Opendoor, an online real estate company claiming to make home-buying and –selling a stress-free and near instantaneous experience, just raised $325 million in a Series E round of financing. The technology-powered company is one of many so-called industry “disruptors” looking to stray from the traditional real estate model by replacing the agent in the transaction with technology-based services.
“We’re excited to partner with seasoned investors and industry leaders who share our vision for transforming the complex process of selling and buying homes into a seamless, elegant experience,” said Eric Wu, CEO of Opendoor, in a statement. “We’ve seen incredible growth in our markets as homeowners embrace the simplicity and certainty of buying and selling through Opendoor. As we enter our next phase of growth, we’re focused on continuing to transform the future of real estate, enabling anyone to buy, sell or trade-in a home with the click of a button.”
With its new round of funding, Opendoor looks to expand from its current 10 markets to 50 by the end of 2020. Additionally, the company is looking to branch out, adding mortgage and title capabilities to its suite of services, allowing consumers to complete the entire real estate transaction, from financing and offer to close, within a single platform.
This most recent financing brings the total equity raised by Opendoor to $645 million, with $1.5 billion in debt financing accrued alongside equity capital. The funding was co-led by General Atlantic, Access Technology Ventures and Lennar Corporation, and featured the participation of existing investors—Norwest Venture Partners, Lakestar, GGV Capital, NEA and Khosla Ventures—along with new investors: Andreessen Horowitz, Coatue Management, 10100 Fund and Invitation Homes.
The company’s track record thus far? Over $2.5 billion in home purchases on an annual run rate that is up 225 percent year-over-year.
“We have spent the last year and a half working closely with the Opendoor team to create a first-of-its-kind ‘Trade Up’ program to meet the needs of both the consumer and the builder,” said Jon Jaffe—president and chief operating officer of Lennar, who will be joining Opendoor’s board—in a statement. “Our increased investment in this round is a reflection of our enthusiasm for the opportunities that lie ahead—which are incredibly exciting.”
“Residential real estate is one of the largest asset classes in the U.S., yet the process of buying or selling a home often includes stress, uncertainty and inefficiency,” said Anton Levy, managing director and global head of technology of General Atlantic, in a statement. “Opendoor’s technology platform provides its users with a simplified experience that disrupts this status quo and we look forward to working with Eric and the entire Opendoor team to further expand the company’s footprint.”
Industry thoughts on the presence of disruptors in the industry? The overall view is negative. According to a RISMedia white paper—The Disruption of the Real Estate Industry: A Survival Guide for Brokers and Agents—which surveyed thousands of real estate professionals to gauge their reaction after Zillow introduced its own disruptive model—Instant Offers—87 percent believe homebuyers are satisfied with the current real estate process; however, 60 percent believe that consumers may take the opportunity to sell to an investor versus listing on the open market depending on the circumstance.
While the National Association of REALTORS® (NAR) firmly opposes the idea of selling or buying real estate without the use of a REALTOR®, Bob Goldberg, NAR CEO, believes that staying proactive is essential to controlling the role disruptors will play in a swiftly changing real estate industry.
“My passion is not to be afraid of disruptors,” Goldberg explained at NAR’s Broker’s Edge event in New York City last July, according to the white paper. “We have to be fearless as opposed to fearful. We need to talk to (disruptors) and influence them before they enter real estate. The threat of new business models is not new in the industry. The challenge is how fast we adapt and create our own model so that we control the answers instead of them controlling us. We have to set the standards and say, ‘Here’s what the consumer expects,’ and help drive that.”