The Closing: Spencer Rascoff

The co-founder of Zillow on entrepreneurship and investing, the notorious Zestimate and trashy reality TV

Spencer Rascoff (Photos by Kevin Scanlon)
Spencer Rascoff (Photos by Kevin Scanlon)

Spencer Rascoff built the most consequential residential tech startup of a generation. As co-founder and former CEO of Zillow, he pioneered consumer access to home listings and price information, making his firm a platform that buyers and sellers — and, resentfully, brokers — could not do business without.

After stepping away from Zillow in February 2019, Rascoff jumped back into the startup world as a founder. In January, he launched dot.LA, a news site covering the tech scene in Los Angeles, where he lives. He’s also an active investor, raising $350 million in an October IPO for a blank-check company with as yet undisclosed acquisition targets. Last month, he launched Pacaso, a startup that lets buyers purchase shares in second homes.

Rascoff was just 24 in 1999 when he co-founded the discount travel startup Hotwire, which Expedia bought in 2003 for nearly $700 million in cash. Three years later, Rascoff and Expedia co-founders Rich Barton and Lloyd Frink started Zillow. Rascoff held various roles at the firm — COO, CFO and vice president of marketing — before being tapped as CEO in 2010. The following year, when he was 35, he led Zillow through an IPO that valued the company at more than $1 billion.

Rascoff recently characterized that IPO as a “facepalm” moment because the stock surged from $20 to $60 per share within minutes of trading. That kind of one-day pop makes for a great headline but indicates the company left money on the table.

The IPO did, however, fuel Zillow’s exponential growth. Over Rascoff’s tenure as CEO, Zillow acquired 15 companies, including Trulia, which it purchased for $3.5 billion in 2014. Its headcount went from 200 to 4,000, while annual revenue grew to $1.3 billion from $30 million.

Last year, with Zillow’s stock dropping, Barton replaced Rascoff as CEO to go full-tilt on iBuying,  an algorithmically driven homebuying model that guarantees sellers a quick close and then aims to resell the property at a premium. (Barton has described it as a “moonshot” opportunity; he believes ignoring iBuying poses an “existential” threat.) Rascoff called the change “bittersweet,” but told The Real Deal he’s hardwired to keep building companies.

“I’m just going,” he said, “Like a rocket that doesn’t have any burners anymore … The habits have been formed.”

Born: October 24, 1975
Lives in: Los Angeles
Hometown: New York City
Family: Married with three kids (15, 12 and 9)

Why real estate? I have a terrible memory for faces and names, but I have a fantastic memory for houses. I can remember almost every listing I’ve ever seen. I love that real estate is a store of wealth that you can enjoy. I’ve always found it dissatisfying and hollow to open up a brokerage account website and see numbers on a screen that show me some imaginary amount of money that I have sitting there.

You were a nationally ranked chess player. Any lessons learned? I was the fifth-best chess player in the country under the age of 12. My coach at Dalton was Svetozar Jovanovic, a Yugoslavian chess master. He’d have a big pointer and he’d snap it on your desk if you weren’t paying attention. It was straight out of the Cold War Soviet Union, but on the Upper East Side. But it taught me everything: competition, concentration, how to plan ahead, to hate losing.

Your dad managed the Rolling Stones. How did that happen? My dad worked at a white-shoe accounting firm called Hurdman & Cranstoun. One day in 1972, he was in the men’s room and the gentleman next to him was grumbling. He was a rotund British gentleman who identified himself as Prince Rupert Loewenstein, manager of the Rolling Stones. He was disappointed that Hurdman & Cranstoun wouldn’t take on the Rolling Stones because they were too wild for a white-shoe firm.

My dad thought that sounded like an exciting opportunity, so he took a leave of absence to be the tour accountant. Ultimately, he left the firm, and over the next 30 years, he expanded into producing rock concerts and became one of the largest producers and business managers of tours for the Rolling Stones, U2, David Bowie, Pink Floyd, Paul Simon and lots of other folks.

What was that like for you? It was cool but in a nerdy, business-y sort of way. Watching concerts with my dad was never about the music. We would stand together on the mixing plot, with 120,000 people cheering for the Rolling Stones, and he would be whispering in my ear, saying, “Those fireworks cost $100,000, and they probably weren’t necessary, but Mick wanted them.” “That big, inflatable woman in a bikini, it was $80,000 and probably wasn’t necessary, but Keith wanted it.”  He’d walk me through the P&L of every show.

Each tour was really a startup in its own right. [My dad] would come home from work one day and say, “U2 has agreed to tour, so it’s time to spin it up.” About 200 employees would come together within a couple weeks.

Zillow co-founder and proptech investor Spencer RascoffSeems like you took a lot from your father. You now also have a business podcast with your son, called “Dad I have a question.” How’d that come about? Luke [age 12] asks me a lot of questions. One time, my father-in-law was there when Luke asked me, for the millionth time, about some topic. After listening to me explain the answer, my father-in-law said, “You should really turn this into a podcast.” Luke loves measuring the statistics, tracking which ones perform better than others. He’s very focused on the fact that the tech-focused ones do well, and the political-focused ones do poorly. We have 35,000 listeners, so it’s been a fun project. Yesterday, Sophie, my 15-year-old daughter, had no school, so I brought her to the dot.LA summit for the day, and she ran social media. This is breaking news, I suppose, but I’m incubating another startup idea for which Sophie is the program manager.

What’s the concept? I can’t tell you that yet. Stay tuned.

