Home-selling startup Opendoor today announced that it has raised $400 million from SoftBank’s Vision Fund, just over three months after raising a $325 million Series E round.
Founder and CEO Eric Wu told VentureBeat in a phone interview that discussions about SoftBank investing in Opendoor picked up around when the company was raising its Series E.
“Real estate is the biggest asset class in the U.S. and the biggest transaction in people’s lives, but its digital transformation is only beginning,” SoftBank partner Jeffrey Housenbold, who will be joining Opendoor’s board of directors, said in a press release.
With today’s announcement, Opendoor has now raised more than $1 billion in venture capital financing, as well as $2 billion in debt financing.
Other commercial and residential real estate companies that SoftBank has invested in include WeWork, Katerra, and Compass.
Founded in 2013, Opendoor is a platform that aims to make the process of buying and selling a home nearly instantaneous and done almost entirely online. Opendoor lessens the dependence on real estate agents by buying and selling homes itself.
Sellers can go to Opendoor’s website or app to list their house. Opendoor then bids on the house sight unseen, contingent upon an inspection to ensure the home is in the condition the homeowner said it was in. The company says homeowners pay an average fee of about 6.5 percent once the transaction is completed, typically within a few days.
Buyers can look for available homes on Opendoor’s website or app and can schedule viewings seven days a week, as they’re not at the beck and call of a real estate agent. The time it takes for Opendoor to buy and resell a home is on average 90 days, Wu told VentureBeat.
With this model, Opendoor is swooping up a lot of expensive assets quickly — which is why the company has needed to raise significant debt throughout its lifetime. However, this strategy could also put Opendoor at risk if the housing market experiences a downturn and the company finds itself saddled with too much property that few buyers are interested in.
Wu told VentureBeat he’s confident in Opendoor’s ability to withstand market downturns, given that “the value proposition that we’re offering increases [in those periods], as there’s more pain and stress for the seller,” and he said Opendoor has more precise data on market and housing trends than traditional real estate companies do.
Opendoor currently offers its services in 19 cities, including Atlanta, Chicago, Dallas-Fort Worth, Los Angeles, Minneapolis, Seattle, and San Francisco. Its rapid ascent has led traditional listings sites like Zillow and Redfin to also slowly enter the home purchasing market. Earlier this year, Opendoor acquired a listings site called OpenListings.
The fact that Opendoor is only in 19 cities five years after launching shows just how long it takes to gain market share as a house-flipping tech company. Buying a home is the most expensive purchase a person will likely make in their lifetime. It’s more difficult to convince consumers to turn to an app to make that decision than when they‘re, say, looking for a place to vacation or order dinner from. These companies also have to get licensed to buy and sell homes in all 50 states, which takes time.
With SoftBank’s monstrous investment, Opendoor is almost certain to maintain a more rapid rate of acceleration than its competitors.
“Earlier this year, we had a goal to be able to launch a new city a month, and with the new partnership with SoftBank, we’re now doing two cities a month,” Wu told VentureBeat. The company expects to be in 50 cities in 2020.
With the SoftBank investment, Opendoor also hopes to increase its headcount to 1,000 employees by the end of the year. Opendoor is headquartered in San Francisco, with engineering offices in Los Angeles and Atlanta.
Correction at 5:10 a.m. Pacific: An earlier version of this story said that Opendoor cuts out real estate agents entirely — the company says that it does partner with them to assist buyers.