Tag: venture capital

• Opendoor.com raises $9.95M to make selling your home as easy as a few clicks

  

  If you’re a regular reader of ATC, you’ll know that I’ve been following the startup Opendoor.com for a few months now. I first wrote about it when it was codenamed Homerun and I just recently wrote about them as preface to a real estate survey I was conducting.

  Well, about an hour go it was announced that they’ve just raised $9.95M in venture funding from everyone and their grandmother. Here’s the list of investors (via TechCrunch):

  Paypal co-founder Max Levchin, Former YouTube and Facebook CFO Gideon Yu, Eventbrite co-founder Kevin Hartz, Y Combinator’s Sam Altman, Quora CEO Adam D’Angelo, Yammer co-founder David Sacks, Angelist’s Naval Ravikant, Yelp CEO Jeremy Stoppelman, Box CEO Aaron Levie, Initialized Capital’s Harjeet Taggar, Garry Tan and Alexis Ohanian, Former Twitter vice president Elad Gil, Blippy co-founder David King, Flixster co-founder Joe Greenstein, Angel investor Mike Greenfield, Quora co-founder Charlie Cheever, Path’s Dave Morin, Facebook vice president Dan Rose, Trevor Traina, Resolute Ventures’ Mike Hirshland, Caffeinated Capital’s Ray Tonsing, Felicis’ Aydin Senkut, True Ventures’ Om Malik, Thrive Capital’s Josh Kushner, Crunchfund’s Michael Arrington (who disclaimer: founded TechCrunch) and SV Angel.

  Not surprisingly, there are quite a few people who see an opportunity in the $20 trillion US residential real estate market – which I think is a good thing. This is a space that–despite its size–hasn’t seen an awful lot of innovation.

  There still isn’t a lot of information about the product, but there’s a clear focus on creating liquidity in the marketplace. Despite being located in San Francisco, the company will be launching in 3 markets outside of California – where liquidity isn’t as great for homeowners.

  The goal is to transform the typical 90 day selling process into a few clicks online. Homeowners submit their home to the platform and then Opendoor makes an instant offer to buy. Done.

  What I wonder then is if it’s going to be an arbitrage play. They buy the homes below market (because they’re offering total liquidity) and then they turn around and sell them at market.

  Do you have any guesses as to their business model?

  2014.07.07

• Will real estate developers open up, too?

  A few months ago I read a book by venture capitalist Ben Horowitz called “The Hard Thing About Hard Things.“ It was a great read and I recommend it to anyone who currently or plans to one day manage and lead people. But on a side to that, one of the things I found really interesting is the shift he talks about in the venture capitalist business.

  Over the span of a decade, venture capitalists went from being ivory tower professionals to incredibly open and transparent. And they did that primarily through blogging. Just yesterday, I saw somebody tweet out that the key to becoming a venture capitalist in 1994 was to get an MBA. Today, it’s to start a blog.

  The reason I find that interesting is because I predict that the same transformation is going to happen in the real estate development business. Today, most developers are pretty opaque. The people and personalities behind the projects are still generally concealed (save for a few developers) and my sense is that there’s still very much a fear of exposing and sharing too much.

  But the lesson to be learned from the VC business is that blogs have become one of, if not their most important customer acquisition tool. I read somewhere that entrepreneurs—which are the customers of VCs—are most heavily influenced by blogs over any other medium. That is how they decide who they will allow to invest in their business.

  Which is why I think it’s only a matter of time before the same sort of dynamic plays out in the real estate business. In fact, one of the most common questions I get from readers of ATC is about the reputation of developers and builders. Customers—before they decide who they will allow to build their future home—not surprisingly want to know something about the developer.

  So if you’re a developer looking to sell more homes or lease more space,   I suggest giving blogging a try. It’s hard work, but I think you’ll be surprised at how effective a tool it can be.

  2014.06.05

• Airbnb for retail spaces raises $7.3 million

  Though it’s sometimes common to downplay “this for that” startups (that is, derivative startups that try and borrow a model and use it in another market), Storefront–which can be described as Airbnb for retail spaces–has just raised a $7.3 million Series A round.

