The market reacted kindly to the news that Opendoor, a generation startup that allows consumers to temporarily sell their homes, will go public through a merger with a blank check company. 7% early on Wednesday.
The agreement provides Opendoor with a commercial price of $4. 8 billion and is a breakthrough for the industry in which it pioneered, but although Opendoor dominates the fast-track home sales market, also known as iBuying, with about some of its market share, there is little evidence that the company, to name a few , has devised a sustainable path to profitability. Last year, he lost $339 million in revenue of $4. 7 billion.
Opendoor insists that it only burns cash in the short term as it continues to grow. “In the more mature markets we’re in, we’re seeing that the measures are very strong,” Ian Wong, Opendoor’s co-founder and director of leader generation, told Forbes Ian Wong. August.
Last year, Opendoor sold 18,000 homes, more than 3 times more than its next largest competitor, Zillow, with which it had a combined market share of 86% in 2019, according to genuine real estate representative Mike DelPrete. Competitors like Redfin and Offerpad are behind.
For Wong, he speaks for himself. ” Five years ago, we were in two markets, 3 markets,” he says. “Today we are 21 years away. “
At the beginning of the pandemic, Opendoor’s position seemed bleak. In March, the company suspended acquisitions to assess the economic damage ahead.
“Just as Covid made everyone stop, it also happened to genuine properties,” Wong says. “The only knowledge problems we saw came here from China and Italy, and things didn’t seem very good. “
The following month, in April, Opendoor fired 35% of its staff, a major setback for a company that had been valued at $3. 8 billion in 2019 and earned heaps of millions of dollars in venture capital, added from SoftBank.
“Opendoor’s resolution gives him time to weather the storm, but at the expense of the company’s weakening,” DelPrete said in a report this month. “Saying goodbye to 35% of a well-oiled team puts it at a disadvantage of execution compared to the Opendoor pre-Covid. And with Zillow, ” he did not announce layoffs.
Wong says the company spent the next few months completely digitizing the home sales process, from inspections to notarizations, some of which had already been done in person. To further stimulate momentum, Opendoor also introduced a new feature this spring called Home Reserve, in which it will buy a new home for money consumers as it seeks to sell its existing home. Once the original house is sold, consumers get the deed of their new property.
These efforts seemed to be paying off. The company says offers for homes for sale in June rose to 153% over the past year, helping to ensure that loan rates are at traditionally low levels, and many urban citizens want more area to facilitate remote work.
“New York and San Francisco: if you live in those two places, you think the sky is falling,” Wong says, “but in fact, if you live anywhere else in the country, it’s the opposite. “
Opendoor is a creation of Keith Rabois, a venture capitalist and veteran of the generation, who saw wonderful prospects in the painful experience of buying a home. According to a 2016 Forbes profile, he came up with the concept in 2003 while running for Peter Thiel’s investment firm. Rabois and a colleague once introduced Thiel to a concept to Zillow; Thiel would have discovered the concept so boring that he expelled them from the convention hall.
Rabois shaped the concept anyway. The numbers are huge. “After a few years, [we were] projecting revenue along Wal-Mart,” he said in 2016. He admitted that those initial forecasts were high, but added that “we will be in the billions of dollars [of income] very fast,” a prediction that came true.
For years, Rabois tried and failed with an entrepreneur willing to start the business. Finally, he meets Eric Wu, who had already sold a genuine property to start with, Rent Advisor, and will soon be promoting his second, Movity. Wu agreed to take over the project.
Ian Wong joined a time later, in 2014. A Ph. D. graduate. Stanford, and a Square alumni, was in charge of creating price models that were essential for Opendoor’s initial home purchases. “If we underestimate, we undermine visitor confidence. And if we overestimate, obviously, it’s bad for business,” Wong says. The fourth co-founder, JD Ross, also joined the company at approximately the same time and left in 2018).
Opfinishoor raised an A-series of $10 million in 2014 and introduced it in its first city, Phoenix, e-year. It captured 2% of the city’s genuine real estate transactions at the end of 2016. style in other cities, and in 2017 generated $700 million in annual revenue.
Now that sales have soared, the challenge has to take effect. Opendoor says using its own metrics (adjusted earnings before revenue, depreciation and depreciation margin) can be beneficial in 2023, but it doesn’t prefer, typical Silicon Valley style. , to use net profit as an indicator of profitability, which is useful for a company that wastes cash while reaching a higher percentage of the US real estate market. UU. de $1. 6 billion.
Last year, losses increased to 41%, revenue nearly tripled. This year is probably worse: the company forecasts a 47% drop to $2. 5 billion, according to a presentation to investors released Tuesday. He didn’t assign losses.
Right now, the entire iBuying industry accounts for only 0. 5% of transactions, however Opendoor says it aims to succeed in a 4% market percentage and generate $50 billion in revenue. The corporate will use the capital of its public willing to do so, making an expanding investment and new products.
Wong said of the company’s initial, but unprofitable, trajectory: “Our ambition has surpassed that . . . What we have to do is really, honestly, play a very long-term game.
I’ve been a Forbes reporter since 2016, before that, I spent a year on the road, driving for Uber in Cleveland, a volcano in Guatemala, raising farm animals in
I’ve been a reporter at Forbes since 2016, before that, I spent a year on the road, driving for Uber in Cleveland, a volcano in Guatemala, raising farm animals in Uruguay and a lot of things in between. I graduated from Tufts University, with a double degree in foreign and Arabic relations. Feel free to contact nkirsch@forbes. com with concepts or tips of articles, or follow me on Twitter @Noah_Kirsch.