Nextdoor today is worth more than $2 Billion and is used by 250,000 neighborhoods throughout the world. Silicon Valley types had doubts about their approach, but Sarah offers valuable ideas for finding the path to the light. One crucial hint is that users matter far more than the folks in the "chattering class."
Sarah Leary:
We didn't invent neighborliness. That's been around for centuries, but in today's modern world, how can you actually use technology to break down those barriers and help people restart conversations that maybe they have let wither over the last few decades?
Mike Maples:
That's Sarah Leary, co-founder of Nextdoor, the social network for neighbors to build stronger connections. She's felt the ups and downs of the startup roller coaster many times over the last 20 years and time and again, she's prevailed. Today, Next Door is worth more than $2 billion and is used by 250,000 neighborhoods across the world. This is Mike Maples, Jr of Floodgate and it's go time with Sarah Leary.
Mike Maples:
For listeners who don't know Sarah Leary, I'm excited that's about to change. She's built multiple successful online communities from the ground up in the last 20 years. We'll talk about lessons learned from Bill Campbell, the legendary Silicon Valley coach, who also helped Steve Jobs of Apple and Eric Schmidt at Google, and what did she learn from her biggest mistakes, particularly that of fan base, which was a social network for sports fans that ultimately failed? And then of course, we'll do a deep dive on Next Door, which required patience and time to build from a cold start.
Mike Maples:
It was an idea that had many more skeptics than believers at first, but it's now in more than 11 countries and in use by more than 250,000 neighborhoods. Next Door offers a perfect example of a key lesson of greatness. Hack value before hacking growth. Let's talk to her and see why.
Mike Maples:
Sarah Leary, welcome to the podcast.
Sarah Leary:
Excited to be here, Mike. Thanks for having me.
Mike Maples:
Thanks for coming. I think we're going to have some fun. How did you get into the tech business in the first place? Because if my memory serves me, you were an econ major at the beginning.
Sarah Leary:
That's right. That's right. So, coming out of Harvard, an econ major is supposed to go into banking or something like that. And whenever I talked to people, they hated what they were doing, and then I had the opportunity to talk to some people who were at a company called Microsoft, and barely knew what they did at the time. But as I dug deeper, I realized, "Wow, these are people who love what they're doing. They're super smart and they feel like what they're doing has an impact in the world." That intrigued me and got me to go out to Redmond, Washington for the summer.
Sarah Leary:
I remember my first day at Microsoft. I showed up, they told me the name of the product ... I had never heard of it ... and said that I would be presenting it to 30 resellers two days later and I better learn the product. So, I stayed at work til about 9:30 at night that first night during my summer internship, and I loved it. I was just captured by the idea that they would trust me to do anything important and that you had to just roll up your sleeves and learn the product, and then you could go out and make an impact almost immediately. I became hooked in the whole idea of working with very smart people, building products and given responsibility probably a little bit earlier than I deserved in my career.
Mike Maples:
Was there anything in your earlier years or childhood, or upbringing, that suggested you would be an entrepreneur someday?
Sarah Leary:
Looking back on it, you could probably say yes. Mostly because I came from a family of entrepreneurs, small business owners. Whether it was my uncle, my grandfather, or even amazingly my grandmother, who ran a family business from nothing and built it into a multimillion dollar company with her brothers at a time when you didn't do that. I mean, she started her business in the 1930s, so I just grew up understanding that women can be in charge and be very successful in business. I didn't think that that was unusual. That was just what my grandmother did.
Mike Maples:
That's just how it was.
Sarah Leary:
I didn't realize it until I was in college that other people didn't have grandmothers who did that. It just was what I was used to, and if you become familiar with that, that's normal. I always thought, "Wow, you, you want to be able to work hard and reap the benefits, but also be able to contribute to community in a bigger way." And, I felt like small businesses and building businesses was a great way to do that.
Mike Maples:
So, then you decide one day "I'm going to strike out as a founder."
Sarah Leary:
Well, not exactly.
Mike Maples:
Okay, so how did you go from a place like Microsoft to now all of a sudden you're involved with a startup? How did you find co-founders? How'd you come up with an idea?
Sarah Leary:
I actually took a detour through business school, and pretty quickly when I was at business school-
Mike Maples:
That's right. I think that's where I first met you when you coming out of business school.
Sarah Leary:
That's right. Pretty quickly I thought, "Oh, I need to get back to tech as quickly as possible." And this is 1998, 1999. Things are just exploding.
Mike Maples:
You're like I'm on the sidelines.
