real estate

Opendoor to go public by way of Chamath Palihapitiya SPAC

Today, Social Capital Hedosophia II, the blank-check company associated with investor Chamath Palihapitiya, announced that it will merge with Opendoor, taking the private real estate startup public in the process.

The transaction comes during a wave of market interest in special purpose acquisition companies, or SPACs, often called blank-check companies. They exist as publicly traded entities in search of a private company to combine with, taking the private entity public without the hassle of an IPO.

In this case, the SPAC Social Capital Hedosophia II is combining with Opendoor, a richly-valued private technology company that operates in the real-estate market.

“This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move,” Eric Wu, co-founder and CEO of Opendoor said to TechCrunch in a statement. “I am grateful for the continued support from my teammates and shareholders and most thankful for the tens of thousands – and I hope soon to be hundreds of thousands – of families, couples and individuals that trust Opendoor with the largest financial decision of their life.”

Palihapitiya, and his press team did not immediately respond to requests for comment from TechCrunch over phone and e-mail.

Shares of Social Capital Hedosophia II, which trade under the ticker symbol IPOB, were up around 14% in pre-market trading this morning.

According to a notice associated with the transaction, Opendoor will have an enterprise value of $4.8 billion in the deal, including equity value of around $6.2 billion and around $1.5 billion in cash. Social Capital Hedosophia II will provide “up to” $414 million in cash as part of the deal, while a private investment in public equity transaction, or PIPE, will provide another $600 million.

Some $200 million of the $600 million PIPE, or a third, will be funded by investors in the SPAC, with Chamath Palihapitiya himself providing $100 million.

Palihapitiya is not subtle about his plans to use SPACs to pursue his ambitions to be the next Berkshire Hathaway. He famously brought Virgin Galactic to the public markets through a SPAC, which played a role in the $1.7 billion profit that Social Capital made in 2019.

If not acquiring a public through a SPAC, he’s also used personal capital to take majority stakes in businesses. When describing his appetite for acquisitions, he put it curtly to TechCrunch: “I like businesses that build non-obvious data links.”

The rest of the PIPE will be funded by another Palihapitiya group, some private entities like Access Industries, and what a release hyped as “top-tier institutional investors” including Blackrock and a pension plan.

A total of $1 billion in cash is expected to be provided in the transaction. Notably all the cash will flow to Opendoor itself, with shareholders in the company “rolling 100 percent of their equity into the combined company,” per a notice. Along with the transaction, Adam Bain, former Twitter COO and founder of 01 advisors, will join the board, CNBC reports.

Opendoor last raised $300 million at a $3.5 billion pre-money valuation in March of 2019. Of that, $1.3 billion was in equity with nearly $3 billion in debt financing. Investors in the company include General Atlantic, the SoftBank Vision Fund, NEA, Norwest Venture Partners, GV, GGV Capital, Access Technology Ventures, SV Angel, Fifth Wall Ventures, along with others.

Orchard real estate platform raises $69 million Series C led by Revolution Growth

Orchard, the tech-forward residential real estate platform, has today announced the close of a $69 million Series C funding led by Revolution Growth. Existing investors FirstMark Capital, Navitas, Accomplice and Juxtapose also participated in the round, which brings the company’s total funding to $138 million.

Orchard (formerly Perch) launched in 2017 on a mission to digitize the entire experience of buying or selling a home. They focused initially (and still) on ‘dual trackers’, which essentially means that they are home buyers who are also in the process of selling their existing home.

As you might expect, the process of doing both at the same time can be incredibly tedious and, at times, costly. Orchard makes an offer on the buyers’ home with a price that’s guaranteed for 90 days — the company says the vast majority of those homes sell at market price before that 90-day period is over.

Orchard’s product suite also includes tools for searching for homes, title and mortgage.

The search products, in particular, stand out among a crowded space of property search tools. For example, Orchard users can search homes by the room that’s most important to them, putting the Kitchen or the Backyard as the lead image on their listings. Orchard also uses machine learning to suggest more personalized listings.

