Venture capitalists are betting that a new breed of startups can disrupt the slow (and expensive) process of buying and selling real estate in Europe. It comes just months after US real estate site Zillow shut down its own algorithm-based house flipping service after posting losses of nearly $880 million.
Italian startup Casavo has just raised $100 million in equity and $300 million in debt to expand its own buy-it-now service in France and expand operations in Italy, Spain and Portugal. The Milan-based company has bought and sold 3,200 homes since its inception in 2017 for a combined price of $1 billion.
“We asked the question about Zillow, but investors who have a solid thesis on housing markets understood that this was a very Zillow-specific issue,” said Giorgio Tinacci, Founder and CEO of Casavo. . iBuying, or Instant Buying, transformed Zillow from a simple listing portal and review tool for buyers and real estate agents into a realtor that, at its peak, was buying thousands of its homes every month , renovated them before re-listing them - sometimes at a higher price. Zillow laid off 2,000 employees from its listings department after labor and supply shortages left it with a loss of $304 million and a backlog of 7,000 unsold homes in the third quarter of 2021.
Tinacci says that while Zillow dropped its home buying division after just two years, its US rivals Opendoor, Offerpad and Redfin remain active and the European real estate market is very different from that of the United States.
Tinacci says he is focused on buying apartments in a handful of major European cities, such as Rome, Milan and Madrid, where there is "information asymmetry" in listing prices due to data uneven and lower renovation costs, unlike the typical American suburb, the target of Zillow and its rival. "In short, Europe has a structural advantage over the United States," says Tinacci. Casavo claims to be able to quote a property in two days and close a sale in less than a month, when it takes 20 weeks to sell the average Italian home, according to data from European property site Idealista. However, sellers who choose Casavo must accept a discount on the review to book a quick sale.
The latest investment in Casavo, which has now raised $350 million, was led by Exor, the investment arm of the billionaire Agnelli family, along with previous investors Greenoaks Capital Partners and Picus Capital. Support for an Italian dynasty of dealmakers comes as many venture capitalists have retreated from tech investments, especially in capital-intensive sectors like real estate, and are betting on European ownership as the continent's economy is battered by a growing energy crisis and inflation. "They're a perfect fit because they're a long-term investor," says Tinacci, who has also been backed by the family's venture capital arm, Exor Seeds. Casavo is not the only startup to bet that "ibuying" could take off in Europe. Clikalia, based in Madrid, Spain, raised $ 75 million in February in a round led by SoftBank's Vision Fund, and Sequoia Capital led a $ 20 million Series A in French competitor Zefir at the end of the month.