Nearby Startup Case Study: A Look into a Hyperlocal Marketplace

Markets are the lifeblood of every economy — where people buy, sell, and connect. For most small and medium-sized businesses (SMBs), their local communities serve as their first and most important markets. But with the growing demand for convenience, the impact of the COVID-19 pandemic, and the rise of online shopping, many local businesses are losing customers to larger, distant e-commerce platforms — draining money from local communities.

To address this challenge and ensure that SMBs could benefit from the support of people in their neighborhoods, a bold startup set out to create a convenient platform that made it easy for individuals to shop locally and help grow their community’s economy. For a time, the venture was a remarkable success — until things took an unexpected turn, and the company was forced to close its doors.

The startup?

Nearby

Nearby is a local-focused marketplace designed to bring convenience to both customers and businesses. It serves as a centralized platform where users can shop from multiple offline stores in a single order.

Founding Year: 2020

Headquarters:  Oakland, California, United States

Industry: E-commerce (Hyperlocal Marketplace)

Company Status: Closed

Business Model

B2C, Two-sided, Product & Service

• Clients: Residents who want the convenience of shopping at multiple nearby stores with a single order and delivery.
• Suppliers: Offline stores in specific districts/towns, particularly those using popular accounting systems.

It’s Like: Instacart but for local stores in a single marketplace.

Nearby acts as a digital storefront and delivery service for local businesses, much like how Instacart does for grocery stores. Both platforms connect customers with businesses they might not otherwise visit and streamline the purchasing and delivery process.

• Similarities: Both platforms aggregate products from multiple businesses in a single online marketplace, handle ordering and payment processing, and offer delivery services.
• Key Difference: Nearby focuses on hyperlocal businesses within a specific district, while Instacart primarily partners with larger grocery chains and covers a broader geographical area.

Challenges Faced by SMBs

• Declining foot traffic for local businesses: As consumer habits shift towards online shopping, local businesses struggle to attract customers and compete with larger retailers.
• Inconvenience of shopping at multiple local stores: Customers often face the hassle of visiting multiple stores, dealing with separate transactions, and transporting their purchases.
• Lack of online presence for local businesses: Many local businesses lack the resources or expertise to establish and maintain an online presence, limiting their reach to potential customers.

Nearby’s Solutions

• Centralized online marketplace: Nearby provides a platform for local businesses to showcase their products and reach a wider audience.
• Streamlined shopping experience: Customers can browse products from multiple stores, add them to a single cart, and check out with one transaction.
• Convenient delivery services: Nearby handles the collection and delivery of orders from different stores, providing a hassle-free experience for customers.
• Business support: Nearby assists local businesses with creating attractive online descriptions and leverages social media and email marketing to promote the marketplace.

Founding Story

When and Where Founded: Nearby was founded in 2020 by April Underwood in Oakland, California.

Founder’s Problem Experience: The genesis of Nearby is linked to the onset of the COVID-19 pandemic in early 2020. The founder, April Underwood, decided to take tangible action to support local communities and small businesses facing existential threats due to mandated shutdowns and the sudden decline in essential foot traffic resulting from safety concerns.

Founder’s Past Experiences:

• April Underwood brought significant Silicon Valley experience, having held senior leadership roles in several top tech companies, including Slack, Twitter, Google, Travelocity, and Intel. She is also a co-founder of the #ANGELS investing collective and holds degrees from the University of Texas at Austin (B.B.A.) and the University of California, Berkeley Haas (M.B.A.). Her extensive experience and network were instrumental in the company’s rapid formation and funding.

Ability to Start: The identified critical gap in the market: lack of a simple, unified online platform for consumers to discover and purchase goods from the diverse array of independent stores within their own neighborhoods, coupled with the founders’ experience, and securing a $5.1 million seed round, propelled their initial take-up and launch.

