For all the speculative hype about AI’s transformative impact, there’s been comparatively little interest in finding real-world applications for it that improve the average daily routine.
That’s the notion artificial intelligence company Metropolis was founded on, according to co-founder Alex Israel.
The company, which was founded out of a co-founder’s home garage in 2017, has substantially expanded its parking capacity in the years since, most recently through its acquisition of Chicago-based SP Plus Corp. in May.
In a statement, Metropolis said the $1.8 billion financing and subsequent take-private of SP Plus would allow Metropolis to deploy its technology to a consumer base of 50 million.
Israel told the Business Journal the acquisition was the result of the company’s new growth buyout model.
“Traditional large-scale take-privates are based on cost synergy. Our thesis is based on the opposite, we’re going to send significant revenue to this business and value to its real estate owners and consumers,” Israel said.
Getting its start
From its inception, Israel said, Metropolis’ mission has been about finding ways to apply AI that help people cut down on life’s simple annoyances that are as time consuming as they are mundane.
“When most people hear about AI these days, they think about GPT, and a lot of it is speculative. But there’s a reason the industry has started talking about ‘AI in the Real World,’ as opposed to just AI, that nomenclature is important,” Israel said. “The whole thesis behind applying AI in the real world is about giving you back your time. How much time do we spend over the course of our lives on life’s little annoyances?”
Along with Israel, who now serves as chief executive of the company, Metropolis was co-founded by Travis Kell, Peter Fisher and Courtney Fukuda. Rejecting the glitz and glamor associated with the speculative potential of artificial intelligence, Israel said their AI tech start-up was founded on putting the revolutionary technology to work in the real world.
Basing the company out of Los Angeles County – and being a born-and-raised, second-generation Angeleno himself – Israel said Metropolis immediately identified a good place to start.
“The parking!” Israel said, pointing to studies that indicate that drivers circling the streets on the lookout for a parking spot contribute to as much as 30% of the city’s average daily traffic. “This used to be something where we thought there was simply no alternative, that it could not really get better.”
Metropolis’ goal might have seemed like a pipedream to the average Angeleno around the time of the company’s 2017 founding. But between advances in AI and Metropolis’ consistent growth, the company’s technologies may very soon be a part of the commuter’s everyday routine.
The company’s neural network aims to eliminate the traditional pain points associated with parking, but parking may be just the start for the company.
Israel said it’s not hard to conceive of potential alternative uses for the company’s tech. The system could be deployed in airports, in grocery stores or just about anywhere where a checkout-free experience would make life easier.
Metropolis’ expansion explained
To support its mission, Metropolis has been bulking its AI tech capabilities and expanding its physical presence through acquisitions of parking locations throughout North America. In addition to deploying its technology out of its own locations, Metropolis also partners with real estate customers to “modernize their parking operations, introduce a premium amenity for building visitors and tenants, and improve net operating income,” according to a company spokesperson.
The acquisition of SP Plus was financed with $1.05 billion in series C preferred stock financing and $550 million of term debt financing, each provided on a committed basis primarily by Beverly Hills-based Eldridge Industries LLC with backing from Westwood-based 3L Capital. Metropolis also obtained a separate $175 million revolving debt facility from PNC Bank, National Association, in connection with the deal.
“Metropolis has developed a new growth buyout model, demonstrating how innovation and technology can evolve legacy industries for the 21st century,” said Tony Minella, co-founder and president of Eldridge Industries, at the time of the series C funding announcement. “Alex and the Metropolis team will implement their tech solutions to both improve people’s daily lives and drive significant value to real estate partners.”
Not its first buy
Metropolis had previously acquired Premier Parking – the owner of more than 600 garages and an early adopter of the company’s AI tech – in 2022. The cost of the acquisition was not disclosed.
“It’s a very non-traditional path … a technology company expanding through the acquisition of old-world businesses and applying artificial intelligence to that business to drive innovation and create a better revenue synergy,” said Israel.
The 2022 addition of Premier Parking locations to the company’s portfolio extended the company’s AI-based services to more than 1 million customers worldwide, according to a 2022 press release. With Metropolis’ acquisition of SP Plus, the company generates approximately $4 billion in payments a year.
“This isn’t just an acquisition,” said Israel in a statement at the time of the acquisition of SP Partners on May 16. “By deploying our computer vision technology to more than 50 million consumers and our real estate partners globally, we will enable checkout with a speed, ease and convenience that is unparalleled, even online. While transforming the parking experience is our focus and priority today, the opportunities for our growth are limitless. We are excited for the future and we’re just getting started.”
Israel told the Business Journal the strong commitment from investors thus far is a particularly good indicator for Metropolis, given the recent slowdown in startup tech investment.
Metropolis’ product streamlines parking services with tools like automated payments and license plate recognition. The platform allows parking facilities to leverage AI to track the stay time of vehicles and charge customers without the driver needing to stop to pay. The company said that, while its computer vision technology is currently being applied to parking, it plans to offer its “checkout-free experience” more broadly in the future.
Goldman Sachs & Co. LLC and BDT & MSD Partners LLC served as financial advisors for Metropolis in its acquisition of SP Plus, while Wilkie Farr & Gallagher LLP, Fenwick & West LLP and Latham & Watkins LLP served as legal advisers for the company.
