Opendoor Is Taking part in A Excessive-Stakes Recreation of Disruption: ‘Go Large Or Go Dwelling’

With billions saved — and misplaced — Opendoor resides by the creed “go massive or go dwelling.” But even after a dreary This autumn, the iBuyer persists, which often is the greatest takeaway, Mike DelPrete writes completely for Intel.

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Final week Opendoor posted its This autumn monetary outcomes, revealing mega losses alongside early indicators of a doable turnaround.

Mike DelPrete

Why it issues: In 2022, Opendoor skilled a completely devastating check of its enterprise mannequin – a worst case situation occasion – and survived. 

Behind the numbers: Opendoor posted a internet lack of $1.4 billion in 2022, on high of already sizable historic losses.

  • Opendoor, and plenty of different venture-funded disruptors, are burning billions of {dollars} to develop new enterprise fashions – and the dearth of profitability simply doesn’t matter.
  • Essentially the most noteworthy reality is that Opendoor misplaced $1.4 billion in 2022 and continues to be working (albeit with a brand new CEO).

Money is king: Manufactured monetary metrics apart, Opendoor has loads of (however not limitless) money reserves.

  • Opendoor ended 2022 with $1.3 billion in money, money equivalents, and marketable securities – down from $2.2 billion at first of the yr.
  • That’s a money burn of $934 million – large losses, however a situation that Opendoor was in a position to climate with out elevating extra capital (or going bankrupt).

Like many corporations, Opendoor is racing to chop its working bills as shortly as doable.

  • In November, it laid off about 18 p.c of employees, and only in the near past introduced it had diminished its run-rate bills by roughly $110 million.
  • Working bills are trending considerably decrease – a constructive signal for an organization seeking to preserve money (word: gross sales, advertising and marketing and operations flex up and down based mostly on the variety of dwelling gross sales).

Mike DelPrete

The point of interest upon which the way forward for the enterprise rests is when Opendoor will flip the nook and cease selling homes for a loss.

  • Houses that Opendoor bought in Q3 and This autumn are performing a lot better, with constructive gross margins.
  • Sure, however: The primary properties to promote at all times have the perfect gross margins – over time, with value reductions, gross margins fall – as expertly illustrated by

Mike DelPrete

What to observe: Money, money, money – Opendoor’s future as a going concern rests on its means to fund loss-making operations.

  • With $1.3 billion within the financial institution and the worst behind it, the corporate seems to have loads of runway.

The underside line: Opendoor is taking part in a high-stakes sport of disruption. 

  • With billions within the financial institution and billions in losses, the corporate resides by the creed “go massive or go dwelling.”
  • After experiencing its single largest problem in a difficult historical past, Opendoor persists – which often is the greatest takeaway from a brutal yr.

Mike DelPrete is a strategic adviser and world skilled in actual property tech, together with zavvie, an iBuyer supply aggregator. Join with him on LinkedIn.