Could the empty corner in your neighbor’s garage compete against the newly built self-storage facility off the interstate?
The founders of a new startup and its new financial bakers definitely think so.
Neighbor, a Salt Lake City, UT, company that matches people with spare space to rent out in their homes, garages or apartments with those that need storage space, earned about $25,000 by winning multiple business competitions in the startup days.
“That got us on our feet. Then we took this seed funding money,” said Joseph Woodbury, CEO, referring to a $100,000 Technology Commercialization and Innovation Program grant from the Utah Governor’s Office of Economic Development.
Then came the big money: Neighbor recently landed $2.5 million in seed funding from Peak Ventures and Pelion Ventures. The latter has given Neighbor incubation space in its office.
Airbnb for storage
Woodbury claims that Neighbor can save renters about half the cost of using regular self-storage facilities. Hosts set rates on their own. The company generates revenue with a 15 percent service fee.
Coverage by Tech Crunch Inc. and Business Inside, as well as Neighbor’s efforts to market through Facebook, Google AdWords and word-of-mouth, has helped the company grow to listings in 46 states, with 25 of them published and live.
“The biggest challenge is making sure we have enough host spaces for our renters, and enough renters for our hosts,” said Woodbury, 25. “Hosts want to rent out quickly. Renters want something close to home. We’re a true marketplace. We need hosts and renters to communicate with each other and come to an agreement.”
As often happens, a negative experience led to the company’s founding. Woodbury’s business partner, Preston Alder, needed storage for the three months he was going to be out of the country. But he found only locations that were too far away or expensive.
“We’ve got all this empty space around and people that need the space,” Woodbury said. “Why are we building these big storage buildings?”
Tapping the sharing economy
If a host is tempted to go through a renter’s belongings, Neighbor discourages that with contract language that specifies financial penalties. To help keep both sides honest, Neighbor procures the renter’s credit card number and the host’s bank account number.
Hosts can offer one of three access options: 24/7, business hours only, and by appointment only, which is the most popular arrangement. If there’s an emergency need for a renter to access their items, hosts “will try to work with the renter, but there’s no guarantee,” Woodbury said.
In addition, Neighbor covers hosts and renters for up to $10,000 in damage. Neighbor has an insurance partner that will write policies for higher coverage, if desired.
Neighbor also has developed a proprietary feature called “Store With a Friend” that enables users to see which friends are hosts or renters with the company.
“We’re the first sharing economy company to use that feature on Facebook,” Woodbury said.
Neighbor encourages local connections, with hosts and renters often living just blocks from each other.
Today, most users live in Utah and nearby states, but, “We’re starting to get national interest,” Woodbury said. And beyond as well, with users in Canada, New Zealand, the Philippines and other countries.
“We think this is a global problem,” Woodbury said. “Part of our motivation is we just think it’s a great community-building tool.”
Our new look is spreading across the Wasatch Front, have you noticed? 🙃 pic.twitter.com/j1FpWoKXIA
— Neighbor (@neighborstorage) March 20, 2018
Potential for growth
Ben Lambert is an investment partner with Pelion Ventures.
“We fell in love with the team,” he said. “These guys were in the top of their classes in college and are very talented.”
Lambert also likes that Neighbor is a gig (sharing) economy company and that it offers steady revenue every month.
“The multiples are good, the space is good, the business model is good and the team is just fantastic,” he said.