We recently learned that neighborhood-focused social media company Nextdoor is planning to go public via a merger with special purpose acquisition company (SPAC) Khosla Ventures Acquisition II (KVSB). In this Fool Live video clip, recorded on Aug. 2, Fool.com contributor Matt Frankel, CFP, explains to Industry Focus host Jason Moser why he's excited about this company's future potential.
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Matt Frankel: A few weeks ago, we learned that a company called Nextdoor is going public through a SPAC deal. Are you familiar with Nextdoor? Do you use it?
Jason Moser: I do not, no. I don't use it but have heard of it, yes.
Frankel: They're like the social network for neighborhoods. People report on neighborhood watch programs. You operate on Nextdoor. People post things for their neighbors to read on Nextdoor, items for sale, things like that. They're merging with a SPAC called Khosla Ventures Acquisition II, the ticker symbol is KVSB. It values the company at $4.3 billion. Just to put that in context, that is very, very small for a social media platform. Snap (SNAP 3.63%) is valued at over $110 billion. Pinterest (PINS 2.40%), even after its recent fall, is valued at something like, I want to say $37 billion. A little over $4 billion is not a high valuation for a social media company, especially with some of these impressive numbers. Listen to this: One out of three U.S. households has a member registered on Nextdoor. One out of three.
Moser: Really?
Frankel: They're in over 275,000 neighborhoods in the U.S. Over 60 million verified users, 27 million weekly active users. We mentioned Square's (SQ 5.84%) Cash App has 40 million active users. They're pretty close. Speaking of Square, you know who's the CEO of Nextdoor is?
Moser: If you tell me Jack Dorsey, I'm going to go ahead and end the show right now.
Frankel: Close: it's Sarah Friar.
Moser: Oh wow. Well, there is a connection there.
Frankel: That's why she left Square. She left Square to be the CEO of Nextdoor.
Moser: That's right. Now I remember that.
Frankel: She is personally participating in the PIPE [private investment in public equity] investment round, as well as being the CEO. They have a big opportunity to monetize. I mentioned that impressive membership base with over 60 million registered users. The average active user generates about $10 in annual revenue for Nextdoor. That's about one-sixth of what the average Twitter (TWTR) user generates. Big opportunity to monetize. They are not a profitable business yet, but in Social Media World, as long as you're growing and delivering the growth numbers, no one really cares about profitability just yet. At some point, people will, but right now, they grew 49% year over year in 2020. If you're delivering numbers like that, profitability will come eventually.
Moser: Yeah.
Frankel: Eventually, when the merger goes through, hopefully later this year, the ticker symbol will be KIND, K-I-N-D. Nextdoor's mission is to create a kinder world through neighborhoods, and that's where the ticker comes from. But the user engagement statistics are just off the charts with this one. They're getting almost $700 million of cash in this SPAC deal. I am really curious to see what Sarah Friar can do with it because she was an absolute rock star at Square. I'm really curious to see where she takes this one. It could be the next great social media company.
