Unlocking Storage Potential in All Properties with Joseph Woodbury, CEO and Founder of Neighbor.com

Nate Smoyer (00:01.715)
Joseph, welcome to the show.

Joseph (00:04.334)
Hey, thanks for having me.

Nate Smoyer (00:06.739)
For those who don't follow my every waking tweet, they may have missed the live stream that you and I had a chance to do with Tyler Cobble earlier this week, which will get published to his podcast, but I'm hoping I can beat him and we can publish this interview before he publishes that conversation to his podcast. But I'm excited to have you back. We'll have a little bit of a different conversation this time on a topic that I actually really like.

Storage, actually, I wanted to show you this last time. For the listeners, you're gonna have to bear with me for just a hot second here. This is a total off the cuff moment here. I've talked about this before. I have my own storage facility. I even have my own little key chains. And I've never given these to anyone because I don't use keys for any of my locks. I thought I would. Maybe one day I'll have a use for those. Anyway.

We've got Joseph Woodbury. He is co -founder and CEO at a company called Neighbor. Neighbor .com. And they are aiming to disrupt the self -storage industry, estimated a $500 billion industry at that. They've raised over $65 million in their efforts in pursuit to disrupt the industry from investors such as Andreessen Horowitz, Airbnb, Uber, StockX, DoorDash, as...

helping them on this path here. And interestingly enough, and I want to start here, you guys are the only company to have storage operations in all 50 states. How'd you do that?

Joseph (01:49.39)
Well, you know, I think that highlights the beauty of the peer to peer model. Right. These big storage companies, I mean, public storage, fifty five billion dollar publicly traded company. They have storage facilities in thirty nine states and huge. I mean, they put a lot of capital, but every single location you you open up, you're putting millions of dollars to open up a new location. Whereas neighbor, we're not building anything. We're taking space that's already been built.

Nate Smoyer (02:13.329)
Mm -hmm.

Joseph (02:18.99)
and we're crowdsourcing it. And anywhere that you have unused space that you want to monetize, you can onboard that. It's been amazing to see the reaction as people have a friend that does it and then they hear about how much their friend is making or one of their business partners does it. And so they start doing it in their business. And so I'd go further. We don't just have storage renters actively using neighbor in all 50 states. We have active users in almost every city in the country. Like,

There's towns that have 2000 people where we have someone renting out space that they own and we have someone renting that space from them. Whereas as a storage facility, you could never really justify going into that town of 2000 people and deploying capital there. There's people that still need storage there and we can service them at a smaller level, a more micro level than building some 400 unit storage facility there.

Nate Smoyer (02:48.551)
Wow.

Nate Smoyer (03:06.547)
Mm -hmm.

Nate Smoyer (03:16.371)
I can actually think of right now of multiple towns, not far from me in the Black Hills here that are 500 people or less that have really nice storage facilities, like, you know, just on the skirts, that's because of town, but there's no way, cause they've been built like 10 years ago. There's no way anyone's going there now to build more facilities in those areas. It's just, it's just not going to happen. And yeah, so I, I, I'm fascinated by this topic because I have myself,

leverage like unconventional ways of maximizing revenue on a property of like thinking about space and storage as a thing that anyone can sell. But there's some, there's some tricks to it, right? Cause most people don't think about like, okay, I'm gonna, I'm gonna round up my garage, but where do you go? How do you do that? What's the contract look like? You know, how do you structure that? So maybe you can talk about some of the support you're supplying there because the average, you know, peer to peer person, right?

or peer to peer transaction here is going to come from non storage professionals, right? So they're kind of newbies to the industry.

Joseph (04:24.27)
Yeah, that's right. So we started the company back in 2017. We started it on the residential side. So this is just an individual renting out space in their home. This could be a garage, could be a driveway, could be a shed, could be a carport, anything for vehicle storage, self storage. And we started that in Utah. That grew to all 50 states. And then we had people reaching out to us saying, hey,

Nate Smoyer (04:31.953)
Mm -hmm.

Joseph (04:53.646)
I'm not a residential user. I got on a home. I own a business. Could I list on your site? And we had small businesses. I mean, we during the pandemic. We had a gym owner in LA totally shut down because COVID. And he listed on our platform. He was earning $50 ,000 a year from neighbor. It helped pay the lease for his small business. So we'll have gyms, nail salons, whatever. And some of these guys, they tell us,

Nate Smoyer (05:09.777)
Mm -hmm.

Joseph (05:22.734)
This is actually good for my business because there will be people that come in store with me that they didn't know I had a business here and now they know I have a business here. It helps make these cool community connections. And then as we started that, we started getting larger property owners reaching out to us saying, hey, we have space we're not using. Can we list that on our space? And now we have most of the billion dollar retail REITs in the country.

and many of the largest multifamily owners in the country, all using us to earn seven figures of ancillary income to their portfolio. But yet, even with all those big partners, like you said, still the biggest category is these residential homeowners renting out space on the platform. It's really cool to see.

