Compass raised $100 million in a Series E investment round, putting the rapidly growing real estate technology company one step closer to a potential initial public offering, officials announced Wednesday.
The latest round of financing from Fidelity Investments, IVP and Wellington Management brings the total capital raised by Compass to $325 million, which will be deployed to fund an aggressive expansion plan into 10 new markets and an array of cutting-edge technology, including a recently announced customized Customer Relationship Management (CRM) platform and targeted digital marketing tools.
“We’re excited about the makeup of that capital raise in the sense that it’s both bringing on board a new extremely credible institutional investor in Fidelity but also we’re seeing reinvestment from venture capitalists that led our former rounds,” said Compass Chief Revenue Officer Rob Lehman, who confirmed that the company is now valued at $1.8 billion.
Lehman acknowledged that Compass executives now may be setting their sights on an initial public offering, though he insisted that private investment, thus far, remains a proven funding lever for the four-year-old company. Nonetheless, should Compass choose to go public, the move would echo that of Redfin, a heavily funded, technology-forward real estate brokerage worth $2 billion that issued its own successful initial public offering earlier this summer.
“We think an IPO is certainly a possible path for us, but we really don’t spend time strategizing about that,” said Lehman, continuing:
“An IPO is a way to raise capital and continue to fund the business, and as we’ve seen today the private markets are still a very productive way to be able to achieve that same goal. We continue to evaluate every quarter what the right growth strategy is and what the most efficient and effective capital support strategy is, and if at some point we deem that should be in the public markets than we would certainly go down that path.”
Last month in a companywide meeting, Compass CEO Robert Reffkin announced a so-called “2020 By 2020” strategic plan to expand into 10 new markets by 2020, and to grab 20 percent of the market share in the 20 largest U.S. cities.
The plan, revealed publicly in a video posted online yesterday, also calls for the creation of a new CRM platform for the company’s 2,000 agents, a targeted digital marketing tool and innovative new real estate signage fueled by solar power. Those technological innovations, in addition to a new training program, are all slated for next year.
Seattle; San Diego; Phoenix; Dallas, Houston and Austin, Texas; Atlanta; Charlotte, North Carolina; Philadelphia and Chicago are all slated for Compass outposts under a coverage plan that already includes New York City, Miami, Aspen, Washington, D.C., San Francisco and Los Angeles, among other cities.
“In the top 20 cities, 20 percent market share by 2020,” said Reffkin during the Oct. 24 meeting, held in New York. “How are we going to do that? By investing in our agents, giving them support and building more for them than any company in the history of this country.”
Launched in 2013, Compass’ agent count has increased by 500 percent over the past two years and the company is on track to tally 16,000 transaction by the end of 2017 for a total of $14 billion in sales and $350 million in annual revenue, according to a company spokesperson.
Correction: This story originally misstated Lehman’s position as Chief Financial Officer, which is incorrect. The story has since been updated. We regret the error.
Email Jotham Sederstrom