343: How To Find The Next Big Business Idea with Nextdoor Co-Founder Sarah Leary

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Sarah Leary @ Nextdoor

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For Sarah Leary, entrepreneurship has always been in her blood. Growing up in a household of small-business owners including her grandmother who was also an entrepreneur, she knew she would eventually be one, too. She remembers that even when she was working for Microsoft as part of the founding team for Microsoft Office, she knew that being a business owner was her future.

From her development, launch, and successful scaling of Nextdoor into the world’s largest private social network for neighborhoods, Leary has experience in every aspect of entrepreneurialism. Her advice for budding entrepreneurs comes from years of experience in both scaling a business, building a community, and growing brands.

In this interview with Nathan Chan, Leary reveals the absolute essentials every new entrepreneur needs to tick off when they want to start something new. As a venture partner at Unusual Ventures, Leary has advice straight from the frontline of what she wants to see in a pitch.

Key Takeaways

  • How Leary grew up in a household of business owners and entrepreneurs and why that means she always knew she would be one too
  • Finding herself in the early start-up culture of Silicon Valley in the 90s
  • Her first business and how she faced failure, the decision to pivot, and a whole new frontier
  • The beginning of Nextdoor, and it’s growth internationally over the past decade
  • Joining Unusual Ventures, and why she wants to dedicate her time to helping others build companies from the ground up
  • Why founders need to be comfortable validating their ideas and assumptions
  • The two essential questions entrepreneurs need to ask themselves before starting
  • How Leary developed Nextdoor through a combination of brainstorming, customer research, and why you need to consider customer painkillers
  • Why every entrepreneur needs to learn to do extraordinary work for a narrow band of people, and then expand
  • How Leary fuelled the Nextdoor community, and why networks need leaders
  • Why Leary believes authenticity is the most important part of community strategy, and why you need to start with it
  • Why Leary stepped down from Nextdoor, and how the team of Unusual Ventures is rolling up their sleeves to help new entrepreneurs
  • Leary’s reveals the secret to pitching ideas correctly, and what Unusual Ventures looks for in a new business idea

Full Transcript of Podcast with Sarah Leary

Nathan: So the first question that I ask everyone that comes on is how did you get your job?

Sarah: That’s a great question to ask people. I think that the journey to finding out what it is that you want to do in life, it always tends to go back to your roots. And for me, that started with my family. And I grew up in a family where entrepreneurship and small business owners were everywhere. And maybe somewhat unusual, but it was normal to me. That was my grandmother who actually started a business with her two brothers immigrant family. You can’t go work for big blue or some big company. You got to go make your own way in the world.

And so I just grew up thinking that that’s what everyone did, and that’s what everyone’s grandmother did. So when you grow up with that in the background, you think about that’s where you want to end up. And so even though I started my career at Microsoft and it was an awesome time to be there early, mid ’90s and had a chance to work on the first launch of Microsoft Office. Even then I kind of knew wait a minute, this is Bill and Steve’s company. Bill Gates and Steve Ballmer’s company. And I kind of want to try my hand at doing that. And obviously, I shouldn’t have been running the company. I was 20 something years old. But it got me hooked on the idea that here was a company that they had started from the ground up, at least with Bill and Paul Allen. And so I knew pretty early on in my career I just wanted to go early stage.

So after going to university, after going to business school, I pretty quickly found myself in the early stage startup game in Silicon Valley in the late ’90s. And I loved it. I loved being in a place where you could build the team, you could build the culture, build the product, and have a lot of control and impact on what you were doing. And fortunately, that first company, we were able to take it public. And then eBay acquired the company. And I had joined as employee number 15.

So you would’ve thought I had scratched the itch of being in a small company. But I felt like well wait a minute. I wasn’t there at the very beginning. Right? That’s what I missed out on. So I joined my co-founder who had started the first company I had joined. My co-founder Nirav Tolia, and we started to think about new ideas and starting a company from the ground up. And that was a crazy ride. And we can talk more about it if you want. But basically, we started one company. It didn’t work out, we had to pivot to another direction. And we eventually landed on the idea of trying to build a social platform for your local community, for your neighbourhood. And that was Nextdoor. And we started that about 10 years ago and built it from one neighbourhood in the United States to now being available across the entire U.S., almost every neighbourhood here. 10 other countries including Australia, Canada, the UK, France, Italy, Spain, kind of you name it.

So I was just really drawn to being in that early stage company. And as I left Nextdoor about a year ago, I wanted to take those experiences and then apply them to helping other entrepreneurs and founders on that journey. And that’s what drew me into venture capital and to joining Unusual Ventures. So it’s kind of a journey for everyone. And for me, it was one that just had this truth about wanting to be an early stage company, and be a part of building something from the ground up, and then helping other people do the same.