Sarah Leary:
A little bit. Then, I went and I spent some time at Greylock, a venture capital firm based in Boston. And, once again, I was sitting there saying, "I want to be in the game, not on the sidelines." So, one of my business school classmates told me about a company and wanted me to meet the founders. That team became the founding team of Epinions. I joined, employee number 15 there, and it was an incredible ride. It was before we ever launched a product, and yet, I felt like I missed the really fun part, the first four or five months where you have the whiteboard and the idea. That being said, it was an incredible journey. Moved out to San Francisco, 1999. It is insane in the Valley, and it's go, go, go, go, go. And then, boom. Things crash.
Mike Maples:
It was a pretty interesting cast of characters, if I recall. Nirav Tolia was there. Wasn't Naval also there?
Sarah Leary:
Naval Ravikant, yep.
Mike Maples:
Was Mike Speiser there?
Sarah Leary:
That's right.
Mike Maples:
That's quite an interesting cast of characters. What was it like working with folks like that?
Sarah Leary:
You know, the Valley at that time was filled with very smart young people who had big ideas and ambitions. But, about a year into the founding of the company, some of those people stepped aside because they wanted to be a part of the early stage, but not the operating of the company. Nirav Tolia and I, and many others, stayed with that company as it went through the ups and the downs. I think a lot of people joined tech companies at that time because they thought they could make money fast. And, the reality was when the music stopped in what? 2000? 2001? You're sitting there looking at how do I take this company, we've raised money. We have a big team of people. How do we turn it into a great business? That was painful for a lot of people, and it was not an easy road.
Sarah Leary:
People used to say B2B, B2C, back to consulting, back to banking. I had at one point a lot of business school classmates who had come out to San Francisco to be part of the gold rush and most of them left.
Mike Maples:
That dot.com fever.
Sarah Leary:
That's right. I was someone who was interested in the building, the building of a product and the building of a company and building of a team. So, Epinions went through really high flying, grew to be about 100 employees, had to scale back to 68, and then 32 employees and change our business model, turn it all around, and by the end of 2001, we had our first profitable month. Not by much, but it was a profitable month.
Mike Maples:
It was something.
Sarah Leary:
Exactly. You can look back on that, and that really forged this idea of understanding that when you're starting a company and building a company, you inherit a lot of responsibility and you have to be able to whether the good times and the bad times. That's really where Nirav and I formed a close bond of what it means to be in the bunker with each other in building things. It's awesome when everything's going well and it's up and to the right, but who do you want to be working alongside when everyone's giving up hope on you? You have to make hard decisions. You're hunkering down, and quite frankly, you have a lot of uncertainty as to whether or not you'll be able to see a brighter day. Yet, you have to be able to lift each other up.
Mike Maples:
What was like to have to downsize a company when you're facing all these problems, and probably never had that in your experience before? What was that like?
Sarah Leary:
That was probably the hardest day of my professional career, and I'll never forget, someone you and I both look up to, Bill Campbell, was on our board and we had to make this decision to scale back operations because we were burning too much cash and we needed to extend the runway as much as possible. I'll never forget sitting in a board meeting and we're talking about what we're going to do and running through ... We're 31, 32 years old at the time, really young. We're going through this checklist, and I remember one of the board members being like, "Well, you better shut off their computers and make sure they don't have access to the source code."
Sarah Leary:
And, I remember sitting there and like that doesn't feel like our company. It doesn't feel right. And, Bill Campbell, you know, who is a CEO of Intuit and CEO whisperer to Apple and Google, slams his hands on the table. I will leave out some of the expletives.
Mike Maples:
I bet he had some colorful words to share.
Sarah Leary:
He's like, "Make no mistake about this. This is a failure of management. These people have done nothing wrong, and you're about to deliver really hard news to them. Make sure you treat them like the adults that they are and treat them with dignity, and they will act that way." It was a really important moment because that's what my instincts told me, but you feel like you're new to this and you've got to do everything the way that other people who have more experience-
Mike Maples:
By the book.
Sarah Leary:
Exactly. Bill Campbell just brought a humanity to it, and he said something really important. He said, "Just remember that the way you treat people on the way out, everyone is watching, including the people who are staying." It was still a really, really hard day but treat people with dignity, give them the time and patience to wrap things up and that will pay it forward, and lo and behold, a couple of those people I've worked with again.
Mike Maples:
Yeah, I remember probably at around the same time, September 11th happened and it was the really bad time in the industry, and we had this meeting with our E staff at Motive, and we said, "We're going to have to cut 120 people." I had a lot of pride. You could probably even say egocentric pride about the fact that we'd never had a layoff through all the tough times from 2000 up to that point. We always maintained our footing. And then, it's so hard because I remember the day that we had to announce them, meeting people one-on-one, 15 minutes at a time to explain to them, "Hey, this wasn't your fault. The company has to survive, and if we don't make this decision, we're not going to survive. Nobody's going to have a job at the company."
