July was a big month for Nextdoor’s CEO, Nirav Tolia. The dot-com veteran became a father, spoke at Allen & Co.’s annual bigwig brainstorm in Sun Valley, and announced a major round of funding, which valued his 22-month old startup at $100 million. It’s a sort of arrival for Tolia, who has been working his way back since being embroiled in a resumé controversy that bubbled up during the 2004 merger of Epinions and DealTime. Tolia bounced back in 2007, securing an entrepreneur-in-residence position with Nextdoor investor Benchmark Capital.
Tolia was an early pioneer of user-generated content, and his launch of Nextdoor in 2010 sought to apply some of these same dynamics to real-world communities. The company, which spent the better part of a year in stealth mode, builds hyperlocal social networks that allow residents, and only residents, to interact with others within their neighborhood. The closed nature of each network makes scaling the project a daunting task, but the San Francisco-based company has managed to set up 4,050 communities in less than two years.
Street Fight caught up with Tolia recently to discuss raising money in local; developing technology for real-world communities; and the increasingly blurred line between information and social connectivity in the local space.
Nextdoor landed term sheets from six investors in this latest round. What’s the sentiment among the investment community toward local plays?
I found that there was quite a negative stigma against local, primarily because there have been a lot of venture investments in local companies that have gone nowhere. We’ve of course seen a handful become very successful – namely, Yelp, Open Table, Groupon (depending on how successful you think it is at any particular time). But there are many, many more that are in the graveyard rather than the winner’s circle.
When we tell our story [to investors], we don’t simply say were a local company – we say we’re a tech company that sits at the intersection of mobile, social and local. That’s important, because it really puts us in a different light in the way investors think about what we do. It plays to something we think is true: we are taking the best practices of social networking, or social software, and applying those to the local space. We would never lead with, “Hey, we’re a local company.” We’re a builder of communities. It just so happens that the online communities we are building and enabling are on a neighborhood level.
As someone who has spent his career developing digital communities, what’s unique about building for the real world?
Building a local play requires much more hand-to-hand combat. We talk a lot about getting liquidity, which just means having some scale of audience. When we launch an online community, each one of those is its own network — its own littler silo that needs to get liquidity. That really underscores how hard it is to make this work. We’re not starting a site, say, about Brittney Spears, where a user is a user is a user.
Virality is also a huge challenge. If you’re seeing someone in person everyday, you don’t necessarily need his or her email address — so you can’t easily invite him or her to an online service. We’ve invested in things like flyers as well as direct mail technology, in which you can click on houses in your neighborhood and invite them to the service with an actual, physical postcard.
But the benefit is that it’s the real world. The connections we have with people in the real world are immensely more powerful than those which we have online. It’s a lot harder to get it going, but when you do get established it’s way more valuable, because the switching costs are much higher.
Facebook has kept its local strategy close to the vest since shutting down its daily deals and check-in product last summer. Where does Facebook fit into Nextdoor’s competitive landscape today — as well as in the future?
We’re always hyperaware of Facebook’s scale. You can’t count them out in any direction — whether that’s local commerce or community, or whether they build their own venue platform or a search engine. They do everything. When you have almost a billion users, you have a strategic point of leverage. It’s like in the old days when Google had so much traffic that the fear was that instead of sending the traffic, they would build their own property, and send traffic to themselves. And I think that’s sort of the concern that we always have and always will have [with Facebook].
But it’s our key belief that local is not a tack-on thing. We believe it’s different. I personally had some concerns that Facebook would consume LinkedIn and even Twitter. But what I realized is that the way I interact with people on LinkedIn varies from the way I interact with people on Facebook. The use-cases are just different. On Nextdoor, you connect with a bunch of people that you may have never met. The bond is geography — not friendship, employment or interest. It’s such a different modality because we’ve built everything around location.
Patch appears to be making a move toward a more horizontal, community platform model. How does what they’re planning compare to your vision for Nextdoor?
We’re not focused on the type of editorial, top down, one-to-many approach which a Patch is looking to build. We’re about many-to-many communication. We have no external information coming into these communities — our users create everything. Sometimes it’s harder because we have to wait for our users to create content rather than plugging in the crime reports or finding a way to automatically feed local information into these neighborhoods. We say “look, if there’s a crime report that a neighbor feels like posting, then great – but we’re not in the business of deciding that.”
How do you see social networks and media evolving in terms of the ways in which local information is both consumed and produced?
From a media perspective, [one-to-many communications] is how we used to get our local information — people would watch their local news, they would listen to the radio, or read the paper. Only a few of those companies have managed to stay economically viable, and the ones that are sustaining have become almost syndication services. The traditional one-to-many approach to consuming and distributing local information has really started to dry up.
I think that was the premise for most types of local news plays, whether it’s Topix or Patch, or even Everyblock — and I think that’s a legitimate one. But media is quite different. We are a social network, not an information provider. We’re about connecting people, not necessarily about broadcasting information. The thing that we’re trying to address is not the decline of local media, but the reality that we don’t know our neighbors anymore.
But social connectivity (through the distribution of information) was once the bread-and-butter of local media, right? Do you believe that the motivation people have to read hyperlocal news is the same motivation people have to join Nextdoor?
No, I think they’re different. I think local news is about consuming information that comes from a trusted source around you. I think that what were trying to tap into is a hungering for a connection with people in your neighborhood. We’re all about the connection with people. That’s what a social network is about.
Let me actually put it this way: I think that Patch and Twitter are in a much better position to broadcast information. Twitter is potentially hugely powerful. From a broad standpoint, I can be visiting Kansas City and notice there is a forest fire, and post that on Twitter, and that’s news. That’s a very powerful source for local information.
Tell us about the most interesting conversation you had at the Allen & Co. conference?
I was approached by a handful of foreign CEOs and heads of state that wanted to put Nextdoor in their countries – not for local information, and I want to be very clear about that, but the notion of being able to reconnect with your community. We learned pretty quickly that it’s not just an American initiative. There are powerful ways to use these tools outside of the U.S.
Steven Jacobs is Street Fight’s deputy editor.