Neighbor, a p2p self-storage marketplace, bags $2.5M seed

Neighbor is another startup with designs on your spare space. Not for letting to guests to bed down in, like Airbnb, but for self-storage. The 2017 founded, Salt Lake City based startup is announcing $2.5 million in seed funding today, raised from Peak Ventures and Pelion Ventures.

The core business idea is to build a trusted marketplace for storage needs by offering people with items on their hands what it bills as a cheaper (and potentially easier) alternative to traditional self-storage solutions — and, on the host side, a platform to earn a little money for not having to do too much (just having space where you can let stuff safely sit).

There’s a social element in that Neighbor is plugging into Facebook’s Graph API and another of its APIs (called All Mutual Friends) so that users who sign in with Facebook can make use of a “store with a friend” feature — which shows which (if any) of their Facebook friends or mutual friends are also hosts or renters on the platform.

The idea being that a degree of linked acquaintance will help Neighbor offer users “more personalized, localized and trustworthy storage options while helping hosts advertise their storage spaces to friends and family on social media”, as it puts it.

The startup claims this feature is “completely unique to the sharing economy space”, though it has been used by other apps — such as dating app, Tinder, to (in that case) enable people to hook up with friends of friends.

Neighbor says it’s banking on the Facebook connection to help it build trust between users and grease activity for a marketplace that’s otherwise essentially asking a pair of strangers to agree to store/host others’ items in their home.

Co-founder Preston Alder says he came up with the idea for the business when he was a student about to move to Peru for a summer internship and needed to find a nearby place to store his stuff — but didn’t want to fork out on traditional storage costs.

“On the two hour drive to a friend’s house who had agreed to store his stuff, he realized there were probably a lot of people with extra storage space who lived closer that would agree to store his stuff for the summer —  he just didn’t know how to find them,” say other co-founders Joseph Woodbury (also CEO) and Colton Gardner.

The team put up a basic landing page was put up in early 2017 — initially fielding enquiries by phone. In March 2017 they launched a website to meet early demand.

“During that time, we won grants from Get Seeded, the Opportunity Quest, the New Venture Challenge, and the Utah Entrepreneurship Challenge, which helped us build out the website and do some basic local marketing,” they add. “We then turned down the jobs we had lined up post-graduation to keep building the business. Since then, our primary focus has been to build out the platform — we’re just now coming to a point where we’re going to double down on marketing.”

A year on from the website launch they say they have “thousands” of users in 11 different US states — claiming this is mostly organic as they’ve only done a regional marketing rollout in Utah thus far.

They are about to step up on that front now though, with the VC cash injection — including with discount offers for people wanting to rent space to store stuff.

“The seed funding will be used for continued platform improvements and to market the service more broadly across the US,” they tell TechCrunch. The funding will also go towards “technologies to foster trust”.

“Trust is our central focus at Neighbor — it’s why we chose to call our company ‘Neighbor’,” they add. “Our goal is not just to provide you storage, but to provide the safest option available on the market.”

To back up that claim the startup says it’s carrying out verification of users (both hosts and renters) — including by ID verification and background checks.

“We require the submission of a government ID or passport, and any user can request that a background check be performed,” they say. “A host can request the check on their renter or a renter on their respective host.”

On the trust front there are some pretty obvious risks when strangers are caching unknown items in other people’s home. So there’s also a list of banned items — such as firearms, toxins, drugs and so on.

Space renters are also required to submit a list of the exact items that will be stored for Neighbor and the host to approve ahead of a transaction getting the go ahead.

“If a renter is caught misleading a host or Neighbor about their items, then they are promptly evicted and fined,” they say. “It is worth noting that there is an excellent sifting mechanism that occurs due to Neighbor’s business model. Because of the high amount of personal interaction that occurs on Neighbor, individuals seeking to store prohibited items are likely to avoid Neighbor because they are concerned about keeping their items concealed from their host. We anticipate renters with illicit items will naturally prefer industrially zoned storage facilities.”

Who’s liable if something goes wrong? “Neighbor assigns liability in the same way as a self-storage facility,” the team says. “The host is liable for gross negligence (i.e. the host knocks over one of the renter’s boxes and the contents break). The renter, however, is liable for all other instances (i.e. fire, flood, etc). For this reason we provide a $10,000 guarantee to the renters and encourage renters to obtain a renter’s insurance policy through our local insurance partner.”

Another perhaps more sticky potential issue vis-a-via insurance is whether a host might be risking voiding any existing buildings or contents insurance they have by using the service and thereby opening their home to a third party (and their stuff).

Neighbor says it recommends hosts verify with their insurance provider “on a case by case basis”. Though it also claims there hasn’t yet been a single host insurance dispute in the history of the company.

“Storing a neighbor’s items is a longstanding and accepted practice,” it adds, saying it doesn’t currently have any plans to offer hosts insurance packages.

In terms of other logistics, space renters are asked on sign up how long they estimate they’ll need to store their stuff to give hosts an idea of the time commitment.

“Once their stuff makes it into storage, the renter starts paying a monthly subscription that can be cancelled anytime by the host or renter with 30 days notice. So the length of storage time is ultimately up to both the host and renter,” they add.

While hosts can set their own flexibility in terms of providing renters with access to their stuff — from 24/7, to ‘upon request’ — which, in turn, renters would be agreeing to ahead of time.

Hosts can also set their own pricing for the space rental, with Neighbor charging renters a 15% service fee on top of that to make its cut.

Hosts aren’t charged for listing their space on the platform. And while they are free to choose how much to charge for their space, Neighbor also says it’s using algorithmic pricing to recommend how much they charge — with the aim of keeping prices on the platform at half the cost of a traditional self-storage facility. So it sounds confident it can nudge hosts to set the kind of prices that will drive custom.

“When we saw what Neighbor was doing, we were blown away by the potential,” said Chad Packard, investor at Pelion Ventures, commenting on the funding in a statement. “The concept is simple and straightforward, the market potential is incredibly high, and the team is whip-smart. We knew really quickly that we wanted to work with them.”

So what are early Neighbor users using the service to store at this point? All sorts of stuff, according to the founders — although the biggest chunk of current business (~35%) involves big but moveable stuff: Boats, vehicles, trailers or RV’s.

Then they say another 25% is household goods; another 25% large furniture items; and the remaining 15% is “comprised principally of small business inventory”.

On the competitive front, the team names Spacer (based in Australia but with a US presence) and Stowit as US operating rivals with similar business models. Internationally, it lists the likes of Stashbee and Costockage but says that 80 percent of the global storage market is in the US — arguing that “no one has won that market yet”.

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