Team and Problem-Solving: Underwood employed Brett Rounsaville, Ben Matasar, and another engineer who designed and managed Nearby’s back-end. The first major public initiative was the “Keep Oakland Alive” marketplace (keepoaklandalive.com), launched around September 2020 under the initial entity name “Local Laboratory Corp” (https://locallaboratory.co/).

Challenges: Included convincing local business owners to list their products on the platform and getting locals to use the site for their purchases.

First Results: Initial traction stemmed from focusing on the Oakland area, providing a seamless shopping experience, with access to several stores and doorstep delivery. They listed over 40 stores at launch, including Love Iguehi, FLAX art & design, Mudlab, Rockridge Furniture and Design, Philippa Roberts Jewelry, Oaktown Spice Shop, Oaklandish, and The Lemonade Bar. Within the first nine weeks after its launch, the platform achieved a gross merchandise value (GMV) of $25,000.

Continued Growth: Growth was fueled by addressing customers’ needs to support local businesses while still allowing them to shop conveniently. Positive media coverage and securing significant funding also enabled the company to expand and enhance its services.

Innovation and Technology: Nearby created an online marketplace where SMBs could list their products for free. They also leveraged social media and email marketing to reach consumers.

Key Growth Milestones

• 2020
  • May: Ideation/founding
  • June: Seed funding round
  • September: Launch of pilot marketplace, Keep Oakland Alive
• 2021: Secured Series A funding

Market & Competition

Target Market

• Local Offline Stores: Nearby targets brick-and-mortar stores within specific districts/towns in the United States, enabling them to sell their products online.
• Local Consumers: Individuals residing within the targeted districts/towns who prefer shopping locally. Nearby aims to make local shopping more convenient for these consumers.

Growth:

• The online hyperlocal services market was poised to grow by $451.64 million from 2020 to 2024, progressing at a CAGR of 18% during the forecast period. This proves a resurgence in hyperlocal marketplaces due to changing consumer habits post-pandemic, indicating a growing market for Nearby’s services.
• Nearby’s successful fundraising rounds ($5 million in June 2020 and $21 million in May 2021) indicate strong investor confidence in the company’s growth potential.
• Nearby’s pilot launched in Oakland, California, before expanding to Austin, Texas.

Potential New Markets:

• Nearby intended to expand to several cities. Before its closure, 120 locations in the U.S. and beyond had been nominated, indicating a focus on geographical expansion for growth.
• Nearby’s model hinges on testing and validating demand in different district types. Therefore, expansion into new markets would involve a data-driven approach to identify areas with high potential for hyperlocal marketplaces.

Competitor Landscape

• Google Business Profile: Enables local businesses to manage online presence and customer reviews, directly integrating with Google Search and Maps for visibility.​
• Groupon: A global e-commerce marketplace connecting subscribers with local merchants by offering activities, travel, goods, and services in 15 countries.
• Facebook Local Awareness Ads: Offers hyperlocal social media targeting within a geographic radius and strong social engagement.
• UpMyStreet/Neighbourhood: Community-driven local content and engagement platform with decentralized hyperlocal interaction.
• Yelp & Better Business Bureau: Trusted local business reviews and directories, driving customer decisions on local businesses.

Marketing & Sales

Main Positioning Values: Variety and Convenience

Website & Socials

• Website: nearbyhq.com is unreachable and currently registers no monthly visits on SimilarWeb. All reported traffic sources (direct, referral, organic, paid search, social networks, and ads) show 0%, suggesting minimal or no digital marketing activities.