Nathan: Yeah. Well, you’ve had an incredible journey. A lot I’d like to unpack. I’m sure a lot you’d love to talk about. We can go many directions. But I’d love to talk about the early days. You said, because I was really excited to speak to you because Nextdoor, well-known company. Massive success. Right? So I’d love to just kind of understand the early days, because it’s easy to look outside and see wow, all this is a success. And yeah, like you said the early days you worked on a product-

Sarah: You want to hear how the sausage got made.

Nathan: Yup. Yup. But you talked about the early product that didn’t work out. So tell me about, so that was kind of the first kind of, yeah.

Sarah: Yeah. So my co-founder Nirav and I were entrepreneurs in residence at a venture capital firm, which is a fancy way of just saying you get kind of put in a room and told, “Come up with ideas and see what you come up with.” And hopefully, it turns into something big. And we went on a journey of starting a company that was still an online community. It was actually around sports fans. And we launched this company, it was called Fanbase. We actually worked on it in a stealth for about a year, year and a half before we launched it. Big mistake. And then when we launched it, it actually had a great reception, seemed like it was doing well. And then after a few months, we just realised that we weren’t onto the next big thing. We weren’t building the next ESPN, the next big online sports community, whatever you would call it.

And that was a really hard situation to be in because we had spent all this time, we had raised money. But we could just tell from the engagement, and the retention, and the usage that we really hadn’t figured out something big and something that people loved. And that was a really hard decision as co-founders. We actually went back to our original investor and offered to give the money back. He said, “No, I bet on the team.” He was also like, “That’s a little bit of the easy way out. Why don’t you try out it again?”

So we hunkered down, we shrunk the team down to a core group of people and started working on new ideas, and took a radically different approach in developing those ideas. It was much more of what now has come to be known as lean startup, where you work on ideas, you talk to users beforehand, you build a prototype, you test it as quickly as possible. And you try and figure out if you have product market fit before you fully commit to building out the entire company. And frankly, that was a big learning. It was a hard learning. We spent two and a half years doing it the other way. And I now feel very, very strongly about how you go about finding that new idea.

And for us, that idea became Nextdoor. And part of it was inspired by our own experiences in our neighbourhoods, where we could talk to people all over the globe on Facebook, we could connect with people in our business spheres with LinkedIn, and yet we didn’t know the people who lived right next door or right down the street from us. And that seemed to be a missed opportunity. And certainly wasn’t the way that I grew up. So that became the nugget of an idea. We went out and we tested it in a couple of neighbourhoods. It turned out we weren’t the only ones who felt that way. And then we were off to the races and building Nextdoor. But that was 10 years ago.

Nathan: Yeah wow, crazy. So few questions there around that first company Fanbase. So you said you were building a sports community in stealth and you said that was a big mistake. Because yeah, that’s an interesting concept where you see somebody is working at a company on LinkedIn and it’s in stealth. That’s just the title. They’ve updated their in stealth, whatever they’re working on. Why do you think that was a big mistake for this particular instance?

Sarah: Well building something where you’re not getting feedback along the way is very dangerous. I mean you better be right. And I always think about it, it’s like you’re trying to hit this target that’s really far out in the distance. And if you’re off by even a little bit in the beginning, you’re going to miss the target. And instead, it would be much wiser to go out and take, “Here’s our idea for a community for sports fans,” and go talk to people who might be your target users and find out, do they agree with your hypothesis about why there needs to be something new in the world? And if you can’t get people excited and lighting up as you’re talking about it, it’s going to be hard to convince them to adopt a new app, or a new website, or a new community.

So the big mistake that we did was we didn’t want anyone to know. And I think a lot of founders think about that as like, “I don’t want anyone to steal my idea.” And the reality is the idea is part of it, but it’s also about the execution. So I’m not saying you need to go out and go do a big launch that you’re working on something new. But go talk to your potential users, or customers, and validate whether or not your assumptions about what’s missing in the market is true.

As entrepreneurs, I think we’re optimistic. We’re willful. We see something that we think is missing in the world. And that optimism is essential to get something off the ground, and to give it meaning, and to recruit people. But you got to be careful not to be in your own echo chamber and listening to yourself. Get some third-party validation, ideally with your users and your potential customers before you start investing in building out the whole product.

To me, it’s a little bit like if you were building a house, you usually draw up some blueprints. And you show it to some other people who might be an expert in something. And you find out whether or not you’re missing something before you start digging and pouring the foundation.

Nathan: Yeah. No, that makes sense. And the lean startup. Yeah. Game changer. Steve Blank, Eric Ries. Next level. We’ve spoken to both those guys.

