Many social media platforms have some type of location-based feature built into their interface. For dating apps, you can usually set a range for how far—literally—you’re willing to go to date someone. For more public platforms like Twitter and Facebook, users can filter posts and other types of information from location to location. With the Nextdoor IPO date nearing, we’re reminded just how much location matters in our local worlds.
On Nextdoor, your location doesn’t just determine some aspects of how you experience the app—it determines pretty much everything. According to their website, Nextdoor calls themselves “ the neighborhood hub for trusted connections and the exchange of helpful information, goods, and services.”
Think of it like this: eBay, Craigslist, Facebook, and Tinder all decide to pitch in a little piece of what makes each of their platforms special. Now, mush all of those features together, and divide it up into groups based on your location. Boom, there’s Nextdoor. Here’s all about the Nextdoor IPO, plus the Nextdoor fundraising that got the company where they are today.
TL;DR
- Nextdoor, which was founded in 2008 and premiered stateside in October of 2011, is currently available in 11 countries across the globe. A location-based app, users that sign up are required to submit their real names and street addresses (minus the exact house number, if users prefer extra privacy), and assigned to a neighborhood group based on that information.
- The company plans to go public in 2021, joining other notable companies having their IPO this year, such as Barkbox and Hims.
- Controversy has surrounded the app for a handful of years now, being criticized for enabling their users to racially profile others by using the app.
- Sarah Friar, the former Chief Financial Officer of the prospering financial services company Square, took over as CEO of Nextdoor in October of 2018, following the retirement of Co-Founder Nirav Tolia.
- Public entities such as police departments as well as local and state governments have partnered with Nextdoor in exchange for these entities writing public service announcements on their platform.
You can learn more about IPOs here.
Nextdoor’s company history
Nextdoor was founded in 2008 by Nirav Tolia, Sarah Leary, Prakash Janakiraman and David Wiesen in San Francisco, CA. The idea behind the app was a simple one, aiming to give neighborhood communities a platform to share comments and posts about local businesses, events, and other happenings.
In order to sign up for an account on the platform, an individual user must submit their street address and real name, as Nextdoor doesn’t allow the use of aliases. Once all this is done, the platform assigns users to a neighborhood group based on their address.
By offering individualized “groups” within previously established neighborhoods, Nextdoor gives their users the opportunity to see (and not see) what they choose to. For example, those who don’t want to see political posts can avoid that group of postings on the app. Those looking to find a romantic interest can take advantage of the app’s dating groups. It seems as if for everything you might seek out from social media, it can be found in some capacity on Nextdoor.
More recently, the company has faced criticism on its use of geographic segmentation, which critics say enables users to racially profile other users and members of their communities. This has been a point of contention for years, but recent protests, marches, and other forms of racial reckoning have reignited the conversation.
Now, Nextdoor reports that it maintains a full-time staff of moderators that has been intentionally diversified since the killing of George Floyd in May 2020.
Related: How and why to start impact investing
A look back at Nextdoor fundraising
Throughout nine rounds of fundraising, Nextdoor has raised over $455 million from 24 different investors. Most recently, a Series F round of funding occurred in September of 2019, raising $47 million in capital, and adding both Meyer Equity and Bond to the list of investors.
The company has also added to their value through the acquisition of three companies in the last two years— Trove, Hoodline, and Neighborland.
Path to the Nextdoor IPO
In their most recent round of funding, Nextdoor had a valuation of $2.2 billion. They received that valuation in 2019, and since then, the company has eyed a much larger valuation for when they go public—nearly double the 2019 number, in fact.
Eyeing a valuation between $4–5 billion, Nextdoor is relying on their substantial market share to power investor interest. Currently, the platform reports that 1 in every 4 neighborhoods in America has a neighborhood group on Nextdoor, with that number expected to grow. Since the start of the COVID-19 pandemic, their user base has grown at an 80% month-over-month rate. This rapidity likely will slow down, but the surge surely says something about what people want.
What are the next steps for the Nextdoor IPO?
Nextdoor has filed their initial paperwork with the SEC, stating their intention to begin selling equity in their firm this year. The company chose to keep their current revenue private on their filings, leaving possible investors having to take the company at their word on their financial health (for the time being, at least).
The next key step for Nextdoor will be for them to select an underwriter to guide them through their IPO process. An underwriter helps a company court initial investors through what’s referred to as an “IPO roadshow” and get their SEC paperwork in order. Popular choices for this partnership include prominent financial services companies such as Goldman Sachs, Ernst & Young, PwC, and J.P. Morgan.
Whoever they choose as their guiding partner, the company will then have to determine their offering price for shares of their company. The IPO valuation will be determined by how much capital Nextdoor wants to raise during their IPO and will be made up from a total number of shares times price per share.
When is the Nextdoor IPO date?
As of right now, the Nextdoor IPO date is still unknown to potential investors. Once they file their final paperwork with the SEC, they’ll share the Nextdoor IPO date as public knowledge. Then, retail investors will be able to decide whether they want to use Nextdoor as a means for portfolio diversification.
Related: How to diversify a stock market portfolio
What investors should know
Nextdoor brings in their revenue through a variety of different methods, most of them familiar to the social media landscape already. Chief among these revenue streams is the influx of sponsored ads, similar to the way that Facebook and Instagram support their business models.
One of the key differences is that Nextdoor currently does not allow—and says they have no plans to—any political advertising. Those looking for an escape from political conversations on other platforms will find it on Nextdoor, where there is a separate category of posts for conversations on that topic.
The pandemic brough on massive amounts of growth for Nextdoor, and they’ll need to sustain that influx of users once the pandemic ends. Last March they saw their largest growth numbers, with the total number of active users growing over 80% month-over-month. Much of this growth was attributed to Nextdoor’s ability to act as a hub for supporting local businesses, assisting neighbors, and keeping up on local news and happenings without having to leave your house.
This has been the app’s strongest advantage during the time of coronavirus, when those who were previously absent from social networks had more free time, and a greater need for social connections during isolation. Unlike other platforms who had a high number of users before the pandemic started, Nextdoor will have to put in extra effort to retain their new user base.
To do this, they’ve begun to develop new features, such as an interactive map to find services and other forms of help, and a “kindness reminder” to help the moderating team stop posts of an unsavory nature before they get posted. The money raised from the company’s expected IPO will help to support the development and growth of these extra features, which should help in their effort to retain users.
Among Nextdoor’s biggest challenges are managing the posts that make it onto their app, and maintaining an equitable method of accepting new users. With current in-app rules, a “neighborhood” must already be established in order to join, otherwise it needs the support of 10 new users within the area to create a new one. For more rural, spread out communities where it can be quite a distance between homes, this risks excluding these potential users. It also risks excluding users in areas with higher poverty rates. It’s imperative that investors hold Nextdoor accountable to avoid allowing them to circumvent equitability.
Bottom line
Nextdoor has used the opportunity presented by the coronavirus pandemic to take a strong hold in the social media landscape, solidifying themselves as a central player in a variety of different niches (primarily that of hyper-local community gathering).
Overall, Nextdoor has a lot to offer the market, as well as the social media industry at large. As for the forthcoming Nextdoor IPO date, investors considering putting money into the company should—as always—do their own research and come to their own conclusions on whether or not they believe the company will succeed in the market in the long term.
Related: How to know if a stock is risky