net income is expected to oscillate from 175.000! in
2014 to 25M! in 2020.
Balance Sheet
Losses in the first 3 ears will result in tax credits used to reduce taxable income. ParkIt expects to
obtain an installed sensor price of 150! due to volume purchase agreements with Streetline. In
addition we expect to keep high levels of fixed assets since the sensors are an essential part of the
business.
We have assumed that we will be granted the Import Export Bank of the US terms of 4.8% debt
financing on 80% of our goods purchased for export from the US. The debt financing will be a
revolving debt agreement that we can use throughout our development of the project
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Cash Flow Statement
We have assumed that we can collect from the government of Spain within 30 days. We assume that
our supplier will grant us terms of 30 days. Financing Offering
The financial needs of ParkIt will be significantly supported with the favorable loan terms offered by
the Import Export Bank. This will give ParkIt the ability to fund its capital expenditures in purchasing
the sensors from Streetline. However, this does not cover all our capital needs in the first year.
We are looking for an equity value of ! 200,000 and we hope to raise these funds with one financial
investor. We are willing to offer are convertible preferred shares with mandatory redemption rights.
ParkIt will be looking for an outside investor that can provide significant value added resources to the
company. These resources would be key contacts in the government and industries that can support
our business in Spain. We look at this investment as an opportunity in this venture to have a key
strategic partner. We hope to have support throughout the projects growth and offer two board seats
as well to the investment firm as well as the right to pick an independent board member with the
current management team.
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17. ParkIt April-2010
Exit Strategy
The options for exit strategy are the following:
Sale
Acquisition
Merge
Initial Public Offering
The plan to exit will be to sell the company or merge to a complimentary organization. Perhaps an
organization such as Vinci or SICE who manage parking solutions already in Spain may be viable
candidates. An alternative would be to sell the company to an investor looking for a secure dividend
investment as once this system is setup, a steady stream of income is generated without further
costs. Mobile/Telecom companies may also have interest in this since there is crossover from the
mobile application aspect. As for timing the optimum timing for exit would be in year 10 as the
company is showing significant profits. The enterprise value at that point according to our calculations
would be 152M!.
Key Challenges
Strengths, Weaknesses, Opportunities and Threats
Strengths Weaknesses
No service exactly like this exists in Madrid at the Setup time and installation cost/time
moment.
Bureaucracy and long legal and approval times of the
Connections to US-based companies offering similar Ayuntamiento
service
Opportunities Threats
Benefit to traffic congestion, reduction of 100.000 km Mobile phone manufacturers rejecting applications to
or more of unnecessary driving distribute via online stores
Benefit to environment –reduction by 20% or more of Competitors pre-emptively entering market to lock
carbon emissions ParkIt out
Possibility to setup payment system via mobile phones Ayuntamiento de Madrid not approving the project
Improving life quality of Barrio de Salamanca visitors –
reduce 12,5m time to find a parking spot.
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18. ParkIt April-2010
Risk Analysis
Several issues and events might arise during the execution stage that has a negative impact on the
business. We have incorporated contingency measures.
Risk Effect Mitigation
Costs of Implementation Limited installation, or forced to Looks for alternative technologies or
utilize another technology negotiate with Streetline for better
pricing
Agreement with Ayuntamiento Critical risk item, without permission Attain contacts and/or hire another
from Ayuntamiento this project manager who is Spanish and has
cannot move forward. appropriate contacts to the right
offices.
Profitability Inability to expand to larger areas of Seek other sources of revenue,
Madrid and inability to expand to from local based advertising to
other cities. government security to subscription
model
Agreement with Streetline No technology to install and no Alternative suppliers and/or
application to offer customers technologies will be sourced
Users frustrated with service by not Users will not use application, A system of education and
able to find an open spot spread negative opinion via WoM. expectations setting will need to be
Network externality of a group of enforced. Social media will need to
users may be lost. be monitored, and being software,
application modification can be
made fairly rapidly in response to
demands of users.
Americans doing business in Spain Difficulty getting connected to Bring a 3rd partner into the team,
Ayuntamiento either from an investor firm or
otherwise who has connections into
the Ayuntamiento
Market adoption of smart-phone Limit the available market for mobile
technology phones
Legal limitation of mobile phone use Can interfere with adoption of Understand local legislation and
while driving application craft application to require little, if
any input from user while driving
similar to many GPS models. Voice
commands and other features can
be examined to reduce this risk.
