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“Cash is king,” Mike DelPrete proclaimed.
DelPrete had taken to the stage at Inman Connect Las Vegas last week to discuss the state of the housing industry and in particular what is happening to big companies, such as Opendoor. During his presentation he ultimately argued that many newer entrants to the real estate business are coming after agent commissions.
But before he got to that point DelPrete explained that in the past, big companies with venture capital funding had the ability to lose money almost indefinitely. They existed in a state of “sustained unprofitability.”
“It’s a competitive advantage that is incredibly difficult to compete with,” DelPrete said.
However, thanks to the ongoing market shift and a changing economic landscape, investors pulling back and losing money forever is no longer an option. And that means for the real estate technology sector, “cash is king” because “you can’t pay bills in adjusted EBITDA, or contribution margin, or any other manufactured financial metric.”
The result is that “sustained unprofitability” is less and less of an option for big, historically well-funded companies.
“Now that has turned from an advantage to a liability,” DelPrete said of sustained unprofitability.
Watch DelPrete’s entire address via the video at the top of this post.