Keith Rabois explains why OpenDoor launched in Phoenix: $250k median home price, 90-day time-on-market, and 20% unsold rate made it ideal for testing instant offers. He's targeting markets that mirror national averages, avoiding the Bay Area, with Portland and Dallas next. The team is 20 people and growing.
Chapters
Okay, so congrats on launching Open Door Family. You launched in Phoenix. So two questions. Tell us a little bit about the launch. What cities should consumers expect you guys to roll out? And then what's the biggest or toughest lesson you've learned in the time of, you know, starting with the founding team.
And now getting to launch that you were surprised by? So let's see. So we launched a couple days ago in Phoenix. We're really excited about that. Phoenix is a pretty big market. Last year, 82,000 people sold their home in Phoenix. even with all the friction and expense. So hopefully we'll unlock even greater sales. We've also announced that we're going to be going to Portland and Dallas soon, and then we'll roll out from there.
We haven't committed yet to cities beyond-- which cities beyond that? How did you guys think about cities? I know following companies like DoorDash and Instacart and Lyft, there's all this kind.
Of fun analysis of thinking through where do you go next? How do you guys think about that? Well, we wanted to avoid the Bay Area, which would be the natural place to start. As I talk about a lot, the median home in the United States is worth $250,000. So the Bay Area is incredibly atypical and anomalous. Secondly, the Bay Area time on market is significantly less. Normally in the United States, believe it or not, if you list your home for sale, it takes 90 days from when you list to get an offer that you accept. In the Bay Area, it's very easy for sellers to list their home today and have offers tomorrow. So it's a very, very weird environment here. So we wanted to avoid that. So then the question is where? And we wanted to pick a market that allows us to test out a lot of things. For example, if you go to Boston, nobody sells their homes in January and February because it's so cold. Phoenix is generally a year-round market. Our CEO, Eric, is actually from Phoenix. Little things like that matter. I think Phoenix is a very good market for adding a seller value proposition. Right now, it takes over 90 days to sell your home on average in Phoenix. 19 to 23% of homes are actually listed in Phoenix don't even ever sell. So one of the other things that sometimes sellers forget about is just because you list it, it doesn't mean you're magically going to close. Where with open door, we give you an offer right then and there and you're done. So if you can find markets that are typical in terms of median home distribution, that have year round sales and where the market is obviously broken. So 90 days plus on market. and 20% or so of people selling their homes can't even get a buyer, that's actually a great place for us to innovate.
Got it. And so have you brought any of your learnings from being an investor in Instacart, DoorDash, Lyft, and how these cities expand to what you've done at Opendoor.
And picking these new cities? I wouldn't say that per se. I mean, obviously we're incredibly excited to have Evan, who's co-founder of DoorDash, join the Opendoor team. And so there are some lessons from the on-demand economy that can apply to some of the things we do. But we're not quite an immediate gratification in terms of instant liquidity that some of these services have to provide hot food in 30 minutes, or as we talked about earlier, a car within 3 minutes. So it's not exactly Apple's apples. Right.
But you will have a city launcher team. So if you're going to go into Portland, you're going to go into Dallas, you're going to need some kind of on the ground activity.
Sure. We'll probably need some, but I don't think that's a problem because also our margins and just our structure are different. when we're hopefully at scale, we should be talking about thousands of dollars, not a dollar trying to carve out a dollar here and there. So the dynamics of our market in our product is very different. So I think in startups, this is globally true, which is taking a lesson from one company and applying it to another just doesn't work. You can take conceptual learnings and try to figure out how they apply to your problem, but just taking advice from one company and applying it to the next almost never works.
And have you guys thought about markets outside the United States?
Not for now. I mean, the United States alone is something like $100 trillion of sales and something like $70 billion last year of agent commissions. And the availability of data, the legal process, the time on market, who pays for what is all very different and culturally specific. you could build the largest company ever. If we did the US well, we could build the largest company ever. So I'm not too worried about additional markets. Good market.
And then so what's been the hardest lesson you've learned through the process? I don't know if we've really had.
A great lesson yet. I know this is kind of a bad answer, but fundamentally we're just live. So I'm sure we'll learn a lot. I mean, we've been able to assemble an incredible team. So that reinforces some of my instincts. You know, Vinod has this lesson and adage about the team you build is the company you build. And so we have about 20 people, full-time employees now, and they're extraordinary. And I think that's become self-fulfilling. So I think it's incrementally easier for us to recruit people because they see the quality of the team. So just confirming that bias of starting with the team and then building a company that way. But it's not a surprise. We'll probably find some data, like that's anomalous and that's a positive thing to find anomalies, but we haven't yet made enough transactions and had enough offers extended to really abstract out anomalous behavior yet.
Got it. And then what should people look for from Open Door in 2015, these two additional markets on top of Phoenix?
And hopefully we'll expand beyond there. One of the things, and this sounds mundane, but I'm sure entrepreneurs this will resonate with, is we're ready to run out of office space. We need a new office. We just launched the company in March, in April, I just started the company and we're already way out of space and struggling with what to do in San Francisco. Maybe we'll go to Daly City. Yeah, right. I read it. It's a very difficult problem and the costs and the consequences of making a mistake in real estate are pretty significant.
Are you finding it difficult to find space, like suitable space in San Francisco?
It's very expensive with longer term commitments and how that affects our financials and when do we raise money. So this stuff is actually more important than people realize. And I think that's-- this is going.
Back to Bill's post about the 10-year lease lock-in.
Exactly. A lot of companies in the '90s and the bubble failed because they had these commitments and they're all sort of self-fulfilling. They felt safe because someone could sublease. But if the market changes, there's no one to sublease and you're on the hook and you're going to be bankrupt. So the consequences of making a mistake in an office space, both culturally, which we've talked about before, as well as financially, are really material. I think that's a surprise that I'm already encountering this with a company that we really founded in April, and that we're already going through a lot of permutations and thinking about how to play out the office space world.
And do you see that maybe not Open Door, but other companies moving to other areas because of that? Or is it not?
They're certainly exploring that. I mean, it does affect recruiting and the talent's the most important thing to some extent. your derivative to where do the best people really want to work. And depending on what kind of company you're building, whether it's hardware or software, or design oriented or more deep infrastructure, there's different talent pools that you're tapping into and prioritizing. But really, everybody's competing for talent right now, and I don't know that it's possible to make a sub-optimal decision from a talent perspective and still be super successful.