Sarah: Steve Blank, a lot of his writing influenced us. And these were all things that we knew. It’s not like this was our first time building products or companies. But I think even experienced entrepreneurs, you can get overconfident. You can actually get to a point where you’re even more fearful of telling the world what you’re working on because it’s not fully formed yet. And you’re going to be subject to some more scrutiny because you’ve done it before. So I just encourage people to share it with the audience that can be most helpful to you about understanding, are you meeting a need that they actually have? So you have to validate is the need that you see in the market true? And then there’s a question of does your solution, usually a product or a service, actually meet that need? Those are two separate steps that I think sometimes people rush through because they want to start building something. And we just had a rule where you couldn’t start building anything until we had answered those first two questions. Was there really a problem? Was there something missing? What were the alternatives? And was your solution potentially better?

Nathan: Yeah. And so that’s when you took to when you started building Nextdoor. Yeah.

Sarah: Really important learnings that came out of that failure. That was a very expensive way to learn the lesson. So hopefully, we can share it with other founders, so they don’t have to waste two years of their lives working on something that leads to nowhere.

Nathan: Yeah. Look, it’s a very common thing. Because it’s scary to do product development, it’s scary to speak to customers. And it’s quite exciting. And yeah, there’s something special about this idea of starting your own thing, or building this grandiose business. And then you want to hold onto that idea. And it’s fun. It’s really fun to come up and map it out in your head. But then it’s oftentimes not something that people actually want. Or it doesn’t solve a need, or problem, or pain, or there’s no solid business model.

Sarah: It’s scary. It’s scary to show your product or your baby to someone to be like, “Do you love it as much as I do?” And this is what I encourage people is show it earlier, because you’re going to get clues that are going to increase the probability that when you actually launch it to a larger audience, you’ve built something that people care about and that they are delighted with. And that’s the name of the game. That’s the name of the game.

Nathan: Yeah. Agreed. So curious. You said you wanted to give the money back after 2.5 years. A couple of questions there. One is are you able to share how much money it was? And for 2.5 years, that’s a decent runway of itself. How much did you raise and how much did you want to give back? Were you self-funding? Yeah.

Sarah: Sure. Well I think in part because my co-founder had started a previous company, I had been a part of that company and that company had had a successful outcome. We were able to raise money pretty easily. So at the time that we were willing to give the money back, we had somewhere in the neighborhood of $7 million that we still had. And we had spent a couple million dollars to date. Because the team was small. We were very lean. But when you take money from whether it’s friends or family or an institutional investor like a venture capital firm, you’re taking on some responsibility to turn that money into a positive return for them. And if at any point along the way on that journey you don’t feel confident that you’re going to be able to do that, I think you have to be able to have the conversation with your investors and say, “Hey, we don’t think that our original mission that we were on that we thought we were going to achieve is viable.”

And that’s where the conversation to give the money back was. And I think lucky for us, our investor was willing to say, “Hey, why don’t you take another crack at it? I’ll give you three or four months to come up with something new. And if that doesn’t work out, then we can have a conversation at that point in time.”

And look, that vote of confidence was awesome. It did make you feel like okay, well you now have to come up with a great idea. So when we shrunk the team down, and we had a standing meeting every other day to come up with the next big idea. We would have that meeting for about 90 minutes, two hours. And then it was lunchtime because we were all exhausted. Right? And that was a whole exercise of we get excited about an idea. Two people go off and go work on it. And then the next day, you come back you’re like, “There’s four other competitors. They’re well-funded.” Right? So it was a lot of one step forward, two steps back along the way. And it was a summer of exploration and discovery. And one of the ideas that came up was this private network for your local community or neighbourhood. And it was one of a couple of ideas that we kept going out and talking to people, and it just kept gaining steam.

And at some point you say, “Okay, we’ve learned a lot here. Now we have to build a simple prototype to validate what we have learned through this discovery process.” And that’s when we knew we had something because it worked. It worked in one neighbourhood. And they were like, “Well, let’s try it in another neighbourhood.” It wasn’t until we got to about five neighbourhoods that we’re like, “Okay, we think we really have something here. And this is what we’re going to build the company around.” So it was a process. Money doesn’t solve all those problems. Sometimes it just gives you the runway to eventually figure it out.

Nathan: Yeah. It’s the oxygen.

Sarah: Exactly. Exactly.

