Neighborhood Social Media Platform Nextdoor Lands SPAC Deal With Khosla: What Investors Should Know

A social media platform that connects people living in the same neighborhoods announced a SPAC merger to help fund expansion plans.

The SPAC Deal: Nextdoor announced a deal with Khosla Ventures Acquisition Co. II KVSB that values the company at a pro forma equity value of $4.3 billion.

A PIPE of $270 million for the merger includes investments from T. Rowe Price, Baron Capital, Dragoneer, Tiger Global, Hedosophia and ARK Invest.

Shares of Nextdoor will trade with the ticker KIND after the merger is completed.

Public KVSB shareholders will own 9.7% of the new company with PIPE investors owning 6.3%.

About Nextdoor: With a mission of connecting neighbors, Nextdoor offers a platform for neighbors to connect with businesses, public services and people living nearby.

Nextdoor is used in over 275,000 neighborhoods globally. The company has over 27 million weekly active users, according to its presentation.

Retention for the company is declining with over 50% of users remaining active on the platform two years after signing up.

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Growth Plans: Nextdoor will use proceeds from the merger to increase hiring, expand into new territories and increase its product development for monetization.

Businesses can reach local customers using Nextdoor and this service can continue to be monetized by the company. Nextdoor’s audience does not use other social media platforms as often, making the platform a good place for local businesses to potentially advertise.

In the presentation, Nextdoor lays out plans to introduce contact sync sharing, neighborhood guides, video tools and ask a neighbor.

The company will also introduce ways that people can add new neighborhoods they don’t live in to their networks including neighborhoods where a parent lives, where they own a business, where they spend the summer or where they used to live.

Nextdoor’s average revenue per user is lower than Twitter Inc TWTR and Snap Inc SNAP, which have rates of $59 and $18 respectively. Nextdoor’s average revenue per user was up 28% year-over-year in the fourth quarter and up 31% year-over-year in the first quarter. The company had an average revenue per user of $4.62 in 2020 and $4.99 in the first quarter.

Financials: Nextdoor had revenue of $123 million in 2020, up 49% year-over-year. The company is forecasting revenue of $178 million in fiscal 2021 and $249 million in fiscal 2022.

Nextdoor expects revenue to grow at an average annual rate of 49% from 2018 to 2022.

The company has negative EBITDA and expects that to continue through fiscal 2022. The company’s long-term EBITDA margin goal is 40%.

Nextdoor had 58 million verified users in 2020 and 60 million in the first quarter. The U.S. segment made up 50 million and 51 million of the 2020 and first-quarter totals.

Price Action: KVSB shares are up 4% to $10.34 on Tuesday.

See also: HOW TO BUY NEXTDOOR IPO STOCK