While many social media platforms aim for massive reach, Nextdoor has chosen a different path, focusing on building robust, local communities as the foundation for its growth.

For a significant period, this strategy proved successful. Over its 15-year history, Nextdoor established itself as a go-to platform for neighborhood discussions, facilitating exchanges ranging from lost pet notifications to local business recommendations. However, growth eventually plateaued, with users engaging predominantly for transactional interactions. Additionally, the prevalence of misinformation, racism, and petty disputes deterred participation, driven by users who either lacked awareness or disregarded consequences.

Now, founder Nirav Tolia is determined to revitalize the platform. He has a personal stake in this mission, having originally founded the company and led it until 2018, when he was reportedly removed by the board due to a disagreement regarding a potential acquisition. In 2021, Nextdoor went public through a special purpose acquisition company with an initial $4.3 billion valuation, but faced challenges with stagnant growth and declining advertiser interest, prompting the board to invite Tolia back last year.

With significant financial stakes, Tolia identifies himself as the company’s largest individual shareholder, now that Nextdoor’s market capitalization hovers around $1 billion. Benchmark, one of Nextdoor’s earliest investors, holds the title of largest institutional shareholder, with Tolia noting that “neither of us has sold since the IPO.”

Confident about Nextdoor’s potential, Tolia is implementing changes to enhance the platform. Recent reports indicate that Nextdoor has reached 45.9 million weekly active users by the end of September, marking a 13% increase compared to the same time frame in 2023. A unique asset for the company is the proprietary data generated from its users—unlike peers such as Reddit, Nextdoor has no plans to monetize this data through partnerships with OpenAI or Google.

Despite the promising developments, Nextdoor faces significant hurdles ahead. The challenges of being a smaller entity include limited access for large institutional investors, raising questions about how much time remains for a successful turnaround and whether the company might benefit from going private.

In a recent discussion with Tolia, we explored these challenges and his relationship with board member Bill Gurley from Benchmark. You can listen to the conversation here. Below are key excerpts from our chat, edited for clarity and brevity.

You’ve been actively engaging with the media lately. Why is that?

Since returning to the company, my primary focus has been connecting with internal stakeholders. However, as we formulate our strategy to unlock our full potential, sharing that story externally has become increasingly important. Nextdoor has been in operation for 14 years and has 100 million verified neighbors registered on our platform, making it a significant player. We believe there’s untapped relevance and potential that Nextdoor can achieve.

You mentioned plans for product changes.

We deeply believe in the value of community support. Staying connected to our local neighborhoods is crucial for keeping informed, safe, and making smart purchasing decisions. However, upon reviewing our product, we recognized a lack of relevant information for users, and when we did have that information, it was not always well-presented. Our goal with a new initiative, internally dubbed the “next Nextdoor,” is to empower our users’ connections with their community.

What specific transformations do you envision?

Nextdoor has traditionally relied on user-generated content (UGC), which constitutes 99% of our posts. However, we’ve come to realize that local schools, businesses, influencers, and news outlets possess valuable content that should be shared with neighbors. Therefore, a major initiative involves integrating more diverse content sources to enhance the overall value of the information available on Nextdoor.

I stopped using Nextdoor due to some alarming posts. How will you ensure discussions remain constructive without infringing on free speech?

This is a significant challenge common to social media platforms. We acknowledge there’s room for improvement in fostering a more constructive conversation atmosphere. With advancements in AI, we expect to leverage new technologies effectively. By reminding users of community values while utilizing innovative AI tools, I’m optimistic we can significantly enhance user experiences.

Would you consider using AI to mitigate political discussions?

Our policy prohibits national political discourse, though it occasionally arises. We facilitate dedicated groups for political discussions, as some users want that interaction. This allows us to contain such conversations while ensuring they remain accessible. Additionally, we are exploring the use of AI to manage that content more effectively.

For example, we have a feature called a “kindness reminder,” which checks posts before they go live to identify heated or unconstructive language. We can suggest users rephrase their remarks before they’re published, and we plan to expand these capabilities.

Is this AI developed in-house?

Absolutely, and I feel strongly about that. For effective AI deployment, we possess three critical elements. Firstly, we have skilled engineers developing the technology in-house. Secondly, we’re creating our own proprietary content rather than relying on purchased or licensed material, which enhances our unique value proposition. Lastly, with our extensive audience of 100 million users, we have a substantial base to test and refine our machine learning models.

Do you have plans to license this AI technology?

This question arises frequently from investors. My stance is that if Nextdoor’s content can be found elsewhere, users will likely gravitate to those platforms instead. While I wouldn’t rule anything out, I believe that for users seeking the true value of Nextdoor, it’s essential they come directly to us.

You have a long-standing relationship with Bill Gurley, who sits on Nextdoor’s board. Reports suggest he was instrumental in your removal and later called you back during a period of stagnation. How accurate is that account?

That characterization is misleading. The entire company was dissatisfied with our trajectory. After going public, our stock price fell dramatically. It was a collective realization that action was necessary. Bill has played a pivotal role in my career since 1996, and I’ve appreciated our working relationship across various ventures. We all shared a common goal of enhancing the company’s prospects.

Do you envision steering Nextdoor as a public entity? With your plans ahead, would going private be more beneficial? Have discussions with private equity buyers taken place?

We do not comment on such considerations. However, it’s an intriguing question about potentially going private. I’ve discussed this extensively with Bill, who primarily invests in private companies, and that’s a space I’ve navigated for years.

Being public means quarterly results are crucial, and stock prices reflect performance consistently. In contrast, private companies can focus on long-term strategies without immediate external pressure. That said, Bill and I concur that to maximize the company’s potential, it should remain a public entity. It’s akin to comparing the minor leagues to the major leagues, where going public involves greater responsibility, scrutiny, and the need for long-term strategic thinking.

What does the current ownership of Nextdoor look like? It’s known you hold a significant stake alongside Benchmark, and recently, Ark Investment Management acquired a portion of your Class A shares.

That information is public domain. I am the largest individual investor, while Bill and Benchmark are the leading institutional investors. Neither of us has sold any shares since the IPO, underscoring our confidence in Nextdoor’s potential, which we strive to realize for all our shareholders. Cathie Wood’s recent investment is an encouraging sign, but it’s notable that as a smaller entity with a current market cap around one billion, we face challenges attracting larger institutional investors. Aiming for marquee investors requires a steady approach, and our immediate focus is to prove our value through enhanced products that benefit users, advertisers, and financial performance alike.