Venture Funding Targeting Alternative Social Networks Snapchat, Nextdoor

Wednesday, 13 Feb 2013 07:54 AM

By June Manning

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Venture funds are looking beyond Facebook and Twitter, and investing in a newer generation of smaller social networks that focus more on privacy than public sharing, the Financial Times reported.

Benchmark Capital and Greylock Partners have invested a significant amount in less well-known networks that currently lack revenue.

Snapchat, a mobile app that destroys all photos and videos seconds after they are opened, raised a reported $13.5 million dollars in its first round of venture funding. Benchmark, which still has a stake in Twitter, led the round for the Los Angeles-based startup and valued it at $60 million to $70 million, according to redOrbit.com.

Editor's Note:
Make 2013 the Year You Pay Zero Taxes

More than 60 million messages are sent on Snapchat each day, and the app boasts “millions of users,” Rebecca Grant of VentureBeat told redOrbit.com

Nextdoor, an online community for offline neighborhoods, raised $21.6 million in new funding led by Greylock, which was an early investor in Facebook. Nextdoor also raised $18.6 million from Benchmark and others in July.

“If you build something differentiated, there can be distinct social networks from Facebook,” Nirav Tolia, co-founder and chief executive of Nextdoor, told the Times. “Facebook is all about connecting with your friends. Nextdoor is all about connecting with your neighbors.”

Bill Gurley, a Benchmark partner, noted that many social networks targeting specific demographics or professionals have performed poorly, but noted, “Twitter and LinkedIn were once called alternative social networks.”

Distinct from other social networks, Nextdoor fosters user conversations that have a utilitarian nature. Neighbors, whose real names and addresses are verified by Nextdoor but kept out of search engine results, ask each other for recommendations on local services such as caretakers. They can organize to get a street pothole fixed or address a local crime, or ask if anyone has a lawnmower they can borrow.

“These conversations aren’t happening on Facebook,” Gurley said. “This is not a dancing cat, or a picture of someone at a party. This is about improving lives in those communities.”

Some Facebook alternatives, including Pinterest, have been quite successful in the past year. The online pinboard is rumored to be raising a new round at a $2.5 billion valuation. However, other networks, including Path and Foursquare, have attracted only niche audiences, the Times added.

Similar to their predecessors, Snapchat and Nextdoor are focusing on attracting users before trying to make any money.

“For at least a few years, we are going to focus on adoption. We know there is a giant pot of gold at the end of the rainbow,” Tolia said, referring to the $100 billion local advertising market.

Editor's Note: Make 2013 the Year You Pay Zero Taxes

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