In 2012, entrepreneurs Ori Allon and Robert Reffkin banded together to form Compass, a real estate company that leverages modern technology to make the process of buying, selling and renting property easier than ever before. Since its launch, Compass has grown to become the largest independent real estate brokerage in the US, employing around 20,000 agents and covering other 22 areas of the country. On April 1st this year, it launched its IPO. After raising $450 million on the first day of trading, it now plans on using the cash injection to expand even further. Find out more with these 20 things you didn't know about Compass.
1. It was founded in 2012
In 2012, entrepreneurs Ori Allon and Robert Reffkin founded Compass. Both men already had a history of developing successful companies. Allon, who at the time was working as a Director of Engineering at Twitter, had previously founded several very successful companies that had eventually been acquired by Google and Twitter. Reffkin was no less successful, with a resume that included stints as the chief of staff to the president of Goldman Sachs and as a Mergers & Acquisitions Associate in the Investment Banking division of Lazard Frères & Co. LLC.
2. It raised $8 million in seed money
When Allon and Reffkin decided that moving into real estate was the logical next step in their careers, they had all the business experience and knowledge they needed to turn their ideas into a reality. What they didn't necessarily have was the money. Fortunately, a lack of capital didn't stay a problem for long. After taking their business plans to various investors, they ended up raising $8 million in seed funding from sources that included Founders Fund, Thrive Capital, and Goldman Sachs. Several private investors were also taken by their idea, with both American Express CEO Kenneth Chenault and ZocDoc CEO Cyrus Massoumi stumping up with sizeable contributions.
3. Its launch was attended by the Mayor of NYC
By 2013, Allon and Reffkin had solidified their business model and acquired all the initial investment they needed to launch their business to the public. Real estate agencies are rarely known to be understated and true to form, Compass' public debut made a big splash. The event was even attended by then Mayor of New York City, Michael Bloomberg.
4. It changed its business model in 2014
When Compass first launched, its business model allowed users of its social network to find, secure, and pay for rental accommodation with the assistance of salaried brokers working full time for Compass. Just a year after its public debut, Compass announced it would be shaking up its original model by contracting independent real estate agents who would retain a portion of the selling price of the property and pay Compass a 15 to 30 percent commission. Compass now works with around 20,000 independent agents across the country.
5. It offers interest-free loans for home improvement
Selling a property that's in need of a lick of paint and a fresh new look isn't necessarily easy. For homeowners concerned that their chance of getting a good price for their home is being compromised by peeling wallpaper and scuffed carpets, Compass offers a solution - Compass Concierge. In essence, the service is a loan. Homeowners work alongside a Compass agent to determine exactly what kind of work will have the biggest impact on the property's value. Compass then provides an interest-free loan to cover the cost of the work. Depending on their preference, homeowners can repay the loan either when they sell their home or when they terminate the listing.
6. It offers bridge loan services
Over the past few years, Compass has introduced a wide selection of enhanced services to its customers. One of the most popular is Compass Bridge Loan Services. Described by the official Compass website as "a simple solution to bridge the gap between the home you have and the home you want," Compass Bridge Loan Services is exactly what the name implies: a bridge loan that allows customers to have up to six months of bridge loan payments fronted when they sell their home via Compass.
7. It uses technology to its best advantage
What distinguishes Compass from almost every other real estate company in the world is its utilization of technology. While every real estate broker worth its salt has a website these days, Compass takes things much, much further. Just a few products that demonstrate the way in which it's made tech integral to its service include Compass Collections, a curated workspace that lets customers work directly alongside agents to organize listings and monitor the market; Compass Insights, a dashboard that allows agents to access the information they need to create effective marketing strategies and find new opportunities; The Marketing Center, a digital design studio that enables agents to create customized marketing materials; Compass Markets, a mobile app with both current and historic sale information; and Compass CRM, an AI-powered customer relationship management platform.
8. It buys as much as it sells
Compass might be in the business of selling properties, but over the past few years, it's proved it's not shy of investing in the buying process either. Since 2014, it's acquired a vast collection of smaller real estate groups. As Wikipedia notes, some of its most notable acquisitions include Lindsay Reishman Real Estate (acquired November 2014), Bushari (acquired January 2018), Conlon (acquired April 2018), Northwest Group Real Estate (acquired April 2018), The Hudson Company (acquired June 2018), Paragon Real Estate Group (acquired July 2018), Pacific Union International (acquired August 2018), Avenue Properties (acquired August 2018), Wydler Brothers (acquired November 2018), Contactually (acquired February 2019), Alain Pinel Realtors (acquired March 2019), Stribling & Associates (acquired April 2019), and Detectica (acquired November 2019).
9. It cut 15% of its staff because of COVID
When the COVID pandemic began to make its presence known, Compass, like most other businesses, entered into a period of massive uncertainly. Stay-at-home orders and economic turmoil led to a minor crisis in the real estate business, and like the majority of other firms, Compass reacted by taking measures to protects its financial interests and long-term chance of survival. As a result, it cut a full 15% of its staff in the first month of the pandemic breaking in the US.