Nate Smoyer (06:15.443)
I know firsthand how difficult it can be to find consumers for services like this, especially, you know, fragmented audiences are an awesome thing to talk about in terms of the TAM and you paint a really rosy like chart that shows annual revenue just kind of always goes up and to the right. Like if we just get this many this year and that many next year, billion dollar company all day long. But it...

can be a challenge to find some of those consumers, at least in some verticals. And I'm speaking to like the rental vertical, for instance, like at Avail, we had to find all the DIY landlords to introduce them to Avail. Have you also found it to be challenging to find those residential customers or something that people are proactively looking for? Like how does that happen?

Joseph (07:10.446)
Well, it's a lot different today than, you know, it's evolved dramatically. I remember when we first started this business, we were all about the polygram, do things that don't scale. We got our first host by going door to door and dropping off, you know, flyers and then door knockers and stuff like that. That's how we got our first host. We made these these fun little flyers. We were passing out these flyers and I just thought people were throwing them away.

Nate Smoyer (07:27.091)
Let's go!

Joseph (07:39.438)
I thought these things were going straight in the trash as we were delivering them to houses. And so what we did is we added a dollar bill to it and just paper clipped and the flyer said, this is the first dollar bill you'll earn on neighbor .com just to get people to like hang on to it because you're not going to throw away a dollar bill. And you think about those early days in a marketplace, no one has any reason to use you.

Nate Smoyer (07:54.867)
Well...

Joseph (08:05.366)
The renters that come on, there's not any supply that's close to them. If there is, it's not the supply they want. You can't store a boat in a basement. You can't store boxes on someone's RV pad. You're not going to drive three cities over to find something. And then for the hosts, they're getting on and they're spending a lot of time without getting rented. And the renters they get may not be the renters they want. It's just a poor experience for everybody.

I sometimes I wonder how marketplaces ever get started. Like this is the same way it was for Airbnb, same way it was for DoorDash. Who went on to DoorDash before they had any restaurants? When you'd click on and like, you're like, okay, we've got one option in the city to DoorDash from. Hope you like Chinese food tonight, because that's all we got.

Nate Smoyer (08:58.739)
We have one option for DoorDash where I live. Because we're not near anything. It's a Pizza Hut.

Joseph (09:02.222)
Hahaha

Joseph (09:08.638)
It beats out, it's like, we'll deliver it.

Nate Smoyer (09:10.739)
I'm literally living this.

Joseph (09:14.094)
So, you know, over time in a marketplace, you add more users and all of a sudden, the renters start to get on and guess what? There's more stuff closer to them. It's a lot better experience. There's a lot of price variability, quality variability. I find what I want, what quality I want. And then the hosts are getting booked faster and it just compounds on itself. And so the ways in which we get users shift, I mean, we do a lot more like,

A lot of our hosts are coming on from like brand and word of mouth where they've heard about us. Someone told us about their great earnings experience. Someone told them about their great earning experience. They heard about us as opposed to doing everything door to door in the past. Like there was a period where we use digital channels quite a bit to acquire our supply, to acquire our hosts. We do almost none of that today because we've got so much more data on.

Who's going to be a good host? What city are they going to be a good host in? And so we can be more targeted and use more non -digital types of marketing to reach the exact sort of person where we want instead of just broadly spending and a lot of wasteful stuff. The renter side though has always been a little more straightforward than the supply side. Storage industry, and you know this, it's crazy.

There is so much more demand for storage in the United States than there is supply. There's more storage facilities in the United States now than there are Starbucks, McDonald's, Dunkin' Donuts, Burger King's, Walmart's, Home Depot's, and Costco's combined. And I can tell you that, it is, it's just massive. And I can tell you that not all of those storage operators are geniuses, right? Like these aren't all like,

Nate Smoyer (10:54.803)
That blows my mind.

Joseph (11:07.022)
the best operators in the world. And yet the average occupancy across the United States is like 94%. So you've got more locations in all those restaurants not being run by the best operators in the world and they're 94 % occupied. That's how supply constrained this industry is.

Nate Smoyer (11:24.98)
Hmm.

Nate Smoyer (11:29.235)
Yeah, I mean, I think of a few things that you constantly see the estimates of, you know, we're like seven, I think the last number I saw was close to 7 million housing units under supplied there. And the housing trend has been houses have actually been decreasing in size. So when you think through like, well, if we're decreasing housing in size, any place we're building in, you know, concentration,

or volume is gonna be apartments. So clearly that's a smaller house to begin with. And then of course, any aged markets, you're gonna have smaller houses just by generational differences of what we build for housing. So you have to build all this more housing. Well, you know, invariably Americans, we love stuff, you know, we're gonna fill the space in which we occupy, which is just human nature. And so there's gonna be more space that's gonna be needed.

