Ex-Zillow CEO Takes Offerpad Public in $3B Deal Pitting Him Against Former Colleagues

Ex-Zillow CEO Takes Offerpad Public in $3B Deal Pitting Him Against Former Colleagues
GeekWire Photo/Kevin Lisota

Former Zillow Group CEO and dot.LA cofounder Spencer Rascoff is jumping back into the real estate game in a big way.

Rascoff, who left the CEO post at Zillow in February 2019, is part of a group of SPAC investors that's buying Offerpad, a 6-year-old real estate company that competes directly with Seattle-based company in a quest to transform how people buy and sell homes.


It's a deal that pits Rascoff against his former colleagues at Zillow, including co-founders Rich Barton and Lloyd Frink.

Rascoff's SPAC — operating under the name Supernova Partners Acquisition Company — is acquiring Offerpad in a deal that will value the Chandler, Ariz.-based company at $3 billion and bring in an additional $650 million in gross proceeds to a real estate technology provider that powers the quick selling and buying of homes. Offerpad plans to trade on the New York Stock Exchange under the ticker symbol OPAD.

The SPAC deal is a volley fired by Rascoff across the bow of his former employer at Zillow, now valued at $35 billion.

Asked about the competition, Rascoff said in an email to GeekWire via a spokeswoman: "I'm still a Zillow shareholder, supporter and lifelong fan."

He added: "The real competition for Offerpad isn't Zillow or Opendoor, it's the fact that 99.5% of the time people sell their home the old analog way."

Rascoff doesn't have a non-compete agreement with Zillow, according to a spokesperson. Still, the competitive nature of the transaction could raise eyebrows on Wall Street and in the inner circles of the online real estate community.

Offerpad shareholders are expected to roll over 100% of their equity into the new entity, owning 75% of the combined company. Offerpad founder and CEO Brian Bair will own about 35% of the voting power of the combined company. He will remain CEO.

"Our team's combination of grit and real estate experience have helped us complete around 30,000 transactions and achieve nearly $7 billion in gross transaction volume since inception, and we are now poised for fast growth as a public company," Bair said in a statement. In a conference call Thursday morning, Bair said they operate more like a logistics company versus a real estate technology company.

The 500-person company, which operates in more than 900 cities, said it plans to do about $1.4 billion in revenue this year. It has raised $975 million to date in equity and debt capital.

As a comparison, Zillow Group in the fourth quarter of last year reported revenue of $789 million across its various platforms, with the company's "Homes" segment that includes online buying and selling of homes coming in at $304 million.

The online buying and selling of homes is becoming a more important part of Zillow's business, which first entered the market in 2018 in Phoenix and Las Vegas. In fact, at the time of the entry into the market — a diversion for Zillow, which until that time had positioned itself as an agnostic media company serving the real estate market — GeekWire's headline story noted: Zillow Group will start buying and selling homes, taking on Opendoor and expanding real estate footprint.

In a statement, Zillow said that the "increasing interest and investment in transforming real estate underscores the incredible demand for a more customer-centric, easier, tech-enabled transaction." It added that its 200 million monthly unique visitors puts the company in "a strong leadership position to usher home shoppers and sellers into the new era of real estate."

Rascoff last year launched a new real estate startup with his former Zillow Group colleagues called Pacaso, which aims to make it easier for more people to own a vacation home. At the time, Rascoff said he didn't view Pacaso as competitive with Zillow — Offerpad certainly is.

SPAC craze

Rascoff is involved in three SPACs, special purpose acquisition companies that are all the rage on Wall Street these days as an alternative to the traditional IPO process. All three of the SPACs are organized under the Supernova umbrella, an organization formed by Rascoff, Alexander Klabin, founder and CEO of Ancient; Robert Reid, an investor who formerly worked in Blackstone's Private Equity Group; and Michael Clifton, an investor who was most recently a senior investment professional at The Carlyle Group.

Rascoff shared more of his interest in SPACs in an interview with GeekWire last fall, noting that the traditional IPO process is broken in part due to the fact that many companies "leave money on the table" when shares soar after an offering.

