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The issue a lot of people have with OpenDoor is their business model. Only some people in silicon valley can raise $320mm to wholesale homes using algorithms. T

The issue a lot of people have with OpenDoor is their business model. Only some people in silicon valley can raise $320mm to wholesale homes using algorithms. The skepticism I have is that OpenDoor isn't disrupting anything because they're not Airbnb or Uber. They're not going after unused inventory and taking huge amounts of business from incumbents, they're simply amassing massive amounts of debt like no wholesaler could and when the economy crashes, and it will as nothing goes up forever, they're going to have this backfire on them. And then what? When the economy goes down, Airbnb will do just fine. More people will want to do short term hospitality to earn cash and more people will want to drive for Uber. OpenDoor will have to liquidate their debt which will prove difficult. Also if I remember correctly, Keith Rabois said he was talking with Peter Thiel and Peter mentioned how real estate has rarely changed. Later Keith helped create, more like fund, OpenDoor. What I wonder is, why hasn't Peter invested in Keith's new company? It's not because he's too busy with Trump's transition team. OpenDoor isn't a startup you should emulate. I wholly disagree with this article.

jdross 10y ago
Hey, definitely appreciate the criticism. Without going into too much detail, investors aren't generally in the business of losing money and at the scale of investment we've taken we're far beyond "bet on the team" kind of diligence. Managing inventory and pricing risk is a key piece of this business and has been since day 1. We really owe the world some blog posts, but until then hackers, data scientists, and predictive modelers are always welcome to come by the office for lunch!
- deleted 10y ago
  [deleted]
- WhitneyLand 10y ago
  >>investors aren't generally in the business of losing money...we're far beyond "bet on the team" kind of diligence Sure, in principle large investments should mean good DD. But Magic Leap fans were pretty surprised this week. Theranos also raised more than Opendoor. It's not fair to put other company's problems on Opendoor, but the point it's hard to accept the large cap/DD argument with so many counter examples. In any case, it would be great to see you succeed - good luck.
  - jdross 10y ago
    That's fair and those are embarrassing tales in Silicon Valley. One difference is they were/are bets on a technology that wasn't in the market yet. We buy and sell thousands o homes, hopefully at the appropriate price for the market's current level of risk. Hard, deeply appreciated by customers, but not much handwaving on how it will go to market.
    - deleted 10y ago
      [deleted]
- free2rhyme214 10y ago
  In negative market conditions, you can't stop gravity. Not with VC funding, engineers or technology. Your business is a double edge sword - the only way you grow is by purchasing more debt. You're ignoring reality with a delusional belief in consumer demand.
- LordHumungous 10y ago
  >investors aren't generally in the business of losing money and at the scale of investment we've taken we're far beyond "bet on the team" kind of diligence. LOL. When an SV founder defends his business model by pointing to fundraising numbers, look out.
prostoalex 10y ago
> OpenDoor isn't disrupting anything because they're not Airbnb or Uber Prolonged sales cycles remove liquidity from the markets and generally restrict economic mobility of the population at large, as one needs to sell their current house in order to shop for a new one. On the buying side having a no-haggle buying experience is also somewhat appealing to modern buyer https://www.opendoor.com/homes https://www.opendoor.com/homes The real estate is currently financed via debt instruments, and issuing debt for a real estate potfolio purchases is a fairly well-travelled path for many financial institutions and investors out there. OpenDoor is likely to spin that out as a short-term residential holding REIT, for better tax treatment, if nothing else. Macroeconomic risk is always a factor with real estate investments, but the exit options are also well-known. Liquidate at any price, convert it to rentals, or wait it out.
- genericpseudo 10y ago
  They're real-estate market-makers. Market-making is one of the most reliable strategies for making money in financial markets. This is really smart as long as you can pull it off (and you have the network to get the capital and debt together to get it off the ground).
  - mconnolly 10y ago
    Smart, yes. Disruptive and beneficial to the customer? Not really.
stevenj 10y ago
>Also if I remember correctly, Keith Rabois said he was talking with Peter Thiel and Peter mentioned how real estate has rarely changed. Do you have a source for this conversation? I'd like to read more about Peter's thoughts if they're available.
- jdross 10y ago
  Keith recounted the story here, a bit, but Peter didn't comment: www.forbes.com/sites/amyfeldman/2016/11/30/home-shopping-networkers-opendoor-is-upending-the-way-americans-buy-and-sell-homes/#6d08e3f5cff1 "A member of the so-called PayPal mafia, the founders and early senior execs at the payment platform who went on to start many other companies, Rabois, 47, came up with the idea for Opendoor back in 2003 while doing a stint at Peter Thiel's investment firm, Clarium Capital. Rabois recalls a time when he and a colleague presented an idea similar to Zillow, the online real-estate database, that Rabois says Thiel found so boring he kicked them out of the conference room. (Thiel did not respond to requests for comment.) Rabois then started thinking about how car owners can sell their used autos to dealers based on their Kelley Blue Book valuation and how he might create similar liquidity for homeowners."
  - free2rhyme214 10y ago
    I actually found it in a youtube video. I still wonder why Peter didn't invest in your company.
rokhayakebe 10y ago
If you can sell your house in 1 day vs 100 days that is definitely Disruption by any standard. I buy and sell used cars randomly and I would love to do this to the market.

