Recently, when giving speeches, I have discussed investment trends and industry trends that the built environment is experiencing. They are quite contrasting, but perhaps with good reason.
On the one hand, the trend for venture capital investment in technology suppliers is currently bias toward the underlying infrastructure. This is no surprise as it is where true technological change is happening. It carries the higher risk, I might suggest, but also the one with the highest potential returns.
Industry trends, however, are somewhat different. They are most definitely skewed to a more emotional angle.
As you can see from the slide below, the industry trends fit in three main areas; Certainty, Affordability and then Control.
Usually in speeches, I then dive into examples of each of these motivations, discussing relevant business models as I go.
For Affordability, I review business models around Rent to Buy, Credit schemes and discuss this natural symbiosis between FinTech and PropTech.
For Control, I often talk about the online agent models. Putting the buyer in control and helping them with a degree of digital service.
Whilst I don’t offer my own opinions on whether I agree with the business models or not, I am at pains to say that these are trends I am seeing in the market.
And this brings me to the aspect of “Certainty”. Here, I reference the trend in the last few years for iBuyer models. The model that uses an auto valuation model, to work out the figures on viable purchases and then, in some cases, does them up to sell themselves. Hopefully making money in the meantime.
Each iBuyer has a slightly different modus operandi, but essentially they all offer buyers certainty and quick sales. Something that is becoming important to some depending on situation.
I have spoken briefly about iBuyers in this column before, too. I discussed my scepticism of The Guild operating an IBuyer model. But this column today looks at something a little bit differently.
Opendoor, an iBuyer based in the US and having started operations in 2014, is looking to list directly using a SPAC - a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.
These seem all the rage at the minute for certain types of company to IPO. And not all positive as they do jump through several hoops to list which some find questionable.
That is also the case here for Opendoor. A questionable SPAC.
Is it listing because it is so successful or are they listing because they need to for a cash injection to try desperately to grab market share?
I have read a lot about this move by Opendoor to list and, as such, I want to share the resources here with you to form your own opinion on the model.
Firstly, here is a largely positive piece by Packy McCormick - an excellent analyst and writer about all investment matters. He doesn’t have specific property experience but he is looking at it from the numbers perspective.
On the other side of it all are both Mike Delprete (a passionate writer on the topic of iBuyers) and Drew Myers (one of the founding team at Zillow).
You can read Drew’s article - The Waking of the iBuyer elephant – here.
But lastly, do watch the taking apart of the $50bn playbook by Mike Delprete. He essentially tells you why it isn’t going to work. I must say I agree with him.
And then he adds another five minutes to it here. In this video, which you can also view at the bottom of the piece, he talks a lot about how adding ancillary services is not going to make the business - “if it hasn’t already been done, it is likely not going to be.”
All in all, a bit of a difference piece this week, but I hope it gives you an idea of just how big these iBuyer markets are trying to be - and the ways they are trying to create investment funds to fuel their growth.
My perspective is simply not enough here. We need others to be brought in to really give weight to it all.
Giving the general population some form of certainty is not a cheap exercise, it seems...