Farhad Manjoo of the New York Times published an article this morning about Opendoor – a startup that I have written about multiple times on this blog – called, The Rise of the Fat Start-Up. (His definition of “fat” is that the startup owns lots of hard assets, which considered atypical in tech.)
Below are a couple of interesting tidbits from the article:
Opendoor has raised over $300 million in equity and over $500 million in debt since inception.
Opendoor plans to be in 10 cities by the end of this year.
Average commission charged on Opendoor is 7.5%, which is higher than a traditional real estate agent and higher than what was quoted before in the press. The higher % is because of certainty and convenience.
Opendoor offers a leaseback option if you’d like to stay in your house for a period of time after you’ve sold it.
Their conversion rate (offers made to closings) is about 30%.
Other startups are now in the market with similar models, including Offerpad and Knock. Zillow is working with Offerpad on a pilot. Someone is starting to feel threatened.
The article also quotes a blogger and real estate analyst named Mike Delprete. Heads-up: His blog is called “Adventures in Real Estate Tech.” I’m sure this will appeal to many of you. I obviously just subscribed.
I was planning to write about something else today, but then I saw Fred Wilson’s post on revitalizing urban cores and I had to switch topics, because I think he makes a great point about turning around declining cities:
I’ve been asked by civic leaders from places like Newark, Cleveland, Buffalo, and a number of other upstate NYC cities that have suffered a similar fate how they can do the same thing. They all talk about tax incentives, connecting with local research universities, and providing startup capital. And I tell them that they are focusing on the wrong thing.
You have to lead with lifestyle. If you can’t make your city a place where the young mobile talent leaving college or grad school wants to go to start their career, meet someone, and build a life, all that other stuff doesn’t matter.
It’s exactly the same point I made in my post entrepreneurship as economic development strategy. You can throw as much money as you’d like at startups, but if young people don’t want to live in your city then you have a serious problem.
Farhad Manjoo of the New York Times published an article this morning about Opendoor – a startup that I have written about multiple times on this blog – called, The Rise of the Fat Start-Up. (His definition of “fat” is that the startup owns lots of hard assets, which considered atypical in tech.)
Below are a couple of interesting tidbits from the article:
Opendoor has raised over $300 million in equity and over $500 million in debt since inception.
Opendoor plans to be in 10 cities by the end of this year.
Average commission charged on Opendoor is 7.5%, which is higher than a traditional real estate agent and higher than what was quoted before in the press. The higher % is because of certainty and convenience.
Opendoor offers a leaseback option if you’d like to stay in your house for a period of time after you’ve sold it.
Their conversion rate (offers made to closings) is about 30%.
Other startups are now in the market with similar models, including Offerpad and Knock. Zillow is working with Offerpad on a pilot. Someone is starting to feel threatened.
The article also quotes a blogger and real estate analyst named Mike Delprete. Heads-up: His blog is called “Adventures in Real Estate Tech.” I’m sure this will appeal to many of you. I obviously just subscribed.
I was planning to write about something else today, but then I saw Fred Wilson’s post on revitalizing urban cores and I had to switch topics, because I think he makes a great point about turning around declining cities:
I’ve been asked by civic leaders from places like Newark, Cleveland, Buffalo, and a number of other upstate NYC cities that have suffered a similar fate how they can do the same thing. They all talk about tax incentives, connecting with local research universities, and providing startup capital. And I tell them that they are focusing on the wrong thing.
You have to lead with lifestyle. If you can’t make your city a place where the young mobile talent leaving college or grad school wants to go to start their career, meet someone, and build a life, all that other stuff doesn’t matter.
It’s exactly the same point I made in my post entrepreneurship as economic development strategy. You can throw as much money as you’d like at startups, but if young people don’t want to live in your city then you have a serious problem.
Fred goes on to talk about
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
, since the company is not releasing this information. Here’s what he found (the chart is up to March 2017):
The trend line is certainly moving in the right direction. But Mike also believes that Opendoor is only netting around $8,320 in profit per home and that much of it is driven by appreciation. There’s also substantial risk in owning so many homes – each one is usually held for a few months.
But you can be sure they’re thinking well beyond where they are at today. Expect many more updates on this blog.
The WSJ article is about the growing divide between affordable and expensive cities in the US. And the argument is that expansionist, or sprawling, cities are better at suppressing home values and maintaining affordability:
“The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.”
Now, here’s a chart saying that same thing:
The reality is that greenfield development (suburban sprawl) generally has far fewer barriers to development than urban infill development. So I’m not surprised to see cities like Las Vegas, Atlanta, and Phoenix clustered towards the bottom right.
At the same time though, I’m obviously not convinced that sprawl is an optimal outcome. I think there are other costs not reflected in the chart above. So what’s the best solution here, assuming we want to build inclusive mixed-income cities?
When Tony moved Zappos from the suburbs to the former City Hall in downtown Vegas a few years ago, he decided to invest $350mm in a massive urban revitalization project. He set aside $200mm to purchase land at bargain prices and the other $150mm to invest in three areas, arts and culture, small businesses (restaurants, cafes, bars, markets, boutiques, etc), and tech startups. $50mm is going into each area.
It’s an example of leading with lifestyle, urbanism and city building, rather than purely economics. And I think it’s the way to go. But to be clear, I’m not suggesting that the focus should be on large capital projects, such as stadiums and infrastructure. I’m not convinced those are the most effective catalysts. There’s no silver bullet here.
Instead, I think the answer is in building, from the ground up, a real sense of community and place. People need to love your city. That’s easier said than done though.
, since the company is not releasing this information. Here’s what he found (the chart is up to March 2017):
The trend line is certainly moving in the right direction. But Mike also believes that Opendoor is only netting around $8,320 in profit per home and that much of it is driven by appreciation. There’s also substantial risk in owning so many homes – each one is usually held for a few months.
But you can be sure they’re thinking well beyond where they are at today. Expect many more updates on this blog.
The WSJ article is about the growing divide between affordable and expensive cities in the US. And the argument is that expansionist, or sprawling, cities are better at suppressing home values and maintaining affordability:
“The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.”
Now, here’s a chart saying that same thing:
The reality is that greenfield development (suburban sprawl) generally has far fewer barriers to development than urban infill development. So I’m not surprised to see cities like Las Vegas, Atlanta, and Phoenix clustered towards the bottom right.
At the same time though, I’m obviously not convinced that sprawl is an optimal outcome. I think there are other costs not reflected in the chart above. So what’s the best solution here, assuming we want to build inclusive mixed-income cities?
When Tony moved Zappos from the suburbs to the former City Hall in downtown Vegas a few years ago, he decided to invest $350mm in a massive urban revitalization project. He set aside $200mm to purchase land at bargain prices and the other $150mm to invest in three areas, arts and culture, small businesses (restaurants, cafes, bars, markets, boutiques, etc), and tech startups. $50mm is going into each area.
It’s an example of leading with lifestyle, urbanism and city building, rather than purely economics. And I think it’s the way to go. But to be clear, I’m not suggesting that the focus should be on large capital projects, such as stadiums and infrastructure. I’m not convinced those are the most effective catalysts. There’s no silver bullet here.
Instead, I think the answer is in building, from the ground up, a real sense of community and place. People need to love your city. That’s easier said than done though.
