Olivia Michael | CNBC
Chamath Palihapitiya was a pioneer in publishing private unicorns by conversely merging them into specialist acquisition companies – an idea he called “IPO 2.0.”
After his first iteration of doing the final year with the space company Virgin Galactic, he found his next target: Opendoor, an online marketplace for buying and selling homes.
“These guys are my next 1
The investment, which was announced on Tuesday, amounts to more than 1 billion. $. Opendoor receives $ 414 million from the capital generated from its first IPO in April by its SPAC, Social Capital Hedosophia II. In addition, a group of investors, including Palihapitiya and funds managed by BlackRock, agreed to inject an additional $ 600 million through a PIPE or a private investment in public capital.
The deal estimates Opendoor at $ 4.8 billion – almost equal to revenue in 2019. The company’s previous investors include General Atlantic, SoftBank’s Vision Fund and Lennar Corp.
“This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop that needs to be relocated,” said Eric Wu, who founded Opendoor six years ago. in a statement. Wu will continue to lead the company, while Adam Bain, former Chief Operating Officer at Twitter and Director of Social Capital Hedosophia II, will become a member of the Board of Directors after the transaction is completed.
How Opendoor works
How Opendoor often works: Homeowners get an offer through an algorithm and can sell their homes directly to the business. Opendoor can make some corrections and then put the house on the market to sell. The gap between what the home is bought and sold is part of how Opendoor generates revenue. Opendoor, which operates in 21 markets, says it sold more than 18,000 homes last year.
It also provides services such as a mortgage product, home repair and home warranty that users can purchase. (Opendoor ranked No. 35 on last year’s CNBC Disruptor 50 list.)
“The company is transforming the $ 1.6 trillion real estate market by combining superior user experience, streamlined operation and machine learning to create a seamless digital experience,” said Palihapitiya, CEO of Social Capital Hedosophia II.
The move is a bet on two secular tailwinds – greater home ownership in America and the digitalization of commerce.
Sales of existing homes jumped nearly 25 percent in July from June, according to the latest report from the National Association of Realtors. It is the strongest monthly gain in the history of the study, dating back more than half a century.
But earlier this year, the pandemic and the simultaneous shutdown of the economy took their toll on the housing market. In April, the company laid off 600 employees or approx. one-third of its staff as the uncertainty prompted many Americans to stop housing-related transactions.
Around the same time, Palihapitiya was getting his SPAC off the ground. Virgin Galactic, which he announced through a separate vehicle, has produced returns of nearly 70 percent over the past year.
Social Capital Hedosophia II used this momentum in its search for a new goal.
The deal for Opendoor came together fairly quickly, a person close to the process said. Two months ago, the two sides started talking.
And just like Opendoor’s digitized tenor was also its own sales, where the majority of the negotiations took place via the Internet.