Orchard cofounder and CEO Court Cunningham had this to say in a prepared statement:

In the same way Amazon has fundamentally changed retail, and Carvana has innovated the car buying experience, Orchard is putting the customer first and modernizing the home buying and selling transaction. We’re thrilled to have a partner in Revolution Growth who has extensive experience working with transformative growth stage consumer businesses that are upending traditional industries. In the year ahead, we’ll be launching an exciting suite of new products and services that further modernize the home purchase experience, while also offering our services to new markets throughout the country.

In the release, the company said it would be using the investment to further expand the product portfolio and grow the team in markets like New York, Texas, Colorado and Georgia, as well as move into new states.

9 proptech investors talk co-living, home offices and other pandemic trends

The real estate industry — like so many other sectors — was forced to adapt this year.

Now, investors are ready to pour capital into the startups they believe are best-positioned in this new era, from companies tackling construction tech, financing and digital workflow tools to those finding ways to monetize vacant spaces, flex offices and yes, even co-living arrangements.

TechCrunch surveyed nine firms that are writing checks today for startups in the sector. Our first survey, published last week, provided a broad view of the residential and commercial real estate landscape, and homed into the trends that have emerged and accelerated in the past year. In short: Optimism still runs high for startup hubs as well as supercities like New York and San Francisco. However, the move toward e-commerce and remote work — a trend that started before COVID-19 upended the way people live, work and play — has accelerated.

This second installment of responses focuses on the opportunities and risks for startups that these investors are betting on (or not). 

For additional context on where top investors believe the market is headed, be sure to check out our real estate and proptech investor survey from late March and the previous ones from late last year (when everyone thought 2020 would be something different).

Clelia Warburg Peters, venture partner at Bain Capital Ventures

How do current trends translate to opportunities and problems for proptech companies? For example, co-living is among the worst-performing asset classes with a risky tenant demographic. Are there still worthy investment opportunities in previously hot areas like this?

Because real estate is such a complex business, some of the investing trends we have seen around proptech are fad-based and not deeply rooted in fundamentals — and I do agree that some of these fads may not weather the challenges presented by the pandemic.

Co-living is clearly facing challenges, and likely will for some time as younger consumers have more flexibility to opt out of living in larger cities with supply constraints and high pricing. However, there are also a number of underlying trends that suggest that the way that we rent or own properties is going to continue to evolve. I believe we will see shorter lease terms, more amenitization (including a trend towards furnished apartments or renting furniture) and more options for shared community resources. This could extend into co-living, but in the short to mid-term, means that I think we will see more rapid growth in companies offering more hybrid short to mid-term stay innovation models (Sonder, Zeus, Kasa, Whyhotel, etc.) and companies servicing landlords or consumers who are doing this themselves (CasaOne, Feather, HelloAlfred, Hom).

Flex office is also an area that I think will be challenged in the short term but I believe could see a major recovery once companies start to think about their ongoing office commitments. In my opinion, premium players such as Convene and Industrious who have focused on building relationships with enterprise clients and increasingly use management contract models with landlords will likely see major growth 12-18 months from now.

Real estate fintech companies have a unique set of challenges in this time, given limited real estate sales and higher costs. How do you see these companies successfully adapting?

I don’t think these companies are challenged across the board. In fact, real estate fintech companies focused on disrupting the residential real estate transaction have largely seen a bump, not a decline, in their business during this time. Nationally, the residential market has remained brisk (with some obvious exceptions, like New York), and many of the companies providing equity-based alternatives to debt financing (mortgages or HELOCs) are seeing a big surge in demand. Obviously it’s also been a great time to refinance a home, so many companies in the mortgage space are seeing a big jump in demand as well. Even iBuyers, who many thought would be facing the ‘economic challenge which undermined their whole model’ have instead seen meaningful growth during this time. I think this moment may prove to be a watershed in terms of consumer openness to different tools to facilitate and finance the residential home transaction.

What are other big problems and solutions that everybody else is missing?

Increasingly, there is a whole ecosystem of really smart people working in and around proptech, so I don’t know that there are many big problems no one has noticed. (I would contrast that with five years ago when I don’t think much of the industry had woken up to the degree of disruption and innovation that was coming!)

With that said, I think we are primed to see a massive expansion of innovation in construction, and I am excited by the quality of entrepreneurs I see actively building in that space, as well as the engagement of industry-leading incumbents.