Uh, and I think it constantly spells a pretty positive outlook for storage. But one of the gripes I hear in the industry though, is it's so expensive to build. And I think that's where you guys have a really unique take on this because you're not constrained by how expensive it is to build. You actually get the benefit of like leveraging prices of 10 and 20 years ago construction or older.

to maximize that space. And you kind of, we talked about this a little bit before the show, but full property monetization was the word you threw out there. Can you talk a little bit more about what that means and how should investors and owners both on the, we can look at the individual level, but also like more on the business side, how should they be considering storage as an opportunity or option to achieving full property monetization?

Joseph (13:26.766)
Yeah, I feel like this is kind of a new movement that's taking place among real estate owners and operators where in the past you had your asset class, maybe you owned rental properties, maybe you owned retail, maybe you owned office and you kind of stayed in your lane and you just got really good at doing that. And you, you, the philosophy was if I do anything outside of that, I'm getting distracted from being a good operator where I'm at.

Nate Smoyer (13:45.649)
Mm -hmm.

Joseph (13:56.334)
I think the shift, at least with the smarter operators, the more kind of forward -thinking creative ones, is they're starting to realize, I own a piece of property. I want to make as much money off of that property as I possibly can. That's my goal as an investor. I want to earn as much yield as I can. And so I shouldn't care how I'm renting that out to someone. If...

there's high demand on the top five floors for office, I should rent that out for office. And if the bottom floor would be better rented out, if it's always vacant and I'm always having to spend all this money trying to get it filled and it's been vacant for five years and I've never found a tenant, maybe that should be something else. Like maybe I should rent that out as storage. Or if the city like required me, there's so much deadweight loss in regulation.

If the city required me to build all this parking around my new multifamily complex or a big parking garage next to my office and the top three floors of that parking garage never get used or There's always ten spaces next to my multifamily complex that never get used Well, then maybe I should rent those out for vehicle storage In industrial you see people get I mean neighbors not the only way here, right? You see industrial operators

Nate Smoyer (14:52.177)
Mm -hmm.

Joseph (15:22.03)
put solar all across the top because they have this massive roof footprint. And they've learned they can put solar on that, offset their energy costs, but also contribute back to the grid and earn a yield from the power company. You get people that put in different kind of charging stations or amenities, things like that. Workout deals with cell towers. I think the new operator is starting to realize,

Nate Smoyer (15:28.283)
Right.

Nate Smoyer (15:48.947)
Mm -hmm.

Joseph (15:51.726)
All I care about is money and stability. And guess what? One of the most stable cashflow NLI streams you can be bringing in is storage.

Nate Smoyer (16:04.371)
Yeah, I remember the very first person I actually talked to about the storage industry. I was still a realtor. I had found this property and it was like contractor garages that they were leasing or you could lease them or you could buy them, but they were condoed. And I went to this property and I can't say that this was like the most elegantly laid out property, but this guy was, I mean, he was an inspiration to me. This was before I bought our storage facility.

because I seen these contractor garages and then I see he had like this kind of like service station building and there was an apartment up top. And then I seen all these containers and I said, what's with all the containers? He goes, oh, that's additional storage. We didn't want to, you know, he didn't want to build. And he was like, it's like, we're buying them for three, you know, two and three grand delivered. And he goes, and they rent for 50 to 80 a month. I'm like, 50 to 80 a month. I was like, there's no power, there's no water.

didn't even put down foundations. And it was, it was amazing to me to see like, it was pretty crude, but at the same time, it, it met a need. Like the market was asking for this. It was asking for, you know, I wanted an inexpensive dry place to put a few things. And it turned out it was a lot of contractors who were looking for something like that, that was a secured parking area where they could drive in. They didn't care about.

big brands, they didn't care about some of the amenities that you might find at some of your more public reads when you're doing like individual self -storing or like the indoor, like the expensive stuff, like for wine or for art kind of stuff. And it was just interesting to see that. I think that there's more people that maybe just haven't been exposed that this is an option and that the market is willing to absorb if you're willing to put up the supply.

Joseph (17:56.91)
Yeah. Yeah, it's interesting. Oh, go for it.

Nate Smoyer (17:59.163)
Whissa -

Nate Smoyer (18:02.771)
No, that's okay. So, so I do want to shift a little bit because you know, you can hear about all the different applications and immediately the first thing that pops into my mind coming from a tech background though, and I want to hear this. I think this will be interesting to other founders listening. How in the world do you plan a product roadmap to facilitate delivering solutions to all these problems? Because the guy who's got storage, you know, containers in his driveway.

to, you know, I've got a shed in my backyard that I want to rent out, to the person who's got two carports and a old barn. How does that all work on the same platform?

