David Sze, a 13-year veteran of venture-capital firm Greylock Partners, has gained acclaim for his lucrative bets on Facebook, LinkedIn and Pandora. But he’s never written a check as big as the one he just gave to Nextdoor.com, a social-networking site for neighbors.
Sze led Greylock’s $15 million investment, part of a $21.6 million round of financing that the San Francisco-based startup announced today. Nextdoor has yet to generate any revenue, but Sze said the growth in membership reminds him of LinkedIn during its early days. (Greylock’s investment in the social network for professionals netted the firm more than $1 billion after the Internet company’s 2011 initial public offering.)
Nextdoor “has all the hallmarks of being the next great massively valued social network,” Sze said in an interview. “I see every social network that comes out. I’ve sorted through all of them and passed on most of them.”
Nirav Tolia, who co-founded Nextdoor in 2010, said the company isn’t trying to make money yet because it’s focused on attracting more users. The market for local advertisements online is estimated to reach $96 billion this year, according to research firm Borrell Associates. Though the company declines to disclose user numbers, Nextdoor’s website had 140,000 visitors last month, according to ComScore.
Nextdoor, which has 39 employees, now operates in more than 8,000 neighborhoods in the U.S., up from 3,600 in July. Each day, members post more than 500,000 messages about activities in their communities, including recommendations for local dentists, preschools and architects, crime and safety updates, and classified ads for used cars or children’s toys. To sign up, a user must provide a real name and address.
The site got a big boost in Chicago last week, when Comcast’s EveryBlock closed its doors. On Feb. 8, the day after the announcement, Nextdoor experienced 2,400 percent growth of new members in Chicago from the previous week, Tolia said. “We had hundreds of people filling out applications to start neighborhoods,” Tolia said. “If you pull the plug altogether, people feel the need to find an alternative.”
Sze, whose Menlo Park, California-based firm first bet on Facebook when it was worth less than 1 percent of its current value, said Nextdoor has found the right formula for viral growth. His latest investment in Nextdoor comes just seven months after Greylock first put money into the startup. The venture firm participated in an $18.6 million round last July, which was led by Benchmark Capital and DAG Ventures, valuing Nextdoor at more than $100 million, Tolia said.
Bill Gurley, a general partner at Benchmark, said the site has resonated with people looking to organize a grassroots movement in their community. The Woodside, California, resident has observed frequent debates about bicycle lanes, for example. “Those political issues can create whirlwinds and storms,” Gurley said.
Sze, who’s been using Nextdoor since mid-2011, said his neighbors in San Mateo, California, have been utilizing the site to try to block a 7-Eleven store from opening in place of a beloved local deli. They’re using Nextdoor to get signatures from residents who oppose the retail chain, and hoping to prove that Slurpees are no match for social-media campaigns.