Mike Maples:
These are people you told this company's going to be awesome, we're going to rock people's world, this is going to be huge.
Sarah Leary:
And, they joined in large part because they trusted you.
Mike Maples:
Yeah, so now you're explaining to them that you let them down, and September 11th doesn't feel like much of an excuse at the time, right?
Sarah Leary:
No, not to that individual and to their family.
Mike Maples:
Yeah, I don't think I can ever remember a worse day in my career to be honest. I remember doing all those talks, just from the very first thing in the morning to the very end of the day, and then just getting in my car, just not being able to deal and just driving away just in tears. Just crying. I was like this sucked.
Sarah Leary:
I remember our version of that, feeling the same way, and I remember Bill Campbell being like, "you care. You care and that matters, and people will see that," but it doesn't make it any easier when you have to have those tough conversations.
Mike Maples:
The thing that I think Bill Campbell got was that people who didn't feel that way really shouldn't be trusted to lead. You read these stories in Fortune Magazine about Chainsaw Al Dunlap. That just doesn't resonate with me at all when it comes to startups.
Sarah Leary:
Oh, and especially in a startup where you're asking people to often times take a smaller salary and work longer hours, and they're in on the mission and they're in the bunker with you. For that to not work out as you had hoped, it's gut wrenching.
Mike Maples:
Yeah, it's tough. It's definitely the down part of the rollercoaster for sure. So, then what happened in the end with Epinions? How did you stare impossible in the face and come out to tell the tale?
Sarah Leary:
So, we hunkered down. We found a new business model. We merged with another company called Deal Time and combined the companies into Shopping.com, and then in October of 2004, we took that company public and then the next year eBay acquired the company for $620 million dollars.
Mike Maples:
Not bad.
Sarah Leary:
What was crazy is that I was still hooked, and the thing I was missing from that whole experience was I wasn't there in the beginning. So I was like, "I want to be there in the beginning with the whiteboard is clear and we don't know what we're doing yet and we're figuring it out." That's when I turned to Nirav and I said, "I want to start a company." We decided we were going to start a company together, which I think you hear this a lot. People figuring out who they're going to work with before they figure out exactly what they're going to do.
Mike Maples:
Sorry, before we get to Next Door, I'm just curious. What did you learn about community building at Epinions? Because, it feels to me like it was one of the earlier companies that really emphasized community.
Sarah Leary:
Yeah, it was really the first platform where anyone could write a review about products and services. So, you go back to 1999, the idea of reading a review on a hotel or on a digital camera or stroller, that was totally new. At Epinions, we learned a lot of hard lessons about how you get community off the ground, and I think one of the biggest things was how do you seed community and cultivate it? In the beginning, we were very hands on because there was no other alternative. How are you going to go find people who want to go write reviews? Well, you go to Usenet and talk to them. And, you convince them to come over to your platform.
Sarah Leary:
It turns out that that's actually a good way to seed community. We had a lot of ideas around identity at the time that was all relevant to that period of time, but I think one of the key learnings was when we started out Epinions, people would earn money and get paid for writing reviews. As we had to change the business model, that wasn't going to be sustainable anymore. So, we removed that and what we realized is that people weren't doing it for the money. They actually did it much more for the feedback, the engagement, what sometimes is referred to as ego-boo and getting that ego boost. So, it turns out that creating an ecosystem where people contribute content and they can hear from other people who share their interest in that topic is really rewarding, and having an audience to be heard was something that the internet made possible that previously you couldn't tap into that type of audience.
Sarah Leary:
So, that was a really important part. We learned a lot about how to drive quality and how to build reputation. You fast forward, and even whether it was the next company that we started, what eventually became Next Door, we were very focused in saying, "Wow, how do we tap into the power of the internet to bring people together and form community?" And, we really felt like Epinions was the one dot ...
Sarah Leary:
... and we really felt like Epinions was the 1.0 version of user generated content, and there was a whole host more that could be done. And frankly, we felt like there were not a lot of people who understood actually how to develop it and cultivate it.
Mike Maples:
You talked a little bit earlier about maybe there were some things that you learned that you'd do differently. What are the things that Epinions taught, hard lessons that you applied to getting right at say Nextdoor ultimately?
Sarah Leary:
I think that there was a time in 1999 where getting big fast and lot of hype around the public relations piece of it was really important. I think we just learned, "Hey you got to build a real business here." And if those things can help you build a real business, great, but don't get so enamored with just, "We started the company, we're hiring lots of people, we're fundraising." Those aren't necessarily signs that you are succeeding.
