Compass raises $ 370 million as more and more crowded real estate space heats up

Property-focused startup Compass, a tech-focused startup that builds a platform for professional residential real estate, has raised $ 370 million in a Series G round that takes valuation to $ 6.4 billion as space continues to become warmer and bigger.

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According to Fortune and the company's Crunchbase profile, it is 45 percent more than the $ 4.4 billion valuation when it raised its $ 400 million Series F in September last year. The round brings the company's total funding to over $ 1.5 billion since it was founded in 201[ads1]2 as Urban Compass. (It dropped “Urban” in 2015, according to the Crunchbase profile). A mix of new and existing investors participated in this latest round, including the Canada Pension Plan Investment Board (CPPIB), the Dragoneer Investment Group, the Qatar Investment Authority (QIA) and the busy SoftBank Vision Fund.

In a press release, Compass said it plans to invest in "platform software and scaling operations, including continued expansion of the east and west coast product and engineering nodes." It also plans to use its new capital to invest more in "cloud, mobile and AI."

Compass said it is building an "end-to-end software platform" aimed at streamlining home buying and selling. It also offers a concierge program that "fronts" customers money to make home improvements such as staging and painting.

It appears that the company is growing strongly with sales increasing over 250 per cent in the second quarter compared to the second quarter of 2018. (It did not give specific revenue figures). A spokesperson told me that Compass now employs around 2,200 people, up from less than 1,000 a year ago. Specifically, it has tripled the size of its product and engineering team to more than 300 employees since the last raise in September 2018. Currently, Compass has more than 300 offices across the country and a team of more than 13,000 agents working as independent contractors. [19659005] Also since the last increase, Compass Contactually, a cloud-based software company, has built a CRM (Customer Relationship Management) system for the real estate industry. A number of new hires have also been made, including pressing Joseph Sirosh, former CTO of AI at Microsoft and ex-VP of advanced technology at Amazon, to serve as its technology manager. The company opened its first West Coast product and engineering campus in Seattle, Wash.

Looking ahead, the company declined to comment on whether it is planning further acquisitions. According to the Crunchbase profile, it has made seven acquisitions over time, including three this year alone. Besides Contact, Compass has also picked up luxury real estate Alain Pinel Realtors and Stribling & Associates.

The company said it plans to launch in August "a fully redesigned consumer search and app experience." Also, according to the Wall Street Journal and validation of the broker acquisitions above, Compass has invested a lot of money in "moving high-profile agents with hefty marketing budgets, slick technology and stock options when it dangles the prospect of an initial public offering." A source from inside confirmed that the company really sees a stock exchange listing as "a potential alternative."

The real estate-focused space expands as the number of brokers increases left and right. This year alone, the industry has seen a number of mega-rounds, as well as a number of upstarts (like this one), raised money to compete in the field as well.

As I reported earlier this year, US-based real estate companies were collectively collecting $ 4.99 billion in 105 transactions in 2018, according to Crunchbase data. While down from the $ 5.8 billion raised in 95 deals in 2017, it's still a staggering 10 times the $ 520 million raised by such startups in 2013, which you can see in the chart below.

has been following the real estate for a while now, and it's no surprise that an industry that has been (excuse the cliche) "ripe for disruption" sees so many startups traveling mega-rounds. All this is fine and dandy when the economy is good. But the real test of how viable these companies are will be when we hit another downturn. We'll see.

Illustration: Li-Anne Dias

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