Houzz became the seventh highest valued e-commerce startup in the world on Friday when it closed a $400M Series E round financed by GGV Capital, ICONIQ Capital, and Sequoia Capital. Houzz, which provides a community-driven visual platform for residential home remodeling and design, is valued at $3.84B following the raise – representing a 71% increase over its earlier valuation of $2.24B, which it received in September 2014.
Using CB Insights data and analytics platform, we looked at where Houzz’s raise stands amidst other deals in the e-commerce home furnishings space, and how the company stacks up against Pinterest, the site to which it is often compared.
The Houzz deal is the largest ever raise of any home furnishings-focused e-commerce startup, as well as the fourth largest funding round to an e-commerce startup this quarter.
The Series E round is Houzz’s first raise since September 2014. Coming just a month after mattress delivery startup Casper closed a $170M Series C, Houzz’s latest financing round puts Q2’17 funding to home furnishing e-commerce sites through 06/26/17 at $616.4M – making this the sector’s highest-funded quarter of all time by a significant margin.
Yet the mega-rounds raised by Houzz and Casper come at a time when deal activity among home-furnishing sites has largely been on the downswing. Financing activity hit a five-year peak of 39 deals in Q3’16, with subsequent declines over the last two quarters. Houzz’s standout deal is just the 20th raise in the space this quarter.
Not just a ‘niche Pinterest’
Houzz has achieved significant traction and its latest round brings its total funding to $613.6M and puts it in closer company with Pinterest, the startup Houzz is most often compared to.
Both Houzz and Pinterest – which has raised $1.47B and is currently valued north of $10B – are “social discovery platforms” that offer consumers the ability to browse curated images of designs and products available for purchase.
Unlike Pinterest, Houzz operates exclusively in the home design niche and offers services from contractors and architects who must pay to offer services on their website. As a more traditional e-commerce business, Houzz is less dependent on advertising revenue than Pinterest.
The Houzz marketplace offers more than 8 million products and features services from 1.5+ million home professionals, enabling the company to earn fees and commissions on consumer purchases. Pinterest, meanwhile, features “buyable pins” and offers multi-product “shop the look” tools to enable customers to make purchases, but Pinterest is not making money directly off those purchases. Instead the company earns its revenue from advertising.
So while Pinterest remains far ahead of Houzz in terms of users – reporting 175 million monthly active users compared to Houzz’s 40 million – Houzz’s offering extends through the entirety of the home renovation buying cycle, from discovery to purchase.
Houzz has also shown a commitment to deploying advanced technology in its consumer-facing product. The company launched a basic augmented reality mode in May, enabling users to see how around 300,000 of the items in Houzz’s inventory would look in their own homes. In addition, Houzz also says that its visual recognition feature, Visual Match, uses deep learning technology to help customers learn about and purchase items suited to their spaces and budgets. Pinterest has ventured into AR with its Pinterest Lens feature, but the tool remains in beta.
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