Compass, a high-tech brokerage, has raised an additional $75 million in a funding round that values the company at more than $1 billion, according to a person familiar with the deal.
Compass will use the truckload of cash to “to accelerate our growth into new markets and inject transformative technology to improve the experience for consumers and agents,” Ori Allon, founder and executive chairman of Compass, said in a statement.
The latest funding round caps a string of others that have stunned industry observers and helped the firm aggressively muscle into new markets.
Where’s the money going — and how much is there?
Compass has used its treasure chest not only to churn out what it casts as cutting-edge tools for agents and consumers but also to allegedly poach columns of elite agents from competitors, roiling some market incumbents and resulting in some lawsuits.
Launched in New York City in 2013, Compass claims nearly 1,000 agents in eight luxury markets and has expanded in the last eighteen months to Washington D.C., Miami, Boston, the Hamptons, Cambridge, Beverly Hills, Malibu, Pasadena, Santa Barbara and Aspen. The firm plans to open in San Francisco this fall.
Compass has generated more than $100 million in revenue so far this year, and the company anticipates generating three times as much in revenue this year as it did in 2015, according to spokeswoman Ashley Murphy. Compass is profitable in New York City, Washington, D.C., and Boston, she added.
Lead by Wellington Management Company LLP, the latest funding round comes nearly one year after Compass’ $60 million Series C financing in September 2015.
Compass has now raised $210 million to date. News of Compass’ latest raise comes shortly after word that another high-tech brokerage, SRE Matrix, had received $200 million in funding from its billionaire founder.
Both companies have now raised more money than Redfin, a 10-year old venture capital-backed firm that may be real estate’s best known high-tech brokerage.
Proprietary agent technology
Compass provides proprietary technology that it says helps agents save time by reducing reliance on multiple platforms. It describes its agent app as “one-stop marketing, property valuation, and open house capabilities.”
Compass CEO Robert Reffkin, a former White House fellow and chief of staff to Goldman Sachs’ president, previously said examples of Compass’ agent tools include:
- A valuation and comparable market analysis (CMA) tool that allows agents to “value properties better than any tool in the country.”
- A listing strategy tool that provides insights into what month is best to list a property and the best pricing strategy by month.
- An open house and “show sheet” tool that allows agents to create “high-quality collateral in seconds, not hours.”
Compass supplemented its property search site with a mobile app that serves up “national real-time market reports” in November of 2015, describing the the app as a replacement for “stale quarterly market reports.”
Much of, if not all, the software that Compass says it puts in the hands of its agents exists in other shapes or forms.
But whether competing products perform as well as Compass’ platform and fit together as seamlessly may be a question that only agents with wide knowledge of agent technology and exposure to Compass’ software can answer.
In its infancy, Compass closely resembled Redfin, but it abruptly stopped employing salaried agents, paying bonuses based on customer satisfaction and offering discount listing fees shortly after launching.
The company’s reach and growth
Compass operates 24 offices nationwide and “represents” approximately $7 billion in annual sales, according to the company.
Twenty-year real estate veteran Leonard Steinberg is president of Compass, responsible for more than $2 billion in residential sales in New York over the course of his career. His team was recently ranked no. 12 in the nation by RealTrends with $680 million sales last year.
“When it comes to technology, the real estate industry is fragmented and regional systems don’t talk to each other,” said Allon, who sold two previous companies to Twitter and Google before founding Compass.
“There is no reason the real estate process shouldn’t be transparent, convenient, expedient, and intuitive. Compass is aiming to change that.”
In announcing its latest funding round, Compass listed three milestones in the past year:
- A national new development division with a $3 billion pipeline that’s headquartered in New York and Los Angeles
- A sports and entertainment division “catering to the specific real estate needs of celebrities and professional athletes”
- Becoming the fourth-largest brokerage in NYC, first in East Hampton, third in Washington, D.C. and second in Cambridge by sales volume
- Transacting the fifth-largest U.S. residential sale ever — a $110 million East Hampton estate on Lily Pond Lane
