Zillow’s Home-Buying Experiment Fell Apart But Investors Think It Could Work In Europe

Venture capital investors are betting the house that a new crop of startups can shake up the slow, and expensive process of buying and selling property in Europe. That comes just months after American property portal Zillow scrapped its own algorithm-driven house flipping service after chalking up losses of close to $880 million dollars.

Italian startup Casavo just raised a $100 million equity, and $300 million of debt, to expand its own instant home buying, or ‘ibuying’, service to France and grow its operations in Italy, Spain, and Portugal. The Milan-based company has already bought and sold 3,200 of homes with a collective $1 billion price tag since launching in 2017.

“We got the question around Zillow but investors who have a strong thesis on residential markets understood that this was a very Zillow specific problem,” says Giorgio Tinacci, founder and CEO, of Casavo.

iBuying, or instant buying, transformed Zillow from being merely a listings portal and valuation tool for buyers and brokers into a real estate agent that was buying thousands of its homes a month at its peak, refurbishing them, before relisting them—sometimes at a higher price. Zillow let go 2,000 staff from its Offers division after labor and supply shortages left it with a $304 million loss in the third quarter of 2021 and a backlog of 7,000 unsold homes.

Tinacci says that while Zillow scrapped its home-buying division after just two years, its American rivals Opendoor, Offerpad and Redfin remain active, and Europe’s property market was very different from the United States.

Tinacci says that he focused on buying apartments in a handful of major European cities like Rome, Milan and Madrid, where there is a “information asymmetry” on listings prices because of patchy data, and lower refurbishment costs, as opposed to the typical suburban American home targeted by Zillow and its rivals. “In a nutshell, Europe has a structural advantage versus the U.S,” says Tinacci.

Casavo claims to be able to make an offer on a property within two days, and complete a sale in under a month while the average Italian home takes 20 weeks to sell, according to data from European property listings site Idealista. But sellers opting for Casavo will need to accept a discount on the valuation in order to book a quick sale.

The latest investment into Casavo, which has now raised $350 million, was led by Exor, the investment arm of the billionaire Agnelli family, along with earlier investors Greenoaks Capital Partners, and Picus Capital. The backing of an Italian deal-making dynasty comes as many venture capital investors have pulled back from tech investments particularly in capital-intensive sectors like property, and is a bet on European property as the continent’s economy is buffeted by a mounting energy crisis and inflation. “They are a perfect fit because they are a long-term investor,” says Tinacci, who was also backed by the family’s venture arm Exor Seeds.

Casavo isn’t the only startup betting that ‘ibuying’ could take off in Europe. Madrid, Spain-based Clikalia raised $75 million in a round led by SoftBank’s Vision Fund in February, and Sequoia Capital led a $20 million Series A in French competitor Zefir later that month.