Sarah Leary:
If you go back to that time though in 1999. There was a lot of frothiness and companies were going public before they ever should have been going public and had no idea how they were going to make money, and that was terrible. But I also felt like the correction was too severe. People were saying, "The Internet's not going to work. These businesses are terrible." And as someone who was inside of a company, even though the financial dynamics had changed quite a bit, you saw usage rates just continuing to go up into the right.
Sarah Leary:
Part of what I felt like we did well at Epinions was to just focus on the thing that was in front of you that you could control, which was the product that you were putting out there and how many users and the engagement that you had. And you had to kind of trust that things would balance out in the external market as long as you were delivering on real performance, real usage. And that was something that even as we went on to start Fanbase and Nextdoor, shut out the noise sometimes. Now, there's a difference. There's noise from your customers, from your users, pay attention to that, but the Silicon Valley tech crunch, buzzy, you're going to a party in SoMa, stop listening to that because that's the echo chamber that I think is less helpful if you're really trying to build a product and build a business.
Mike Maples:
Okay. So now you've decided you're going to do a second company with Nirav. How did that come about? What's up with that?
Sarah Leary:
We started working on ideas and Benchmark was kind of enough to allow us to be entrepreneurs and residents, and work on ideas. That sounds like a really fancy title. It sounds, "Oh, it's so great. Get to just think about ideas." But I want you to imagine sitting in a room and having people come up to you like, "Have you come up with the next great idea," every single day, right?
Mike Maples:
And it's like Bill Gurley and Bob Kagle.
Sarah Leary:
Yeah, that's right. We wanted some of that pressure. That was fine. So we spun out of Benchmark and we went out to go build the world's largest almanac for college and pro sports fans. We felt like this was an area where online community would naturally form, and we pulled a former colleague from Epinions who was at Google at the time, and went on this Fanbase journey. Name of the company was Fanbase, most people probably have not heard of it. And gosh, we made so many mistakes in what we were doing. We basically hunkered down, wouldn't tell anyone what we were working on, and worked on it for 14 months building it.
Sarah Leary:
By the spring of 2010, I think we each knew that this wasn't going to be the next ESPN. There was this moment where we kind of looked at each other, "This isn't the next big thing." And that was really hard truth moment where you just realize, "Wow, the most precious thing I have in this world is my time, and I don't feel like this is the product that I want to pour myself into." We didn't think it was a big enough opportunity for all of our ambitions. And so that was really tough. And then you got to turn to the team who has faith in you, has bet on you, has signed up for this idea and basically we said, "We think we're going to go in another direction. We have no idea what that is. But you can leave now and actually get some severance, or you can stay and be a part of this journey and who knows where it will turn out, and there probably won't be severance down the road."
Sarah Leary:
There ended up being seven of us that stuck around. One worked full time on Fanbase, and then the other six basically would meet every single day. We had no hierarchy at all. And we had this standing 10:00 AM meeting to come up with billion dollar ideas.
Mike Maples:
Wow.
Sarah Leary:
It was fun. We were kind of poking fun at it.
Mike Maples:
That focuses the mind.
Sarah Leary:
Right. And you would have ideas and they would come up and people would talk about them and then you'd find out, "Okay, who wants to go work on that?" We had a lot of ideas that were focused on building and taking advantage of online community because that's what we understood and what we knew. One of those ideas was what became Nextdoor, where one of our co-founders came in and said, "Hey, I'm trying to get a pothole fixed in my neighborhood and I realized there's no way to communicate with the folks who live around me." And it was like, "Huh, that's interesting."
Sarah Leary:
I remember the moment he said it. "Oh, that's super interesting." And then we started to ... like, well, you have Facebook for friends and family, people you know. LinkedIn for your professional contacts. But people who live around you, how do you have a way to communicate with them? And I don't know how you grew up, but I grew up in a small town in New England and on the refrigerator was the names of everyone on the street so my parents could find me. At six o'clock it was time for dinner, and send Sarah home.
Mike Maples:
Yep, pretty much.
Sarah Leary:
Right?
Mike Maples:
Yep.
Sarah Leary:
That's not the way that we were all living in San Francisco.
Mike Maples:
Okay. So you're starting Nextdoor. How much had you raised for Fanbase and how much of it was left, and how much time did you have?
Sarah Leary:
You know, I looked this up just before coming in here. We had raised upwards of $12 million and we still had 7 million in the bank.
Mike Maples:
Okay. So you weren't on fumes?
Sarah Leary:
No. That's an incredible gift. That's unusual. But we definitely stepped back from the experience of Fanbase, and frankly the failure of Fanbase, and said, "We got to do things differently here." So the idea that we would have ideas and test them out became essential. And in fact, the two engineers that we had basically were like, "We're not writing a line of code until we have a lot of feedback that says we should be working on one idea or the other." Because remember, at this point there's multiple ideas.