Nathan: So I’m curious around you said that you would have a stand up every second day, and you’d spend a couple of hours just kind of discussing ideas. Then you’d have the team go and work on some things. And then you’d kind of switch again. I’d love to delve a little deeper on that process. Because I think oftentimes as well, people like the idea of the lifestyle of being an entrepreneur. But they often say, “I don’t have a good enough idea yet.” And I’d love to delve a little deeper on, there’s some people that can come up with 101 ideas, but they don’t have the confidence for it to … they’re looking for signals. They’re looking for something. So I’d love to delve a little deeper. How did you generate those ideas? And then what were those couple of steps? You said you went and spoke to people. But even before the prototype, yeah.

Sarah: Oh yeah. No, it’s a great question. Because some people, they just automatically think of ideas. And some people, it’s more of a process. It’s more of a discussion. And what we tried to do was create an environment where people who had ideas in our group, there were six of us that were working on this together. That we created a forum where we could just get the ideas out for discussion. And then what you were looking for was not just the idea, but that other people would glom onto it and get excited about it. They’d be like, “What about this?” So you would just have a discussion that was very organic. There was no hierarchy to the way that we were doing this. There were some days where we had new ideas, and there were some days where maybe we didn’t. And we were just talking about the current ideas that we were working on.

I think people would come in. Some people who are very analytical about the opportunities. Some were inspired by something that they had experienced in their own life. For some people, they had been just triggered because they had met with a friend and heard about some other idea that they were working on. So during that period of time, I think one thing that was true for almost all of our ideas was that they had these underpinnings around building on top of online communities. Because the group that we had assembled remember had worked on Fanbase, and they had actually worked on the previous company, which had also been an online community. So we had that shared focus, and we were thinking about different parts of our lives where you could benefit from that type of foundation.

The other thing that I think is really important was that at the end of every meeting, any ideas that we had, we would say, “Okay, who wants to go work on one of these ideas?” And what you’re looking for is someone who had some interest, passion, motivation to go take one of those ideas and run with it. And then the second thing that we did is that we never sent anyone out on an idea solo. You always went in teams of two. So then you had someone to kind of riff off of, someone to pair up on, and go on that exploration together. Because again, an idea is just an idea that needs to take shape. And you need energy to make that happen. So I think it’s really important that you find these small SWOT teams. And I think two people’s pretty good. Sometimes there were three, if there was an idea people were really excited about. But then we would come back two days later and that team would report out what they learned. And there was the factual information. But what you were also okay, kind of an unspoken part is are you getting more excited about this idea or not?

Because you can’t fake passion for long. It doesn’t work. And I do think that you have to have an interest in what it is that you are building because you could be working on it for very long hours for five, 10 years. So if you don’t get some joy out of focusing on it, it’s going to be really hard to be persistent and resilient during the ups and downs.

So that process came about very organically. But I think it was essential to ideas getting off the ground. And then sometimes okay, something’s getting ahead of steam. Then other people are joining in to that effort. And that’s what happened with Nextdoor. It started with one person, and two people, and then it became three, four of us that were working on it. And we’re like there’s something here. And I think for most people, they get drawn to momentum, progress, and things that are working. And that’s what happened in a very organic way. So in that regard, it kind of survived the process. It didn’t die online. And that to me I think is one of the things about a startup that you can’t fake, right? There has to be an intrinsic motivation of the team. They have to be getting energy out of working on it to keep going. And at that point, the thing that you’re spending your time on that you haven’t killed off because of market negative feedback, that’s the thing you should go work on.

Nathan: Yeah. I see. This is really interesting. So how many ideas for how long did you work on this before you found Nextdoor?

Sarah: We had, I mean at one point in time, I think that there were nine ideas that were on the board that people were working on, that pretty quickly whittled down to about five. And we worked on them over the course of a summer. So call it 10 weeks. And by the end of the summer, there were really two that were emerging that had some potential. And then that’s when we started to move out of customer discovery work, which as you know from Steve Blank is go out and learn if this is something that people have a need for in their life. And we had done very simple mock-ups and wire frames. Again, we hadn’t written any code. And at that point we said, “Let’s build a simple prototype. We have enough feedback from the market to suggest that Nextdoor.” And we didn’t even call it Nextdoor at the time. I think we were calling it, I think was [Neighbourly] or something like that. Here’s an idea that has some credibility. But the only way we’re really going to learn is if we can launch it in a single neighbourhood, and see how neighbours interact with each other, and how they like it from there.

Nathan: And when it comes to the parameters for the idea, one thing you said that was interesting was you’d look at maybe one from a brainstorming session, and then you’d go back and you’d be like, “Oh look, there’s a tonne of competitors. Or they’re already got heaps of traction.” I’d love to know what were some of these parameters that you were looking for? Total addressable market, I’d love to know. Because that’s important when it comes to trying to solve a big problem. That’s a big thing in San Francisco and that culture is you don’t just go small. You don’t just look for a small niche, right? You’re looking to a big total addressable market. But what else was there?