Media Coverage

• Broke-ass Stuart: Featured Nearby, highlighting its efforts in keeping stores in Oakland open.
• Forbes: Reported Nearby’s Series A funding and expansion plans
• NBC News: Highlights Nearby’s innovative idea, aiding local businesses to compete with giants such as Amazon.
• Business Insider: Reported Nearby’s closure in 2021

Marketing Strategies

• Supplier Acquisition: Nearby offers free marketplace integration to local stores, simplifying the onboarding process.
  • Product Synchronization: Their software integrates with popular accounting systems used by stores, automating product availability and price updates on the marketplace.
• Customer Acquisition:
  • Hyperlocal Targeting: They focus on specific districts or towns within a city, allowing for targeted marketing efforts.
  • Social Media and Email Marketing: Nearby leverages social media campaigns and email newsletters to reach potential customers within those targeted areas.
  • Content Marketing: They assist stores in creating appealing descriptions, enhancing their visibility on the platform.
• Value Proposition: Nearby simplifies the process of buying from local stores by offering a single cart and checkout experience for products from multiple shops. They handle order collection, delivery, and payment processing, streamlining the entire shopping experience for customers.
• Target Audience: Nearby’s target audience is residents within the specific districts they operate in; individuals seeking convenience, and a preference for supporting local businesses.

Product & Innovation

Hyperlocal focus

Unlike broader online marketplaces, Nearby concentrates on connecting businesses and customers within a specific district, fostering a sense of community and catering to the demand for local goods and services. Its Keep Oakland Alive Marketplace had over 40 registered stores.

Integration with existing POS systems

Nearby’s software integrates with popular accounting systems used by local stores, automating inventory and price synchronization and minimizing manual effort for businesses.

Low fees and free delivery

For merchants, Nearby provided the digital infrastructure and toolset necessary to establish an online presence, manage sales, and compete against larger e-commerce players. The fee was equally very low (5%), which was charged on sales made through its platform and covered shipping and logistics. They also offered free doorstep delivery to shoppers. This encouraged more stores to sign on, and shoppers seeking convenience and access to several stores to use the platform.

Multi-store order consolidation

Nearby’s platform enables customers to combine products from different stores into a single order, simplifying the purchase process and offering a unique convenience compared to visiting individual stores.

Financials & Metrics

Revenue Source

Commission: Nearby’s revenue model was commission-based. The brand received 5% commission from marketplace transactions.

Funding/Investments

• Total investments: $26.1 million in two rounds.
  • Seed Round: $5.1 million (June 2020)
  • Series A: $21 million (May 2021)

Staff Metrics

Nearby started with 3 employees before employing more as the business expanded. At its peak, it employed about 20 people.

Structure & Culture

Structure

Nearby operated a lean team that comprised about 20 employees at its peak. Top figures included:

• Founder and CEO: April Underwood
• Head of Merchant Operations: Brett Rounsaville.
• Chief Technology Officer: Ben Matasar

Culture and Values

• Support local businesses/economy: Ensuring that local independent retailers in Oakland have visibility, access to e-commerce, and a delivery channel, especially during the Covid-19 disruption. This helped small businesses to adapt and survive through difficult periods.
• Convenience and ethical commerce: Providing an online marketplace experience (one cart, one delivery for many stores), making it easier for locals to shop from independent retailers.
• Community and collaboration: Treating shop owners as partners, building relationships with them, seeing them as “heroes.”

Impact & Success

Customer Feedback

Being a hyperlocal marketplace, customer reviews of the platform are scant, but comments on Nearby’s closure post on Facebook and Instagram indicate that consumers were pleased with their services. Ali Flow comments, “Oh my gosh I went searching for this today to do my holiday shopping and I was SO BUMMED to see it gone!! Will follow in case you decide to open up for the holiday season…all I want is local goods delivered to my door.” The_real_urembo_asili comments, ”So sad to see you close. It was wonderful to be part of something so amazing. I always felt supported….THANK YOU!💜”

Success Stories

Most of the store owners whose businesses featured on the hyperlocal marketplace commended it for helping their businesses.