Joseph (18:45.366)
Yeah, when you figure out the answer to that question, please come let me know. It's been something where we have built for different customers at different times. So again, the first life of neighbor, the first really four years of the business, we only built for these residential customers. And we just got really good at that. In fact, when we raised our seed round, way back in 2017, we raised

about two and a half million dollars. And we didn't spend almost any of that on marketing. We said, we're going to let users come to us. Again, we'll use some of these physical tactics to get people on the platform. We're going to spend all of that on product, you know, getting a good product team in place and engineers. And then we just kind of let people come to us and iterated. We just listened and iterated and iterated and iterated. And we didn't expand outside of the state of Utah.

for about a year and a half after starting the business. And it was only once our NPS scores in Utah, our net promoter scores, were high, getting into the 50s and 60s, only then did we choose to expand outside of Utah. And because of that, it made the second market move so much faster. Los Angeles was our second market outside of Utah. And when we launched it, we were able to get as many hosts, many people renting out their space,

in LA in the first seven weeks in LA as we'd gotten in the first year and a half in Utah. And so by really kind of nailing that value prop, we were able to accelerate it. And then we did that for three or four years, just focusing on that customer. And then as I mentioned, these small businesses started coming to us asking if they could rent out space on our platform. And they're a very similar user.

Nate Smoyer (20:21.875)
Ow.

Joseph (20:38.606)
Right. The only difference is they may have more listings than your standard residential user. And so we built the product to be able to handle more, you know, slightly more listings, but it was still very like single user centric. Where we're just thinking about one, whoever owns that small business, they're the host, they've got an account, they're renting out space. It works almost like a house, just with more space.

Nate Smoyer (20:52.595)
Mm -hmm.

Joseph (21:04.398)
Now we have the capability to manage more space. And then as we started working with these larger partners, all of a sudden that's a more relationship driven business. Instead of having people come in through marketing or whatever, you're doing a partnership and you're meeting with their team and you're getting their needs. And that starts to drive your roadmap to where they say, okay, well I need my finance guy to have access to update our bank accounts.

Nate Smoyer (21:15.027)
Mm.

Joseph (21:31.758)
and I need my property manager to be able to approve the renters that are coming in, all of a sudden you need some sort of corporate account system where you can have admin controls and managed users. And so you build that for that customer because that's the focus now. That's the new opportunity. And so we tried to take it piece by piece along that journey. There are of course many times where we had opportunities to do something.

but had to make a decision not to do something. And there were other areas where we decided to do that and it was too much and we spread ourselves too thin and we ended up having to pull back sooner than anticipated.

Nate Smoyer (22:09.521)
Mm -hmm.

Nate Smoyer (22:16.079)
I mean, I think this is something that an issue that faces founders across the board. I think you guys might be a bit of a unique scenario in this, but you know, as you're, you get an opportunity, a customer comes to your door and they tell you they want this feature and they want that feature. And if we get those feature, we're going to bring X number of units on board with you. And then it's going to be good. And you build the features. It's like, yeah, but actually we need this, this, this, and this yet too. And so you extend the sprint another six months and

You're kind of chuckling. Have you experienced some of that?

Joseph (22:49.774)
Oh, for sure, for sure. And, you know, maybe more often, you know, it's, we may work with a new partner and, you know, we onboard and we get them rolling and they're like, oh, wait a second, there's this thing I didn't think of that now that I'm using it, this needs to work differently in this way. You know, our residential systems, they just work on a...

whatever day you start on, that's the date you renew on. It's all month to month. You start on the 16th of a month, we're going to charge the renter again on the 16th of the next month into perpetuity forever. Certain larger customers, they think of everything on a first of the month basis. And so you have to build stuff to where it prorates the first month and then starting on the first of the month, then everyone's on the same exact cadence because that's how their financials work.

Nate Smoyer (23:24.113)
Mm -hmm.

Joseph (23:47.118)
We had several customers way back when, you know, we probably built that a couple of years ago and they actually started using us. Like they were users of our platform and then like three months in when we went to pay them out, they're like, wait, this is not how we want to be paid out. So we had to go change how our reservations tool booked reservations on a monthly basis.

Nate Smoyer (24:10.931)
Fascinating. Yeah. You mentioned NPS and obviously you were, you earlier we were discussing some of the growth and you didn't really get into it and say specifically network effects, but with a marketplace and a product that, you know, it can be challenging to grow if you don't.

Nail some of these organic channels. And the way I used to think about this with startups was, you really have three types of growth engines when you're trying to achieve venture level growth. You can be network effects where the platform inherently grows in value and everyone else gets more as both sides fill out. You get your viral effects where each one customer leads to at least another, like, I think it's like 0 .25 is a meaningful viral coefficient.

Or you can do paid, which is very expensive. And if you want to take that, you know, blitz scaling path, uh, may not be the time, uh, any more these days to take the blitz scaling path. Um, but you guys obviously nailed the network effects. You were able to succeed with the viral effects of growth in that you're picking up new hosts, you know, by word of mouth.

but there's still kind of like this external piece yet because storage inherently is a very hyper local type of market and product. How have you bridged the gap there to make people feel good about, okay, my host is here and but what's this thing they're using or how are they finding like maybe they found them through neighbor. So they still don't know it's like that person is local. Like how did you, how did you bridge some of those gaps?

