Neighborly, a startup that runs a marketplace that connects cities and investors to bankroll civic projects like parks, bridges and schools, raised $25 million in venture funding.
According to a report in Fortune Magazine, the round of funding was co-led by Palantir Co-Founder Joe Lonsdale’s firm, 8VC, and Emerson Collective. Existing investors in the round of fundraising included Ashton Kutcher’s Sound Ventures, Maven Ventures, Bee Partners and Stanford University, reported Fortune. With the $25 million, the company has been able to raise a total of $35 million.
“We’re modernizing access to public finance,” Neighborly CEO Jase Wilson said about his company’s business in the report. Because Neighborly is a registered broker, it can sell bonds that go to fund city initiatives. In addition to big banks, Wilson said people who live in cities are purchasing the bonds.
Neighborly earns money by charging a 1 percent commission based on the deal size. Other companies selling bonds for public finance projects often tack on a 2 percent fee, noted the report. The company’s leader said that since city residents can take part in the fundraising, it sets the company apart from other players in the market.
The City of Lawrence in Kansas used Neighborly to raise $650,000 for a new fire truck for its fire department. Neighborly has also helped raise $5 million for new bike paths in Burlington, VT. It is now helping finance an affordable housing project in the San Francisco Bay Area, reported Fortune.
Although other online lenders have struggled, Wilson said the startup works with regulators and complies with all rules. The main challenge, noted the report, is competition from other brokers and underwriters who handle bond sales for cities.