High-tech real estate brokerage Compass has a new mountain of cash to continue building out its technology platform and grow both its East and West Coast engineering hubs.
Compass today announced a $370 million Series G round that brings the company to a lifetime total of $1.5 billion raised. The round ups Compass to a valuation of $6.4 billion, the company said. Primary investors in the round include Canada Pension Plan Investment Board, Dragoneer Investment Group, and SoftBank Vision Fund.
Real estate technology is an area that is swimming in cash, with a growing list of companies — including Seattle’s Zillow and Redfin — vying to come up with the best way to simplify the painful process of buying and selling houses. Compass says it differentiates itself by marketing its technology and tools primarily toward real estate agents.
“To date, the technology has been focused on building directly for the consumer without the agent, although the agent is the heart of the experience,” Compass CEO Robert Reffkin said in an interview with GeekWire earlier this year. “We have an obsession with the agent the way Amazon has an obsession with the customer.”
Compass opened a West Coast hub in Seattle last year, with plans to hire 100 product and engineering workers. So far, the company has brought in about two dozen engineers and the office has grown to about 100 people working in areas including marketing and design. Here are a few of the key people Compass has added in recent months to build up the Seattle office:
- Compass’ Vice President of Engineering Rahul Singh founded Distelli, a Seattle startup that helped software engineers deploy code more efficiently and was acquired by Puppet in 2017. Prior to Distelli, Singh spent eight years at Amazon as a software engineer, working on the early stages of AWS and the company’s retail platform.
- Senior software engineer Naomi Robert spent the last five years at Google building the data behind Google Maps.
- Senior staff engineer Fu Zhou came over from Qualtrics.
- Cindy Zhang is a machine learning engineer who joined from Zillow.
Compass has recruited a number of Zillow engineers in recent months, kickstarting a legal dispute between the two companies. Zillow alleged in a pair of lawsuits earlier this year that Compass stole its intellectual property and poached employees with non-compete agreements. The companies settled their dispute earlier this month.
Overall, Compass has roughly 300 engineers working on the tech side, based out of Seattle and New York. Leading them is Joseph Sirosh, Compass’ chief technology officer and a former Microsoft and Amazon executive with an extensive background in artificial intelligence.
Sirosh referred to Compass’ technology in an interview with GeekWire earlier this year as “artificial intelligence to empower agent intelligence — AI to empower AI.” The overall goal is to simplify and automate some of the day-to-day tasks that take agents away from money-making activities such as meeting with clients and showing homes. One example of that at Compass is a dashboard that lets agents post to a variety of online sources all from one place, saving the time of jumping back and forth between platforms.
One of the first big tech initiatives under Sirosh’s watch is a revamped search experience that will launch next month. Sirosh envisioned a search experience where customers are notified as soon as a home that matches their preferences hits the market, giving them a jump on other potential buyers.
Compass has a key advantage over other brokerages, Sirosh said, in its ability to quickly scale up in new locations. The company landed in Seattle in early 2018, and today it has more than 350 agents in the city.
“We can very easily recruit a significant number of agents into the brokerage,” Sirosh told GeekWire earlier this year. “We have the infrastructure to support them and a platform that amplifies all of them, a platform that empowers all of them. That scalability is what none of the other players have pulled off yet.”
A person with knowledge of Compass said it is not yet profitable. The company said in its funding announcement that it had three consecutive months of “record revenue” and an annual revenue increase of 250 percent over the second quarter of last year. Compass makes the bulk of its revenue through commissions it splits with brokers. The company does not say what percentages of each commission it takes.
Nationwide, Compass has 2,200 employees, and its network also includes 12,000 real estate agents in more than 300 offices. Agents aren’t traditional employees at Compass; they make their living from commissions.
Though agents are independent contractors, the situation differs from the “gig economy” where workers can ply their trade on multiple platforms. Agents are tied to one brokerage, so Compass is a threat to rival brokerages as a suitor for their talent. The company is rumored to use big signing bonuses to lure top-tier agents away from competitors.
Compass is focused on a 20/20/20 strategy as the basis for growth: 20 percent market share in the top 20 U.S. cities by the end of 2020. A recent report from Puget Sound Business Journal suggested Compass is struggling to hit the market share benchmark in Seattle.
Reffkin compared his company to Amazon several times, saying that the real estate transaction is like books were to Amazon — just the beginning. Expanding beyond the transaction puts Compass squarely in the crosshairs of Zillow, which aims to become the Microsoft Office of real estate, and Redfin, which has steadily added new services over the years to control more of the sales process.
“If we can get everyone searching Compass because we have the best inventory of listings and the best agents around them, then we can add more products and better experience in mortgage, title and insurance, moving services, and real estate vendors like plumbers and HVAC repair,” Reffkin said earlier this year. “It’s a very wide ecosystem.”