Joseph (25:46.968)
That's weird.

Joseph (26:05.39)
Yeah. So there's some major advantages and disadvantages to being a hyper local marketplace. The, and we're, we're a little bit unique here, right? Like Airbnb is not hyper local. You use an Airbnb in a city where you go stay and you're probably never going to talk to that Airbnb host ever again. After you're done. Same thing with Uber. You use an, you know, maybe I use an Uber when I'm traveling to Chicago and I need to get from the airport to my hotel. I'm.

Nate Smoyer (26:23.667)
Mm -hmm.

Joseph (26:32.686)
I'm going to maybe talk to the Uber driver, but after I get out of that car, I'm never going to talk to that Uber driver ever again. Probably. So there's no sort of user connection. On Neighbor though, it's called neighbor .com for a reason. That is, if you look in the self -storage Almanac, which is kind of the industry publication for the self -storage world.

Nate Smoyer (26:40.275)
Probably.

Joseph (26:56.398)
They survey renters on why they pick their storage facility. And there's price, there's different amenities, climate control, stuff like that, security. But the number one reason that renters pick their storage facility is proximity. It's even over price. They'll just say, I picked the closest one to my house. I didn't even look at what the prices were. Just picked the closest one to my house. Now then you have the next biggest group is those price shoppers where they're like, well, I'll drive a little further.

Nate Smoyer (27:11.795)
Mm -hmm.

Joseph (27:25.23)
to find the right, to the cheapest price. Neighbor tries to compete on both of those angles in that we're typically much cheaper than traditional self -storage and we're much closer. But it's so proximate, so what are those advantages and disadvantages? Well, the advantages are there's an inherent trust built in and as a marketplace you're trying to build trust, like that's what you do. And Uber has to really win you over that the guy that's gonna pick you up,

is not gonna harm you in some way, shape or form. You just have to trust Uber on that and that's a big leap of faith. I'm shocked that we all get in Ubers today. It's crazy. You're in someone's car, they can take you wherever you want. You've never met them before. You just trust that Uber's done a good job of vetting this guy. Neighbor though, because we're hyperlocal, while we do have the vetting systems, like WeID Verify and Check Every Listing, all that stuff,

Nate Smoyer (28:22.289)
Hmm.

Joseph (28:25.454)
There's a built -in trust in that you know that this person lives close by. Like you chose to live in that neighborhood. We used to have this really cool feature. I call it the best feature we ever built on neighbor .com. And it's also a feature that no longer exists. We built this feature where you could connect your Facebook account as a host and as a renter, you can connect it when you were searching. And we would display how many degrees of connections you were to that user. And.

Nate Smoyer (28:53.075)
Ah, okay.

Joseph (28:53.838)
On Airbnb, if you did this, you'd probably be like fifth or sixth connections to everybody. But on neighbor, when you get on, you're like second or third degree connections to everyone. You either know this person or you know someone who knows this person. And then Cambridge Analytica came and Facebook shut down all their APIs. And so we had to turn that feature off. But it was one of our biggest A -B test wins ever because it just instituted this immediate trust of like, oh, I know this person. I know someone that knows them.

Nate Smoyer (29:08.017)
Mm -hmm.

Joseph (29:23.95)
And there's also a social pressure there where I'm going to treat your items very well because when this transaction is over, I'm not moving anywhere and you're not moving anywhere. And so like we're going to live together still. And so we better do good by each other. So there's all this built in trust and safety that other companies, they have to work really hard to build. And we had, we get it automatically because we're so hyper local. The disadvantage is it spreads.

Nate Smoyer (29:40.913)
Mm -hmm.

Joseph (29:53.336)
You know, you talked about that viral coefficient Airbnb, I use it in another city and then I come back and I bring it to my city and I can be a renter and I come back and I list my house and now I'm my house and now I'm a host. There's all this cross geographical spreading going on. Whereas you could have a whole community that just loves neighbor and like neighbor has taken over storage in that community and a community a hundred miles away doesn't even know about it.

Nate Smoyer (30:10.515)
Mm -hmm.

Joseph (30:22.542)
And we have to enter that community and build that community almost like it's a new market every single time. And so that's that's the network effect disadvantage to the platform is that hyper local nature. Yes, but it's also a very strong moat, right? You know, the bigger we get and the more markets that we've conquered, the more it would be virtually impossible for a.

Nate Smoyer (30:31.057)
Hmm.

Nate Smoyer (30:36.243)
because it's so hyperlocal. Yeah.

Joseph (30:52.014)
another person to try and duplicate what we're doing because guess what? There's no easy way to build this. There's not a hack. There's not a kind of get rich quick way to build neighbor. You got to go market by market and teach those people and it just takes time or money or both.

Nate Smoyer (31:01.553)
Mm -hmm.