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19. ParkIt April-2010
Risk Effect Mitigation
Increase in electric vehicles Electric vehicles can park for free in Monitor the number of electric
Madrid currently, this would have vehicles parking in Madrid
revenue impacts on the organization
if the number of electric vehicles
rises significantly
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20. ParkIt April-2010
Appendix
Exhibit 1 - Survey Characteristics, Results and Conclusions
Characteristics:
Area of survey: Barrio de Salamanca
Size of sample: 66 people
Gender: 60 % males 40 % Females
Average age: 38
Range of ages: 20 to 64
Time Frame of Survey: from June 2009 to September 2009
Average duration of the survey: 4 minutes
Within the barrio de Salamanca the team conducted the survey in the following locations:
Underground Car Parks
Private underground and open Car Parks
Public Parking areas
Results (Administered through http://polldaddy.com)
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22. ParkIt April-2010
Survey Conclusions
1. Logistics in the Barrio de Salamanca.
82% of the interviewees were unsatisfied or greatly unsatisfied when trying to find an available
parking location in the Barrio of the Salamanca. The remaining percentage was either satisfied
or greatly satisfied and was mostly private car park owners.
74% of the interviewees were unsatisfied or greatly unsatisfied with their final car parking
location in comparison to their actual destination. The remaining percentage that was either
satisfied or greatly satisfied was mostly private car park owners.
38% of the interviewees would take between 5 to 10 minutes to park in Barrio de Salamanca
once they have decided to do so.
31% of the interviewees would take between 10 to 20 minutes to park in Barrio de Salamanca
once they have decided to do so.
20% of the interviewees would manage to park in no longer than 5 minutes.
The remaining 11% needs between 20 minutes to even more than half an hour to park.
As a whole this shows that Salamanca drivers would take on average no less than 12.5 minutes to
park going around till finding an available slot
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23. ParkIt April-2010
2. Parking Pricing in the Barrio de Salamanca
92% of the interviewees were unsatisfied or greatly unsatisfied with the price they pay for
outside public parking. Dissatisfaction in this case refers to the little time of parking allowance
they get for the paid time.
89% of the interviewees were unsatisfied or greatly unsatisfied with the price they pay for
private underground or open-air parking. Dissatisfaction in this case refers to the little time of
parking allowance they get for the paid time.
89% of the interviewees were unsatisfied or greatly unsatisfied with the price they pay for
underground public parking. Dissatisfaction in this case refers to the little time of parking
allowance they get for the paid time.
3. Parkit general acceptance & price sensitivity
88% of the interviewees would be willing to use Parkit Services as a whole.
Out of these 88%:
59% would purchase the service on a monthly fee basis.
29% would purchase the service on a per use basis.
12% of the interviewees would not be interested at all in Parkit.
Monthly fee analysis
34% of the users would be willing to pay between 10 and 20 Euros monthly usage fee for Parkit
services.
9% of the users would be willing to pay no more than 10 Euros monthly usage fee for Parkit
services.
Pay per use analysis
16% of the users would be willing to pay between 0,7 !cts to 1,5! per usage. Rest of pay per
use users are fragmented through small percentages in either ranges going from 2 ! up
or 20 cts.
4. Communication and connectivity & usage
54% of the interviewees have a smart phone (iPhone, Blackberry or 3G phone) that supports the
monthly subscription fee. The remaining 46% of the users have regular phones
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24. ParkIt April-2010
Exhibit 2 – Focus Group Results
Two focus groups were held; all of the participants live in Madrid and own their car.
Date Quantity and Sex Average Age
22-July-2009 6 men 31 years old
24-July-2009 5 women 27 years old
Although two focus groups are not representative of the whole reality, they gave us very good insights
about the main concerns and perspectives of Madrid citizens on parking issues.
Results are divided according to the three main parts of the focus group:
I – Introducing and understanding the parking issue
When deciding whether to take car or use public transports, the factors that are taken into
account are: traffic (time), parking (time and cost).
Although most of the participants consider taking the car inconvenient they still take it
because they see it as a comfort advantage (speed and flexibility).
When trying to park, people usually go directly to their destination and then start looking for a
parking place.
The main emotions that arise when we think about parking the car is: difficulty & frustration
When people get the parking place, they feel relieved and have a sense of achievement.
People prefer parking in the street than in parking lots, as these last ones are usually old and
very small, so driving inside some of them can be difficult
II – Parkit solution assessment
Verbatim of the participants: “Why didn’t anyone think about it before?”
People first reaction to Parkit solution was very positive, stressing that it is a small detail that
can make their lives much easier.
Main advantages
Easy to send a message and receive a result
On time
Very good solution everyday of the week (including when street parking is not paid but finding
a place is still a challenge), at any hour (even at non paid hours)
I can be very useful also for people who live in Barrio de Salamanca and have free street
parking
Main disadvantages
What if when I get there (to the free place), it is already occupied?
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25. ParkIt April-2010
What if I do not know exactly where the street with the free place is?
Even though we did not talk about the pricing issue, peoples’ comments assumed that it
would be priced as a “per service charge” and implicit in the message cost
When told about the two alternatives of pricing (per service our fixed quota per month), people
told they would prefer the first one, as only people who live there go there often in order to
compensate the fixed cost
III – Communication
Communication should be directed to people from that zone: who lives there, who works
there, who often goes there shopping
Distribute fliers in that zone
Possible crossed promotion with for example: El Corte Ingles – free trial of the service (on per
each mobile phone)
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