OpenDoor has raised $20 million in new VC funding, as it tries to revolutionize residential real estate.
OpenDoor is a website for selling your home, without having to hire a real estate agent, find a buyer, retain an attorney or wait weeks (if not months) for that buyer’s financing to close. Sometimes in as little as three days from beginning to end. Eventually, it also hopes to expand into the homebuyer’s market, with a similarly quick and efficient process.
If that sounds like a pipe dream, then you’re a lot like venture capitalist Glenn Solomon. Nine months ago, when he first heard the concept, Solomon had little faith that the model could actually work, that OpenDoor could accurately price homes or that people would want to participate.
Beginning last December, however, OpenDoor opened for business in the Phoenix market, and quickly ramped up to around one home sale per day. Or, more specifically, one home purchase per day, since OpenDoor is currently on the other end of the transaction (it has secured a large line of credit to help make purchases, and then uses existing sell-side services — including Zillow Z and Trulia — to flip the homes).
Solomon was sold. His firm, GGV Capital, agreed to lead a $20 million Series B investment into OpenDoor, and was joined by existing investor Khosla Ventures (whose partner, Keith Rabois, is an OpenDoor co-founder). This is on top of the $10 million that OpenDoor originally raised last July.
Most of the new capital will go toward expanding OpenDoor’s team and product offerings, although a part of it also goes to the equity portion of each home purchase. The company also is expanding into the Dallas market.
OpenDoor CEO Eric Wu explains that the company first chose Phoenix because of its large number of annual home sales, and also because so much of it involves relatively-new homes (i.e., less lemon risk). He says that the real selling point for home-sellers is quick liquidity, which isn’t really isn’t an issue in red-hot housing markets like San Francisco or New York.
“People in New York can list an apartment and get a cash offer the same day and close the next day, so we’ll avoid those sorts of markets until we’re at cost parity,” Wu explains. “Beyond that, the only variance in terms of geography can be taxes, but so far that hasn’t been an issue.”
Wu declined to provide a launch date for OpenDoor’s homebuyers product, nor even to explain much about how it would work (save for it being more “transparent and efficient” than the traditional experience). He also didn’t get too detailed about how his company’s pricing mechanism works, except to say that one advantage over Zillow’s estimates is that OpenDoor is able to collect specific information from home-buyers about things like square footage and internal improvements.
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