From laying off 35% of its employees in April, to becoming a publicly traded company valued at $4.8 billion via merger with Social Capital Hedosophia in September, Opendoor has been the talk of the tech world as they reinvent how people buy and sell homes.
Opendoor's co-founder, Ian Wong, spoke about the company's meteoric rise at a recent TechTO event. Beyond the headlines, massive valuation, and all the trappings of success—when you hear the process behind scaling to unicorn status is fraught with trials and tribulations common to many a startup venture, it gives you greater perspective and confidence in pursuing your own ambitions. Their team certainly has grit, considering they've been on the journey since 2013, which I had been following closely as I formed my own Proptech business around the same time. Ian shared a few points about his experiences in building the team behind a once-in-a-generation company:
- Look at talent as T-shaped. Find people that are well-versed in a particular area of expertise, yet with the ability to collaborate across disciplines.
- Everyone must take ownership of their work, for instance doing what you say, or shipping on time.
- Have a shipping cadence in one to two week sprints, with a sense of urgency to deliver better software continuously for your customers, as they are the highest priority.
- Perform weekly retros to determine where you can improve.
- Evangelize, reinforce, preach, and educate on the vision constantly.
- Write good documentation about your company's knowledge-base, which will make it easier to scale teams.
- Hire not only for skills, but more importantly values, and mission.
Beyond the day-to-day operations of Opendoor, their investor presentation is what got me even more engaged in how they are disrupting the fragmented, $1.6 trillion real estate industry in the US. One slide that caught my attention was their pricing advantage in terms of data, accuracy, and automation.
The largest undisrupted market in the US sees 5 million homes sold annually, therefore effective data science is critical in supporting the promise of greater liquidity through the use of real-time models to predict the current and future value of a home.
"Opendoor's offer came in right near our appraisal, but we never had to list the house or do showings." - Sold to Opendoor in Phoenix, AZ
I would have loved to compare the appraisal with the Opendoor offer. I'm sure it would be enlightening to see the efficiency gains in turn around time, cost, and gathering of market evidence to support the estimate of value. They still require input from the homeowner to determine the property's condition, but their robust algorithms are able to analyze hundreds of comps and millions of data points, instead of the 3-6 found in a traditional appraisal report.
The real estate industry is undoubtedly at the crux of fully automating property valuations, as more companies rely on these models to scale and reduce bias, however outside of the typical iBuyer "buy box" (est. $150,000 to $750,000), it would remain difficult to challenge traditional valuation methods.
Opendoor collects a wealth of proprietary data that feeds their machine learning models, and isolates individual features that contribute to a home's value. They claim 1 billion home level adjustments, and demonstrate that over time, its accuracy is improved through a combination of supervised, unsupervised, and reinforcement learning. As a former appraiser, I admire how they extract the value of adjustments for property characteristics and make it available in real-time to the public for free. I used to get asked all the time by homeowners if an addition would increase their home's worth, yet I often had to reiterate that cost is not always synonymous with value.
Asymmetry has always been a major inefficiency in the appraisal profession, where the inspector, appraiser, and realtor all collect similar information that will likely never be incorporated into a broader data graph. It is fragmented, inconsistent, and siloed within disparate IT systems, yet an incredibly valuable resource that is simply not being leveraged. Collecting these unique data points with Opendoor's own workforce strengthens their competitive advantage, which I would relate to one the 7 Powers in the foundations of business strategy, Cornered Resource, defined as: "Preferential access at attractive terms to a coveted asset that can independently enhance value."
A few short years ago, real estate technology was only on the brink of innovation. Fast forward to today—transacting a home can be done within a few clicks, billions of data points are continuously being analyzed at scale through machine learning and AI, and a determination of market value for your property is delivered digitally. The pandemic has surely accelerated this new era of Proptech, and it will be interesting to watch how Opendoor continues to evolve the last frontier to fully embrace modern technology.
What a time to be in real estate.