Sarah Leary:
And actually that summer of 2010, the Nextdoor idea was one of many, and it just kept living on. And we started to do a lot of one-on-one interviews. I think we did 15 or 20 interviews with different folks within a neighborhood. Some of the folks that were working on it were really excited about it being a platform for issues, where you could talk about the pros and cons and a certain proposition that was going to be on the ballot. And I remember this was an idea that I was like, "Ooh, that just feels like a weird way to start a conversation with your neighbor."
Sarah Leary:
But they designed the mock-ups for it and we went and showed them to people and they're like, "Hmm, this is interesting. And once every five years there's an issue, but you know what I really need? I need to find a handyman, an awesome babysitter so I can go out on Friday night, and I want to find out why that white van is parked the wrong way on the opposite side of the street for the last two weeks." And what came across very clearly in those one-on-one interviews was just this daily need to know what was happening in the neighborhood and a way to communicate with people. And it was a very visceral thing that people talked about.
Sarah Leary:
We would go to things like the Coal Valley Improvement Association weekly meeting. And you sit there and you listen to the meeting before and after your segment, and I think you learn as much from that just to get context to understand what are these lives? What are they looking for? What role does neighborhood and community play in their lives? And that was something that ... Again, remember, we had just spent two years of our life working on something that hadn't worked out, and so there was a healthy dose of skepticism around any idea that we had because we were fearful that we were going to do that again.
Sarah Leary:
And so, we were almost our own worst critics on the idea. And I think that that comes from the humility of having failure. But remember we only had two engineers, and so we said we have to find a way to test this as quickly as possible, because we felt some urgency to figure out is this the right idea? I went back and looked at this a couple of years ago. The most prominent use cases on Nextdoor presented themselves in the first two weeks on that neighborhood website.
Sarah Leary:
Someone was looking for a name of a good exterminator. Someone had a lost package on their front door wanting to know whose it was. We launched right before Halloween, which turns out to be the most neighborly of all holidays, and so they were organizing a parade of all the trick or treaters. Someone was looking for a piece of felt for a costume. You know all these examples that we see play out again and again revealed themselves in that first two weeks of people using the platform. And we were like, "Huh, that seems to have worked."
Mike Maples:
One thought experiment I like is to say, "In zero to one mode you can only have one value proposition, or you should only try to have one." And it's like when you get into this mode of going and talking to customers and trying to quote unquote "Handle their objections by adding more features," you're wasting ergs of energy. You got to find the one thing they're desperate for. Because if there's not at least greater than equal to one of those things, you don't have a startup. There is no opportunity.
Sarah Leary:
I totally agree. And I think, you have to do something extraordinary and solve a real problem for them, for folks to decide that they're going to learn your product. I think it's something, actually Rich Barton who I met at Microsoft many moons ago and he was on the board at Nextdoor, he talks about that hook that you need to get people to engage in your product and you better do that thing really, really, really well. Because ultimately, if you do that well, you'll get like a parking spot in a user's brain. And, if you do it really well, they will tell people about it. And that drives the word of mouth. That to me is a sign of you've really solved a problem for someone, and it's something that has stuck with them and is meaningful to them such that they'll talk about it with other people.
Mike Maples:
How long did it take for you to start to feel, this is working?You probably started out one neighborhood at a time doing things that didn't scale. When did you start to say, "Man, my sense now is palpable. This is going to work"?
Sarah Leary:
So the first year of Nextdoor we had 200 neighborhoods, and at that point we were like, "There's probably about 200,000 neighborhoods."
Mike Maples:
Little bit of a slow start.
Sarah Leary:
A slow start. But remember, we had built that simple prototype. We had done the simplest thing and hadn't built all the technology, and it was a really important part of the process of being able to interact with our earliest neighborhoods in the beginning. And frankly it took us till about neighborhood 10 before we felt like this is on ... In fact, Bill Gurley's like, "You have built something here." We're like, "You think so. Is this the idea we should go with?" And I think we were a little bit ... We realized there's 200,000 neighborhoods. How are we going to build this? It's going to take forever. Right?
Mike Maples:
How are you going to get distribution?
Sarah Leary:
And there was a lot of, anytime you thought about that it gave us a headache. But what we saw in our early neighborhoods was once you get over a certain tipping point, the growth starts to happen. Conversations are happening. And so there was enough of a signal there to help you understand that, "Well, if you can build these, they'll be very entrenched in the community, hard for anyone else to dislodge it." And so that led to, "Let's build this the right way," so every neighborhood had a boundary, it had a name. But we only learned those things because in the beginning, I'm on the phone with people hand drawing neighborhoods, giving it a name, making corrections along the way, watching them draw on a map to say this is the boundary of our neighborhood.
