Subscribe to Inc. This Morning, a daily news digest curated for those interested in entrepreneurship.
Changing the way you've always done something is really hard. Especially when it involves the biggest investment you may make in your lifetime.
This is the task facing Opendoor, the San Francisco-based real estate tech company with a $3.8 billion valuation. The startup wants to radically change how millions of people buy and sell their homes.
My Inc. colleague Kevin J. Ryan spent months reporting on Opendoor--its initial success and intense challenges--for a feature published on Tuesday. In the story, he explains how Opendoor pioneered the concept of "iBuying"--buying and selling homes online--when it launched five years ago. Since then, Opendoor has grown a lot. In 2019, the startup is on pace to purchase $5 billion in homes, most of which it aims to sell within about 90 days.
While the growth is impressive, a little industry context reveals that Opendoor has a long way to go: Annually, $1.6 trillion worth real estate transactions close in the U.S., and iBuying accounts for less than 1 percent of them.
For that to change, Opendoor founder and CEO Eric Wu needs to change a lot of minds. People spend months or even years planning for a move. Quick turnarounds and instant offers feel hasty. Unknown solutions feel untrustworthy. Plus, the concept of moving the entire home buying and selling process online--especially with the specter of automation looming--can make many prospective customers feel distinctly uncomfortable.
"Overall, I think [Opendoor's model] will work," Gilles Duranton, dean's chair in real estate at the Wharton School of the University of Pennsylvania, told Inc. "But are they going to capture more than 2 or 3 percent of market? I have doubt. And I think they are dreaming much bigger than that."
Wu, of course, is undaunted. He envisions a future in which Opendoor has removed every pain point associated with buying and selling homes. To get there, the startup will have to deal with some serious growing pains of its own and an increasingly long list of competitors.
For the moment, turning a profit isn't yet a goal. Opendoor has $1.3 billion of funding to burn and a head start over its rivals.
But the clock is ticking.