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SAN FRANCISCO – Opendoor, a startup that returns homes, drew attention in June when it announced that it had raised $ 325 million on a long list of venture capitalists. The funding has valued the four-year company at over $ 2 billion.
It was only an aperitif. Three months later, Opendoor has more than doubled its cash flow. On Thursday, the company said the SoftBank Vision Fund had invested $ 400 million. The valuation of Opendoor remains the same.
The haul is part of a race of investors to invest money in technology for real estate, or what Silicon Valley now calls proptech.
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After watching tech start-ups disrupt traditional industries such as taxis and hotels, venture capitalists are entering the field of software and data. Many have turned to real estate as a major opportunity, as some industry sectors, such as pricing, mortgages, and building management, have been slow to adopt to make businesses more efficient.
Last year, startups in the real estate technology sector raised $ 3.4 billion, five times more than in 2013, according to data provider CB Insights. One company, Fifth Wall Ventures, is entirely dedicated to proptech.
"Tech is starting to make progress to be adopted and open the eyes of investors," said Jeffrey Housenbold, Managing Director of SoftBank's Vision Fund.
Until recently, the biggest technological innovations to hit the residential real estate market came from sites such as Zillow and Redfin. But the new wave of start-ups addresses a wide range of areas – assessments, building management, financing, co-working, co-living, accommodation and empty spaces.
The Vision Fund, one of the most aggressive investors in real estate technology start-ups, sent large checks to Katerra, a construction company; Compass, a high-end brokerage; WeWork, an office rental company; Lemonade, a home insurance start-up; and Oyo Rooms, a hotel company in India.
Housenbold said that SoftBank's reserve funds – it has $ 98 billion in cash to spend – could influence the market.
"Given the great attention paid to the Vision Fund, people have become more curious," he said.
Opendoor, one of the largest startups in the construction technology category, is giving the Vision Fund an entry into the housing sector. The company Silicon Valley was founded in 2014 by venture capitalist Keith Rabois and Eric Wu, general manager of Opendoor. Thanks to SoftBank's money, it has raised more than $ 1 billion from investors such as Khosla Ventures and GGV Capital.
The goal of Opendoor is to make moving as simple as the click of a button, according to Mr. Wu. Although this remains a distant reality, the company has simplified the sales process of 39, a house. It uses a combination of data, software and a team of 50 human appraisers to assess the value of a home. If a customer accepts the value of Opendoor for his home, the company will buy the property, for an average fee of 6.5%.
The company said it was offering sellers certainty – many sales of conventional homes are falling through – and flexible closing dates, helping them avoid paying double mortgages. This also eliminates the need for a real estate agent. Opendoor employs 100 licensed real estate agents to advise clients when they request it.
Opendoor only buys houses built in 1960 or later, worth $ 175,000 to $ 500,000, and does not require any major renovations or repairs. Present in more than a dozen cities, mostly in the South, it bought $ 316 million of housing in August, up from about $ 100 million in January. After some light repairs, he sells houses on average 90 days.
Before his last injection of funds, Opendoor was planning to expand into a new city each month. Now, he plans to double that pace. The company hopes to be present in 22 cities in the United States by the end of the year.
Its growth has created competitors: OfferPad and Knock offer comparable services to Opendoor, and Zillow and Redfin, both listed, have also entered the home market.
"For a while, we were literally the only ones to do it because it's complex," Wu said. "Size is an advantage," he said. "More deals mean more. data to help Opendoor to offer its offers more accurately, as well as greater power of purchase from local suppliers for renovations.
Wu said he thought reducing inconvenience and moving costs would encourage more people to do so, which would increase the size of the market.
"There are a limited number of houses, but if people move more frequently, it increases the liquidity of supply in the system," he said.
Opendoor's business model has not been put to the test by a major downturn in the real estate market, prompting some skepticism as to its long-term effectiveness.
"The vast majority of investors who hear about it initially think it's a bad idea," said Stephen Kim, an analyst at Evercore ISI, a market research firm. But skepticism often fades as they realize that Opendoor is making money by providing a service to home sellers, rather than a price appreciation, Kim said. Even if the company manages to sell at a sale, the transaction costs represent a significant activity.
Jason Childs, Opendoor's chief financial officer, said the company's geographic diversity and average turnarounds over 90 days help protect it from a possible housing market crash. In the real estate crash ten years ago, long-term asset holders were the most affected, he added.
Opendoor's Phoenix operations are already profitable, with the exception of the cost of its headquarters in San Francisco, and Dallas is "at the limit of profitability," Childs said.
The long-term success of the company lies in its ability to accurately price home prices. Half of the people who are now receiving Opendoor offers are selling their home to the company. Opendoor did not provide data on the proximity of its offers with the final sale price of the houses they did not buy.
Over the past few months, helped by Softbank's promise of cash, Opendoor has also expanded its business to selling homes directly to customers, instead of going through brokers in the traditional way. He acquired Open Listings, a home shopping site, to offer a service called "Exchange", where Opendoor handles the entire process of buying and selling for a person or a family. This service is now available in Dallas. It has also begun offering mortgage and securities services to buyers.
But Mr. Wu does not provide for total disappearance: the work of the real estate agent. On the contrary, he expects the work of an agent to play a more advisory role, rather than an administrative one.
"The thing that can not be automated is this notion of counseling – which neighborhood, which school district, how much can you afford," he said. "It's important to have someone who is an expert by your side."
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