The real estate industry requires a lot of money to challenge it: Startups like Opendoor — which buys houses from people and flips them — not only need investment to grow into more cities, but also serious lines of credit in order to purchase homes.
Opendoor has already taken out $1.5 billion in loans for home buying. And the company now says it has accepted another $325 million in new financing that values it at more than $2 billion, according to a person familiar with the matter.
That valuation validates the expensive business model and the company, which was last valued in 2016 at about half that figure. But that’s not all: Opendoor remains in serious talks with SoftBank’s Vision Fund for additional money that could arrive in the next few months, according to people familiar with the conversations. Those talks are still active despite the new funding.
Opendoor will expand to 50 cities with the $325 million round. But SoftBank, with its huge $100 billion checkbook, could help Opendoor expand to even more as soon as later this year. The Japanese investor typically invests hundreds of millions of dollars into private companies, and that sort of check would be expected here, though some of the money tends to buy out existing investors.
SoftBank has been negotiating with the startup to try and find deal terms that appeal to such a large investor, the people said, but Opendoor did not want to wait for those talks to settle before closing on the first tranche of $325 million, according to one person.
Opendoor CEO Eric Wu declined to comment to Recode on any future funding talks. But he acknowledged that his business model required tons of money.
“We recognize it’s both a technology software business and an operations and capital business,” he said. “It’s similar to Apple or Amazon or Tesla.”
Wu said that in addition to growing from the 10 markets in which it operates today to a goal of 50 by 2020, Opendoor would double its current staff size of 650 over the next year or so.
Opendoor competes with the legacy real estate broker industry and offers a two-sided marketplace that tries to remove the hassle of buying and selling houses. The company uses its loans to buy homes sight unseen, makes improvements and then flips them. The company makes money by charging about a 6 percent fee on the sale price.
This round is led by typical big-money backers like General Atlantic and some real estate-specific names like the large home-building company Lennar, but two smaller investors also stand out: Andreessen Horowitz and the 10100 fund, the new investing vehicle of former Uber CEO Travis Kalanick, in his first disclosed venture capital deal.
How did Wu convince Kalanick to invest? Wu’s chief operating officer, Gautam Gupta, was one of Kalanick’s key deputies at Uber, and made the connection.
This article originally appeared on Recode.net.