Sarah Leary:
We had huge debates over the privacy model. But again, if you had been sitting in people's living rooms, you just knew the privacy model was something you had to get right because it was the foundation of building trust in the community, and that was our true North. And so that was a year, two years frankly, of doing a lot of unscalable things to get things right. Because figuring out what to build, I think the best way to do that is to actually do it by hand, figure out what's important, what's not important, and then design a product solution that can build it in a scalable way. And that took us an entire year. And that first year after we launched, I think we grew from 200 neighborhoods to 7,000. And that's when we started, I think, taking this test things, iterate, to how we thought about market expansion and marketing.
Sarah Leary:
And so we did a bunch of things that were very counterintuitive. Like, how about you partner with government agencies versus disrupt them, right?
Mike Maples:
Yeah.
Sarah Leary:
So Nextdoor now has 5,000 partnerships with police departments, fire departments, city hall around the country, and now around the globe. Wow. That was not a obvious thing for most Silicon Valley tech companies to go do. But again, if you're sitting in the living rooms talking to people ... I remember the fire marshal in Orinda wanted to find a way to send out updates to the neighborhood that we had started in Orinda, California. In order to be a member you had to verify that you lived within the neighborhood boundary, which of course he did not. And so we had to build a way for folks like him to communicate with residents. If you're trying to build a platform to talk about local issues, that is an important voice to have on the platform.
Mike Maples:
Totally valid voice, yeah.
Sarah Leary:
Even if it's a hard way to build a business, it was the right way to go do it. Same thing happened with how do we get neighborhoods going in some of the top U.S. cities. We felt like we were onto something but we had to move quickly because we didn't want someone else to come in and beat us to the punch. Because as soon as you get a neighborhood up and running and vibrant, it's going to be hard to move them off of a platform to your platform if you are a second mover. And that's where we actually looked at models outside of Silicon Valley and the political organizing model.
Sarah Leary:
We looked at the Obama campaign and how they had done community organizing work in top cities, and we built an in-house team of about 150 people that went to the top 40 cities and helped to get neighborhoods started across those cities. It was a super fun project. It was very daunting to work on. But we didn't start with a project that big. We started with one city, with three organizers, and when that worked we then went to six cities, and then to 12 cities, and then eventually to the 40 cities. And so, this idea with, how do you take an idea-
Sarah Leary:
And so, this idea was how do you take an idea that could be great but tested in a really small way, and give yourself permission to fail and tweak it before you say, okay, let's expand it to the next ring, and go to a bigger group of people. And that was something that we did both on the product side and on the market expansion side in terms of growth. We could test things. You could do one thing in the Dallas-Fort Worth area with the product, and do something different in the Philadelphia area. And you could compare those two. And that became a mantra for us. We would never launch anything nationally on day one.
Mike Maples:
When did you run out of that first $12 million check? And how did you convince people to invest more money when you didn't have that many neighborhoods yet?
Sarah Leary:
Well, one of the things that I think my co-founder, Nirav, was really smart about when we came time to raise money was that we never went to a point where we were running out of money. Instead, you looked for when were you hitting certain inflection points in growth. And we were very intentional about trying to bring onboard people who understood what we were trying to build.
Sarah Leary:
And so, for us that ended up being Gray Lock and David Z, who had been a part of the first investor into LinkedIn and early investor in to Facebook. And here was someone who understood what it was that we were trying to build. And I think a lot of times when people are raising money, they think about just the money and how to maximize the terms. We did not always take the highest valuation. Instead, we thought about who was going to be strategic for us and to help us be successful.
Sarah Leary:
By the way, it wasn't just David, it was also Reed Hoffman, who was like, "I'll help you as you continue on this journey." Because having people who... Two things: one, can they see around corners and help you understand things and understand what it takes to build this type of business? Another person was on the board was Rich Barton, who understood local with Zillow.
Sarah Leary:
But the second thing was you want to make sure, and I think this is true on a founding team as well, that people are aligned in terms of what's the goal, what's the urgency? And one of the things that we looked for in investors were people who were willing to understand that this wasn't going to be something that got built overnight.
Mike Maples:
Right.
Sarah Leary:
That it might take years to build it the right way, with a focus on quality and putting those seeds of grassroots community in place, and that you needed to get these flywheels going in order to reap the benefits. And that was something that we were very hardcore about. And I think it has served the company well because you didn't have the situation where someone was like, "well, wait a minute. I just invested and I want to be able to get my money out in two or three years." If you don't want to be on this journey and be a part of building something that could be massive, this isn't the right company to invest in.
