Nextdoor’s CEO Sarah Friar Is Opening Doors for Smaller Businesses

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Nextdoor’s CEO Sarah Friar Is Opening Doors for Smaller Businesses

By Joann S. Lublin

Sarah Friar, chief executive of Nextdoor Holdings, takes a somewhat Pollyannaish view of how the neighborhood social networking platform will fare during the next downturn.

“Nextdoor is still really well positioned to continue to show growth even in an outright recession,” Friar says. People come to the platform during tough times such as COVID-19 because it aims “to cultivate a kinder world where everyone has a neighborhood to rely on,’’ she explains. The first-time CEO took Nextdoor public via a special purpose acquisition company—or SPAC—in November 2021 with the ticker symbol KIND, which she devised.

Friar sounds remarkably upbeat even though her employer last month lowered its expected full-year revenue amid uncertain advertising demand. Nextdoor makes money from ads and sponsored content. Nearly one in three U.S. households uses the free app to find plumbers, sell stuff, or complain about neighbors. But rivals like Meta Platforms’ Facebook are far bigger.

Friar, a 49-year-old native of Northern Ireland, holds master’s degrees from the University of Oxford and Stanford University. She assumed command of San Francisco-based Nextdoor in 2018 following stints as a McKinsey management consultant, Goldman Sachs software analyst, and finance executive for Salesforce and Square.

Heeding criticism, Friar has pushed to remove racist and other toxic content from Nextdoor. Her effort represents “a promising solution for any social media company struggling with toxicity,’’ wrote TIME’s Alison Van Houten in ranking Nextdoor among the 100 most influential companies for 2022.

Friar recently spoke to TIME about her strategies to curb toxic content, Nextdoor’s depressed share price, its international expansion strategy, and persistent gender bias in America.

This interview has been condensed and edited for clarity.

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Why won’t your revenue growth spurt come to a screeching halt if the economy sours in 2023?

All our competitors in the digital ad space recently took down their forecasts. We’re still doing quite well comparatively because we're bringing something unique to advertisers. We reach over 75 million neighbors across 11 countries. We’ve [also] taken time to confirm we only have real neighbors.

Why did Nextdoor introduce two more features this spring to mitigate implicit bias and promote kinder conversations? A system you launched last year scans posts for red flags and encourages users to reconsider before publishing something problematic. Plus, your Kindness Reminder already nudges users if it sees signs of a heated conversation such as negative language.

The amount of platform content reported for harmful reasons is tiny. It was 0.34% in 2021. But there’s always more we could or should do. Sadly, the work of being a welcoming platform is never done.

We’re now doing a bit more work around the platform’s commercial intent. We would like to help businesses figure out better ways to engage their community so it doesn’t feel like you’re trying to sell me something all the time. Someone posting ‘$10 off the next window cleaning’ five times a day, for example, can be toxic if it feels really spammy.

Do your competitors adequately manage their toxic content?

We would love to see the industry do more of what we're doing. They should be willing to slow people down to create more welcoming spaces—even if it disrupts engagement. We’ve seen people following in our footsteps with features similar to the Kindness Reminder.

Nextdoor investors don’t seem impressed by your strides at improving civilized discourse online, however. Your share price has hovered far below the $13.01 level seen when Nextdoor went public. How soon might your plan to repurchase up to $100 million of shares revive your depressed stock price?

Our share price has performed slightly better than most other peers. The stock repurchase is a signal to the market that we think our stock price is way undervalued. It’s quite a good business decision to buy back stock in the $3-to-$4-a-share range. It will help the share price because it will remove shares from the earnings-per-share calculation. Assuming the market is rational, we will have higher earnings per share with a smaller share count.

Nextdoor is growing faster abroad than in the U.S. How many countries will you operate in by 2032? And when will the company be a worldwide player?

We have to be in more than just 11 countries. Our goal is to be a worldwide player though I’m not prepared to put a date on it. Making the platform more global is a great way to continue to show growth.

We launched in Canada, our latest country, about two years ago. We have a playbook to pick countries that gets better every time. Scale matters. So do countries where digital phones are already quite penetrated. The third thing we look for is a predisposition toward community. Fourth is digital ad spend because that's our monetization engine.

More than 30,000 small and midsize businesses advertise on your platform. How will you attract more such businesses?

We have a very thriving ecosystem with them. We've seen about 55 million business recommendations from Nextdoor neighbors. We've also had about 3.4 million small and midsize businesses claim a free business page on Nextdoor. They can then grow further through Nextdoor ads.

Awareness is the limit right now. Some businesses don’t yet know that Nextdoor is for business. We need to help them understand that we might be their perfect way to advertise—and make it seamless to get more customers. They want to understand performance. Our new ad platform, for example, gives them a dashboard so they can actually see the performance.

What's the best leadership advice you’ve gotten from more experienced chief executives who have mentored you?

Build something that has real scale. Don’t get caught in iterations. Think about the biggest needle movers you can spend time on rather than getting stuck in too many weeds.

Describe a potential Nextdoor move you skipped because you realized it would only be a baby step.

For a long time, we wanted to get into the barter idea within our For Sale & Free marketplace. But about two years ago, we pulled back. I said, ‘Strategically, we need to stick to the big things. We need to have an ad platform that's fully functioning, for instance.’ Focus and discipline are particularly important in a business like Nextdoor, where you could probably do anything because most things have a local spin to them.

Should public company CEOs be outspoken advocates of social change? You experienced wrenching upheaval growing up in Northern Ireland during its protracted religious conflict and later residing in South Africa as apartheid ended.

More CEOs are being asked to think much more broadly about stakeholder value partly because you’re seeing trust go down in government, the media, and other elements. With my life, I want to work on things that can have a societal impact and not just be in business for cold, hard dollars. I grew up knowing that a small group of people is the only thing that ever has changed the world.

But you have to be very careful. If you stand for everything, you stand for nothing. We have a very clear framework at Nextdoor to determine which social issues we engage in as a company. It depends on whether this issue aligns with our purpose, mission, and core values. It’s also not helpful to be the squawky voice if you have absolutely no ability to influence. The third step involves assessing whether our users are directly impacted. We’ve taken a stand on issues such as tightening federal gun control laws.

You believe sunlight is the best disinfectant and that’s why you share board materials with all Nextdoor staffers ahead of board meetings. Why should more corporate chiefs take this transparent approach?

Leading with transparency and empathy are probably the two best leadership traits you can exhibit as a public company CEO. Transparency takes away a lot of fear that employees often have.

Within the confines of being a public company and mindful of material non-public information, we share everything. It can be so easy for employees to get caught in silos and become experts in a very niche area. Forced to read broadly, they can pattern recognize. Broad knowledge sharing will breed great ideas.

At the same time, trust is our core value. You have to show you are leading from the front on trust if you really want that to become part of your culture.

You recently said there are a lot of mediocre men in the business world, but ‘ there’s no room for mediocre women.’ Why are you and other U.S. female executives still held to a higher standard than their male counterparts?

There’s still a lot of inherent implicit bias in the system. Statistics prove it. Female founders secured only 2% of venture capital in the United States in 2021. That's the smallest share since 2016. And 2021 was the second year in a row that women’s percentage of venture capital funding shrunk. I am part of that group of women trying to raise capital. I’ve raised a lot of money in my life whether it was with Square or now with Nextdoor.

We are going backward. How can this be happening? It would be great if we could get more blind reviews of founders’ pitch decks like big orchestras [do with auditions]. Meanwhile, women executives must work harder, better, and ultimately do more than the majority of the business community—which is white, straight men.

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