10. It increased its business by 66% in 2020
While the first half of 2020 may have been a disaster for the real estate industry (and everyone else for that matter), the second half of the year saw realtors bounce back in style. As CNBC writes, when homeowners realized that remote work is here to stay, they began to look for more desirable locations, with the result that home prices began climbing and realtors were very much back in business. Consequently, Compass ended the year on a high, recording 144,784 transactions in total and increasing its business by 66% from 2019.
11. It's raised over a billion dollars in private funding
In 2012, Compass raised $8 million in seed funding. It seems like a significant amount of money, but it's nothing compared to how much it's raised since. According to Crunchbase, Compass has now raised a total of $1.5B in private funding over 10 rounds. Its last round of private funding raised $370 million in July 2019. The round was led by SoftBank Vision Fund and Tech Pioneers Fund.
12. It operates from 22 regions
Compass was launched in New York City and initially, its services were limited to the city. Those days are long gone. While it still maintains its headquarters in NYC, it now operates from 22 regions across the US, including major metropolises such as Dallas, Los Angeles, Washington DC., Chicago, San Francisco, and Boston.
13. It's going global
Since its inception, Compass has expanded across the US to become one of the biggest real estate brokers in the country. In 2019, it announced its decision to expand even further by taking its operations global with a new technology hub and development center in Hyderabad, India. The new office will focus primarily on the development of mobile applications and will have as many as 200 employees on the payroll.
14. It initially focused on rentals
A decade ago, the rental market was huge. It was also clunky, awkward, and besieged with problems. If you wanted to find somewhere new to rent, you could expect to dedicate hours to searching through page after page of advertisements, many of which would turn out to be misrepresentative of the property being listed. If you lucked out and found the apartment of your dreams, there'd be a good chance it had already been rented out several months prior. With their new technology and their new way of doing business, Compass aimed to change that. As it transpired, they succeeded in overhauling the rental market so well, they soon decided to expand into property sales.
15. It's the largest independent real estate brokerage in the US
Despite having been around for less than a decade, Compass now ranks as the largest independent real estate brokerage in the US. As Fool.com notes, in 2020, its agents achieved over $300 billion in gross transaction value, increasing the company revenue by 56% from $2.4 billion in 2019 to $3.7 billion. Net losses were reduced from $388 million to $270.2 million. It now has a 4% market share and ranks fifth in the country for transaction sides.
16. It was inspired by its founder's mother
When co-founder Robert Reffkin teamed up with Ori Allon to found Compass, he didn't just do it because he saw the potential to make a lot of money (although in fairness, that may have inspired the decision to some extent). He did it to help real estate agents like his mother, Ruth, who he says was never able to develop her business to its full potential simply as a result of not having the right kind of tools and support.
17. It's a great place to work
Compass may be loved by the homeowners and homebuyers who use its services, but it seems to be pretty well adored by its employees too. Glassdoor users have given the company a very impressive 4.7 out of 5, with 93% of them saying they'd be happy to recommend working at the company to a friend and a whopping 99% of them saying they approve of the company's CEO, Robert Reffkin. If the praise is to be believed, Compass is "like a community that everyone is very proud to live in" that "provides everything that you need to succeed."
18. It went public on 1st April
On 1st April 2021, Compass went public. Its first day was neither the huge success it was expected to be, nor an abject failure. As CCN writes, after pricing its shares at $18 apiece (the low end of the targeted price range), Compass' stock spiked by around 20% immediately after trading began, but gradually fell as the day wore on. It closed the day with a share price of $20.15 apiece, having sold 25 million shares and raised $450 million in total.
19. It's happy with its IPO
When Compass decided to go public, it hoped to sell 36 million shares for between $23 and $26. In the event, it lowered its target price range and reduced the number of shares to be sold, meaning it raised only half of what it had initially set out to. Despite that, CEO Refkin is confident that the IPO has given Compass exactly what it needs to move on with the next stage in its growth. Speaking to TechCrunch, he said "We now have hundreds of millions of dollars that have been infused into the company to help accelerate our investment in the platform." "So I'm very happy that we were able to meet that goal," he added.
20. It plans to build a Shopify for real estate agents
Speaking to CNN about how he plans to utilize the $450 million raised during Compass' IPO, Reffkin outlined his plans to build a platform that will essentially act as a Shopify for real estate agents. "If you're a merchant, you can go to Shopify and have all your needs met in one place, and at Compass, that's what we're building for agents," he explained. "There are 86,000 brokerage firms in the country, but they're not investing in R&D, they don't have teams of people ... to build out that complete solution. I believe agents need and deserve a one-stop-shop solution to meet all their needs in one place."
Written by Allen Lee
Read more posts by Allen Lee