Question from Robert: The business that you created, Nextdoor, is a really cool concept. But, you had to make a pivot before launching Nextdoor, right? Tell us about how your entrepreneurial journey started and what became of it.
Sarah Leary: It all starts with people. For me, the biggest decision was working with my Co-Founder, Nirav Tolia. We had worked together at a previous company, Epinions, and we decided to work together before we even knew what we were going to work on. That company was called Fanbase and was about building community around sports. We built out the company and toiled away in stealth for two years because we didn’t want anyone stealing our idea. The launch got attention but users didn’t stick around—they weren’t finding the product useful. We spent another six months trying to address and fix that problem.
Eventually, we realized it wasn’t working and offered to give the money back to our original investors. One of our investors, Bill Gurley from Benchmark Capital, surprised us and said, “I bet on and invested in the team. It’s the easy way out to give the money back. Why don’t you work on a new idea?” He gave us the summer to work on new concepts.
That’s when we took a radically different—and better—approach. We tried several different ideas, but instead of keeping them close and secret like we did before, we went out of our way to engage users early. We built a very simple prototype and tested it within six weeks with one neighborhood. From that feedback we knew we were onto something. We started doubling down and had another year of testing in private beta before we launched Nextdoor.
That approach helped Nextdoor become something that not just a few hundred neighbors wanted, but really every neighborhood in the United States. Fast forward to today and 270,000 neighborhoods around the globe and 11 countries are using Nextdoor to keep neighbors informed, connected with one another and with their local community.
Question from Robert: It’s pretty incredible what Nextdoor became, but what was it like personally for you at that time? You had just put in two years day in and day out on the Fanbase idea. It’s not easy to just pivot and change. Was that a very difficult time period for you?
Sarah: When people hear about the early stage of the journey and the pivot, they say, “Oh, that must have been fantastic.” I can honestly say that was probably the most difficult time of my career because I was coming off of something which I had already poured two years into and it was a failure.
The opportunity to keep moving forward was great, but there was so much uncertainty. The whole journey forced us to take a step back and recognize that we needed to do the hard work. We had to go into communities, talk to users, build a product, and do it in non-scalable ways in the beginning.
In the early days, I was on the phone with users and hand drawing maps of the neighborhoods. My co-founders and I were going into living rooms and telling people about the benefits of being connected to your community. Everyone said, “That’s never going to scale.” Yet, these activities were essential to understanding our users and market. The whole process was so humbling. I am forever grateful for the experience of Fanbase and the pivot because it led us to the humility to buckle down and do the work we needed to create Nextdoor.
Question from Robert: One of the biggest things I’ve noticed with people who are super successful is their willingness to pick themselves off of the mat and the persistence to keep going for it. You reminded me of that with what you were just saying. Is your willingness to roll up your sleeves and do some of the grit work with Nextdoor a reflection of who you are? Did that come about from the humility of Fanbase or was that just what was needed and you were just going to do it?
Sarah: If I reflect back on it, I now think of it as a strategy, which is: Don’t be afraid to do non-scalable things in the beginning. But at the time, it was really just humility. You have to find a way. And frankly, we didn’t have another option. As seasoned entrepreneurs, I think we had to go back and relearn first order principles, sadly. You have to earn success because there’s nothing more unforgiving than the startup world.
I think many current entrepreneurs—especially ones that are in the technology field—remove themselves from the actual users. That’s a huge mistake. At the beginning, entrepreneurs need to be eyeball to eyeball with their users to really understand what their pain points are, the nuances about their energy and tone, and when they like or don’t like something. This step in the process is essential if you’re going to be successful in finding product-market fit.
The dirty little secret of most marketplaces and communities is that you have to do that handcrafted work in the beginning—you have to do unscalable things just to get the fire burning. It’s like the kindling of a large bonfire, but it really starts on a super small scale that can be measured with the number of users you could count on your hand.
To me, that was a big lesson. When I talk to entrepreneurs, I talk to them about this all the time and they kind of look at me like, “Right, but we want to get to 50 million users, a hundred million users.” My response is, “Yes. And you have to think about the first five and the first 10. And you’re going to know these people really, really well. They’re going to be on your speed dial in the beginning.” They look at me like, “Really?” But, that’s truly how it must start.
Question from Robert: Let's talk about Unusual Ventures. Why did you want to make the transition to investing and tell me a little bit about Unusual Ventures?
Sarah: After nearly 10 years of running almost every function at Nextdoor—especially in the areas of growth and international expansion—I felt like it was a good time to step back and think about what’s next. I realized that I kept getting drawn into talking to entrepreneurs. As I had more of these conversations, I noticed that my experiences were highly relevant to those entrepreneurs who were trying to get a company off the ground or trying to scale it. Along the way, I connected with an old friend who leads investments for Harvard and he said, "Based on what I know about you, you should really talk to John Vrionis over at Unusual Ventures because they are a little unusual and approach things differently.”
For me, it's going back to the original goals of Venture Capital, which is to be a true partner to entrepreneurs along their journeys. John likes to bring on board people who have been entrepreneurs, who have been founders, who can bring that experience, and help these founders. He’s also keenly interested in bringing in folks who understand how important that initial step of finding product-market fit is and can actually roll up their sleeves and work with entrepreneurs to help them find it. To me, that was unusual. In addition, John has also built a firm that has a team of people internally who can work with founders. These are folks that are experts in recruiting, developing the sales pipeline, or working on product marketing messaging. So again, much more hands-on than what you normally find from VCs.
The last thing that stands out is Unusual has been very thoughtful about its Limited Partners. Unusual’s LPs have been some of these large endowments that help with financial aid, but also research hospitals, historically black colleges (HBCUs), as well as the largest boys orphanage in the United States. These are limited partners whose values I align with and it felt like these were great causes to work hard for, to increase their ability to do good work. That was a unique combination and John was nice enough to say, "Come on board as a Venture Partner and let's try this out. Let's see if you can be helpful to these entrepreneurs." I'm just trying to share the experiences that I've had and hopefully can help entrepreneurs avoid some of the mistakes that I made, see around the corners, and increase the likelihood that they can be successful.