Nate Smoyer (31:11.347)
like the Marshawn Lynch approach to business. Are you familiar with the one interview where he, he's like, he says something along the lines. He's like, you know, you just, you got to hit them over and over and over. And he says like over like 10 times until they don't want to get hit no mo is what he's saying. But it's kind of what it sounds like. I mean, hey, you'd have to be willing to get out there and over and over, but also like you guys have built some systems into that. You can now have a little bit more of a more mature.

Joseph (31:17.326)
No.

Joseph (31:27.822)
Yeah.

Nate Smoyer (31:41.171)
platform, you know, some of the backing from some of your investors, which, you know, let's kind of touch on that for just a minute. You know, and then we'll jump down to the bottom of the show. You guys have really pulled in some heavy hitters when it comes from investing. Some who I would say genuinely have a very solid grasp and I can see the connection between other marketplace or network effect type investors and who's, you know, on your cap table. What was that process like? And,

You know, I'm also curious if you guys, I don't know if you're actively raising, gonna be raising, but like the environments change. So there's probably some, you know, some things that have changed since you guys have last raised to like where the market's at today. I'm curious what you're seeing as a founder.

Joseph (32:26.126)
Yeah. Yeah. So the investors we brought in evolved over time. You know, when we raised our seed round, we're based out of Utah. So we raised from the top two venture capital firms in Utah. That close proximity really helped. Really smart guys. You know, the firm that led our seed round, they're still on the board today. And they're just like the sort of people, you know, you call whenever you want to bounce an idea off of.

amazing, amazing close people to us and almost like they've helped us build the business alongside us. Then when we raised the A round, we had just started expanding outside of Utah. And there's not a lot of marketplaces in Utah. Utah is a SaaS state. Like we just dominate SaaS. If you want to like throw up a big sales team and like have this great sales org, Utah is your place. And so you think of the companies.

Nate Smoyer (33:23.699)
There's something in the water out there for sure.

Joseph (33:26.254)
There is, yes. So, sort of companies that come out of Utah, like Qualtrics, for example, I mean, just go into businesses selling, you know, build a $20 billion survey company. So that's where a lot of our early investors' expertise was. We wanted to bring in someone with really strong marketplace expertise. Obviously, Andreessen's a great name and a great brand, but really, we were going after a specific partner at Andreessen Horowitz, a guy named Jeff Jordan.

He is kind of the marketplace guy. He built eBay .com from 2000 and 2005 in the early days, ran all of eBay North America. He was then president of PayPal when eBay bought PayPal. And then he was CEO of OpenTable, the restaurant marketplace, took them public. And then he became an investor. And first year as an investor, invested in this tiny company called Airbnb. Still sits on their board today. He's on the board of Pinterest.

offer up an Instacart, just does Marketplace. That's what he does. And so we were grateful to have him lead our A round and join our board. And then we're a real estate Marketplace. So when we went to raise the B round, just like we had gotten like what we considered to be the best Marketplace investor for the A round, we wanted to get the best real estate investor, best PropTech investor for the B round. And that for us, that's a group called Fifth Wall.

Nate Smoyer (34:30.419)
Mm -hmm.

Joseph (34:56.238)
All they do is PropTech. They're LPs, the LPs that invest into their fund instead of being institutional like pension funds and stuff like that. They're all real estate owners, big REITs around the country that are invested into Fifthwall. And Fifthwall will actually help their portfolio companies partner with those REITs that are LPs in their companies. So there's actually a strategic, investors are always talking about value add.

Nate Smoyer (34:56.753)
Mm -hmm.

Nate Smoyer (35:18.897)
Mm -hmm.

Joseph (35:24.046)
we'll help you hire people, we'll help you, whatever. Unless you're Andreessen Horowitz and you have a 500 person team, that's like where you have one person that does hiring for consumer engineering and another person that does hiring for consumer marketing and another person that does hiring for, you know, SaaS marketing and unless you're that dedicated to the infrastructure as a VC, you're probably not going to be that value add. But fifth wall has actually got this direct industry specific

value add, they know everyone in the space, it's all they do. So we brought them to lead our $50 million Series B round. And that's kind of how we thought about that process. That all sounds very nice. As you mentioned, the venture market is as bad as it's been in 20 years. I mean, it's just, if you're at the Series C stage, B stage, D stage, it doesn't exist. I mean, no one's investing, period.

Nate Smoyer (36:14.355)
It's rough.

Joseph (36:21.134)
There's just no activity going on.

Nate Smoyer (36:23.795)
It's been very sparse. I mean, I see it from the number of announcements that get sent to me this year. I thought for sure I was going to see a spike this year. I thought for sure spring was going to be hot. I thought we finally got through the dark days and hey, people are just going to be ready. All right, we're through Christmas. It's new years. You know what the hell of it? Let's, let's put some money in. We got to, you got to deploy the fund because you're not going to be able to raise the next fund if you don't deploy it, but it's.

