Nextdoor announced this week that it will become a public company by merging with Khosla Ventures Acquisition Co (KVSB).

San Francisco based Nextdoor, co-founded by Nirav Tolia, 49-years-old, is a social media platform. It enables people to connect to their neighbors to hold parties, report lost pets, find baby sitters, borrow tools, sell couches, post information on crime; get updates from police, fire and other local public services; and buy from local businesses.

KVSB is a special purpose acquisition company, also known as a blank check company, set up by Khosla Ventures, which is based in Menlo Park, California.

“Our business strengthens as we scale, benefiting from strong network effects,” Sarah Friar, Chief Executive Officer of Nextdoor said in a statement.

Nextdoor is in more than 275,000 neighborhoods in 11 countries. In the U.S., the company says the platform is used by one out of three households; it has more than 60 million users and 27 million who access the platform weekly. 

Nextdoor gets revenues from local business advertisements, including from real estate brokers and job listings, as well as large companies. The real estate and job ads are unique since they get “double-digit percentage click thrus, because members see this as content,” Nirav Tolia told Pando in 2017, when he was Nextdoor’s CEO.

In 2010, Tolia co-founded Nextdoor with Sarah Leary and Prakash Janakiraman. He got the idea for Nextdoor from an opinion piece in The New York Times about the isolated lives many Americans lead.

Nextdoor was also based on lessons learned from the failure of Fanbase, a site for sports enthusiasts the three co-founded in 2008, while Tolia was an entrepreneur-in-residence at Benchmark Capital. Tolia calls the experience, “one of the most difficult things that I’ve ever had to do in my life, which is to go to my main investor and tell him that we had failed.”

In a 2019 interview with Modern Luxury Silicon Valley,.Tolia described Nextdoor as being “old-fashioned; we’re about the real world, about using your real name, about greeting your neighbor with a smile.” Today, while more connected through technology, we are “less connected emotionally than we’ve ever been.”

Tolia, who served as CEO of Nextdoor till 2018, is now an investor and board member. Janakiraman continues to work at the company, currently as the chief architect.

Earlier in 1999, Tolia co-founded Epinions, a consumer review site. In January 2005, Tolia, the board and Benchmark Capital, with its partner Bill Gurley, and two other early venture capital (VC) investors were sued by co-founders Ramanathan Guha, Naval Ravikant and Michael Speiser and 45 other employees and contractors. Their complaint was that they were cheated out of a share of a $200 million payoff, according to the Wall Street Journal.  

The suit was reportedly settled for an undisclosed amount in December 2005. Epinions, which became Shopping. com, was acquired by eBay in September 2005 for $620 million.

In 1996, Tolia started his career at Yahoo as a web surfer.

He majored in English literature from Stanford University but also took pre-medical courses since he originally wanted to become a doctor.

While singing in the all-male Stanford a cappella group, the Stanford Fleet Street Singers, he got his first exposure to business as the group’s business manager, he told the Los Angeles Times.

Nextdoor will get $686 million in cash following its merger with KVSB, which is expected to close later this year. It plans to use the funds to develop new products, add employees and expand into new territories.

Besides Khosla Ventures, investors include Tiger Global and ARK Invest. Nextdoor will be valued at about $4.3 billion. Benchmark is also an investor in Nextdoor and its partner Bill Gurley is a board member.

“We have long focused on partnering with cutting-edge, category-defining companies with tremendous growth potential, strong management teams and, importantly, clearly defined missions. Nextdoor exhibits all of these qualities,” said Vinod Khosla, founder of KVSB and Khosla Ventures.

Khosla, a 1980 Stanford Graduate School of Business graduate with a BTech in electrical engineering from IIT Delhi and a master’s in biomedical engineering from Carnegie Mellon, was a co-founder of Sun Microsystems.

Khosla, Benchmark and other venture capitalists in the U.S. are extremely eager to find and fund the next big social media platform. After all, Benchmark Capital, Lightspeed Ventures, Sequoia Capital and other VC firms made billions by investing early in Facebook, Snap, Twitter, WhatsApp, LinkedIn and Instagram.

Huge financial wins also give the VC firms access to the best potential deals since there is intense competition among them for such deals. 

The investment appeal of social media platforms is that they monetize content created by users for free. If a site gains traction and goes viral, it will create what the VCs daydream about, a flywheel: more users bring more content, new content brings more users which bring more advertisers and on and on. Such a virtuous cycle, as Facebook and the other successful social media companies have shown, generates strong revenue growth and high profit margins since it is not a capital-intensive business. 

Will Nextdoor’s business turn into a flywheel? So far, eleven years after its founding, there appears to be little evidence. Part of the reason is that the content posted by users on the platform, unlike say on Facebook or Twitter, is private and therefore cannot go viral through media attention.

Also, the content being mostly local – safety, traffic and noise problems, school meetings, requests for recommendations for plumbers and hair salons - is not of relevance to a wide audience. But Nextdoor has a growing number of loyal users, in part because it says it provides them “a secure environment where all neighbors are verified.”

In 2019, after he stepped down as CEO of Nextdoor, Nirav Tolia told Modern Luxury Silicon Valley., “To see changes measured in quality of life indicators such as declining crime rates, rising property values and increases in longevity, rather than just market (value), revenues and profits and stock prices, is rewarding.”

That year Tolia taught an undergraduate course at Stanford in Florence, Italy, titled “Silicon Valley: The Modern Day Rebirth of Renaissance Florence, a comparative study on Florence then and Silicon Valley today. The course description says it exposed “students to the crucial intersections between technology, entrepreneurship, and humanism that enabled two relatively small valleys to rise up and literally change the world.“

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