Sarah: Well, so total addressable market is important. And just a word on that. You’re going to work really hard on anything. You might as well work on something that has the potential to be big. So I definitely encourage people to, especially if you want to take outside money from an investor to fuel that. If you don’t, you can keep it more of a lifestyle business. But otherwise, you got to think about how big is that market. Because you’re going to put your heart and soul into it whether it’s a $10 million market or a $10 billion market. So might as well go stretch for the stars.

But beyond that, I think a key philosophy for us on the team was we wanted to find something that was a real pain point. That it wasn’t a vitamin versus the painkiller, right? You’d much rather be in the painkiller business. And I think that terminology gets used a lot, but it was for us something that said how are we going to … it’s hard to get consumers to adopt a new product, or a new app, or a new service. So it has to be something that they’re feeling a gap in their life. And if they don’t feel it, then you’re going to have a really hard time convincing them that they are missing out. So what we wanted to find were real pain points that people had in their life and try and address them.

When it came to competition, competition is one where you might say, “There’s a lot of competitors. You should stay out of it.” But it’s also about the quality of the competition. Is this a recently funded new startup that has a great team or there’s 10 teams that are in this space? That’s going to be a little bit harder to break out. But if it’s a business that maybe has been around for a while that has been neglected, then that competition is one you say maybe I’m willing to take that on. In the case of Nextdoor, there were people who were using things like Yahoo Groups and listservs, and maybe the local newspaper, like the printed newspaper. That was the competition at the time. You’re like okay, I think we can do better than that. I think we can offer something that is demonstrably better than what they currently have. So that competition was one that in some degrees helped validate the market for us, but didn’t dissuade us from going into the market.

Nathan: Yep. That makes sense. That’s some really good advice. Because I think often, if there are competitors, it can be intimidating. But that can often be good signs because that means that there is a market and it’s not a crazy idea of something that nobody wants. It’s one of many signals that you’re looking for. Right?

Sarah: That’s right. But you have to be able to clearly articulate why you are a better option than that competitor. And if not, then go back to the drawing board.

Nathan: Yep. Okay. So you started with five neighbourhoods. What did that mean exactly? Because it ain’t easy to build an online community. And it ain’t easy to build a social network. So yeah, I’d love to hear.

Sarah: Well there was, I think one of the biggest challenges when we first started thinking about the idea of Nextdoor was your head starts to explode when you think about oh my goodness, we’re going to have to build 200,000 of these small neighbourhood networks across the country. And that’s just in the U.S. So you think about that and you start to say that’s daunting. That’s really hard. But I think part of the calculus that we did was saying well, if we can figure out a way to make this valuable, don’t you think we’ll be embedded in these communities? And therefore, it will be worth the hard work to go do it, right? It will be hard. But if you do it, it’ll be valuable, and you will be embedded into these communities for years to come.

So one of the things that I think we got right was being willing to not be daunted by the large numbers, but instead to be really focused on how do we get the seeds of these communities correct. So that first year, so if we started and we had five, by the end of the first year, we had 176 neighbourhoods total. Before we publicly launched. And most of those 176 neighbourhoods we were on the phone talking to those users. We had direct connections with them. And what we were doing was learning how to really build the process of getting a community off the ground, and then figuring out how we could build that into the product so that we could do it at scale.

So one of the things that I think is really important and valuable for people to think about is in the beginning, do not be afraid of doing unscalable things so you can get it right. Because the most important thing is to figure out what makes this, in this case, we are building community. What makes it work? What are the ingredients that make it work? Okay, you did it in one neighbourhood. You did it in five neighbourhoods. Can you do it in 15 neighbourhoods? Can you do it in 25 neighbourhoods? And once you start to see those patterns, and most of the time you’re doing them in manual ways, unscalable ways. But with that, you’re learning what is the essence of making it work. And then you can build that into a product at scale, a service at scale.

I think you made this point. It’s easy to look at something that’s been successful and be like, “It was easy.” But the reality is in the beginning, it’s usually very granular, very tactile, very hands-on. And frankly, that is where I think a lot of innovation and insight comes out of that process.

And it’s something that at Unusual Ventures, when we are talking to founders and entrepreneurs, we encourage them pick part of the market. And over-deliver for that segment of users. Build a product that people actually love and are delighted with. Because if you can find that, then you can think about expanding out the market from there. But the worst thing to do is create a mediocre product for a large number of people. Because early on, what you’re looking for are true believers. The people who will be almost evangelical about telling their friends about your product. And the only way you can do that is to deliver an extraordinary product experience for a group of people who you understand really, really, really, really well.