And so, you know, I think there's also like, there's a lesson here, like, because hindsight is always the easy way to look back on businesses. And I don't know the internals of all the things you guys definitely did right or definitely did wrong, but you talked about having weaned off of paid acquisitions and really kind of mastering those marketplaces and getting that, you know, extremely high NPS, you know, and I think this is something that's a little underrated.

uh, across businesses, you know, the, the growth by all means are, you know, forcing the growth and I'm a paid media guy. Like that's my jam. You want to get your business started. Like, great. Let's start a Google ads count. That's like part of how we set up the business, but it's not everything. There's so many other pieces. And, you know, I've always looked at it. Like if you want to be competitive on Google ads, you actually have to have a really strong organic business. And the combination of some of that.

really can foster some powerful growth. But of course, you guys having powerful marketplace effects and network effects through peer -to -peer sharing can help any startup survive some of these not so bright times when funding isn't so plentiful and freely being given out.

Joseph (38:15.854)
Yeah, and just transparently, we're not perfect, right? Like, while we did do that, I think it took us way longer than it should have to do that. And that's just part of running a business is you're learning as you go and trying to make the best decisions. It's interesting you bring up this dry capital argument I've heard a lot, which is that investors have raised a lot of dry capital.

Right. So when are they going to start deploying that they've got to deploy it. It's like their livelihood. Right. And, you know, as I as I've paid more attention to it, I've realized that there's really two things holding up the venture market, you know, both having to do very much with interest rates that kind of make dry capital irrelevant. The first is that.

Nate Smoyer (38:45.285)
Yes.

Joseph (39:12.366)
The people that invest into venture funds, these LPs, they have large portfolios and venture capital is only a very small portion of that. If you're a $20 billion pension fund, you're gonna invest whatever, some large percentage of that into public equities, some percentage of that into bonds, some percentage of that into commercial real estate, and then you're gonna take like 1%, maybe,

and put it into venture capital. And that's like your high risk stuff. And so because you're a $20 billion fund, maybe that's, you know, $200 million you're writing into venture capital, which is a lot of money. But when your portfolio gets all out of whack, like have happened with the markets and commercial real estate's down, you're focused on rebalancing that portfolio, not focused on fixing that venture portion. And so...

you would actually prefer that that venture capital firm doesn't call your capital. You haven't given it to them yet. You've committed, you've legally committed it to them, but you'd rather be able to rebalance your portfolio first and figure that out. And you're earning, you can earn 5%, 6 % on treasuries. And so like you start to do these time value money calculations and you'd rather that money get invested later anyway.

Nate Smoyer (40:25.075)
Oh, interesting, yeah.

Joseph (40:40.142)
And that's kind of the second thing that's holding us up is companies are ultimately valued on a discounted cashflow basis. And tech companies, all they are, are promises of large future profits. And that works great when interest rates are low, because if I'm gonna make you billions of dollars later in profits,

you discount those back and those are still worth quite a bit today. But if interest rates are high, you use that as your discount rate, those billions of future profits get discounted by that discount rate each year to the point where they're actually worth $0 today. And I'd rather invest in something that's lower yielding that gives me money today. And so tech companies,

Nate Smoyer (41:11.315)
Right, right.

Nate Smoyer (41:33.747)
Yeah.

Joseph (41:34.862)
at these interest rates are kind of worth nothing. And until that changes, it's still gonna be tight no matter how things do, right? Like.

Nate Smoyer (41:44.915)
I don't even owe, I mean, I'm not even the founder of one or on the hook for millions, but when you say that, it's like, it's like a punch in the gut to even like think like, oh my gosh, how many people, how many companies does that put in that category? This does emphasize, I mean, you've spelled this out far more detail than I've ever gone in it, but the need to find a path or get to profitability sooner than not.

Joseph (42:10.35)
Yes. Yeah. I mean, that is it's a little it's a little silly because why should venture capital exist if you need to be profitable? Because like like the whole point of venture capital is to take money and then spend that. And if you're going to if you're going to spend less than you earn, you shouldn't raise any money. You don't need it. You only raise growth capital.

Nate Smoyer (42:25.395)
Hmm.

Joseph (42:39.79)
if you're going to spend more than you earn and that it's going to be worth it for later profits, right? And so the venture VCs won't invest unless you're profitable. And that's just like kind of how it is today. And profitable or very close to it or something like that, right? And yet there's no need for venture capital if you are. So it's this interesting conundrum.

Nate Smoyer (42:42.963)
Right. Right.

Joseph (43:08.43)
that we're in today and I think founders just have to realize like it is what it is, right? You just have to operate. And I actually think it's a very positive thing. I think going through cycles like this helps. I think, and in fact I know because I've talked to them, there are CEOs of billion dollar tech companies today that kind of wished.

we had gone through a high interest rate cycle at some point during their building because it would have built very good practices that would have caused them to raise a lot less money and operate a lot more efficiently. And they'd still own a lot more of their business today, even though they would go on to raise more like markets going to come back. We're all going to go raise more money later and everything's going to be great. But that money that we raised three years from now is going to be so much more efficient.

