Black Founder Of Real Estate Tech Startup Compass Scores A $1.8B Valuation
Robert Reffkin’s mother was disowned by her parents when she had a mixed-race baby. Now her son is the CEO of Compass, a New York real estate tech startup that just scored a $1.8 billion valuation.
Compass has persuaded investors that it can reshape the home-buying process through technology. Not everyone is convinced, but the firm said Wednesday that it is now valued at $1.8 billion after its latest cash infusion — a $100 million Series E round that will be spent on a geographic expansion.
Investors in the funding round included Fidelity Investments, IVP and Wellington Management, which led Compass’ Series D round. The round brings Compass’ total funding to $325 million, according to The Real Deal.
Compass’ dashboard shows neighborhood real estate data and a Pinterest-like app for organizing home listings. The company says the technology will make real-estate agents more productive and more profitable. Fidelity bought in, making a rare bet on a private company.
“To others, though, Compass looks more like a traditional realty broker, Bloomberg reported. It employs more than 2,000 agents, who take a percentage of the selling price and gives 15 percent to 30 percent to Compass. It lures the industry’s top talent with lavish signing bonuses and specializes in high-margin, luxury homes in upscale, coastal markets. The much-touted technology is, according to several agents, not that different from what other brokers provide.”
Compass co-founder and CEO Reffkin is the son of an Israeli immigrant who was disowned by her parents when she had a mixed-race baby. His father, a San Francisco jazz musician with a drug problem, left the family when Reffkin was a toddler, according to a 2013 Fast Company report. Reffkin’s mother raised him alone:
“He got a scholarship to a prestigious San Francisco prep school, graduated from Columbia University in two years, was hired as the youngest McKinsey analyst in the firm’s history, and eventually became chief of staff to Goldman Sachs COO Gary Cohn.”
A champion of diversity, Reffkin helped found a charter school in the Bronx and launched a nonprofit, New York Needs You, which finds mentors for students who are the first in their families to go to college. He has said he hopes one day to run for office.
Real estate is uniquely positioned to be a leader in diversity, Reffkin said in a recent Forbes guest post:
- 62 percent of Realtors nationwide are female.
- It’s an industry that values longevity. “Some of the most talented and successful agents I’ve met are those who’ve seen the industry through multiple housing downturns and can leverage that experience,” Reffkin wrote.
- Immigrants are an important and growing client base. Agents who speak different languages and can relate to diverse clientele will become increasingly important.
- The buying power of the LGBTQ community is growing. LGBT consumers choose companies that are committed to diversity to do business with.
- The real estate industry values a diverse skillset in its practitioners. Real estate is the first career for just 4 percent of Realtors.
Compass said the latest funding round will be used to expand to 10 new cities within two years and invest in new research and development. This includes building new technology including real estate signage fueled by solar power, a targeted digital marketing tool and a customer relationship management (CRM) platform.
Compass wants 20 percent of market share in 20 major U.S. cities by 2020. Its “2020 by 2020” plan, shared at a companywide meeting in New York on Oct. 24, means expansion to Seattle, San Diego, Phoenix, Dallas, Austin, Houston, Atlanta, Charlotte, Philadelphia and Chicago. Compass will have an international presence within 18 months, Reffkin said in June.
“We’re just getting started,” Compass’ executive chairman Ori Allon said in a statement. “The real vision is for Compass to be everywhere.”
The new funding is a sign that Compass is headed for a public offering, The Real Deal reported. Redfin — another venture-backed tech brokerage — is now worth $2.05 billion following its successful public offering.
‘With all that capital raised, all signs are pointing to that direction,’ said Ashkan Zandieh, founder of property data startup Falkon and research company RE:Tech.”
Vera Nelson, a California real-estate agent of 17 years, left Coldwell Banker for Compass in 2015. Compass recruited her with promises of transformative technology and generous commissions, Bloomberg reported. Agents see a 25 percent increase in earnings during their first year, Compass has said. Nelson left less than a year later and returned to Coldwell. “The technology was mostly marketing tools,” she said. “It was sleek, but I can’t say it was different from anything else out there.”
Investors seem bullish on real estate technology, spending almost $6 billion on it in the first three quarters of 2017, compared to $3.2 billion during the same period in 2016, according to RE:Tech data. NYC-based firms raised close to $900 million during the same period, up from $300 million last year, The Real Deal reported:
“A few weeks after Redfin’s IPO, San Francisco-based Homelight, which uses data to connect buyers with agents, raised $40 million in a Series B led by Menlo Ventures. In September, U.K.-based Purplebricks — another investor-backed, low-fee brokerage — launched a U.S. operation after raising $60 million from investors. The 5-year-old company reported $62.6 million in 2017 revenue. Just last month, Oakland, Calif.-based Roofstock, a platform for buying and selling rental properties, raised a $35 million Series C round.”