Absent funding, a San Francisco-based startup’s meandering, seven-year history courting various technologies — from bond-sale software to blockchain to broadband networks — has reached an impasse.
From the municipal bond market to blockchain to broadband, the San Francisco-based startup Neighborly has been through a few transitions, but it may have hit a wall: insolvency.
According to Bloomberg News, the company issued a memo to employees Oct. 6 asking them to stop working, because it failed to secure enough funding to pay them. The company’s CEO Jase Wilson indicated to Government Technology that he had quibbles with that story, but he declined an interview and asked to speak again in a month or so.
The news raises questions about the future of Neighborly, which was founded in 2012 with the stated intention of changing the way municipal bonds are sold, but apparently burned through cash as it subsequently shifted gears several times.
As of May 2017, the company had raised close to $30.7 million in funding from five rounds and 17 investors, according to data on Crunchbase. Lead investors included Formation 8, 8VC, TriplePoint Capital and Sound Ventures.
Neighborly’s initial pitch was something like a “Kickstarter for public projects.” The idea was to make infrastructure projects more feasible for local governments by making the municipal bond market more appealing to small investors. Later, it experimented with “environmental impact bonds” for smaller amounts, and guaranteeing some reimbursement even for projects that didn’t meet their goals.
In November 2017, the company announced an adjacent project, Neighborly Investments, which incorporated artificial intelligence into its platform and focused on wealthy investors. At the time, Wilson suggested the company had made a misstep at first by focusing only on people who didn’t have enough capital to get the big infrastructure projects done. Former Neighborly Investments manager Christine Todd also told Government Technology, at the time, that the company was planning to incorporate blockchain into the platform for the purposes of “cloudsourcing” transactional data and other information, to make the tool more transparent and efficient.
A year later, a new project signaled another change of course for Neighborly. In November 2018 the company announced the Neighborly Community Broadband Accelerator, with the goal of connecting public agencies with private-sector partners to bring high-speed Internet to underserved areas. Neighborly said it had recruited 35 agencies from 18 states to participate, and the program would conclude some time in 2019.
Wilson wrote a post on Medium in August 2018 about community broadband networks, but he got explicit about the company’s new direction in July 2019, telling Bloomberg News that Neighborly was shifting its focus away from state and local government bonds and cutting 25 percent of its workforce.
In August 2019, Wilson wrote another post on Medium explaining the company’s official departure from the bond market. He said Neighborly had previously raised money for schools, parks, libraries, community centers, roads and bike lanes, and the new venture was another way to help communities fund critical infrastructure projects. According to data compiled by Bloomberg, the company has been credited as a senior manager on a dozen municipal-bond transactions, most of which were under $20 million.
“(D)espite its vital role in funding well-established kinds of community infrastructure, the municipal bond market we worked in — as an industry — was not well-suited to this task,” Wilson wrote. “The tight-knit industry is increasingly less reliable as an efficient funding source for newer, smaller infrastructure investment opportunities — especially in communities that lack meaningful market access.”
Wilson added that access to high-speed Internet can make the difference between a community that grows and one that doesn’t; that it’s too easy for communities trying to build their own networks to make technical, legal or financial mistakes; and that the associated fees are now insurmountable for some.
“Once all advisory, underwriting, rating agency fees, DTCC (Depository Trust & Clearing Corporation) fees, legal fees, and other expenses are priced in to the transaction, a community fortunate enough to be able to tap municipal bonds for broadband will overpay for its network by a considerable margin,” he wrote. “As a result, today’s municipal bond market is too complex and expensive for most communities to access in a timely, cost-effective fashion.”
With last week’s news that employees were asked to stop working, and no one answering the phones at Neighborly, the company’s future is uncertain. Today, by all appearances Neighborly is out of the bond-selling business. Web links to its old pages about environmental impact bonds and Neighborly Investments don’t work. The fate of the Neighborly Community Broadband Accelerator is unknown, and former links to its Web page circle back to Neighborly’s main page. The bottom of the main page says Neighborly has installed three community broadband networks to date — two in Maine and one in Stockton, Calif.
Wilson told Bloomberg News that the company is restructuring, that he didn’t think it will have to shut down, and declined to comment when asked if the company would file for bankruptcy protection.