So I encourage people. Even though you want to go for a large addressable market, you want to start with a experience that’s really deep. Look at Amazon. Where did Jeff Bezos start? He started with books, right? And then he moved into music and DVDs. But it was the quality of those experiences early on that gave him permission for Amazon to be able to build out the other categories. If he had not done a great job in those first categories, you don’t have the brand, you don’t have the trust of your customers to be able to expand beyond that. And I think every entrepreneur can learn from that is deliver an extraordinary product experience, extraordinary service experience for a narrow band of users. And then expand out from there. And I think that the benefit of doing something hyperlocal like Nextdoor is that you could do that in a handful of neighbourhoods to begin with. And each time, get a little bit better at building the experience that then could scale up and be used around the globe.

Nathan: Yeah, I see. That’s really great advice, Sarah. I’m curious though, how did you fuel the network effects? Because that is the key element to online community, social networks. Fueling that network effect so it’s built within the product, so it naturally grows. What did you do there? How did you fuel that?

Sarah: That’s a great question. And I think the core of any community is trying to get the one or two people in the beginning of any community who are going to be your real champions. So at Nextdoor, we had this concept of a founding member in each neighbourhood. And that person was the individual who brought Nextdoor to their community. And we would ask them, “What’s the name of the community? Why do you want to bring Nextdoor to your community? What is the boundaries of the neighbourhood?” We put them through all these to kind of prove are you the right person to do this in your neighbourhood? And then we told them they had 21 days to go invite nine other people to join their neighbourhood. So only the neighbourhoods that could get over that hurdle would be allowed to continue. Otherwise, we would give someone else the opportunity to do it.

So if you just think about what that was doing, what that was doing was identifying a local champion within the neighbourhood whose objective was to recruit other people in the neighbourhood to join. And then everyone who joined the neighbourhood was asked to invite a few neighbours themselves. So this was a way in which you built grassroots community at scale. And it was essential. And I think any community that you’re building, whether you’re building your founder community, or someone’s creating a community of people who like to play pickleball, you’ve got to start with one person who’s like the champion who’s like, “Come on guys, let’s get together and let’s do this.” And I don’t care if that community ends up eventually being 10 million people. It starts off with one or two people who plant the seeds and create the community from the ground up.

Nathan: Yeah. That’s really interesting. Love to delve a little more deeper on that. Because I think more than ever, community is becoming more and more important even for direct-to-consumer brands, or SaaS companies, or B2B companies. People are people using, I see this trend where people are using products like Discord or even Facebook Groups to kind of build their community of customers, advocates, and then pick out evangelists. What advice would you give to anyone that is looking to use community building as a tool for growth or a competitive advantage?

Sarah: Nathan, it’s a great insight. And it’s something that for me who has worked now on community building platforms for almost 20 years, I’m delighted to see more people kind of tune into this. And the biggest thing that I encourage people to focus on is authenticity. The thing about a community is that you can’t cheat it. You can’t fake it. It has to be authentic. And that’s why I often tell people if you think community is an important part of your strategy, it should be a part of what you’re doing from the very beginning. It’s not the type of thing you can just bolt on later on. If you do, it will not feel authentic. So if you want to create a community around your product, then you should have the founding team, the founder, the CEO as member number one of that community. And sharing with people what is the mission? Why is this important? What are the goals? And really create them as almost co-collaborators in building the product.

So it shouldn’t just be like, “Can you just promote my product on your social network?” I want you to be a part of this product process. Tell us what we could do better. How could we improve the product? And then you got to act on it and listen to it. Because if not, then again, the community won’t have the authenticity that you’re trying to I think infuse into not just your community, but also your company, your product as a whole. And that’s something that I think if you go back to those early days with Nextdoor, those first 176 neighbourhoods, those early founding members gave us incredible feedback that dramatically shaped the product early on. And if we did not have that back and forth conversation and relationship with them, we would not have built a high quality product for launch. So it was really an essential part of it. But the biggest mistake that I see people do is that they like, “We’re going to build the product. And then later on, we’re going to bolt on community afterwards.” And I think that rarely works. It has to be part of the DNA of the company for it to be something that rings true with your community.

Nathan: Yeah. No, that’s really good advice. And makes sense. I was thinking back on just experiences that we have. Because at Foundr, we’re trying to build a company that democratises entrepreneurial education with free content on the media property side, but also premium content on the online educational courses side. And I think about certain communities for certain courses, and ones that have really taken off have been kind of myself or some of the early team kind of rustling that up and driving it, versus some other products as we’ve tried to scale out and we bolted a community on, and it hasn’t worked as well. So no, that really makes sense.