  Storefront is a marketplace for short term retail space (think pop-up shops). People with space simply create a listing and decide how much they would like to charge per day, per week or per month. In doing so, Storefront “helps all sorts of brands, sellers, and merchants to create their first brick and mortar retail experience.”

  What I find interesting about Storefront, and other startups like Airbnb, is that they’re really rewriting the way real estate marketplaces work. Instead of large retail landlords (Storefront) and multinational hotel operators (Airbnb), technology is allowing individuals to now participate in these marketplaces. Supply is being decentralized and anyone with extra space can participate.

  You could argue that these sorts of informal and short term rentals are nothing new, but I don’t think there’s ever been the possibility of scaling up like there is today. I mean, just look at how much attention Airbnb has been getting in New York. These startups are having an impact on the way the larger market functions.

  Change is coming. And I think we’ll see a lot more of it in the real estate space.

  2014.04.28

• Core counties > outlying counties

  Recent US Census Bureau data has once again confirmed that there’s a growing preference for living in urban cores. More specifically:

  It finds that population growth has been shifting to the core counties of the USA’s 381 metro areas, especially since the economic recovery began gaining steam in 2010. Basically, the USA’s urban core is getting denser, while far-flung suburbs watch their growth dwindle.

  To put numbers to these statements, core counties in the US grew approximately 2.7% and outlying counties grew approximately 1.9% from 2010-2013. Most of the growth came from net migration, as opposed to higher birth rates.

  The two big factors at play–which will be obvious to readers of this blog–appear to be both a desire to live in amenity rich and walkable communities and a continuing trend towards marrying and having kids later in life, which can often be the trigger for moving to the suburbs.

  But the big question is whether or not this trend is here to stay or if it’s an ephemeral fad caused by a bunch of over-educated and under-employed Millennials refusing to grow up. I would argue that it’s not a fad.

  If there’s a clear consumer preference for urban neighborhoods, then I don’t think people are just going to pick up and leave overnight. As long as there’s adequate housing within the means of growing families, I think they’re going to stay in or go to the areas in which they truly want to live.

  There are also many other macroeconomic trends reinforcing this shift. Just yesterday, Richard Florida wrote an article in Atlantic Cities talking about how venture capital investment is shifting away from the suburbs, towards city centers and walkable communities. These companies (receiving investment) are the next generation of employers and they’re starting in core areas.

  I’ll take that as a leading indicator.

  2014.04.01

• What do venture capitalists have to do with cities?

  This morning I woke up to a tweet from somebody asking me why–despite my obvious love of cities and real estate–do I seem more influenced by venture capitalists on my blog. He wondered if it was because of a lack of public/online real estate thought leaders.

  I responded by saying yes; that’s part of the reason. I honestly can’t think of one real estate developer that hosts a personal and regular blog. (If you know of any, please pass them along.) Whereas I can’t think of a major VC who doesn’t blog.

  Sure there are other real estate professionals who blog, but a lot of those sites just feel like giant lead generation tools and those aren’t enjoyable to read. I’m trying not to create that kind of blog. The trust of readers is more important to me than trying to promote my businesses.

  But the other reason I often cite venture capitalists and “tech” centric topics is because I believe in cross pollinating industries. I don’t believe the world operates neatly under silos and neither should our minds and businesses. I’ve also argued many times before that with software eating the world, nobody should be ignoring technology.

  At the same time, the consumer web feels to me like this profound social force changing the way people live and interact with each, which, if you think about it, is what cities have always been about. And so I see all kinds of interesting overlaps.

  Of course, I also look to planners, designers and other urbanists for inspiration. But I don’t like to do so exclusively. Industries, like anything else, can quickly become insular–whether tech or urban planning. My interest–and the focus of this blog–is cities. And I will continue to incorporate ideas and viewpoints from any discipline that I think touches them.

  2014.03.31

• All sorts of bubbles

  Fred Wilson (New York VC) wrote a post on his blog this morning called The Bubble Question. In it, he talks about how everyone asks him whether or not there’s a tech bubble, which he has been asked for the past 4 years now. It reminded me of the debates that are also happening in the real estate community (particularly in Canada).

