Latest round lifts real-estate brokerage’s valuation to $6.4 billion, indicates the firm is nearing IPO.
Compass raised $370 million in a deal that increases the real-estate brokerage’s valuation to $6.4 billion and indicates the firm is nearing an initial public offering.
Compass announced its latest funding round Tuesday and said it increased its total capital raised to more than $1.5 billion since it launched in 2012. Investors participating in the round include Dragoneer Investment Group. Some of the firm’s existing investors, such as SoftBank Vision Fund, Canada Pension Plan Investment Board, and the Qatar Investment Authority, also contributed more money.
New York-based Compass has shaken up the real estate brokerage industry
in recent years by luring top agents with generous commission splits and stock options and, more recently, fronting seller's money to spruce up their homes for sale. The firm’s deep pockets have left incumbent competitors struggling to keep up amid a slow housing market and shrinking margins.
San Francisco-based Dragoneer has a record of late-stage venture-capital investments that often precede IPOs. For example, the firm led rounds for companies such as Slack and Uber in the run-up to their public offerings.
A person familiar with Compass’s plans said Dragoneer’s involvement in the recent round is a sign the brokerage firm is considering a public offering in the near term. A spokesman for Dragoneer declined to comment. Compass Chief Executive Robert Reffkin declined an interview request.
Compass has branded itself as a technology firm, touting the online tools it has developed to help agents produce pitching materials and communicate with clients about listings. But the firm hasn’t changed the way people buy and sell homes. Its business model functions much like legacy firms with traditional commission rates for agents.
Compass has said it plans to profit from ancillary services like mortgage, title, and insurance offerings but hasn’t publicly outlined a strategy for how it will do that.
Compass said it would use the new capital to invest in its technology and further expand its tech teams on the East and West coasts. Compass launched its engineering hub in Seattle earlier this year and plans to staff it with roughly 100 engineers to build what it has dubbed an “end-to-end software platform to streamline the home buying and selling experience.” The company says it already employs about 300 people in its tech department.
Since its last round of funding in October 2018, Compass has acquired Contactually, a cloud-based software company, California-based Alain Pinel Realtors, and the roughly 40-year-old New York real-estate brokerage Stribling & Associates. Compass has expanded to about 13,000 agents nationwide.
Earlier this month, the company was sued by competitor Realogy Holdings Corp., the parent company of Corcoran Group, Sotheby’s International Realty, Coldwell Banker, and other real-estate firms, which claimed Compass had engaged in unfair and illegal practices to gain market share. Realogy accused Compass of pilfering trade secrets and encouraging agents to break their non-compete agreement. Compass denied the allegations.