After posting five times year-over-year revenue growth, Neighbor is raising over $50 million from investors. This is the self storage marketplace start-up’s Series B round of financing.
Proptech venture capital fund Fifth Wall is leading the deal. Andreessen Horowitz, who led the Series A early last year, is participating again, while DoorDash (NYSE: DASH) CEO Tony Xu and StockX CEO Scott Cutler will be newcomers to the cap table.
WHAT IS NEIGHBOR UP TO?
Put simply, Neighbor is Airbnb (NASDAQ: ABNB) for underutilized or vacant space in a building. For example, I have a barn in my yard that doesn’t really get used. I actually signed up for Neighbor last week and its recommendation algorithm told me I could fetch a couple hundred dollars a month renting the space out.
The combination of lots of commercial space left underused during the pandemic and more people moving and having the time to clean out their homes has led to tremendous growth for Neighbor on both the supply and demand side of its marketplace. The company said revenue has increased five times over the last year, while reservations have increased sevenfold.
An interesting part of Neighbor’s model is that it can offer space standard self storage facilities typically can’t, which has been good news for hosts on the platform — some are making more than $50,000 a year renting out extra space. Meanwhile, landlords hit hard during the pandemic have been able to generate alternative sources of income from their building footprints.
Co-founder and CEO Joseph Woodbury explained to Techcrunch, “We really grew into a national business over the last year and now have active renters in more states than Public Storage (NYSE: PSA), which is a $43 billion publicly traded company.”
PRICING AND MODEL
Neighbor charges a percentage take rate of each transaction based on a sliding scale. The company also suggests pricing to hosts based on the data Neighbor has collected on location, size, type of space, etc.
Neighbor says spaces offered on its marketplace on average are priced roughly 40% to 50% less than traditional storage facilities.
GROWTH PLANS
Woodbury said Neighbor has “tens of millions of square feet of self storage on the platform…The beauty of that square footage is that it’s in every single state. But we want to continue to expand nationally and as we grow and mature, we’ll turn our eyes globally as well.”
Neighbor’s commercial real estate footprint grew 10 times in 2020, according to the Techcrunch article. The company has been able to partner with commercial real estate operators to turn their underutilized or vacant retail, multifamily or office space into self storage.
As Neighbor continues to grow, there’s a huge benefit of partnering with a firm like Fifth Wall. A partner at the firm, Dan Wenhold, said in the Techcrunch article: “We are sort of the bridge between the largest owners and operators of physical real estate assets and the most disruptive technologies that are impacting those property managers and landlords…And Neighbor fits perfectly into that thesis for us.” Wenhold was referencing the fact that Fifth Wall’s limited partners are some of the largest real estate landlords and operators in the world.
Fifth Wall is also excited about this deal because Neighbor actually has a sustainability component to it. As demand spikes for storage space, Neighbor is leveraging the existing infrastructure footprint, as opposed to building to fill demand.
THE MILLIONACRES BOTTOM LINE
If you’re a landlord with extra or unused space, a solution like Neighbor is a no-brainer to consider. Meanwhile, if you invest in self storage REITs, or real estate investment trusts, take note, as Neighbor has fresh capital to go after more self storage supply (and your rental income).