Nate Smoyer (43:50.739)
interesting.

Joseph (44:05.454)
because of the period we went through here as starter operating.

Nate Smoyer (44:08.147)
I tend to agree.

I tend to agree with that. I, it's one of the reasons I genuinely actually have been attracted to, and you know, two of the last three startups I've been at, I've been Midwestern startups, just because there's, you know, that the conservative nature on like how the funds are allocated and your growth by spend, um, you know, it's kind of baked into the culture of Midwest versus, you know, coastal startups. Traditionally, I'm saying here, of course I'm making broad generalizations, but coastal startups generally having the, the reputation for to the moon.

kind of approach, you know, with what they've raised and how they pursue growth. Joseph, we're gonna jump to the bottom of the show here. This is the final segment I like to call for the future. This is when I get to ask each guest who comes on the show to give their best predictions based on the following four questions. Are you ready to play?

Joseph (45:01.326)
No, but I will.

Nate Smoyer (45:03.979)
Question number one, what does neighbor look like one year from now?

Joseph (45:12.012)
Neighbor, one year from now, will be the largest source of ancillary revenue for the most well -known retail and multifamily retail.

Nate Smoyer (45:31.571)
Wow, I love a vision. Number two, get the crystal ball out. Will we see an increase or decrease? We're not gonna see a decrease. Yeah, so think annually, year over year. Will we see an increase or decrease in new self -storage facilities being built over the next three years?

Joseph (45:52.974)
Yeah, it's a softball increase. The industry spends $4 to $5 billion a year just on new construction. That may taper down a little bit, but we're still going to see north of $3 billion a year deployed into new storage facilities.

Nate Smoyer (46:12.051)
I gotta get into the Bower business or something just to start selling to all those facilities. All right, number three here. What's one industry trend you think will continue but you wish would go away?

Joseph (46:31.086)
Well, you know, from a customer standpoint, storage facilities, one of the ways they make most of their money is they get you in at a really low price. Like, here's your first month price or even worse, like here's your first six months price. You know, because everyone knows like first month discount goes away the second month, but people think the price that they get the second month, they're going to stick with.

Nate Smoyer (46:51.845)
Mm -hmm.

Joseph (46:58.222)
But storage chilies will increase your prices like every six months to where two years from now you're paying double what you're paying when you started or even a year from now. I mean it's fast. In fact extra space storage and their earnings call last year was bragging about how fast they increase prices on users. I mean something like they were saying like they increase prices on like 10000 users every month or something like that. I can't remember what the stat was.

That's a little deceptive to users, right? Like on Neighbor, when you come on, whatever you start paying, there may be a first month discount or something, but once you get into that recurring payment, you're gonna pay that for the life of the reservation. And so that gives you lots of predictability as a consumer. You may have made a decision based on basically a false price in a lot of storage facilities. So that will definitely continue. It drives a lot of profit in the industry. It'd be great if it would go away.

Nate Smoyer (47:55.867)
All right. And the last one here, what's one thing you believe will dramatically change or fade away in real estate as a result of tech advances?

Joseph (48:05.39)
Sorry, you cut out a little bit there, can you repeat that?

Nate Smoyer (48:08.241)
No worries.

Nate Smoyer (48:13.937)
All right, the last one here. What's one thing you believe will dramatically change or fade away in real estate as a result of tech advances?

Joseph (48:27.182)
I think that we will see a lot less definition of a property by its primary use case. You will see a lot more conversions taking place in the real estate industry so that the property is being used for its highest and best use. I just think we've opened that door and there's no going back. We've realized we need to reallocate space in the United States quite desperately.

Nate Smoyer (48:42.451)
Hmm.

Nate Smoyer (48:55.155)
I would love that. I want the neighborhood bar and coffee shop to come back. That's what I'd like to see. Joseph, thank you so much for coming on the show. Fun topic. We've talked very little about storage on this show here, so excited to have you on. And I've been following you guys for a while. So honestly, this was a privilege to have you as a guest here. Before we close out, for those who want to get in touch with you and or learn more about Neighbor, where do they go and how do they do that?

Joseph (49:24.782)
So we've tried to make it super easy to sign up. You can list your space in at 10 minutes on neighbor .com or find storage close to you. We're also the number one ranked storage app on the app store. If you just type in whatever you need, boat storage, RV storage, self storage, or neighbor, we'll pop up there. And you can reach out to our business development team as well if you own a large amount of property. We've got a whole.

If you go on our homepage, you can see a whole page for REITs where they can sign up, things like that. Yeah, try to make it as easy as possible to find us.

Nate Smoyer (50:02.483)
Very cool. Well, very awesome. Thanks for coming on the show and hopefully we'll get a chance to actually meet in person one of these days, but until then we'll see you later.

Joseph (50:11.854)
Okay, see you next time.

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