  The thesis of his post is this:

  I learned in business school that the multiple of earnings one should pay for a business is roughly the inverse of interest rates.

  In other words, as interest rates drop, people are willing to pay more for the business or asset in question. And it’s because they can’t find the yields anywhere else.

  The same phenomenon, you could argue, is also happening in the real estate space. Typically, income producing real estate assets are assessed using capitalization rates (or cap rates), which is defined by the Net Operating Income (NOI) of the property (revenue – expenses, but excluding financing costs), divided by the price of the property.

  The real estate equivalent of what Fred is talking about is cap rate compression. When cap rates drop it means you’re paying more for the same amount of yield (or NOI). One of the reasons that might happen is because people are anticipating that the asset will appreciate. But it could also be because interest rates are so low that investors will take whatever returns they can get. 

  So you could argue that the market is just responding to the macro economy. And since the feds are probably waiting for global growth to pickup (before raising rates), one could argue that the status quo is just going to continue. Ideally, it’ll continue until robust economic growth is able to take the place of cheap money.

  2014.03.13

• BlackBerry started our forest

  A friend of mine posted this article on my Facebook wall yesterday: “A Snowier Silicon Valley in BlackBerry’s Backyard.”

  It essentially talks about the fact that despite the rapid decline of BlackBerry (it just reported $4.4 billion in losses), the Kitchener-Waterloo region is thriving. Many companies—both local and international, such as Google and Motorola, Square, Desire2Learn, Kik and others—have all hung their shingle in the area. 

  Part of this certainly has to do with the University of Waterloo, but much of it also has to do with the legacy of BlackBerry. In fact, you could argue that BlackBerry (formerly Research in Motion) is what started at all.

  In reading the New York Times article I was reminded of a post that Fred Wilson wrote last year called, “The Darwinian Evolution of Startup Hubs.” It’s a great post. In it he talks about how he looks for the company that gave birth to the hub. In Silicon Valley he argues that it was Fairchild Semiconductor and in New York it was Doubleclick.

  Once started, he likens the hub to a growing forest. The big trees (mature companies) start dropping seeds and new trees then start to grow (more startup companies). This is important, because it kick-starts a non-linear cycle of entrepreneurial growth.

  Here’s how he maps out Silicon Valley:

  “In my mental model of Silicon Valley, the first “tree” was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun (1982), Silicon Graphics (1981), and Cisco (1984) which begat Siebel (1993) and Netscape (1994), which begat Yahoo! (1995) and eBay (1995), which begat Google (1998) and PayPal (1998), which begat YouTube (2005), Facebook (2004), and LinkedIn (2003) which begat Twitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.”

  Using this logic, Fred Wilson argues that Silicon Valley is about 10 cycles in and New York is at about 2. So what about Kitchener-Waterloo? Well if you buy into the argument that BlackBerry is what started it all, we’re really only into our first cycle. BlackBerry created a lot of wealth and talent, and now it’s being deployed into local startups. Our forest has begun.

  Part of me worries, though, if Kitchener-Waterloo is the right place for a startup hub over the long term. Sure it has the University of Waterloo, but does young talent want to be there? At about 320,000 people, it’s no San Francisco, New York or Toronto. And we’re already seeing a significant pull towards urban centers.

  But let’s look at it from the perspective of Southern Ontario as a whole. We’re at a critical moment in our evolution. The mother tree has caught a disease and it’s starting to take its toll. It may be able to fight it off, but right now it’s not looking promising. Thankfully, there are many young trees sprouting up to replace it. But we’re going to need to take special care of them, because they’re probably our best shot at creating our own thriving forest.

  2013.12.24
• I saw Bill Gurley say that you can only make money by being right about something that most people think is wrong. His logic was that you can’t make money by being wrong. And you can’t make money by being right about something everyone else knows. So you have to be right about something that most people think is wrong. I really like that framework.

  @fredwilson

  2013.05.16