Opendoor, a start-up that buys and sells homes online, has just pulled in $325 million to expand its team, add more cities and move deeper into residential real estate.
The new funding pushed the San Francisco-based company's valuation past $2 billion and includes capital from homebuilder Lennar, whose COO, Jon Jaffe, will be joining the company's board, Opendoor said on Wednesday.
Founded in 2014 by a roster of tech entrepreneurs, including RentAdvisor co-founder Eric Wu and venture capitalist Keith Rabois, Opendoor aims to help homeowners sell their property more quickly by offering to buy it from them. The company uses a wealth of market data and software tools to understand how much it can make by buying, fixing up, listing and selling homes.
Because of that model, Opendoor is commonly referred to as a homeflipper. But Wu says that's a misconception.
"We want to build the best customer experience at the lowest cost so that people can seamlessly buy, sell, or trade in a home," Wu told CNBC in an interview.
Opendoor has now raised a total of about $645 million in equity and hundreds of millions more in debt. The company assists buyers by providing virtual tours of homes on its mobile app as well as through physical open houses. Opendoor says it purchases about $2.5 billion worth of homes annually, up over 225 percent from a year earlier, and has properties in 10 U.S. cities, with plans to reach 50 by 2020.
It's facing fresh competition from real estate marketplace Zillow, which announced plans in April to begin buying and selling homes. That news initially caused Zillow's stock to plunge on concern about the heavy costs associated with buying homes and because it could put the company in direct conflict with the realtors on its marketplace.
However, the stock price has since recovered and is now trading at a record, with a market value of over $12 billion.
"It's validating and we are flattered," Wu said, of Opendoor's entrance into the market. "We are humbled to have like-minded competition in the category."
General Atlantic and Access Technology Ventures led the round with Lennar. Andreessen Horowitz, Coatue Management, Travis Kalanick's new 10100 Fund and property owner Invitation Homes also invested in the round, joining existing investors Norwest Venture Partners, GGV Capital and Khosla Ventures, where Rabois is a partner.
Softbank's Vision Fund had been hoping to lead the Opendoor round, but the two sides never came to terms, CNBC reported in April.
Opendoor plans to use the capital to grow from a team of around 650 to nearly double that in the next year. It's investing in technology to expand and scale its suite of services, like mortgages, titles, closing support and, eventually, warranty and home customization.
The company is also bolstering its Trade Up program, which lets customers purchase new homes from builders after selling to Opendoor. The initiative was developed with Lennar, which provided Opendoor with $100 million in debt financing late last 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," Lennar's Jaffe said in a statement.