Opendoor raises $325M to expand home buying to 50 markets
Opendoor, a startup that uses computer algorithms to buy and sell homes, has closed a new fundraising round in a bid to supercharge growth.
The San Francisco-based company said Wednesday it has raised $325 million from General Atlantic, Access Technology Ventures and homebuilder Lennar Corp., among other investors, to expand into 50 U.S. metropolitan areas by 2020.
The company has now raised $645 million in equity capital and $1.5 billion in debt financing. The new round of financing values Opendoor at more than $2 billion, according to a person with knowledge of the matter, who asked not to be named because it is private.
"Our goal is to allow people to buy and sell real estate without any friction online," said Chief Executive Officer Eric Wu. "That's really what the capital is going towards — how do we start to build the future of real estate, how do we start to reinvent the experience end to end?"
Opendoor is best known for offering owners a new way to sell homes. Instead of hiring a listing agent, they upload information about their home on Opendoor's website and receive a cash offer from the startup, usually within 48 hours. If the homeowner accepts, Opendoor makes minor repairs and puts the property on the market. In return for the convenience, sellers pay Opendoor a fee, usually 1% to 1.5% above what traditional real estate agents charge.
The company is currently buying homes at a rate of $2.5 billion a year across 10 metros and gearing up to offer mortgages and title services to buyers. In Phoenix, one of the company's more mature markets, Opendoor is the buyer in about 3% of home resales, according to Michael Orr, publisher of the Cromford Report, which provides data on the local housing market. That figure excludes new homes and the sales of certain distressed properties.
Other investors in Opendoor's latest round of financing include 10100 Fund, former Uber Technologies Inc. Chief Executive Officer Travis Kalanick's investment fund, and Invitation Homes Inc., the single-family-rental landlord that Blackstone Group took public last year.
As it expands, Opendoor will have to grapple with the complexity of managing building contractors and sales teams in far-flung markets while preparing to sustain the business when the housing market turns. The company currently employs 650 workers — including data scientists who specialize in valuing homes and help the company manage risk — and plans to double its staff, Wu said.
It will also have to grapple with other companies plying similar business models. Offerpad has raised more than $410 million in equity and debt financing and expects to buy and sell more than $1.5 billion of single-family homes over the next year. Zillow Group Inc., the online listings giant, has announced its own plans to buy and sell homes in a bid to capture what CEO Spencer Rascoff has described as a potential "$1 billion profit opportunity annually."