Talk about disruptive. Since launching 18 months ago, Compass–a real estate listing app for iOS and Android formerly known as Urban Compass–has generated quite a bit of discomfort among its legacy competitors, some of which have filed lawsuits. And it’s no wonder Compass has shaken things up: As anyone who’s ever tried to rent or buy property in New York knows, the experience is loaded with pain points–exactly the type of stuff that turns mere ideas into thriving startups.
Real estate brokerages aren’t the only ones who have noticed the quick rise of Compass. This week, the company is being named the Mid-Sized Business of the Year by the Manhattan Chamber of Commerce. In previous years, this title has been awarded to the likes of SoulCycle and Warby Parker.
“Right now, when you want to buy a place, it’s very hard to really understand the value,” says Ori Allon, Compass’s cofounder and executive chairman. Allon brings some serious tech industry cred to the real estate listings space: He sold his first company, a search startup named Orion, to Google, which won a bidding war with Yahoo and Microsoft over Allon’s creation. Orion’s code is now part of Google’s core search algorithm. His second company–a real-time search product called Julpan–got snatched up by Twitter in 2011.
To date, Compass has raised $73 million through seed, Series A, and Series B rounds combined. As of a year ago, the company was valued at $360 million and its monthly revenue is growing 16 times year over year. In addition to poaching superstar real estate agents, the startup has lured talent away from the likes of Google and Twitter.
For Allon, who founded Compass with Robert Reffkin, former chief of staff to the president at Goldman Sachs, this latest venture is decidedly different from his past efforts. Rather than focusing on the invisible, algorithmic guts of information services, Compass takes a stab at real-world, user-facing headaches. In this case, that means both real estate agents and those looking for properties (two groups for whom Compass has built two different apps).
To do this, Compass is using a blend of technology, design, and old-fashioned human touch. Since its launch, the company has hired over 200 brokers, many of which were lured away from established real estate brokerages. One of those firms, New York’s The Corcoran Group, sued Compass earlier this year for poaching key talent and allegedly accessing its proprietary databases. Each of Compass’s agents operates using the company’s agent-specific mobile app, designed with a level of functionality and intuitiveness not typically found in proprietary software used by real estate agents.
For users, Compass aims to ease the pain of dealing with brokers–or worse, wasting time pouring through phony or duplicate listings on Craigslist–by presenting verified listings in an intuitively designed mobile app and charging what it promises are fees lower than those of traditional brokers.
Flowing underneath this experience is, quite naturally, Compass’s own unique search technology.
“Across the real estate value chain–buyers, sellers, agents, developers, renters, et cetera–everyone is making decisions that have enormous financial ramifications, and the big secret is that no one is confident in making those decisions,” says Allon. “We’re building proprietary analytics technologies to help our agents triangulate the value of properties, develop property-specific marketing ROI plans, predict how the market will respond to new properties entering the market. We are bringing the science to what has for too long been only an art.”
Compass’s system pulls in data from a wide variety of sources–both about real estate itself and broader local trends–and merge them into one central database, where machine learning algorithms can make sense of the market with a clarity that wasn’t possible before. Hence the discomfort among those accustomed to doing things the old, less data-driven way.
“Our systems continuously get smarter about the hierarchy of data and which information to trust from which source,” says Allon. “They are able to help us build a more holistic picture of any given property to inform the real estate transaction.”
Compass recently underwent a significant redesign and rebranding, including the purchase of the domain compass.com for an undisclosed (but presumably hefty) sum. Apparently the name “Urban Compass” was too specific for the startup’s ambitions, which includes eventual expansion into markets less densely populated than New York City and Washington, D.C., Compass’s second market. Next on the company’s list are Boston, Miami, and Chicago, Allon says. Beyond that, he thinks key cities in Europe and Australia would be ripe for Compass’s approach.
“I think our solution is very scalable,” says Allon. “It’s something that can potentially power all real estate transactions across the country.”