Here are the big winners from Opendoor’s IPO

Khosla’s $40M investment grew to $1.4B

National /
Jan.January 05, 2021 08:30 AM
Clockwise from left: Softbank CEO Masayoshi Son, Social Capital CEO Chamath Palihapitiya, Opendoor CEO Eric Wu, Founders Fund partner Keith Rabois and Access Industries chairman Len Blavatnik (Getty; Opendoor; Founders Fund)

Clockwise from left: Softbank CEO Masayoshi Son, Social Capital CEO Chamath Palihapitiya, Opendoor CEO Eric Wu, Founders Fund partner Keith Rabois and Access Industries chairman Len Blavatnik (Getty; Opendoor; Founders Fund)

 

Opendoor’s IPO last month crowned CEO Eric Wu a billionaire. It quintupled the value of SoftBank’s stake to $2.3 billion. And it reaped early investor Khosla Ventures a 36x return — on paper.

After merging with a blank-check company last month, the iBuyer’s stock closed at $31.25 per share on its next day of trading, Dec. 21, giving it a market capitalization of close to $19 billion. Although it has sunk 23 percent since to close Monday at $24.01, the firm is still worth about three times its enterprise value of $5 billion in September, when it struck a deal to go public with a SPAC led by tech investor Chamath Palihapitiya.

Opendoor’s largest shareholder is SoftBank’s Vision Fund with a 13.5 percent stake, followed by Khosla Ventures with a 8.5 percent stake now worth $1.4 billion. Len Blavatnik’s Access Industries holds a 6.4 percent stake, now worth more than $900 million; Wu’s stake is 6 percent and GGV Capital’s is 5 percent.

Founded in 2014, Opendoor uses an algorithm to buy and sell homes. Its early mission was to enable homeowners to sell their homes in just a few clicks.

Keith Rabois, a venture capitalist and partner at Founders Fund, picked Opendoor’s early team, including Wu, Ian Wong and JD Ross, who said on Twitter two weeks ago that Rabois bet on the young team’s future growth rate versus work experience. (Ross was 23 in 2014.) Other early employees and investors made their own walks down memory lane after the stock began trading.

Kyle Tibbitts, Opendoor’s former head of brand marketing, recalled the company hitting an inflection point in 2017. “Growth was slowing in Phoenix so we created a War Room where our team worked every day for weeks,” he wrote. “We shipped a ton and growth came roaring back.”

By 2019, Opendoor had raised $1.3 billion from investors. It sold almost 19,000 homes that year, generating $4.7 billion in revenue. But it also lost $339 million. When the pandemic hit, it suspended home-buying and laid off 35 percent of staff before the housing market came bounding back.

Its early backers stand to profit handsomely from their bets on Opendoor.

Vinod Khosla’s Khosla Ventures led Opendoor’s Series A in 2014 and invested $40 million over the next few years, according to regulatory filings. Back-of-the-napkin math indicates the firm’s investment grew by 36x through the first day of post-merger trading.

GGV, which invested in the Series B round in 2015, invested a total of $57.5 million over several rounds, filings show. Their value grew 15-fold.

And Access Industries’ investment, totaling $137 million over several rounds, grew to be worth nearly eight times as much before giving back some of that gain since the Dec. 21 peak.

By comparison, SoftBank — which tends to place huge bets later in the game — invested $450 million. On paper, its investment grew by a factor of 5.

Homebuilder Lennar, which partnered with Opendoor in 2018 and invested $54 million, has seen a similar return, filings show.

Norwest Venture Partners, which invested $77 million, now holds shares worth about six times more. Andreessen Horowitz’s $65 million investment, in 2018 and 2019, has roughly doubled. And General Atlantic, which invested $125 million in 2018 and 2019, has done a bit better than that.

Anton Levy, General Atlantic’s global head of technology investing, called the IPO a “milestone moment” that speaks to the appeal of Opendoor’s digital platform. “Eric and the Opendoor team have sought to meet a market need by reinventing and simplifying the way consumers buy and sell homes,” he said in a statement.

Filings show Fifth Wall Ventures’ investment grew by a multiple of seven through the peak.The proptech fund, headed by Brendan Wallace and Brad Greiwe, invested $82.4 million over several years. It participated in the Series D and Series E rounds.

On paper, Fifth Wall’s total shares were worth more than $607 million at the close of Day One, or 7.4 times its investment. The VC fund also has “penny” warrants to purchase 300,000 shares of stock for $3,000. Based on Monday’s closing price, those shares are worth $7.2 million.

Glenn Solomon, a managing partner at GGV Capital, told The Information he was skeptical of the SPAC deal at first, but came around when he realized it was a “means to an end,” he said.

“The end is being public, which has value,” Solomon said.

Opendoor has projected $10 billion in revenue by 2023. In an investor presentation in September, it said if it captures 4 percent of the U.S. housing market, it can become a $50 billion company.

Wall Street analysts agree Opendoor has plenty of room to grow.

Jason Helfstein, an analyst at Oppenheimer & Co., gave Opendoor a $34 price target. Opendoor is the leading iBuyer in a nascent sector, “leaving plenty of opportunity for expansion,” he wrote in a Dec. 21 research note. He projected iBuying, which accounted for 0.38 percent of U.S. home sales in 2019, could capture 3.52 percent of the market by 2030.






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