Because I think, the reason I ask this question is well, I think community is quite a hot thing right now. And it can be it can be very, very, very powerful. If you look at it from another lens, you look at kind of personal brands and these influencers like a David Dobrik or a Kylie Jenner. The influence that they command and the loyalty that they command with their followers, i.e. an online community of sorts is incredible. That is just so extremely powerful.

Sarah: Yeah. And to me, I think there’s a macro trend that’s happening in the world where we are increasingly less trusting of large institutions. And instead, we rely much more on a far more democratic, grassroots type of word-of-mouth recommendations. And that’s where authenticity has to be there, because you can’t convince people to be advocates for your product, your brand, if they don’t actually feel that way. Right?

And by the way, what I think is so interesting is this is true as you noted on the consumer side, but it’s also going into the SaaS products and enterprise, even in infrastructure. We see this at Unusual Ventures, we have a whole effort around enterprise and infrastructure. And a big part of every single one of those products is about having a community of folks who understand your product that can speak to one another and speak to other CIOs or other decision makers about why the product works.

And in fact, you also have these grassroots open-source communities. That’s a lot of what’s happening in open-source community is, “Hey, what’s the best thing that I can do to fix this problem in my company?” And people feel very comfortable going out to an open-source community and getting the answer to that. The kind of the wisdom of the crowds at scale.

So I think almost every new product, new service, new brand, if you’re not thinking about your community strategy from the very beginning, you’re potentially putting yourself into a corner. Because it’s going to be hard down the road to add that in, in a way that will feel authentic to the group that you’re trying to win over as your advocates and your influencers in whatever market you’re participating.

Nathan: Yeah, I agree 110%. I could talk about this all day. So really enjoying-

Sarah: Well it’s what you’re doing. It’s what you’re doing, right? You’re building community. And so much of this community that you’ve built is a reflection of you, and the early people that you brought on. And the trust that people have in this brand is a reflection of people’s trust in you. And I think that that is true with virtually every community out there.

Nathan: Yeah. I agree. Look, we have to work towards wrapping up Sarah. I’m mindful of your time. But yeah, this is a great conversation. I’d love to just talk-

Sarah: It’s been fun. Thank you.

Nathan: Yeah no, it’s been great. So I’d love to just talk about a little bit more around Nextdoor and also Unusual around kind of what happened next. So you built that company up. Can we talk around kind of, because yeah you said it was one of the largest social networks, or world’s largest private social network of neighbourhoods. Can you kind of give us an idea of scale, and then what happened next, and why you decided to move to Unusual, and how all that came about?

Sarah: Sure. So with Nextdoor, we are growing. We get to almost every neighbourhood in the United States. I spent a lot of time launching Nextdoor in international markets, including Australia, including most of the Western Europe. And then the team launched in Canada. And we were just at a point where I think looking at okay, we’ve built this platform. It’s going really well. And the next question for me personally, was did I want to sign up for the next three to four years for the next phase of the company? And I think that that’s a very personal decision that each of us has to make. And if you’re ever at a point where you feel like, “Hey, it might be the right time to get off the merry-go-round and allow for the next phase of growth,” whether that’s around more expansion, as well as expansion on the revenue side. It just felt like it was a good time for me to step away and actually move to the board at that time, and take a little bit of time to think about the next stages for me.

And what I got excited about was at that point, Nextdoor is almost 400 people, right? It’s a much larger organisation. And I was excited about sitting down with entrepreneurs in the early stages of their creation process and helping them think about how to find product market fit, avoid some of these pitfalls that we had with Fanbase. And that’s what was getting me excited. So I got turned on to the team at Unusual because they are the types of investors who want to roll up their sleeves and help entrepreneurs in those early stages. And hopefully, I can take some of the experiences that I had with Nextdoor and even with Fanbase, and use them as a way to help other entrepreneurs see around the corners and avoid some of those pitfalls that we had at least on the Fanbase side of things. So it’s been a great match and a great experience. And I think it’s just fun to see the creation of new companies and entrepreneurs going through that journey. And if I can be helpful in that process, that’s fantastic.

Nathan: Yeah. No, that makes sense. And look, it’s a very exciting time right now. There’s a lot of exciting, interesting companies being created and a lot of innovation happening during everything that’s going on in the world right now. So just to round out the Nextdoor kind of story, what did the revenue model look like? And can you give us some numbers around, can you share users, or revenue, or anything there?

Sarah: Yeah. So the revenue you can think about as being, we have the ability for local businesses, large businesses to be able to advertise in the feed. So that has been very successful for us. We’re still a privately held company, so we don’t talk about revenue. But in terms of users, so first of all, we’ll take neighbourhoods over 250, I think it’s 260,000 neighbourhoods around the globe. Tens of millions of users around the globe. And as you can imagine in a world where there’s a global pandemic, there’s been a lot of growth this year because people want to know what’s happening in their hyperlocal community, in their neighbourhoods. So it’s been very gratifying for me to see the platform that I worked on for almost a decade here being utilised and being valuable at a time of such critical need. And so we continue to see that growth, and delighted that it’s been a reliable resource for people during these really challenging times.

