Sarah Leary x Nextdoor
“The next billion dollar idea”
Sarah Leary is the co-founder and current board observer of Nextdoor, a neighborhood social networking platform for trusted connections and the exchange of helpful information, goods, and services. Leary took on her current role at Nextdoor after founding, growing, and scaling the company.
A “Nice to Have” not a “Must Have”
In 2008, Sarah Leary, Nirav Tolia, and Prakash Janakiraman cofounded Fanbase—an online directory of professional and collegiate athletes. The team envisioned Fanbase becoming the largest online almanac for rich information on professional and college athletes. The website included career info, photos, videos, articles, and discussions on over 1,500,000 people in sports, with all content contributed by fans. When Fanbase finally launched after a year and half of build-up, it found immediate success, as the website saw 15 million unique visitors in the first month. However, the subsequent months did not experience the same user traction. Leary saw that their user engagement was declining dramatically.
A former Division 1 lacrosse goalie at Harvard made Leary competitive and reluctant to admit defeat. She knew that her company was struggling but she had tenacity and a strong desire to keep going. Moreover, Fanbase continued to receive encouragement and support from the investing community and its early adopters despite its roadblocks. In hindsight, Leary recalled that while “early adopters were important to create content in the beginning, they only made up about 5% of our customer base at the time. The other 95% were customers who did not like our content.”
At the time, Fanbase’s indirect competition, Bleacher Report (B/R), was gaining traction with their unique approach that anyone could write sports articles. Even though B/R was more established as a company, Fanbase decided to move into B/R’s product market to directly compete with them. This put Fanbase in an even more precarious position. During this time, Leary began to seriously question the company’s future. Once this reality hit, they offered to give their remaining funding back to their investors. Bill Gurly, a general partner at Benchmark and the lead Fanbase investor, allowed the Fanbase team time to rethink their company and evaluate the possibility of pivoting in a different direction. Leary remembered Bill saying that he invested in the team, not the idea. He gave them from the beginning of May 1st to the end of August 2010 to come up with an alternative idea.
The Pivot
Leary and Tolia were determined to build something big. During the summer of 2010, they held daily 10:00 AM meetings with their team to brainstorm the “next billion-dollar idea.” Leary commented on the importance of having a small team that was 100% committed; she did not want to drag anyone along. It wasn’t until the third week of June that the idea for their next venture emerged. A discussion arose about how there was no easy way to talk to the community or the city about issues in your neighborhood. This started a dialogue about how many of them felt a similar disconnect to their neighbors. Leary saw that people have social networks for all different parts of their lives. For example, Facebook was for friends and family while LinkedIn was for professional networks. Leary and Tolia realized there was a giant opportunity to connect neighbors with each other as well as local authorities to build safer, stronger communities. These conversations were the inspiration for Nextdoor, which would become the first private social network for neighborhoods.
Leary emphasized, “We really focused on identifying where people had true pain points. What was a need that they really wanted to solve versus just something that was nice to have in their life. And that became a really important mantra for us during the pivot. We wanted to find problems that people needed to have solve that they felt was an essential in their life versus what was just a ‘nice to have.’”
Takeaway
In their decision to pivot, Leary and Tolia were uniquely fortunate to remain in a privileged position as entrepreneurs with solid financial backing, an extensive Silicon Valley network, and the luxury of time. Leary and Tolia were smart to recognize that Fanbase was not satisfying an unmet need that people couldn’t live without and pivot by completely changing course yet remaining in the space of creating community. They were much more thoughtful in their due diligence process at every step in their rigorous approach to Nextdoor by learning from their previous mistakes. They were focused on establishing a solid, deliberate, and researched foundation before launching their service to the public. Without Fanbase facing adversity, Nextdoor would have never come to fruition and become the international company that it is today, valued at over two billion dollars. Thus, the question is not whether one will experience adversity as an entrepreneur, but how one will respond to adversity and failure.