You were 24 when you co-founded Hotwire, which you sold to Expedia. Was it hard to get taken seriously at that age? Yes. I vividly remember, as a 24-year-old, sitting with a 45-year-old who reported to me and thinking to myself, “How can I mentor, manage, coach and direct this employee?” That experience changed my management style to be more collaborative. In other words, I realized that I couldn’t tell him what to do. Instead, I could discuss what challenges he was facing and try to help solve his problems along with him.

Where did the idea for Zillow come from? We were brainstorming business ideas in a conference room in Downtown Seattle, looking out the window at [the neighborhood of Queen Anne], where these Victorian houses all sit on a hillside. Somebody said, “Imagine if you could see a price on every one of those rooftops, almost like magic glasses that you could put on and see data and information on every home.” 

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The original idea was to try to create three prices on every home: a bid price that somebody would offer to pay for the home, an ask price that a homeowner would sell their home for and a market-clearing price, which was meant to be the Zestimate.

So the initial idea was around pricing, not listings? Right. In fact, for the first two years there were no listings on Zillow. It wasn’t until about 2008, once we were already the fifth-largest real estate website, that we went to brokerages and said, “Will you please give us your listings?”

Is it true your first move as Zillow CEO was to get rid of all the individual offices [switching to a bullpen] ? Absolutely. It was quite controversial at the time, and Rich [Barton] wasn’t immediately sure that it was a good idea.

Do you think the Zestimate deserves the hate it gets? A few years ago, you sold your house for way less than the Zestimate; this year, you listed another for $7 million over. There are two points of criticism, accuracy and privacy.

On privacy, Zillow provided enormous transparency to the marketplace, which helps people make smarter decisions. And I have no apologies for that level of information, even though I sometimes am the subject of articles about my own real estate transactions, which brings me no joy.

The accuracy issue is a different topic. Zestimates have always been less accurate at the high end and at the very low end because there are fewer data points. What is a $30 million house worth? It’s very hard to know. The accuracy, however, has improved dramatically over time. When we launched in 2006, we had approximately a 14 percent margin of error. Today, it is in the mid-single digits.

Zillow sparked a lot of fury among residential agents in markets like New York. How did you handle the criticism? I like to be liked. Personal criticism and criticism of my company always cut deep. My strategy was one of intense engagement. I spent a lot of time on message boards, on social media and in brokers’ offices … building personal relationships and listening. That differs from some other companies like Uber, for example, that have a more aggressive approach to the industries that it disrupts.

You stepped down as CEO of Zillow last year when co-founder Rich Barton took over to spearhead a big iBuying push. I’ve heard you’re not a fan of iBuying. Oh, I’m a huge believer. I set into motion Zillow’s iBuying strategy. First we tried this marketplace model called Instant Offers: A consumer would say “I want to sell my home” and we would send their information to a handful of iBuyers. This experiment showed us there was clearly demand for the service, but ultimately we realized we had to be the ones that did the iBuying, so Zillow Offers was born. I still think it’s a fundamental and growing part of the real estate universe.

How’s your relationship with Rich Barton now? Do you agree with the Zillow 2.0 strategy? He’s busy running Zillow and I’m doing my thing, so we don’t talk often. It’s friendly. There are always little things from the outside that you ask yourself, “Would I have done that little thing or not?” But the overall strategic direction I agree with.

Is dot.LA a source of deal flow? Absolutely. It’s certainly not why I started it, but dot.LA unites my passions in startups, journalism and L.A. It’s also allowed me to meet great founders, some of whom I’ve gone on to invest in.

You just started a company called Pacaso that lets people buy shares of a second home. Do you have other homes? I had a second home in Napa Valley that burned down in a wildfire a couple of years ago. It was our family’s happy place. We sold the land to a neighbor and still think a lot about trying to have a second home there. I’m looking for a Pacaso.

You prefer to own a piece rather than the whole thing? I’m not going to use it all the time. My home that burned down was a $3 million home. Instead of buying 100 percent of a $3 million home, I can buy a quarter of a $12 million home.

How has the pandemic changed your routine? For the 20 years prior to Covid I was on a plane every couple of days, and instead I’ve been with my family for eight months. The big innovation that launched today in the Rascoff house is doors. This house has a pretty open floor plan, and I’ve always thought about adding a door to my home office. After four years of waiting, I finally had a door installed.

Where was the last place you traveled or vacationed? Last Christmas, we went to Machu Picchu, Peru. My wife is Colombian, and there’s a South American tradition on New Year’s Eve: You take an empty suitcase and run around shouting the place you hope to travel in the next year. We were shouting “Thailand! Russia! Antarctica!” I certainly had no idea at the time that those would be off the table.

What are your vices? I watch a decent amount of garbage TV. We watch “Vanderpump Rules” and “Real Housewives” and “The Bachelor.” I eat a lot of ice cream.

Do you feel successful? Yes. I’m not really motivated by money or media. I’m motivated by identifying new challenges and solving interesting problems.

How do you instill that value in your kids? My parents always told me I’d never get a single dime of their money, but they’d always pay for my own education and then I’d be on my own. We’ve been saying the same thing to our kids. We’ll be there to cheer them along, but not support them.

Your brother died in a car crash when he was 17. Did that shape you? He died the day before graduating from high school. He was taking the last edition of the school newspaper to the printer after an all-nighter. It caused me to kick things into the next gear in terms of focus and drive and seeking accomplishment. I felt like I had to accomplish twice as much to compensate for what he would have accomplished. I haven’t stopped running since.

What’s the best piece of advice you’ve gotten? Wherever you’re working, look [for someone] 10 years your senior. Find out if you want to be that person, and if you aren’t totally satisfied, get out.

This interview has been edited and condensed for clarity.