New York City-based real estate brokerage Compass is going global: the company today announced an additional $400 million in venture funding for a planned international expansion, as well as moving into the new domestic markets of Austin, Nashville and Houston by the end of 2018.
The company also said it intends to use some of the new capital to double down on technology, with the ultimate goal of building one platform for the real estate industry.
The funding round is being led by the SoftBank Vision Fund — which led Compass’ previous funding round of $450 million December 2017 — and Qatar Investment Authority, a state-owned holding company. The funding round includes additional participation from Wellington, IVP and Fidelity. To date, Compass has raised $1.2 billion in venture capital funding.
“Real estate is the largest asset class in the world, and we are excited to bring Compass technology to international markets,” said Ori Allon, founder and executive chairman of Compass.
“Our incredible track record of growth in the U.S. validates our vision and sets us up for the global stage.”
“The support of our investors will strengthen the Compass mission to help everyone find their place in the world by advancing our national and global expansion and continue building our agent productivity platform through technology and innovation,” Allon added.
In 2018, Compass has more than tripled its agent count and now has over 7,000 agents. The company also expects it will hit roughly $34 billion in sales volume this year, more than doubling its 2017 sales mark of $14.8 billion. That figure would have firmly placed Compass at No. 3 on the Real Trends 500 in sales volume, right behind NRT and HomeServices of America in 2017.
The influx of new capital will help Compass come closer to achieving its ambitious publicly stated goal of 20 percent market share in the top 20 U.S. markets by the end of 2020.
In trying to achieve that goal, the company has also gobbled up a number of major brokerages including most recently, Pacific Union International in California. Combined with its earlier acquisition of Paragon, the moves made Compass the market-leading brokerage in the Golden State by sales volume.
Compass confirmed at the Inman Connect San Francisco real estate conference earlier this year that it pays the broker-owners of the brokerages it acquires between four to six times its yearly earnings before interest, taxes, depreciation and amortization (EBITDA), depending on the size of the acquisition. Another $400 million could go a long way toward additional acquisitions.
Compass has also used its immense capital to recruit top agents — which has angered some in the industry and even brought about lawsuits.
Just this week, Vickey Barron — who ranked No. 8 on the Real Trends Thousand with more than $300 million in sales last year — left Corcoran for Compass. Anne and Amanda Young, a New York City mother and daughter real estate team, is also joining the NYC brokerage.
Compass agents use the company’s in-house proprietary technology platform, which includes: a search tool that can help agents quickly find homes and generate real-time data, including comparables; a marketing center and digital design studio where agents can customize print, social and email marketing campaigns; a collections tool where agents can organize homes, centralize client discussions and monitor the market; and an insights tool that provides key analytics including traffic information to current listings and new lead opportunity.
With this new capital, Compass wants to continue launching new products and initiatives, eventually creating a platform for the entire industry to use, the company said. It had briefly entered into an agreement with Boston independent brokerage Leading Edge Real Estate Group to license its platform, but the deal fell apart.
SoftBank’s Vision Fund — which is now a meaningful shareholder in Compass, according to a source close to the company — has already gambled on Compass in the past. The collaborative tech investment vehicle was started by Japanese company SoftBank and a host of big international players.
“Compass’s continued growth is being driven by their commitment to empowering agents with best-in-class technology that helps them expand their business and better serve consumers,” said Justin Wilson, SoftBank Investment Adviser’s board representative, in a statement.
“We’re excited to continue to support Compass as they further invest in their data and technology capabilities to create a next-generation platform for home transactions and ownership.”
The source said SoftBank sees Compass as an enterprise software as a service company that’s geared toward agents. The platform, according to the source, makes its agents much more effective and allows them to focus on serving clients, while the company handles the back-end duties like marketing.
And SoftBank can see Compass potentially licensing that platform and leveraging its tech across the industry, according to the source.
The source also confirmed there continue to be discussions about an initial public offering from Compass, but right now there’s no specific timeline of when that might happen.
The Qatar Investment Authority is a state-owned holding company — that acts as a national wealth fund — with the goal of investing in foreign assets to bolster the Persian Gulf country’s economy.
“We believe Compass is well-positioned in the real estate brokerage sector driven by technology,” said a spokesperson for the Qatar Investment Authority, in a statement. “We look forward to partnering with Compass and existing shareholders in the next stage of the company’s growth. Our investment marks QIA’s ongoing commitment to investing in high-quality technology, media and telecommunications assets.”