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.”
Keith Rabois, a prolific and eclectic venture capitalist whose investments include home-selling platform Opendoor Labs Inc. and delivery startup DoorDash Inc., is leaving Khosla Ventures and joining Founders Fund, where he’ll serve as general partner.
The move means that Mr. Rabois will be reunited with Founders Fund co-founder Peter Thiel, who was a classmate at Stanford University. The two later worked together at PayPal Holdings Inc. and also have backed several of the same companies, including financial technology startups…
Keith Rabois — one of the more prominent investors in Silicon Valley, and a close friend of Peter Thiel’s since they were a pair of controversial conservatives together as undergrads at Stanford — is teaming up again with his old friend.
Rabois is joining Thiel’s venture capital firm, Founders Fund, as its newest general partner. It’s a major addition for the VC firm, which is a top performer but has seen a coincidentally high number of departures from its upper ranks in recent years. In fact, the entire venture industry has seen a ton of turnover recently.
Rabois and Thiel are also two of the industry’s most prominent political conservatives. Thiel’s support for Donald Trump in 2016 became a flashpoint in the debate over the last few years about the relationship between Silicon Valley and the Republican Party.
Rabois — even at his old firm, Khosla Ventures — has always been a part of the extended Thiel orbit, but this move has a bit of “getting the band back together” about it. He told Recode it was the “most professionally difficult decision I’ve ever made in my life.”
“It moved from something that was a 5 to 10 percent probability to something that became real over the last couple of weeks,” Rabois told Recode. “I’ve learned more from Peter than anybody else in my career, and I probably quote something from Peter every single week of my life.”
Here’s Thiel: “Keith is a great investor, a successful founder, and an extremely talented operating executive. Any one of those is hard to pull off; Keith has mastered all three. If you’re a founder, he’s exactly who you want on your side.”
Unafraid to mix it up on Twitter — where he has become one of the industry’s loudest and most interesting voices — Rabois has had a colorful past: At Khosla since 2013, he was previously the chief operating officer at Jack Dorsey’s payments company, Square, but left following a sexual harassment claim from a coworker. (Rabois denied any wrongdoing.) He previously held senior roles at LinkedIn and PayPal, working alongside Thiel in what would later be known as the PayPal Mafia.
The news was first reported by Axios.
Here’s Rabois’s recent interview on an episode of Recode Decode.