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Real estate startup Compass secures largest real estate tech investment in U.S. history | 2017-12-07

Real estate startup Compass secures largest real estate tech investment in U.S. history | 2017-12-07

Real estate startup Compass secures largest real estate tech investment in U.S. history | 2017-12-07
December 07
20:41 2017



Less than one month ago, Compass, a real estate technology company based in New York City, celebrated that it raised $100 million in its Series E investment round, which placed the company’s valuation at $1.8 billion.

But that investment is dwarfed by the company’s new round of funding, which transforms Compass into one of the biggest in the real estate space.

Compass announced Thursday that SoftBank Vision Fund, the investment arm of the Japanese technology company SoftBank, is investing $450 million in the company.

According to Compass, SoftBank’s investment is the “largest real estate technology investment” in the history of the U.S.

SoftBank’s investment also more than doubles the amount of money Compass had raised up to this point. SoftBank’s investment brings the total capital raised by Compass to $775 million.

According to TechCrunch, the investment also values Compass at $2.2 billion, an increase of $400 million from the company’s valuation in its last funding round, just one month ago.

Compass, which bills itself as the “first modern real estate platform,” operates somewhat similarly to other online real estate listing sites like Zillow, Trulia, Realtor.com, and Redfin, but Compass makes its money differently.

Compass focuses on broker listings, and instead of generating revenue via ads, Compass takes a portion of the sale when a transaction is conducted through its platform.

According to the company, over the last 2 years, Compass has grown its agent population by 500%, driven by its “agent-centric technology,” which helps agents increase their commissions by 25% in their first year with the company.

Last month, the company said that it’s currently on track to complete 16,000 transactions and over $14 billion in sales in 2017, and is set to pull in more than $350 million in annual revenue.

The company, which was founded in 2012, currently operates in 11 regions: New York City, Los Angeles, Chicago, San Francisco, Boston, Washington, D.C., Miami, Orange County, The Hamptons, Santa Barbara and Montecito, and Aspen.

Last month, the company said that it planned to use the $100 million raised from Fidelity InvestmentsIVPWellington Management, and other global investors to expand to Atlanta, Austin, Charlotte, Dallas, Houston, Philadelphia, Phoenix, San Diego, and Seattle.

Now, the company says that it plans to use this new money from SoftBank to expand to “every major U.S. city and increase its investment in technology to further empower Compass agents and their clients.”

According to Ori Allon, founder and executive chairman of Compass, the company already launched in Chicago with the “number one agent team in the State of Illinois,” and plans to keep growing.

“The combination of technology and our partnership with top real estate agents who do outsized transaction volume will enable us to build the world’s largest real estate technology platform,” Allon said. “With the support of the SoftBank Vision Fund, we will be able to move quickly to execute our ‘Compass Everywhere’ vision, partnering with top agents and their clients in every major U.S. city.”

SoftBank’s investment in Compass is hardly its first venture into the U.S. housing economy.

Two years ago, SoftBank led a $1 billion funding round in SoFi, the San Francisco-based lending startup.

And earlier this year, SoftBank announced plans to acquire real estate investment powerhouse Fortress Investment Group for $3.3 billion in cash.

Fortress is the parent company for New Residential Investment, which buys up mortgage servicing rights by the truckload.

At the end of last year, PHH announced that it planned to sell off its entire mortgage servicing rights portfolio in a massive deal with New Residential.

New Residential also bought up nearly all of CitiMortgage’s mortgage servicing rights in a deal earlier this year.

New Residential is also buying $117 billion in mortgage servicing rights from Ocwen Financial in a deal that also includes New Residential making an equity investment in Ocwen and becoming a 4.9% owner of the nonbank.

Fortress is also the majority shareholder in Nationstar Mortgagenow known as Mr. Cooper.

Justin Wilson, a senior investment professional at the SoftBank Vision Fund, laid out the company’s reasoning for investing in the U.S. real estate market, and in Compass.

“Real estate is a huge asset class, but the sector has been relatively untouched by technology and remains inefficient and fragmented,” Wilson said.

“Compass is building a differentiated, end-to-end tech platform that aggregates across diverse data streams to support agents and homebuyers through the entire process, well beyond the initial home search,” Wilson continued. “With disruptive technology and unique data advantages, Compass is well-positioned for future growth in a sector that represents trillions in transaction volume.”



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