Neighbor Raises $53M for Self-Storage Marketplace - 5x YoY Growth

Neighbor Secures $53 Million in Series B Funding

Neighbor, a marketplace focused on self-storage solutions, has announced the successful completion of a $53 million Series B funding round. This financial injection will fuel the company’s continued expansion and development.

Investment Details and Key Participants

Fifth Wall spearheaded the financing effort. Notably, the round also saw participation from existing investor Andreessen Horowitz (a16z), alongside new investors including Tony Xu, CEO of DoorDash, and Scott Cutler, CEO of StockX.

Xu and Cutler are set to join Ryan Graves, former Uber CEO, as investors and advisors to the Lehi, Utah-based startup. a16z previously led Neighbor’s $10 million Series A funding round in January 2020.

Self-Storage Market Dynamics

The self-storage sector is demonstrating resilience even amidst challenges in the broader commercial real estate landscape. Neighbor’s innovative approach centers on repurposing underutilized spaces – from basements to vacant office floors – into accessible storage options.

Company Origins and Mission

Founded in 2017 by Colton Gardner, Joseph Woodbury, and Preston Alder, Neighbor.com was established with the goal of providing a more convenient and personalized alternative to traditional self-storage facilities.

Disrupting the $40 Billion Industry

The $40 billion self-storage industry is poised for disruption, as many conventional facilities are located in less-than-ideal locations. Neighbor’s peer-to-peer model directly addresses this issue.

The platform connects individuals needing storage space (“renters”) with local hosts who have available space in their homes, garages, or driveways. Hosts on the platform are reportedly earning over $50,000 annually in passive income.

Growth and Market Position

According to CEO Woodbury, Neighbor now serves renters in more states than Public Storage, a publicly traded company with a $43 billion market capitalization.

Neighbor generates revenue by applying a service fee – a percentage that varies based on the rental amount – to each transaction. The company’s algorithms also suggest appropriate rental rates for hosts.

Impact of COVID-19

The COVID-19 pandemic has accelerated Neighbor’s growth trajectory, with revenue increasing by a factor of “5x” and organic reservations rising “7x” year-over-year.

Woodbury explained that increased relocation activity from major metropolitan areas to more rural locations, coupled with people spending more time at home and decluttering, has fueled demand for storage solutions.

Cost Advantages

The self-storage options available through Neighbor’s marketplace are, on average, priced 40% to 50% lower than those offered by traditional storage facilities.

Expanding into Commercial Real Estate

Neighbor also collaborates with commercial real estate operators to transform underutilized or vacant retail, multifamily, and office spaces into self-storage facilities. This provides landlords with new revenue streams during a period of economic uncertainty.

The company’s commercial real estate footprint expanded tenfold in 2020, demonstrating the growing appeal of this approach.

Future Plans and Expansion

The newly acquired capital will be used to expand Neighbor’s network of hosts and renters nationwide and to increase awareness of the platform.

Woodbury stated that the company currently has “tens of millions of square feet of self storage” available on its platform, spanning every state. Future plans include continued national expansion and eventual global reach.

Fifth Wall’s Perspective

Prior to leading the funding round, Fifth Wall initially approached Neighbor to explore potential business development opportunities. Partner Dan Wenhold then proposed introducing the concept to the firm’s limited partners (LPs).

These LPs include over 65 of the world’s largest real estate owners and operators from 15 countries. Fifth Wall partners Acadia Realty Trust and Jamestown are already integrating properties onto Neighbor’s platform.

Bridging Real Estate and Technology

Wenhold described Fifth Wall as a “bridge” connecting major real estate stakeholders with disruptive technologies. He emphasized that Neighbor aligns perfectly with this mission.

Feedback from Fifth Wall’s strategic LP partners regarding Neighbor was overwhelmingly positive, with significant interest expressed by owners in the retail, office, and multifamily sectors.

Sustainability and Environmental Impact

Neighbor’s business model also contributes to sustainability by minimizing the need for new construction, thereby reducing waste and emissions associated with building new storage facilities.

Wenhold highlighted Fifth Wall’s commitment to reducing the environmental impact of construction and praised Neighbor’s role in achieving this goal.

“Our firm ardently pursued the opportunity to invest in a transformative proptech business like Neighbor,” he concluded.