Mike Maples:
Yeah, and I guess the other observation I wonder about is if you're going to build a network effects company from day one in a premeditated fashion, I'm starting to believe that the entrepreneur team has to be the type of team that is able to raise a fair amount of money before getting to product market fit because they have to be able to paint a vision of this is going to take a long time, but when we get to the promised land, the competitive barriers are going to be enormous. So, it's worth taking that bet on this team.
Sarah Leary:
I think you need to be a couple things. You need to have a team that is willing to be patient, and investors who will be patient. You need to also understand that planting those roots, the emphasis needs to be on quality and not on speed early on. And frankly, I think you can't just do it on a wing and a prayer. You have to be able to have the leading indicators that tell you that this is working.
Sarah Leary:
And so, one of the important things for us was that those early neighborhoods, we're all growing and taking off. And even though it was 100 or 200, you could see that they were all following this cohort of growth. And you could take that and say, okay, now that we figured out how to do it, and we didn't just do it in Menlo park, we did it in, 50 different places in the United States, you start to say, okay, you can replicate this.
Sarah Leary:
And so, that was a lot of the early days of those early signals to be able to say it's actually working. And I think we had 20 neighborhoods at the time, and I'll never forget this. One of the engineers wanted to upgrade the database and he wanted to do it in the middle of the day and not the middle of the night. And he's like, we've got 20 neighborhoods. So, he decides-
Mike Maples:
How bad can it be?
Sarah Leary:
He decides to take the product, and we don't tell our users anything at this point because we've got so few of them, and so he takes it offline right before lunch. And we go have lunch, and I get a phone call 15 minutes later from one of our users saying, "the directory is down. I need to get it. I need to get in touch with someone." And I was like, "okay, well we're having lunch."
Sarah Leary:
"You can't take the directory down." And I was like, oh, my God, we've built something that people care about, that they notice. And so, that to me it was one of those... It sounds like a small thing, but we've got something here. And so, there are these leading indicators that I think you have, whether it's at the macro level of are all the neighborhoods growing and is all the content growing in each one of them?
Sarah Leary:
But then you have these isolated incidents that happen that tell you that it matters to people. And I think you can't just build a network effect on the wing and a prayer of like once we get there, it'll be great. It has to be great on a local maxim for some people. And if it's not, you'll never have enough patients and you probably won't be able to raise enough money to be able to get to the full promised land.
Mike Maples:
Yeah, so we often say that there are wine sipper consumers and beer slammer consumers.
Sarah Leary:
I like where this is going.
Mike Maples:
And a lot of consumer products in the Bay area are designed for the wine sippers and they never cross over to normal people outside of this bubble. So, how did you think about that and what did you find was different after you went outside of the Bay area? Did people think differently about the product or was it pretty much the same and you just had the right value proposition?
Sarah Leary:
If you were friends with us at that time and you lived outside the Bay area, I'd be like, "hey, do you want to start a neighborhood where you are?" And so, we ended up with neighborhoods in Upstate, New York, up in Hamilton, New York, Arlington, Virginia, Loudon, Tennessee, Austin, Texas, Seattle, and we were like, "get out of this echo chamber."
Sarah Leary:
And what was so refreshing is that when you told people, "would you like an easy way to be able to communicate with your neighbors?" They were like, "yes." The idea of being neighborly and being connected was something that resonated with people all over the country, and in fact outside the Bay area, it resonated more quickly because they're like, "great, you're going to give me a platform that makes that easy to do." Now, they talked about very different things in Upstate, New York than they did in Downtown DC or Chicago. But there was a shared interest in actually having a way to communicate with the neighbors.
Sarah Leary:
And part of this whole journey along the way was going in and looking at some of the research that was out there and there was this incredible body of research, most of it pioneered by Harvard professor, Robert Putnam, in the seminal book that he wrote, Bowling Alone, where...
Mike Maples:
I was going to ask you about that.
Sarah Leary:
Where basically he talks about the importance of building social capital, building trust, and that that has been on a slow, steady decline for the last 30, 40 years. And that leads to issues in society where crime rate goes up, test scores go down and public health is worse. And so, there was a lot of data that was out there suggesting that there was a generational problem that was happening at the time. And we found that that was playing out all across the country and eventually around the globe. It was not isolated to just the US.
Mike Maples:
Yeah, it's interesting. I first started to think about Bowling Alone as it relates to tech because of Steve Blank. And so, Steve had an interesting perspective. He thought that most of the consumer projects that were going to work in the 2000s scratched the itch of a need that had been present because people felt they were bowling alone. So, you felt like you could read that book and you could see what people were missing that they used to have, and that there would be opportunity after opportunity to start companies that filled the void that bowling alone had left open.
