Posted on Wednesday, Mar 11th 2015
There are several companies that have surprisingly reached the stature of Billion Dollar Unicorns without generating any revenues or any significant financial metric to boast of. The valuation of these companies are driven by operational metrics, future earnings potential, and venture firms who appear to have been thoroughly irresponsible by providing valuations that make no sense.
One such company is San Francisco-based Nextdoor. Nextdoor was founded in 2006 by serial entrepreneur Nirav Tolia, Sarah Leary, and Prakash Janakiraman. Nextdoor is a private social network that allows users to connect with neighbors and their community. It was created with the vision to help people build stronger and safer neighborhoods around the world. Users can leverage the social network’s capabilities to spread word about a break-in, organize neighborhood watch groups, help locate reliable care providers, act as the local newspaper and classifieds portal, and most importantly, help people know their neighbors.
Given that Nextdoor uses real names and addresses, they have to be careful about the user’s data security. Users can only register for the secure HTTPS website with their real names and after they have verified their addresses. All that security also means that Nextdoor cannot release the user’s details to advertisers. Data shared on Nextdoor’s groups is also not available to search engines. In 2014, Nextdoor released Nextdoor for Public Agencies that allows cities and their agencies to sign up, verify, and communicate with residents on Nextdoor. Once verified, a public agency such as police departments and emergency management teams can start sending important updates to Nextdoor users to better manage crisis conditions and make residents more aware of goings on in their areas.
Despite all that, user growth has been slow when compared with other social network sites like Facebook. But Nextdoor has been fighting that by sending out postcards to houses in communities to join the network. Nextdoor does not disclose their user metrics, but they reportedly were present in 43,000 communities as of September 2014. As of March 2015, they have grown that number to 53,000 communities.
At present, Nextdoor has no revenue source. Their “long-term” goal for now is to figure out how to generate revenues that will provide value to both their users and to the company. Nextdoor compares itself to other local-focused companies like Yelp and Zillow, which have both found ways to move from unprofitable startups to begin generating revenues. But that will be a tough ask for Nextdoor given the high requirement of security around user identity. Nextdoor does not want to rely on banner ads and pop-up ads that will take away from the user experience. Instead, they are steering toward monetization opportunities like working with local businesses to provide specialized offers to these neighborhood communities.
Meanwhile, that has not stopped venture funding from flowing in and valuations from rising up. The company has raised $210.2 million in funding so far with investments from Valor Capital Group, Insight Venture Partners, Redpoint Ventures, Slow Ventures, Kleiner Perkins Caufield & Byers, Tiger Global Management, Comcast Ventures, Benchmark, Greylock Partners, Bezos Expeditions, Pinnacle Ventures, Allen & Company, Shasta Ventures, DAG Ventures, and SV Angel. Their last round of funding was held earlier this month when they raised $110 million in a round led by Redpoint Ventures and Insight Venture Partners at a valuation of $1.11 billion. In October 2014, the company had raised $60 million at a valuation of $500 million.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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