By Erin Griffith
SAN FRANCISCO — Opendoor, a start-up that flips homes, attracted attention in June when it announced it had raised $325 million from a long list of venture capitalists. The financing valued the four-year-old company at more than $2 billion.
That was only an appetizer. Three months later, Opendoor has more than doubled its cash pile. On Thursday, the company said it had gotten a $400 million investment from SoftBank’s Vision Fund. The valuation for Opendoor remains the same.
The so-called mega-round for Opendoor was not the Vision Fund’s only major real estate-related deal on Thursday. The firm also co-led a $400 million investment in the high-end brokerage Compass that valued the company at $4.4 billion.
The hauls are part of a race by investors to pour money into technology for real estate, or what Silicon Valley now calls proptech.
Having watched tech start-ups upend old-line industries like taxis and hotels, venture capitalists are casting about for the next area to be infused with software and data. Many have homed in on real estate as a big opportunity because parts of the industry — like pricing, mortgages and building management — have been slow to adopt software that could make business more efficient.
Last year, real estate tech start-ups raised $3.4 billion in funding, a fivefold increase from 2013, according to the start-up data provider CB Insights. One firm, Fifth Wall Ventures, is entirely dedicated to proptech.
“Tech is starting to make inroads to becoming adopted, and it’s opening the eyes of investors,” said Jeffrey Housenbold, a managing director at SoftBank’s Vision Fund.
Until recently, the biggest tech innovations to hit the residential real estate market have come from listing sites like Zillow and Redfin. But the start-ups in the new wave are tackling a wide range of areas — appraisals, building management, financing, co-working, co-living, building amenities and empty retail space.
The Vision Fund, one of the most aggressive investors in real estate tech start-ups, has written large checks to Katerra, a construction company; WeWork, an office rental company; Lemonade, a home insurance start-up; and Oyo Rooms, a hotel company in India.
Mr. Housenbold said SoftBank’s deep pockets — it has $98 billion in cash to spend — might be influencing the market.
“Given the vast amount of attention on the Vision Fund, people have become more curious,” he said.
Opendoor, one of the largest start-ups in the proptech category, gives the Vision Fund an entry into residential housing. The Silicon Valley company was founded in 2014 by the venture capitalist Keith Rabois and Eric Wu, who is Opendoor’s chief executive. With the money from SoftBank, it has raised more than $1 billion from investors including Khosla Ventures and GGV Capital.
Opendoor’s goal is to make moving as simple as the click of a button, according to Mr. Wu. While that remains a far-off reality, the company has simplified the process of selling a home. It uses a combination of data, software and a team of 50 human evaluators to assess a home’s value. If a customer accepts Opendoor’s value for their home, the company will buy the property, charging a 6.5 percent fee on average.
The company said it offers sellers certainty — many conventional home sales fall through — and flexible closing dates, helping them avoid paying double mortgages. It also eliminates the need for a real estate agent. Opendoor employs 100 licensed real estate agents to advise customers if they request it.
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