Zillow Gets Mo Money

21 Comments

[qi:053] Earlier this week we were joking about Fundinistas or companies that the ones who raise venture capital relentlessly. One of them happened to be Zillow, which had raised $57 million. Well, today they called to let us know that they had raised another $30 million, bringing the total to $87 million. And with that they have become the Naomi Campbell of Fundinistas.

Legg Mason Capital Management led the round, and previous investors like Benchmark Capital and TCV also participated in this round. Zillow’s rivals include Trulia and RealEstateABC.com.

We asked CEO Rich Barton if the fresh capital was a hedge against the slump in the housing market and at the same time keep ahead of the competition. “I am not particularly worried about the downturn in the real estate market,” he said. “With the buyers market, we are seeing a lot more time being spent on the site.”

In other words, the downturn might actually be turning to their advantage, though I don’t see how the downturn doesn’t impact them. The real estate related advertising is already slumping, as we had pointed out. With $87 million in venture capital, Zillow has to exit at a whopper-valuation or eventually go public.

Nevertheless, Zillow’s funding is a sign that technology VC dollars continue to flow freely, despite the economic turbulence that has been rocking the markets at large. Barton did say that the new round of capital was a soft hedge against the vagaries of capital markets, where money supply dries up as mysteriously as Boston Red Sox’s late season slump. The company is going to spend more money on sales people and engineers. “We plan to add and expand our community features,” he added. The company has 155 employees.

21 Comments

Ron Asteak

Zillow “Guess-Idiots” appear to rely on public tax records that in some cases haven’t been updated in twenty-five years. The zestimator is a sketchy tool to rely on. I believe it’s best to use a Professional Appraiser when valuing real estate.

Dennis

I agree with Ellen H., Zillow has gone downhill, maybe they really needed this money. Because their website isn’t very good. I hadn’t heard of iggyhouse.com (but it looks pretty cool). for my valuation/information I go to housefront.com or trulia.com….zillow who? (maybe they will make something of themselves with this new money…we’ll see)

India Web 2.0 News

Interesting approach to real estate. It’s amazing that they’ve been able to grow in a terrible housing market. I hope they are able to expand to different cities… this is a service that I would certainly love to use.

[linked to this article via India Web 2.0 News]

nonbeliever

They raised a total of $87M. How are they going to exit? Getting bought out for $1B? I doubt someone will pay $1B for this. IPO? Unlikely.

Don Jones

The famed Bill Miller of Legg Mason led this most recent round for Zillow. Didn’t know he dabbled in traditional venture capital.

john andrews

I have no contact with Zillow, despite living nearby and wanting to have lunch with Vanessa Fox someday. However, Zillow obviously has huge upside due to the very real leadership profile they have in their market, and the amazing monetization potential they obviously understand as a web company. Zillow can be more of a commerce driver than an IYP and if you were combine a decent local IYP with Zillow… ka’ching! Movers, packers, stagers, home improvement, lenders, babies and kids and CofC style lead gen. etc etc etc. Social media aspects aside (which they “get” as well, given some of the people they’ve brought onboard) on-page ads are soooo not that important. Housing slump? So what? They’ve got the flexibility and now they also have the money to do it right for the long term.

anon

I suspect Zillow is the real deal. Not all companies are created alike. Real estate is a massive, massive industry that rolls in downturns as well as upturns.

anontroll

@Artashes – let me turn up the heat a bit: 50 employees ~ $1mil/month burn.
So that’s 10 months not 9 years! But they’re doing maybe $2mil/month in ad revenue, so that stretches the money for a couple years.

Here’s what I wonder. How does zillow go back to the VC well (with a straight face) and say, “we need an up round” when:

  1. they have zero (at best) traffic growth?
    http://siteanalytics.compete.com/realtor.com+zillow.com/?metric=uv

  2. The site is already tightly packed with advertising so the easy CPM increases are done.

  3. They might have some innovative advertising products coming (I hope so), but 95% of their traffic has to be for their basic zestimate queries, not for plumbers, so incremental revenue is likely to be marginal.

  4. Valuation is now higher than any of the established public players, which have lots more revenue.

So it’s all got to be on Barton’s reputation, right? But isn’t he goofing off with a hedge fund or something, is he actually running zillow? I guess big exits have been made for less. And I suppose we’d all be lucky to have an asset like that. Whatever it takes.

Patricia

I’m no expert by any means, but I’ve always been taught that raising, and raising, and raising is a bad thing, not a good one.

David G from Zillow.com

Hi, it’s David from Zillow –

The number one question here seems to be; “how can Zillow grow advertising revenue while the real estate market is down?” Consider that more than 80% of home buyers start their search online, yet less than 15% of real estate advertising revenue is currently spent on the web. A downturn in the housing market actually increases the focus on ROI from advertising and should therefore accelerate the trend to advertise online – where the buyers are. Further, Zillow’s audience represents a wealthy demographic that appeals to a broad range of advertisers who aren’t impacted by the changes in the housing market..

buckpost – that’s a theory shared by Bill Tanner from Hitwise. He said he measured increased interest in online valuations when the market started to turn.

Mr. Chips – Thank You!

Mr. Chips

I do some business in the Real Estate industry here in Miami Beach, and Zillow is one of those companies I would pay to get their services.. so I believe it is going into the right direction!

Artashes

@ Peter:

/ start of sarcasm.

Who cares what their revenue is? 155 employees x $70,000 (salary each) = They can operate for 9 years without worrying about that.

/ end of sarcasm.

buckpost

It’s ironic that as the U.S. real estate market flounders, Zillow thrives. It kind of counter-intuitive but maybe it makes sense to have a resource that gives you detailed information at a time when you better make the right decision buying or selling.

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