Sarah Leary:
What I think is really interesting though, is that social capital is something that you build over time. And if it starts with borrowing a ladder from someone, you're like, "wow, Mike's a good guy. He let me borrow a ladder," and maybe six months later, you're on opposite sides of a contentious issue in town politics. But all of a sudden I'm like, "but I know that Mike's a good guy."
Mike Maples:
Yeah, he's probably coming from an honest place.
Sarah Leary:
That's right. And so, you end up with this opportunity to build trust in very practical utilitarian ways. But that can lead to a foundation to have in person meetings with people, getting together and finding more common ground versus focusing on the differences. And obviously over the last few years, that has become a major topic of conversation.
Sarah Leary:
But people are looking for ways to connect, but sometimes it can feel awkward. And what Next Door does is really, it acts as an icebreaker for people to follow their good intuitions. We didn't invent neighborliness. That's been around for centuries. But in today's modern world where people are commuting more, more isolated because they have more technology, they're just busy lives. And so, how can you actually use technology to break down those barriers and help people restart conversations that maybe they have let wither over the last few decades?
Mike Maples:
When you look back on Next Door then, what are you most proud of in terms of... Obviously, you did this death defying scramble from your own end zone for a first down from fan base, but were there any specific things that you look back on and you're just like, "okay, those are really some important lessons that even all founders can learn from."
Sarah Leary:
Probably one of the highlights for me was learning that Next Door was incredibly important and valuable to people during hurricane Harvey in Houston, and that people literally are writing in, "thank you for building this platform. It helped me get the help I needed when 911 went down in Houston."
Mike Maples:
Yeah, that's awesome.
Sarah Leary:
And when people are getting on their kayaks and going in and rescuing their neighbors off of the rooftop or delivering an EpiPen that someone needs in an emergency, you sit there and you go, "wow, what a privilege to be able to work on something like this." And it makes all the long nights and hard days and some of the self-doubt that you have to overcome, it makes it bearable. Make sure you know who you're getting in the bunker with.
Mike Maples:
Yeah.
Sarah Leary:
Because you need people who are going to lift you up when you're down and keep you grounded when maybe you're flying a little high and this is the ultimate team sport. No one has ever built a successful company solo. No one. No one. And so, to me, being able to work together and collaborate, challenge each other, cheer for each other, that's part of what makes it special and part what feeds you during those tough times to get through them. And so, those are things that I think anyone can tap into.
Mike Maples:
This may be shifting gears a little bit, but I have to believe that some of the listeners are going to be interested in your views about women in tech. It's a big topic these days. So, what are your thoughts on that? I know that's a very open ended, broad question. But I'm just curious and I bet a lot of people would be interested in your take.
Sarah Leary:
I do think that the trend is going in the right direction, but I think we have to keep pushing it. And for me, it's all about being someone who is an example where it hopefully it becomes commonplace. I told you the story that my grandmother was a successful entrepreneur. I grew up thinking that was normal and I hope that, as more and more women push through and more and more folks invest in female founded companies and that they move through the process and become wildly successful, that it just becomes something that, in a few years, we don't talk about anymore because it's become commonplace.
Mike Maples:
If you think about it, somebody will be listening to this, in fact, probably quite a few women who are early in their careers thinking about exploring entrepreneurship or maybe even not, but just want to be successful in business or whatever their field is, what would you want to say to them?
Sarah Leary:
Go for it and be unapologetic about going for it. The biggest thing that I think women need to think about is just be ambitious, and lean into that. It's why whenever I run into other women in Silicon Valley and what they're doing, I am cheering for them. I want them to be successful and I want them to lean into being as successful as possible. I think sometimes women want to hold back from being too ambitious or too aggressive. Be yourself, go for it. And frankly, try and build great big companies as much as possible. Don't think small.
Sarah Leary:
One of the things that when we did the pivot with the fan based Next Door, we wanted to go after the largest addressable market we could think of. Well, it turns out that there's neighborhoods everywhere in the world. Everyone's a neighbor. Wow, that's a huge addressable market. And if you want to build something great, you got to shoot for the stars. You may miss, but you're still going to end up with something much bigger than if you thought small.
Mike Maples:
It takes just as much work to do a mediocre idea.
Sarah Leary:
And that's the key. That was the key thing. You're going to work just as hard, and you might as well aim for something big and go for it. And so, that's my biggest message. Think big and go for it and be ambitious. You can do it.
Mike Maples:
All right. Well, thanks for joining us. It was fun talking to you.
Sarah Leary:
This has been awesome. This has been fun. Oh, there are microphones here? [laughs] I didn't even know that. This has been awesome.