Thursday, December 1, 2016
A Silicon Valley startup that flips houses just got valued at $1 billion
Opendoor Labs Inc. has joined the "unicorn" club of startups valued at more than $1 billion (£800 million) after its fourth and latest funding round, led by Norwest Venture Partners, Bloomberg reports.
The San Francisco startup, founded in 2014, has a simple business model — it buys houses in cash, makes some minor repairs, and then resells them at a higher price.
Cofounder and CEO Eric Wu's LinkedIn profile says: "Our mission is to make residential real estate liquid, changing the traditional sales process by making it simple to buy and sell real estate online."
It currently purchases homes only in Las Vegas, Phoenix, and Dallas-Fort Worth, according to its website, but it says it's using the $210 million (£168 million) it just raised to expand to 10 cities next year.
The company says 3,875 homeowners "have made a better move with Opendoor" on its website, such as those who need to sell their house quickly.
A UK startup with a similar proposition, Nested, recently raised £3 million ($3.8 million). The London-based Nested, which wants to be "the Amazon for house sales," promises to sell your house within 90 days or lend you a guaranteed amount of interest-free cash to buy your next property.
Earlier this year, the London property-crowdfunding startup Property Partners — which fronts up the cash for a deposit on a property, underwrites the deal, and then crowdsources investors to fund the whole price — laid off 29% of its staff as part of what it's calling a restructuring of the business to "focus on our core business proposition."
The property companies are part of a growing number of startups that brand themselves as"PropTech." A potential problem with these business models is that they are based on the assumption that both rents and property values will continue to rise, which is not an idiotic assumption over the long term, but what if they stop?
At the same time, Phoenix and Vegas, two of Opendoor's three covered areas, were among the areas most affected by the 2007 US property bubble.