In recent weeks, a number of industry watchers have pointed to a SPAC bubble. New York Times financial columnist Andrew Ross Sorkin said the SPAC phenomenon is a "sign of craziness," during an interview on The Prof G podcast. Meanwhile, Aaron Pressman at Fortune this week wrote: "These kind of things never end well. I fear the SPACpocalypse is near."

Even still, Rascoff is bullish on the latest SPAC deal between Supernova and Offerpad.

"iBuying has barely scratched the surface of real estate, one of the biggest addressable markets in the world, " Rascoff said in a statement. "…As they bring more transactions online, we believe online real estate as a whole is poised to grow rapidly in the coming years and that Offerpad is incredibly well-positioned to grab a huge piece of this market."

Offerpad also faces competition in the so-called iBuying arena from Seattle-based Redfin, which launched its RedfinNow unit in 2017 and now operates in parts of Arizona, California. Colorado, Texas and Washington state. Redfin projected that its property buying and selling unit would drive between $77 million and $80 million in revenue during the first quarter of 2021.

Additionally, San Francisco-based Opendoor went public last fall in a SPAC deal led by investor and SPAC king Chamath Palihapitiya, a deal that pumped $970 million into the business. Opendoor — which sold 18,799 homes in 2019 and 9,913 last year — is now valued at $16 billion.

According to an investor presentation this morning, Offerpad said it plans to sell 5,612 homes this year and 9,593 homes next year. It plans to operate in 19 markets this year, and move into about 50 markets in the next three years. It is also looking to boost its market share from less than 1% currently to about 4% — a significant jump that the company said would drive substantial revenue and profits. It estimates revenue of $3.9 billion by 2023, and gross profit of $353 million.

This story first appeared on GeekWire.

Subscribe to our newsletter to catch every headline.

Cadence

March Capital Raises $650 Million Fund to Invest in AI Startups

Samson Amore

Samson Amore is a reporter for dot.LA. He holds a degree in journalism from Emerson College and previously covered technology and entertainment for TheWrap and reported on the SoCal startup scene for the Los Angeles Business Journal. Send tips or pitches to samsonamore@dot.la and find him on Twitter @Samsonamore.

March Capital Raises $650 Million Fund to Invest in AI Startups
March Capital founder Jamie Montgomery. Illustration by Dilara Mundy.

Santa Monica-based venture outfit March Capital announced Feb. 3 that it raised its largest fund to date, a $650 million investment vehicle that will be used to back up to 15 startups focused on delivering new uses of artificial intelligence.

Read moreShow less
https://twitter.com/samsonamore
samsonamore@dot.la

The Three Best Ways to Work With Your Startup Board

Spencer Rascoff

Spencer Rascoff serves as executive chairman of dot.LA. He is an entrepreneur and company leader who co-founded Zillow, Hotwire, dot.LA, Pacaso and Supernova, and who served as Zillow's CEO for a decade. During Spencer's time as CEO, Zillow won dozens of "best places to work" awards as it grew to over 4,500 employees, $3 billion in revenue, and $10 billion in market capitalization. Prior to Zillow, Spencer co-founded and was VP Corporate Development of Hotwire, which was sold to Expedia for $685 million in 2003. Through his startup studio and venture capital firm, 75 & Sunny, Spencer is an active angel investor in over 100 companies and is incubating several more.

The Three Best Ways to Work With Your Startup Board

When launching and running a startup, your board of directors is one of your most valuable assets. If you already understand why you need a board and how to structure your board, it may be tempting to think you can cross that item off the list. But building a board is just the beginning. Now you’ve got to get down to business—together.

Read moreShow less
https://twitter.com/spencerrascoff
https://www.linkedin.com/in/spencerrascoff/
admin@dot.la

This Week in ‘Raises’: Saviynt Lands $205M, Pagos Secures $34M

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

This Week in ‘Raises’: Saviynt Lands $205M, Pagos Secures $34M
This Week in ‘Raises’:

While it was a slow week of funding in Los Angeles, security vendor Saviynt managed to score $205 million that will be used to meet the company’s growing demand for its converged identity platform and accelerate innovation.

Read moreShow less
RELATEDEDITOR'S PICKS
LA TECH JOBS
interchangeLA
Trending