The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: The Opendoor Memo: Keith Rabois on The Origins of Opendoor from a Conversation with Peter Thiel, Why Cash is Not a Competitive Moat for Startups Today and What People Misunderstand About Black Swan Events in Real Estate and How it Impacts Opendoor

Sep 30, 2021

Keith Rabois, a General Partner at Founders Fund, discusses his groundbreaking role in the creation of Opendoor, inspired by a pivotal conversation with Peter Thiel. He shares insights into the market dynamics that fueled his excitement for the venture and the unique challenges he encountered in launching the company amidst capital scarcity. Rabois also delves into the importance of consumer trust and pricing accuracy, as well as the evolving nature of startup fundraising today, highlighting lessons learned from both Opendoor and his current venture, OpenStore.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

ANECDOTE

OpenDoor's Origin

Keith Rabois conceived OpenDoor in 2003, inspired by Peter Thiel's challenge to tackle the largest tech-unaffected asset class.
A prototype called HomeRun, with contributions from Chad Hurley and Max Levchin, was built but faced funding challenges.

INSIGHT

2003 Funding Challenges

Launching OpenDoor in 2003 was deferred due to limited capital and the nascent stage of debt financing for tech companies.
Securing sufficient funding to acquire enough homes and iterate on the pricing model was crucial for early validation.

INSIGHT

Market Analysis

Keith Rabois didn't conduct a traditional top-down market analysis for OpenDoor.
Peter Thiel's prompt to address the lack of technology in residential real estate spurred the company's creation.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

Keith Rabois is a General Partner @ Founders Fund, one of the most successful venture firms of the last decade with home runs in the likes of SpaceX, Palantir, Stripe, Anduril, Facebook, Airbnb, Nubank and many more. As for Keith, he led the first institutional investments in DoorDash, Affirm and has also led investments in Ramp, Trade Republic, Faire and Stripe. Prior to venture, Keith had the most stellar operating career, joining PayPal when their monthly burn-rate was $6 million; Keith joined LinkedIn, Slide and Square when they had no revenue. Fun fact, five companies Keith helped build are now publicly traded with market caps >$1 Billion. Three others have been acquired for greater than $1 Billion or are publicly traded IPOs. If that was not enough, Keith is also the Co-Founder and CEO @ OpenStore, acquiring small DTC businesses.

In Today’s Episode with Keith Rabois You Will Learn:

1.) How Keith first came up with the idea for Opendoor? How a conversation with Peter Thiel led to the founding of the first iteration of the company? Why did it take Keith close to a decade to pursue the idea fully, post having the idea in 2003?

2.) The Market: What made Keith so excited to pursue Opendoor from a top-down market analysis perspective? What does Keith look for in markets he likes to invest in? How did Keith expect the market to change and evolve? What did the market do differently to how Keith thought it would behave?

3.) The Business Model: With debt being the oxygen for Opendoor, how many homes did they need to acquire before they could prove they could price homes accurately? What were Keith's lessons from the first homes they bought? What did not go to plan? Why does Keith disagree, if macro hits real estate, Opendoor's model is challenged? Why does Keith believe it is stronger then?

4.) The Team: What does Keith look for in the founding teams he backs? How does Keith detect diamonds in the rough? How can teams systematically de-risk an opportunity with their experience? With the benefit of hindsight, what would Keith have done differently with the team?

5.) The Funding: Was fundraising for Opendoor always easy? How did the seed round go down? How does Keith feel today about pre-emptive rounds where little company development has taken place? Why did Opendoor decide to SPAC? Why not a direct list? Was this the right choice? What makes for the best SPAC partner?