When the city of Lawrence, Kan. wanted to borrow $650,000 to pay for a new fire truck for its local fire department, it didn’t use traditional banks and bonds to borrow money. Instead it turned to Silicon Valley upstart Neighborly, a two-year old marketplace that connects cities with investors to fund civic projects like schools, parks, and bridges.
Each year, U.S. cities borrow hundreds of billions of dollars to finance civic projects. This debt is typically in the form of municipal bonds, which investors buy for the monthly interest and relative security. Neighborly is a service for marketing these municipal bonds, an estimated $3.8 trillion market.
On Tuesday, Neighborly revealed exclusively to Fortune that it has raised $25 million in additional funding co-led by Palantir co-founder Joe Lonsdale’s firm, 8VC; and Emerson Collective, the organization started by the wife of the late Apple CEO Steve Jobs, Laurene Powell Jobs. Existing investors including Ashton Kutcher’s Sound Ventures, Maven Ventures, Bee Partners, and Stanford University also participated in the funding round. This investment brings the company’s total funding to $35 million.
“We’re modernizing access to public finance,” Neighborly CEO Jase Wilson, said about his company’s business.
Traditionally, cities use brokers and underwriters to find traditional institutional investors to buy bonds like large banks and financial institutions, explained Wilson. His company, a registered broker itself, has put that search online.
It’s not just large banks that buy the bonds on Neighborly. It’s also people who live in the cities asking for funds. For example, with a Cambridge, Mass. project, residents who live in…