• Oaktown Spice Shop owners, Erica Perez and her husband, John Beaver, commend Nearby’s free delivery. Erica stated, “Keep Oakland Alive has been wonderful to work with. They help make delivery more convenient for our local customers at a time when we’ve lost our usual foot traffic. Other companies have offered similar service but at a much greater cost to us as a business. Keep Oakland Alive is a real community partner.”
• Iguehi James, owner of the clothing store, Love Iguehi, comments, “I have had the honor and pleasure of being one of the first businesses on the Keep Oakland Alive platform. From inception, the KOA team has been exceptional! Delivery service is not something that I was able to offer in the past as a small business owner, so having the KOA quick delivery service is not only great for the customer, but it has benefited me as well. I’ve really enjoyed working with KOA and I look forward to continuing our relationship!”

Growth & Future

Challenges and Risks

• Operational and Logistical Complexity: Coordinating inventory, fulfillment, and delivery across many small shops created integration issues, inventory mismatches, and delivery-time challenges.
• Financial Sustainability and Margin Pressures: Free delivery and low merchant fees strained margins, making profitability difficult without scaling or compromising service quality.
• External Environment and Dependency Factors: Post-pandemic shifts and struggling local economies threatened demand, merchant participation, and the long-term relevance of Nearby’s marketplace model.
• Integration and Merchant Dependency Risks: Relying on many small independent retailers caused potential service inconsistencies, inventory errors, and operational vulnerabilities impacting Nearby’s reliability.

Future Plans

Nearby shut its doors in November 2021. Therefore, no plans are available.

Reason For Closure

Despite solving a real pain point for both SMB owners and consumers, changing consumer behavior ended this remarkable hyperlocal marketplace. Nearby founder, April Underwood, announced the heartbreaking news of the platform’s closure in November 2021. Below is an excerpt from her Medium post:

“Over 100 merchants in the Bay Area and Austin made a bet on our pilot marketplaces, and have been inspiring partners from whom we’ve learned over the past year. A team of 20 Nearby team members have joined on this mission, and incredible investors gave us the runway to take a big swing at this immensely difficult but also massive opportunity. An amazing cast of advisors and friends helped us along the way.

As shutdowns have eased, vaccines have arrived, and kids have returned to school, so have many of our old habits we missed — including shopping at our favorite local stores, in person. As we’ve approached our second holiday season at Nearby, I’ve taken stock of our traction to date — and faced the facts that the need for what we’re building has waned and it’s time for us to bow out.

All of this is wind up to share the following: we are going to stop taking orders on Nearby Bay Area and Nearby ATX by the end of this week.”

Nearby’s founder has since moved on, founding more businesses such as Wise Owl and Adverb, and serving on the board of Zillow Group and Eventbrite.

Key Takeaways for Entrepreneurs

Even though Nearby could not sustain its platform and continue contributing to keeping neighborhood dollars in the nearby, we can still learn a thing or several from their model:

• Hyperlocal is the new frontier: Don’t underestimate the power of focusing on a tightly defined niche. Nearby’s success with a hyperlocal approach demonstrates the potential of catering to specific communities and their unique needs.
• Solve real, tangible problems: Identify everyday pain points that people face and offer practical solutions. Nearby addressed the declining foot traffic of local businesses and the inconvenience of shopping at multiple stores, directly addressing customer needs.
• Embrace simplicity and convenience: In a world saturated with choices, simplicity is key. Nearby’s single-cart, multi-store checkout process streamlines the shopping experience, making it incredibly appealing to busy individuals.
• Leverage existing infrastructure: Instead of reinventing the wheel, find ways to integrate with existing systems. Nearby’s integration with popular accounting software demonstrates a smart use of existing resources to streamline operations.
• Think big, start small, scale strategically: While Nearby had ambitious goals, they launched their pilot in a single city to test their hypothesis and refine their model before expanding.
• Don’t underestimate the power of community: By connecting local businesses and residents, Nearby fosters a sense of community and loyalty, which can be a powerful driver of growth and sustainability.
• Early funding rounds can validate your model: Securing significant funding in early rounds, as Nearby did, can be a strong indicator of investor confidence in the business model and its potential for scalability, although this failed in Nearby’s case.