Online real estate service OpenDoor raises $210M Series D despite risky financing model
This afternoon, Norwest Venture Partners announced that it led a massive $210 million Series D investment round in OpenDoor. With the new capital, the startup is looking to expand the usage of its marketplace platform for buying and selling real estate to 10 cities.
OpenDoor is unique in that it owns its own inventory of homes. While the predictive analytics the company employs to project home resale value are complicated, the experiencefor buyers and sellers is fairly streamlined.
If you opt to sell your property on OpenDoor, you will be given a valuation from the startup. Once you accept it, OpenDoor pays you for your home and effectively flips the real estate, seeking to sell it for a profit.
To entice buyers, OpenDoor allows for self-guided property tours at any time, made possible by smart locks and security cameras. If you buy a house from OpenDoor, you also receive a 180-point inspection, warranty and 30-day money-back guarantee.
This time last year, the company raisedan $80 million Series C. Across all rounds, OpenDoor has now raised a cumulative $320 million. Its very likely that OpenDoor now holds a valuation that exceeds the $1 billion unicorn threshold.
Other investors, includingNEA, Khosla Ventures, GGV Capital, Access Industries, FifthWall, Lakestar, SVB Capital, Caffeinated Capital and Felicis Ventures participated in todaysround.Khoslas involvement is notable because OpenDoor executive chairman Keith Rabois is a partner atthe venture capital firm. According to CrunchBase, Khosla Ventures has been invested since the companys initial Series A back in 2014. Prior to this round, Khosla was the largest shareholder of OpenDoor, though its uncertain whether this remains the case after today.
Beyond venture capital financing, Norwest disclosed that OpenDoor has hundreds of millions of dollars of debt to its name.This debt is what the company uses to actually purchase properties.In the banking world, thereis generally an expectation that fintech companies and marketplaces prove out their business models before they can be issued debt.
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If this sounds too good to be true, you are in good company. Much of the companys press has focused on the possibility of an economic downturn. Most bluntly, this is what happens to companies that own large portfolios of unsold homes during a period of economic instability.
The startup believes that a frictionless marketplace reduces its overall risk. The argument follows that homeowners would be willing to sell their propertiesfor whatever they could get in a complete meltdown and OpenDoor would get a cut no matter what assuming the teams data analytics groupis up tothe nearly impossible task of predicting the future.
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To date, the company has200 employees servicingboth the Dallas Fort-Worth and Phoenix markets. These regions alone account for approximately$60 million in transaction volume per month for OpenDoor.