Nathan: Yeah, no, that makes sense. Thank you for sharing, just because it helps round out that journey. And then yeah, I’d love to talk a little bit about Unusual Ventures. More around kind of you guys are quite hands-on with founders, and you really kind of get in the weeds. So I’m curious what are some of the interesting things that are being pitched to you right now, and what does a good pitch look like?

Sarah: Well, I think the key thing is that we try and be helpful with entrepreneurs where they need the help. And I think people are drawn to us because we have especially on the side that I work on most closely, on the consumer side, Andy Johns and I are both people who have worked at building companies, me and founding companies, Andy Johns in growing and scaling companies. So we have a lot of experience of what it’s like to be in the trenches. So we can help entrepreneurs, especially in those early stages of trying to find product market fit, thinking about positioning, thinking about how to create the viral growth loops, and how to do that in the product and in organic ways. Those are things that we can help entrepreneurs through the journey, as well as connect them to other folks that we have worked with where they need expertise. So that’s something that’s been super interesting.

Over the course of the last year, obviously a couple of things that have happened. fintech has really exploded once again. Andy Johns, my partner was the head of product and then the president of Wealthfront. So he has been in the trenches of building that. So almost every fintech company that you can think of out there has come through and come to talk to him. I’ve had a lot of experience with online communities and with social media. So anything to do with local, which again we’re seeing a resurgence and local and people coming to us and asking us about that.

And then we’ve also gone pretty deep on video, which that is something we’ve been thinking about for a while. And obviously with people working from home, the role of video in the workplace and in our lives is really important. And if you combine that with these network effects, I think we have some unique insight into those areas where we can be helpful to folks as they get off the ground. So even though COVID has pulled us all from working, from being together in the office working home, it has not slowed down the rate at which people are starting new companies, that they’re looking to accelerate their growth. So it’s been a very busy, busy time.

Nathan: Yeah. No it’s actually, from my experience, it’s actually accelerated things in many ways. More than ever. I was reading some statistics, can’t remember where, but more than ever, the amount of LLCs that have been registered in the United States, it’s tripled or something insane. Yeah.

Sarah: Well I think disruption happens. When disruption happens, I think entrepreneurs see that there’s an opportunity for something new to be created. And I think we’re seeing that confluence. Plus you have a situation where there are a lot more people who have the skills that are needed to get a company started today. It’s easier than ever to get them started. There’s capital that’s out there for the right ideas. So that combination combined with a pretty radical change in how we are all working and living right now is creating these new windows of opportunities for new companies to be formed. So in that regard, I think it’s a great time to be an entrepreneur.

Nathan: Yeah, I agree. 110%. So look, we have to work towards wrapping up Sarah. Like I said, really enjoyed our conversation. Two last questions. One, any kind of final words of wisdom that you’d like to share from everything you’ve learned on your journey? And then secondly, where’s the best place people can find out more about yourself, your work, Unusual Ventures?

Sarah: Sure. So the biggest thing I think to think about as you’re going on these entrepreneurial journeys is thinking about who you are working with. And I think that starts with your co-founders and the team that you build. These are intense journeys that often go on for five, 10 years. And do you want pick people who are complimentary to your skillset, but also people who you’re going to enjoy working with through the ups and downs? And I think the same applies when you are looking for investors, especially the early stage investors.

Money is kind of a commodity. Who is it that’s going to bring something to the table that’s going to be additive to the team? Whether that’s specific domain expertise, it’s stage of company expertise. And who do you want to be working with through the ups and downs? Because your investors are part of that team. So think very wisely about that. And I think one of the things that we were smart about with Nextdoor is that we didn’t always optimise for price and valuation. We were much more looking for who could be a great partner for us at this stage of the company.

And then in terms of where people can find me, I can be found really easily. I’m Sarah S-A-R-A-H @unusual.vc. You can go check out our website, unusual.vc. You can go check me out on Twitter. I’m @sarahleary, or you can find us on Twitter @UnusualVc as well. So give it a try. We’d love to hear from entrepreneurs out there that are working on something exciting and big, and looking for someone to be a real partner to them in that journey.

Nathan: Amazing. Well look, thank you so much for your time Sarah. I really appreciate it. It was a great call.

Sarah: It’s been an honour to be here. Thank you so much, Nathan. And keep up the great work with your community.

Nathan: Thank you.

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