The real estate market regularly goes through
ups and downs, but today comes big news for a startup in the space that
has built a platform that it believes can help all players in it —
buyers, sellers and those who help with the buying and selling — no
matter what stage of the cycle we happen to be in.
Compass
— a company that has built a three-sided marketplace for the industry,
along with a wide set of algorithms to help make it work — has raised a
$370 million round of funding, money that it plans to use to continue
expanding geographically (within existing markets in the U.S. such as
New York, Connecticut.
Philadelphia, Washington, Atlanta, SF and LA and
other areas), as well as for more tech and product development. Sources
tell me that it’s also now eyeing up an IPO, likely sometime in the next
24 months.
“From day one we knew, when we had just a small amount
of people at the company, we had a very clear focus,” co-founder and
chairman Ori Allon said in an interview. “We wanted to bring more tech
and data and transparency to real estate, and I think it’s paid off.”
Based out of New York, Compass earlier this year established an engineering hub in Seattle run by the former CTO of AI for Microsoft, Joseph Sirosh . It’s continuing to hire there and elsewhere (alongside also making acqui-hires for talent).
The
Series G funding — which brings the total raised by Compass to $1.5
billion — is coming in at a $6.4 billion valuation, a huge uptick for
the company compared to its $4.4 billion valuation less than a year ago.
Part of the reason for that has been the company’s massive growth: in
the last quarter, its revenues were up 250% compared to Q2 2018.
The investor list for this latest round includes previous investors Canada Pension Plan Investment Board (CPPIB), Dragoneer Investment Group and SoftBank Vision Fund. Other backers since it was first founded in 2012 have included Founders Fund, the Qatar Investment Authority (a construction and real estate giant), Fidelity and others.
The company was co-founded by Ori Allon and Robert Reffkin —
respectively the chairman and CEO, pictured here on the right and left
of COO Maelle Gavet. The company first caught my eye because of Allon.
An engineer by training, he has a string of notable prior successes in
the field of search to his name (his two previous startups were sold to Google and Twitter, which used them as the basis of large areas of their search and discovery algorithms).
In
this latest entrepreneurial foray, Allon’s vision of using machine
learning algorithms to improve decisions that humans make has been
tailored to the specific vertical of real estate.
The platform is
not a mere marketplace to connect buyers to real estate agents to
sellers, but an engine that helps figure out pricing, timing for sales
and how to stage homes (and more recently how to improve them with
actual building work by way of Compass Concierge) to get the best prices
and best sales.
It also helps real estate agents — it currently
works with some 13,000 of them — manage their time and their customers
(by way of an acquisition it made of CRM platform Contactually earlier
this year). Starting with high-end homes for private individuals,
Compass has expanded to commercial real estate and a much wider set of
price brackets. Its traction in the market among its three customer
bases of realtors, buyers and sellers has also meant that it’s been the
subject of around 10 lawsuits from the likes of Zillow (over IP theft from former employees) and Realology (which owns firms like Coldwell Banker and Century21).
There
is a wide opportunity for vertical search businesses at the moment.
People want more accurate and targeted information to make purchasing
decisions; and companies that are in the business of providing
information (and selling things) are keen for better platforms to bring
in online visitors and increase their conversions.
I understand
that this has led to Compass getting approached for acquisitions, but
that is not in the blueprint for this real estate startup: the
longer-term plan will be to take the company public, likely in the next
24 months.
“It has been incredible to see the growth of our
Product & Engineering team, including the addition of Joseph Sirosh
as CTO,” said Allon, in a statement. “We are excited to partner with new
investors, and deepen our relationship with our existing partners to
accelerate our growth and further our technology advancements.”
***
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