Two years ago when three former Tuft & Needle employees decided to launch an outdoor furniture business, they took a gamble that pursuing the endeavor in the midst of a global pandemic would pay off.
But after growing their company, Neighbor, 12 times in size over the first year, that gamble felt more like a sure bet. And this week, the company secured Series A funding, which CEO Nick Arambula says will help Neighbor spread its wings even more. The amount of the investment from Strand Equity wasn’t disclosed.
“This funding will help us with our team, our marketing and expanding product,” he said. “We’re operating profitably and want to continue to do so, so we’re not hiring like crazy, but we’re planning to expand our team largely in the marketing area, and probably also product and then design over the course of this year.”
Arambula said Phoenix-based Neighbor plans to expand its marketing efforts beyond the digital channels it has stuck to so far. And widening the company’s product offering will be a priority, too.
“About six months ago, we hired the VP of product from Tuft & Needle, who we used to work with,” Arambula said. “And he’s currently working on a handful of new collections that we’re going to launch, and some new materials to help us capture a little bit more of the market outside of teak.”
Neighbor’s current product assortment is made up of modular teak seating and dining pieces. Arambula said the team has plans to add aluminum furnishings, as well as expanding into accessories.
“We’re also trying to see how our existing collection can expand to other pieces,” said Mike Fretto, creative director, Neighbor. “So sun loungers and additional dining sets, and there’s also plenty of opportunity for occasional chairs and things like that can just insert themselves into any type of collection.”
One commonality across new and existing lines will be how they ship. Neighbor’s furnishings are knock-down, which has helped the company save time and money as exorbitantly freight rates for containers persist.
“So while container rates were going through the roof and container lanes continued to be constrained, we were fitting probably 10 to 15 times the normal amount of outdoor furniture that you could fit on a container just by how our product is constructed and ultimately shipped to us,” said Chris Lee, COO, Neighbor.
As veterans of the mattress industry, Arambula said the team sees the outdoor category as a similarly fragmented animal, with a mix of small mom-and-pop retailers, regional chains and national players like Restoration Hardware and Crate & Barrel. That made the sector attractive for a new company looking to find its place.
“There were a lot of things that had a parallel to the mattress industry,” Arambula said. “And it’s pretty easy to carve out a little space for yourself when it’s a big fragmented industry.”
One piece of that pie Neighbor plans to pursue further is interior designers and hospitality clientele. While they initially intended to be only direct-to-consumer, over the past two years, trade clients have come to account for nearly 20 percent of their business. Arambula said that has challenged the team to think differently about the company.
“We had to figure out ways to communicate better with that customer because they generally are a bit more informed and had questions above and beyond what the end user is going to ask,” he said. “That’s been a really great experience for us in that we’re also looking to some of them to get feedback about some of our new designs, so we can build products that also meet the needs of that particular category of buyer.”
As Neighbor continues to grow, Arambula says the company will continue to pursue the upper-middle sweet spot that it hits price-wise, which makes their furniture attractive to design-conscious buyers, as well as those who can’t afford high-end pieces.
“We want to bring our price point to a more palatable level to meet a larger consumer base, because we aren’t inexpensive, but we’re not unattainable,” he said. “And when you think about just the economics of the industry, we felt that we could build a business on the backs of a really great product at a much more attractive price point.”