Last night, the power went out in my neighborhood. I peeked my head out the door of my apartment a couple times, hoping other building dwellers would be doing the same and we could commiserate over our unfortunate Sunday night fate and share information on what might have happened. But instead, all that greeted me was a loud, disturbing whir coming from somewhere downstairs.
Given we’re only a few days out from Halloween and I’m a bit of a scaredy-cat I will admit I pondered the presence of ghosts or — worse — Halloween pranksters to explain the power outtage. It didn’t help that I had been watching Carrie trailers prior to the unexpected darkness. I fell asleep (hiding) under the covers.
So, it was particularly apt that the next day, once power had been restored and the inexplicable whirring had faded from memory, I got to interview Nirav Tolia, the CEO of Nextdoor.
In case you haven’t read the bundles of Pando Nextdoor coverage, it’s the neighborhood social network. Your network is limited to your neighborhood, people are identified by name and address, and you all share a newsfeed for posting pictures, questions, and updates. I.e. the perfect platform to consult when power suddenly fails your building four days before Halloween.
For those of you rolling your eyes at the idea of another social network, this one’s got some staying power. For one thing, the likes of David Sze from Greylock and Bill Gurley from Benchmark serve on its board. For another, it’s rolled out to 22,527 neighborhoods, a number it cites as one in seven neighborhoods in America. By comparison it was in 5,694 neighborhoods this time last year, and 176 neighborhoods the year before that. It’s got a nice little hockey stick growth graph going for it.
Today, Nextdoor announced that it raised $60 million in a funding round led by John Doerr and Mary Meeker of KPCB and Lee Fixel of Tiger Global Management. This brings its total funding up to $100 million, and Doerr and Fixel will become ‘special advisors’ to the company.
As Pando has explored before, the big question facing Nextdoor is whether it can successfully scale its network effect model, which is a practice in masochism for the CEO Nirav Tolia.
It’s a company that has eschewed viral hooks and fast growth in favor of word of mouth and user trust. But such a tactic requires one key factor: time. And time requires money. So Nextdoor’s $60 million in funding is a crucial booster to give it the runway to grow in the way it needs to.
Nextdoor didn’t necessarily need the money at this moment however. It wasn’t running out. Tolia says, “When we raised this round we had 30 million in the bank so this takes us to 90 million. We typically spend one to one and a half million a month.”
So why raise the round? “If we had three times as much money we could grow three times faster and do three times as many things,” Tolia says. “Given that things are going well, it makes sense to step on the gas.”
Nextdoor is that rarest of beasts: the social network that can coexist with Facebook. Linked-In did it by carving out a particular niche –professional — that people wanted to keep separate from their personal life. And Nextdoor is doing that with local neighborhood activity.
Whereas you might not want the random guy who lives across the street to see your latest weekend bender photos or your baby’s sleep shots, you’d still probably like to tap him as a local resource. Get his opinion on the best dry cleaner nearby, have him alert you if he noticed you left your garage door open, ask him if you could borrow some sugar.
You know. Classic neighbor conundrums. I imagine.
Nextdoor believes it has ironed out its core product, and wants to use the money to take the network international and add dozens of new features. In the first half of 2014 it plans to be in other English speaking countries — Canada, the UK, Australia — and by the end of 2014 branch out into non-English speaking countries.
Scaling so quickly will be a big departure from the company’s previous pace. As Tolia told me, “We’re different than Instagram or SnapChat where you snap your fingers and get a ton of members.”
During its expansion in the US, the company moved deliberately, carefully, and steadily, much like Linked-In did in the early days. From customer acquisition to mobile apps, CEO Tolia wanted to play the long game and nail the product.
Nextdoor made users verify their addresses through their credit card companies or cell phone area codes, even though that slowed down user acquisition by a long haul.
It didn’t invest much in marketing, or include viral hooks like prompting users to post their Nextdoor activity on Facebook. Instead, it let neighbors share the application through word of mouth.
In terms of moving to mobile, Nextdoor went at the pace of a turtle — to the point where that’s the image Pando chose for the story when Nextdoor finally announced its iOS app.
So what will happen when the company that has played the turtle’s game shifts into high gear and tackles scaling internationally at a faster pace? Will it maintain customer faith and product strength? Or will it stumble?
Although Nextdoor may have nailed its core product and strategy, there will be a myriad of new obstacles for the company to overcome by going overseas. Because Nextdoor relies on hyperlocal connections tied to physical locations, it’s not quite the same as taking a platform like Linked-In or Facebook abroad. The operational challenges abound.
For one thing, it will need to develop a new system for verifying identities in every country, whether that means creating new authentication procedures for international credit cards or determining whether cell phone area codes still work.
It will also need to adapt its system for neighborhood boundary recommendations. In the US people who want to create a neighborhood social network — if theirs doesn’t exist already — consult recommended guidelines from Nextdoor based on census information and other data. They use that information to decide how to ‘draw’ the boundaries of their neighborhood.
But without US Census data, in other countries Nextdoor will need to create different methods for recommending neighborhood boundaries. It may very well come across different cultural definitions of what constitutes a neighborhood.
I know that in some countries — like the United Arab Emirates — there are no addresses. People who live there give directions by saying “left at the Carrefour market and right at the palm tree.” Although Nextdoor is unlikely to move right into address-less countries like the UAE, it will face these types of country-by-country idiosyncrasies as it expands.
Furthermore, Nextdoor will need to scale its city partnerships, a feat easier said than done. As Pando has covered, Nextdoor’s biggest value add for users has become about neighborhood safety. Users can alert each other to strangers lurking, suspicious activity, news reports, or anything else that’s good to know.
To further the app being used for this purpose, Nextdoor had on boarded 80 City Halls by last January. It struck up partnerships that would allow police and fire officials to push notifications through the app to nearby residents. The notifications could be safety or convenience related — like telling people a street is closed due to construction or that a crime was recently reported on their block.
Such partnerships increase the value of Nextdoor, but are not inherently or easily scalable abroad. Creating them in other countries will take time, cultural sensitivity, an understanding of local governance, and translators or multilingual employees.
And lastly, Nextdoor is not an entirely virtual company. It spends a hefty sum on postcards. That’s how people can invite their neighbors to join the network if they don’t know them personally — by sending them postcards through the Nextdoor site. Postcards are also a method of verifying users live where they say they do. So mailing systems will need to be put in place in every country.
Nextdoor’s strategy till now has been slow and steady wins the race, but now it’s going for it. It’s accelerating its pace to scale and own the neighborhood social network space. But CEO Tolia promises it’s not at the expense of product.
“We’re pretty wed to quality over quantity and quality over speed,” Tolia says. “That’s just our culture. We’re very long term minded. We know there’s ultimately no shortcuts to building this.”