Opendoor raises $300M on a $3.8B valuation for its home marketplace

By Ingrid Lunden

Last month, we reported that Opendoor — the startup that is taking on the real estate industry with its own platform for buying up homes and selling them on to interested buyers — filed to raise $200 million on a $3.7 billion valuation. Now, we can confirm that the round has closed, and it has turned out to be higher on both counts: The company has raised $300 million, and sources close to it tell TechCrunch that the valuation is now at $3.8 billion.

This latest round included previous investor General Atlantic, with participation from Hawk Equity, the SoftBank Vision Fund, Access Technology Ventures, Lennar Corporation, Fifth Wall Ventures, SV Angel, Norwest Venture Partners, NEA, GGV Capital, Khosla Ventures and GV, along with other, unnamed investors.

Opendoor  has now raised $1.3 billion in equity, with some $3.0 billion in debt financing for buying properties.

Opendoor’s funding underscores a couple of big themes. The first is the “safe as houses” maxim. That is to say, the housing market — despite some huge dips resulting either from wider economic tides, or simply scandalous mismanagement around, for example, sub-prime lending — continues to be a major draw not just for investors but also consumers.

“Our business is designed to operate in up markets, down markets and flat markets,” co-founder and CEO Eric Wu said in an email to TechCrunch. “During a slowdown, it becomes increasingly more painful to sell a home, which impacts mobility for homeowners and increases the need for reliable home sales through products like Opendoor. It is our responsibility to manage that risk and charge the proper fees to account for the volatility.” The company says that in 2018, more than 800,000 people toured Opendoor homes.

And that leads to the second theme this funding touches on: the disruption of the business model for buying and selling homes.

That process has largely remained unchanged for decades, but Opendoor is part of (and arguably leading) a new guard of startups that is trying to shake that up. In Opendoor’s case, it’s doing so by creating data modelling that lets it spot opportunities and gaps in the market for homes, as well as optimal pricing for properties, which helps the company mitigate some of the risk associated with taking assets on to its own books with the understanding that it will be able to offload them in a predictable way.

“The company has not been around during a national housing recession,” admitted Anton Levy, the MD of General Atlantic, in an interview, “but it is preparing day in day out for if and when it happens, and believes it will be well equipped if it does.”

That includes, he added, data sets of housing and other economic indicators from the last five or six recessions. “That means if and when it happens, the pricing models will adjust accordingly.”

There are signs that over time, those algorithms have been getting more efficient. Eric Wu, who co-founded the company with Ian Wong, Justin Ross and Keith Rabois, told TechCrunch that the average time a home is now held on its books is 90 days, versus 140 in 2015.

Wu said this latest round of funding will be used both for product development as well as to continue expanding to more markets in North America.

On the product side, the company wants to continue making pricing more accurate (not just for selling but for buying homes at competitive rates). Another focus will be continuing to bring down the time it takes to convert interested sellers into actual sellers, and likewise with buyers. This will include integrating more services like mortgage tools — including title and escrow — as well as other service providers and contractors, who might be needed by buyers to help consider the work that would need to be done once the home is purchased.

(If you’ve ever bought a home, you will know that access to estimates and work commitments from contractors and others can be essential to comprehending the “true cost” of home purchase, as post-purchase work can sometimes be a massive and costly effort.)

Wu said that for now, the plan will be to focus all of this around the private home-buying experience, rather than move into using the Opendoor platform to tackle the selling and buying of other large assets such as commercial real estate, cars or loans. “These capabilities lend themselves well to rental/residential income,” he noted, “but that is currently not on our roadmap.”

There are a number of competitors to Opendoor, including not only incumbent channels that involve traditional agents, but others like Compass also trying to change up the old way of doing things, and Knock, which is following a model similar to Opendoor’s. Levy believes that the horse his firm has bet on, however, is the “clear leader.”

Source. Techcrunch, Ingrid Lunden, March 20, 2019

Opendoor files to raise another $200M at a $3.7B valuation, documents show

By Ingrid Lunden

The housing market is predicted to cool this year, but the market for startups selling houses? It seems to be heating up. Opendoor, the company that aims to bypass real estate agents and brokers by providing an online platform — by way of a mobile app — for people to buy and sell properties direct, has filed papers in Delaware indicating that it would like to raise around $200 million more, at a valuation of about $3.7 billion.

The Delaware documents (embedded below, and provided to us by Prime Unicorn Index) do not make it clear if this would come in the form of an outside round, or a conversion — secondary transactions would not be disclosed in public domain documents, or a combination of the two; nor is it clear if the funding has closed already. The documents are dated February 8th of this year.

The raise comes just one month after Knock, an Opendoor competitor, raised $400 million.

Eric Wu, Opendoor’s CEO and co-founder, did not respond to a request for comment, and a spokesperson for Opendoor declined to comment.

The shares are described as a “Series E-2”, which Justin Byers, an analyst with Lagnaippe Labs, noted likely means this is an extension on Opendoor’s last round, from September 2018, of $400 million.

That itself was an expansion of a previous E round, which Opendoor had raised in June 2018, of $325 million. Opendoor had been valued at around $2.47 billion post-money in September, according to PitchBook, and the shares in the document are around 37 percent higher — hence the $3.7 billion estimation here.

Backers of the company include SoftBank, along with some 36 others that include some of the biggest names in VC, such as Andreessen Horowitz, Coatue, General Atlantic, GV, Initialized, Khosla, NEA, Norwest and many more.

The premise of Opendoor — co-founded by Wu, Ian Wong, Justin Ross and Keith Rabois on the back of an idea that Rabois had many years before — is to cut out some of the steps, and subsequent money and time spent, that come with buying or selling a property. (For those who have been through it, you know that the extra fees and rigmarole can be a killer and sometimes feels like it could be done better; that’s what Opendoor is addressing, in part with a very transparent pricing structure.)

Opendoor does this by becoming the virtual middle man. As Opendoor describes it, “If you’re selling, sell your home to us to eliminate the hassles of showings and months of uncertainty. If you’re buying, we make it incredibly easy to tour hundreds of Opendoor homes so you can find the perfect one.” It also has created a streamlined process to cut down the paperwork and work that agents do around transactions.

As of September last year, Opendoor had raised $2 billion in debt to finance these purchases — although the company today said that it is now “buying homes at a run rate of almost $4 billion a year” and that its transaction rate is currently at over 2,000 customers per month, including both buyers and sellers, and it has served some 30,000 customers to date across 19 metro regions covering more than 20 cities.

It’s proving to be a popular proposition. In 2018, more than 800,000 people toured Opendoor homes.

While housing prices had largely recovered in a lot of U.S. cities hurt by the previous crash, experts have said that a rise in inventory, coupled with rising mortgage rates and tax uncertainly, are set to cool the overall market in 2019.

But with the housing industry regularly rebounding and growing over the longer term — the saying “safe as houses” doesn’t come from thin air — it may be that investors are still prepared to make further-reaching bets on platforms that could prove to be strong players when the market is on a high.

Interestingly, Wu has hinted that the company will be making some moves in the area of mortgages and home improvement loans, which could free up and encourage more transactions at a time when traditional mortgage rates are rising.

“We’re doing some things around mortgages that will be integrated into the shopping experience,” Wu said in September, adding that the company “also wants to enable home buyers to personalize their experience.”

Source. Techcrunch, Ingrid Lunden, February 15, 2019