jdross 10y ago

Hey, definitely appreciate the criticism. Without going into too much detail, investors aren't generally in the business of losing money and at the scale of investment we've taken we're far beyond "bet on the team" kind of diligence. Managing inventory and pricing risk is a key piece of this business and has been since day 1. We really owe the world some blog posts, but until then hackers, data scientists, and predictive modelers are always welcome to come by the office for lunch!

deleted 10y ago
[deleted]
WhitneyLand 10y ago
>>investors aren't generally in the business of losing money...we're far beyond "bet on the team" kind of diligence Sure, in principle large investments should mean good DD. But Magic Leap fans were pretty surprised this week. Theranos also raised more than Opendoor. It's not fair to put other company's problems on Opendoor, but the point it's hard to accept the large cap/DD argument with so many counter examples. In any case, it would be great to see you succeed - good luck.
- jdross 10y ago
  That's fair and those are embarrassing tales in Silicon Valley. One difference is they were/are bets on a technology that wasn't in the market yet. We buy and sell thousands o homes, hopefully at the appropriate price for the market's current level of risk. Hard, deeply appreciated by customers, but not much handwaving on how it will go to market.
  - deleted 10y ago
    [deleted]
free2rhyme214 10y ago
In negative market conditions, you can't stop gravity. Not with VC funding, engineers or technology. Your business is a double edge sword - the only way you grow is by purchasing more debt. You're ignoring reality with a delusional belief in consumer demand.
LordHumungous 10y ago
>investors aren't generally in the business of losing money and at the scale of investment we've taken we're far beyond "bet on the team" kind of diligence. LOL. When an SV founder defends his business model by pointing to fundraising numbers, look out.

prostoalex 10y ago

> OpenDoor isn't disrupting anything because they're not Airbnb or Uber Prolonged sales cycles remove liquidity from the markets and generally restrict economic mobility of the population at large, as one needs to sell their current house in order to shop for a new one. On the buying side having a no-haggle buying experience is also somewhat appealing to modern buyer https://www.opendoor.com/homes https://www.opendoor.com/homes The real estate is currently financed via debt instruments, and issuing debt for a real estate potfolio purchases is a fairly well-travelled path for many financial institutions and investors out there. OpenDoor is likely to spin that out as a short-term residential holding REIT, for better tax treatment, if nothing else. Macroeconomic risk is always a factor with real estate investments, but the exit options are also well-known. Liquidate at any price, convert it to rentals, or wait it out.

genericpseudo 10y ago
They're real-estate market-makers. Market-making is one of the most reliable strategies for making money in financial markets. This is really smart as long as you can pull it off (and you have the network to get the capital and debt together to get it off the ground).
- mconnolly 10y ago
  Smart, yes. Disruptive and beneficial to the customer? Not really.

stevenj 10y ago

>Also if I remember correctly, Keith Rabois said he was talking with Peter Thiel and Peter mentioned how real estate has rarely changed. Do you have a source for this conversation? I'd like to read more about Peter's thoughts if they're available.

jdross 10y ago
Keith recounted the story here, a bit, but Peter didn't comment: www.forbes.com/sites/amyfeldman/2016/11/30/home-shopping-networkers-opendoor-is-upending-the-way-americans-buy-and-sell-homes/#6d08e3f5cff1 "A member of the so-called PayPal mafia, the founders and early senior execs at the payment platform who went on to start many other companies, Rabois, 47, came up with the idea for Opendoor back in 2003 while doing a stint at Peter Thiel's investment firm, Clarium Capital. Rabois recalls a time when he and a colleague presented an idea similar to Zillow, the online real-estate database, that Rabois says Thiel found so boring he kicked them out of the conference room. (Thiel did not respond to requests for comment.) Rabois then started thinking about how car owners can sell their used autos to dealers based on their Kelley Blue Book valuation and how he might create similar liquidity for homeowners."
- free2rhyme214 10y ago
  I actually found it in a youtube video. I still wonder why Peter didn't invest in your company.

rokhayakebe 10y ago

If you can sell your house in 1 day vs 100 days that is definitely Disruption by any standard. I buy and sell used cars randomly and I would love to do this to the market.