Nextdoor, which is a neighborhood-focused social network, revealed its plans to go public on Tuesday. It raised $686 million. With this, the company’s worth reached about $4.3 billion.
Nextdoor is a hyperlocal social networking service for neighborhoods. It was established in 2008 by Sarah Leary, David Wiesen, Prakash Janakiraman, and Nirav Tolia. The company has its headquarters in San Francisco, California, U.S. It currently provides its services in 11 countries. Users need to submit their real names and addresses on the website. Posts made to the website are only available to fellow members residing in the same neighborhood.
However, it didn’t go through the conventional initial public offering process. Special purpose acquisition company or SPAC will bring Nextdoor on the public market. SPAC is a kind of financial vehicle that has gained a lot of popularity in the last few years with technology companies.
Khosla Ventures, which is a blue-chip Silicon Valley firm, is behind Nextdoor’s SPAC. Other companies who participated in this are Dragoneer Investment Group, T. Rowe Price Associates and Baron Capital Group. Tiger Group is an existing investment.
In the last year, regulatory scrutiny increased around such financial institutions because private investors and equity firms created many blank check companies to take promising start-ups public. On the one hand, Reddit’s executives are giving second thoughts about going public through SPAC. On the other hand, so many SPACS have already been created in six months of 2021.
According to Sarah Friar, Nextdoor’s chief executive, SPAC is the most suitable route for the companies as it allows the companies to be involved with a small number of investors.
In Nextdoor’s case, she mentioned that SPAC was a safer option for the company because it would know how much money it would be able to raise rather than the conventional I.P.O. process, which was risky. Nextdoor has prepared for this a long time, and they are all good to go now.
Nextdoor became famous in its initial days as it acted as “Facebook for neighborhoods.” People sent invitations to other people living in the same area to form small, close-knit groups based on their living area. Users used the website and its mobile app to discuss various topics ranging from child care, yard care to crime in that area.
Almost a decade later, Nextdoor offers its services in more than 275,000 neighborhoods in 11 countries. When its network grew, businesses started paying it to have their advertisements in user’s feeds. Nextdoor get ads from national brand marketers as well as from local service providers.
The company will invest the new funding in the expansion of its user base. It will also develop its self-serve advertising platform that focuses on small and medium scale businesses and expand its workforce by hiring more talent in the tech field and other employees.
Nextdoor’s earliest investors and three founders want to create Nextdoor Kind Foundation, which will be a nonprofit foundation. This will help neighborhoods re-energize their areas through targeted grants. The foundation will take suggestions from the common people about how they want to improve their communities.